Potential Tax Increase for Regulated Properties in Alberta
Alberta Municipal Affairs has released its 2022 guidelines for regulated properties, including wells, pipelines, electric power facilities, telecommunication carriers, cable distribution undertakings, railway properties, and machinery and equipment, for the 2023 taxation year. The assessment year modifiers (AYMs) have been updated in the guidelines and are detailed below. AYMs function like a cost index and are applied annually to adjust the assessment values for regulated properties, which are based on historical costs, to the current year.
The increases in the AYMs are primarily due to the higher cost of construction materials, such as steel and related products, as well as other rising costs resulting from inflationary pressures and supply chain issues.
The changes to the AYMs for the 2023 taxation year are significant for all but one of the regulated rate categories, and include a marked increase for wells.
While increases in AYMs do not always translate to corresponding property tax increases, as municipalities are able to adjust tax rates to offset increases in assessed value, many municipalities are currently facing similar economic pressures that will impact their overall revenue requirements. As a result, we are anticipating significant tax increases for most regulated properties in 2023.
Potential Relief for Certain Properties
Alberta is now in the second year of a government relief program for newly drilled wells and newly constructed pipelines. Companies with new pipeline and well properties saw significant tax savings in 2022 and will continue to see savings for two more years.
The provincial government’s relief program may be summarized as follows:
For wells drilled between:
- November 1, 2020 and October 31, 2021, three years of tax relief starting in 2022;
- November 1, 2021 and October 31, 2022, two years of tax relief starting in 2023; and
- November 1, 2022 and October 31, 2023, one year of tax relief starting in 2024.
Note that any well drilled prior to October 31 of the relevant year qualifies for government tax relief through 2024. The well license will show on a taxpayer’s assessment, but the property tax owing will be zero and remain that way until the end of the 2024 taxation year.
For pipelines licensed, constructed, and pressure tested before:
- October 31, 2021, three years of tax relief starting in 2022;
- October 31, 2022, two years of tax relief starting in 2023; and
- October 31, 2023, one year of tax relief starting in 2024.
Note that any pipeline that has been constructed, licensed, and pressure tested before October 31 of the relevant year qualifies for government tax relief through 2024. If the pipeline was licensed but not pressure tested before October 31 and reported on the annual request for information (RFI), it will remain non-assessable until pressure testing is complete, at which time the tax relief will apply as outlined above.
Again, a taxpayer’s pipeline license will show on the assessment, but the property tax owing will be zero through the 2024 taxation year.
If you have any questions or concerns regarding these changes and how they may impact your 2023 property taxes, please contact our regulated property tax experts at industrial@ryan.com.
Technical Information Professional
Lauren Sky, CPA, CMA
Director, Regional Leader
Property Tax Complex
403.456.9602