“The government has made the decision that medical marijuana as well as any other federally regulated narcotic will not be eligible for farm classification for property taxes,” Coralee Oakes, Minister of Community, Sport and Cultural Development, told the Times Colonist on Tuesday.
Many local governments have been raising the alarm about the so-called “llama loophole” that enabled new medical marijuana grow-ops to claim farm status to avoid paying property taxes.
The term dates to 2012, when a Chilliwack business owner who had placed llamas on his land successfully argued that his commercial property was being used for agriculture. That saw his property tax bill in 2013 drop to about $1,400 from the previous year’s $156,800.
In April, new federal rules shifted marijuana production to licensed commercial growers from patients. Of the 13 approved producers, five are in B.C., including one in Central Saanich and one in Nanaimo.
The province will continue to view medical-marijuana production as an allowable farm use within the Agricultural Land Reserve that should not be prohibited by local government bylaws, Oakes said. This is consistent with the Agricultural Land Commission’s interpretation of the Agricultural Land Commission Act.
The change will take effect for property assessments in the 2015 taxation year, Oakes said, and the large, industrial-like growing operations will be taxed according to the physical infrastructure being built.
“Local governments were really concerned with how do we grapple with the taxation piece, with the fire and policing and all of those. So we just wanted to ensure there was clarification from assessment purposes what will be going forward,” Oakes said.
The province’s property tax rules set rates based on factors including how the land is used. Benefits of farm class include low land values and reduced tax rates. Farm tourism, sand and gravel operations and wineries — all approved activities on ALR land — also don’t qualify for farm classification for assessment and property tax purposes.
The announcement was cheered by Juan de Fuca Electoral Area director Mike Hicks, who had raised the issue of potential massive property tax losses for local governments.
“That’s wonderful. Not that I advocate more taxes for anyone, but it only makes sense,” Hicks said.
A new grow-op is planned for an Otter Point industrial park next to the new Juan de Fuca administrative headquarters. Hicks said the owners have said they have no intention of claiming the farm tax status, but if they did, the potential loss of tax revenue would be huge.
“If the value of the property was $495,000 — $195,000 for the building, $300,000 for the land — the present taxes would be $7,300. If and when they apply [for farm status], their tax bill will be $172,” Hicks said.
“The interested companies that are trying to establish in Juan de Fuca in our industrial park are bending over backward to say they want to pay their fair share of taxes,” Hicks said.
Federal regulations for medical marijuana came into effect April 1.
