What is a Section 357 Appeal ?
What is the purpose of Section 357 ?
It has historically been used to address damages that are physical in nature and enable municipalities to provide tax relief where a property was partially or fully demolished due to flood or fire and stipulates that the condition needs to be in place for a minimum of 90 days in the preceding year in order to be eligible.
How does the process work ?
- An application is submitted to the Town or City on the prescribed form by February 28th
- The municipality forwards the application to MPAC for review and validation
- MPAC provides their recommendation to Finance staff at the municipality
- A hearing notification is issued to the taxpayer and their representative advising when the matter goes to Council
- Staff recommendations for adjustments and/or recommendations for no adjustment are presented to Council and ratified
- Mailed decisions are subject to appeal if the result is not satisfactory
- The Assessment Review Board (ARB) then puts the appeal into its stream of hearings and traditional appeal proceeding measures apply
When do I apply for a Section 357 ?
The filing deadline is February 28th of each year and the application itself is applicable to the prior taxation year. Applications made on or before February 28th, 2021 are seeking relief for the taxation year 2020.
How does it work in the context of COVID-19?
To be honest, we don’t know yet. Property tax pundits, of which there are many in our own unique space in the world, are suggesting that a precedent ARB decision Canadian Property Holdings (Ontario) Inc. v Municipal Property Assessment Corporation, Region 15 opened for the door for a broader interpretation of damages. People in the property tax community are of the opinion that a government lockdown that imparts damages falls within the realm of this previous Board decision.
We expect most municipalities to deny these applications and force the matter to be heard before the Assessment Review Board (ARB). This is where it may get interesting as the push and pull of fiscal governance and taxpayers rights square off.
How might “damage” be evaluated or quantified ?
The most significant and simplest way to measure the impact is to look at revenue and income before and after the damage has been inflicted. In the cases of physical damage, there is normally an estimate of what it would cost to replace that which was lost.
With a hospitality property, presumably it would be the reduction in net income that is captured and subsequently applied in the capitalization of the income stream to show the loss in value.
Specifically this can be in the form of lost revenue from banquets and meeting space and/or loss in revenue arising from a restriction on eat-in dining and limits on gathering size that has essentially eliminated weddings, receptions and other large events that would have driven room nights and food and beverage revenue.
What might I expect in terms of an outcome if I file a Section 357 or 323 Application for tax relief ?
You can expect some dialogue with MPAC and the municipality and a variety of potential response ranging from;
- Denied, no relief and you can appeal to the ARB if you so choose;
- Partial relief with limited reasoning on how or why the relief was granted or;
- Full relief as quantified and requested within your original application