We have good news from two provinces regarding the application of land transfer tax to charities that are restructuring.
The Ontario Budget 2010 proposes regulatory amendments to the Ontario Land Transfer Tax Act to exempt certain transfers of land to registered charities from provincial land transfer tax. The exemption will facilitate reorganizations of charities. Transfers of land after March 25, 2010 from trustees to a non-share capital corporation or between two non-share capital corporations will be eligible for the exemption if:
- the non-share capital corporation will be continuing the same charitable purpose for the same members; and
- no consideration is paid, other than the assumption of any existing liabilities registered on the land.
On March 26, 2010, the Ontario Ministry of Revenue released a policy stating that until this new regulation is filed, land transfer tax must be paid on all transfers of land to charities. The refunds of tax paid by charities on exempt transfers will be processed after the regulation is filed.
The City of Toronto municipal land transfer tax provides that no tax is payable on a transaction that is exempt under the Land Transfer Tax Act. Therefore, once the Ontario regulation is filed, the qualifying transfers of land located in Toronto will also be exempt from municipal land transfer tax.
The Manitoba Budget 2010 proposes that “transfers between a registered charity and its wholly controlled non-profit organization will be exempt from land transfer tax on transfers of title registered after June 1, 2010.” While such transfers may become exempt from land transfer tax, charities should be aware that transfers to a non-profit that is not a registered charity should be done at fair market value to avoid issues under the Income Tax Act .