A Richmond non-profit, which provides affordable housing, is trying to overturn a federal decision preventing it from receiving tax rebates.
The Az-Zahraa Housing Society operates 15 units in a local residential building including six units sold to BC housing and leased back to the society at no cost.
The agreement with BC Housing allows the society to collect rent, pay operating expenses and retain the surpluses without having to pay mortgage for the units.
The rest of the units were financed through a mortgage loan from BC Housing and the society is responsible for paying the mortgage and other operating expenses.
The society tried to apply to be designated as a municipality, a parliamentary mechanism that allows entities other than municipalities that provide municipal services to receive rebates for GST and HST.
However, Az-Zahraa’s bid was denied by the Minister of National Revenue first in 2018 and again in 2022 on the basis that the society did not receive government funding.
“(T)he use of internal income to reduce loan or mortgage payments due to the (p)rovince does not constitute government funding,” reads the decision, which added renting out units owned by the province and being allowed to retain the income is not considered as government funding under CRA guidelines.
The society challenged the decision through a judicial review application in court, which was granted on June 15.
“I find that by focusing on a narrow definition of funding, the Minister’s delegate fettered her discretion and made an unreasonable decision,” wrote federal judge Sébastien Grammond.
Municipality definition questioned
Grammond explained the minister’s delegate’s decision was based “exclusively” on criteria set out on the CRA’s information sheet and refused to consider “circumstances that fell outside the four corners of the information sheet.”
He also questioned the necessity of distinguishing funding and other forms of government assistance when it was not included in the mechanism for designating municipalities.
“It is, however, difficult to see why the precise form of assistance matters and why creativity in structuring the relationship between government and providers of municipal services should be discouraged,” wrote Grammond.
“I fail to see how it can be reasonable to do so when this does not appear to serve any rational purpose and Parliament instead chose to give a wide discretion to the Minister.”
The society’s application will be referred to another delegate for the Minister of National Revenue for reconsideration.
