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Federal Tax - Payments in Lieu of Taxes Act. Cold Lake (City) v. Canada (Attorney General)
In Cold Lake (City) v. Canada (Attorney General) (Fed CA, 2025) the Federal Court of Appeal allowed a municipality's appeal of a denied JR, this from "a decision of the Minister of Public Services and Procurement Canada (Minister)" which "concerns the annual land values of 4 Wing Cold Lake Military Base (4 Wing) for the years 2013 to 2021 (Minister's Decision)".
Here the court considers a rare (federal) Payments in Lieu of Taxes Act issue:[2] The land values determined by the Minister were to be used as the basis for calculating payments "in lieu of taxes (PILT)" to be provided to the City under the Payments in Lieu of Taxes Act, R.S.C. 1985, c. M-13 (Act). PILT are similar to municipal taxes which the Crown is constitutionally immune from paying. The range of values determined by the Minister is from $42,600,000 to $59,800,000.
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Statutory scheme
[7] The general scheme of the Act is to provide a framework for voluntary payments to be made by the federal government to municipalities "“in lieu of”" municipal taxes. The leading cases that describe this framework are Halifax (Regional Municipality) v. Canada (Public Works and Government Services), 2012 SCC 29 [Halifax] and Montréal (City) v. Montreal Port Authority, 2010 SCC 14. The scheme was also canvassed extensively in the FC Decision (see paras. 28-39). Accordingly, it is not necessary to describe the legislation in detail in these reasons. I will, however, highlight some pertinent features.
[8] The Act explicitly provides that it does not confer any right to a payment. It also states that the purpose of the legislation is to "“provide for the fair and equitable administration of payments in lieu of taxes.”" The Supreme Court in Halifax elaborated on this statement: "“[The statutory purpose] is accomplished by reconciling the objective of tax fairness for municipalities with the preservation of constitutional immunity from taxation ... . The Act requires that property value and tax rates be calculated as if the federal property were taxable property belonging to a private owner ... . Moreover, the Act and its schedules contain detailed lists of various types of property that are included in or excluded from this scheme”" (at para. 51).
[9] When it comes to calculating PILT, the amount is determined annually, generally by multiplying the relevant municipal mill rate by the "“property value”" of "“federal property”", as those terms are defined in the Act.
[10] The term "“federal property”" broadly includes real property and immovables owned by the Crown. Notably, the definition of "“federal property”" does not include certain specified property. This appeal relates to an exclusion for water and sewer mains (the "“statutory exclusion”"), which is listed in Schedule II of the Act.
[11] The definition of "“property value”" requires that local assessment authority principles be applied to federal property. In particular, "“property value”" is "“the value that, in the opinion of the Minister, would be attributable by an assessment authority to federal property … as the basis for computing … real property tax that would be applicable to that property if it were taxable property.”" Although the Minister has some discretion in determining property value, the determination must be "“consistent with the principles governing the application of the Act and with the Act’s purposes”" (Halifax at para. 43).
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