We took advantage of the Ontario government’s 2021 pre-budget consultations to make a submission regarding the Ontario Energy and Property Tax Credit (OEPTC) to the Ontario Ministry of Finance. This was our submission.
Action Required: Amend the Ontario Taxation Act to make it consistent with the Ontario government’s policy statements on the Ontario Energy and Property Tax Credit (OEPTC).
Issue: The Ontario Government states that the OEPTC is designed to help low-to-moderate income residents pay their property taxes and their energy sales taxes. However, wording in the Ontario Taxation Act precludes low-to-moderate income tenants in non-profit housing exempt from municipal property taxes from claiming the energy component of the OEPTC even though they pay their own home energy costs.
Background: One of the credits of the Ontario Trillium Benefit which individuals claim annually through the personal income tax declaration process, the OEPTC has a property tax component and an energy sales tax component. To be eligible for both components of the OEPTC, the resident must have rented or paid property tax on their main residence. When the tenant fills out their income tax and benefit return, they indicate the amount of rent they paid during the tax year in question. This forms the basis for calculating both the energy and the property tax components of the OEPTC.
But tenants in housing exempt from property taxes cannot claim the OEPTC. This is because of the Ontario Taxation Act. Section 98[5]4.ii of the Act states that “no amount may be included in determining the amount of an individual’s occupancy cost for a taxation year in respect of a principal residence that was exempt in whole or in part from municipal tax for the year and for which no grant in lieu of municipal tax is payable by the owner under any statutory authority or, if such a grant in lieu is payable, the owner has not paid it.”
There is no issue with tenants in housing exempt from property taxes being unable to claim the property tax component of the OEPTC. However, the OEPTC is currently structured so that tenants can only claim both or neither component. Therefore, tenants in housing exempt from property taxes who pay their own energy costs cannot claim the energy component.
These tenants are in the same situation as low-to-moderate income tenants who, like them, pay their own home energy costs but, unlike them, live in housing subject to property taxes. The latter tenants can claim the energy component of the OEPTC, which amounted to as much as $241 per household in 2019, whereas the former cannot. Yet both tenants face the same costs for their home energy.
Many tenants remain unaware of this as their landlords have not informed them that they are not paying property taxes. These tenants have erroneously claimed the OEPTC, resulting in reassessments by the Canada Revenue Agency with demands for repayment of past OEPTC benefits.
Recommendation: Amend the Ontario Taxation Act to allow low-to-moderate income tenants in housing exempt from property taxes who pay their own energy costs to claim the energy component of the OEPTC. This will make it consistent with the Ontario government’s stated policy intent for the OEPTC.
Timely article! The CBC has published a story about this two days ago here in Ontario with many residents of community housing being asked to repay their OTB credits. Did the Ontario Gov acknowledge your submission? Any next steps here?
Regrettably, no it did not. Prior to making this submission, we had written directly to Ontario’s Minister of Finance outlining the problem but, similarly, got no acknowledgement.
As CVITP tax preparers, we remain on guard, advising our clients that if they live in social housing, they need to be aware they may not be able to claim the OEPTC. But lack of awareness on the part of clients is only part of the problem.
Social housing providers who have the municipal property tax exemption may not be aware of how this impacts their tenants. Thus, some do not even inform their tenants that their housing is exempt from property taxes. As CVITP tax preparers, we have tried to be proactive, informing ourselves of which social housing providers in our area are exempt from property taxes. (This has involved calls to the accounting offices of some social housing providers.)
But this does not get to the heart of your question. As we have suggested, the energy and property tax credits need to be split apart, so that clients who pay their energy bills can still claim the energy portion of the tax credit. How to make this happen?
Increased media visibility helps to highlight the problem. Unfortunately, the CBC coverage I saw only goes so far: it points out that the CRA is contacting people who claimed (and may have been told by their tax preparers that they could claim) the OEPTC erroneously and is pressing them to pay back amounts claimed for prior years. I have yet to see media coverage which takes the additional step to point out why the OEPTC, in its current form, is problematic.
More lobbying of government would be helpful. (We have contacted our MPP, who is from the NDP and, not surprisingly, sympathetic.) But it probably comes down to a political calculation as the Ontario Taxation Act would need to be modified. Will the party in power take the time to amend the Act?