Many Alberta farm-based businesses will be taxed at higher commercial rates when the provincial definition of a farming operation changes at the end of the year.
Under proposed definitions, when a farm commodity is applied a grade standard, like pedigreed seed or packaged carrots, it will no longer be treated as a farming operation.
The changes to the definition of a farming operation were approved by cabinet this spring and are going through the final regulatory and review process.
“We’re looking at a system that is equitable to all,” said Richard Marz, chair of the Farm Property Assessment Review Committee.
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If farmers are providing a similar service to one offered by an off-farm company, such as cleaning grain, then that part of the farm would be taxed at a higher rate, said Marz.
“We’re looking for a point at which an operation ceases to become a farming operation and becomes a commercial operation.”
Marz said the change in the way farm businesses are taxed won’t discourage value-added activity, but will create a fairer tax system.
Alberta farmland used for crop production is currently assessed on the property’s productive value. Non-residential buildings are not taxed.
But with intensive farming operations, which represent most of the growth in the province’s agriculture value-added sector, farmland production has not increased, yet the buildings accompanying the growth are tax exempt. These operations have increased municipal infrastructure costs for such things as road maintenance, but no additional taxes are available to offset the costs, according to a discussion paper released by the Alberta government.
Marz said the government is concerned that businesses are sliding under the tax regulations in the guise of farming operations.
For example, alfalfa pelleting plants are charged a commercial taxation rate, but on-farm alfalfa or timothy baling operations are exempt.
Under the proposed changes, greenhouses with no commercial sales would be assessed as farming operations, but if a cash register is added, part of the facility used to conduct sales would be taxed at commercial rates.
Farmer-owned condominium storage in grain elevators will no longer be tax exempt.
The taxation rate of intensive cattle feedlots or hog barns would not change, unless a retail or commercial operation is attached to the operation. Then the part of the buildings used for retail would no longer be tax exempt.
William Nychka, a pedigreed seed producer in Beaverlodge, Alta., called the additional tax another expense in an industry already struggling.
Nychka doesn’t clean seed on his farm but he sells it. Under the proposed taxation system, the bulk handling facility on his farm and some of the granaries used to store the cleaned, graded grain would be taxed at a commercial rate.
“They’re now telling us that growing grain isn’t a part of agriculture, it’s a niche market,” said Nychka.
Pat Jacobs, a County of Grande Prairie councillor, said a building used to wash carrots or potatoes should not be classified as commercial. Without washing the produce, farmers wouldn’t be able to sell it.
The changes are part of a series of farm taxation changes under way. Still in the final draft stages are changes in how intensive livestock operations are taxed, farm residence tax exemptions, business taxes on farms and changes to sub classes of tax rates to allow municipalities to vary the charge on different types of farms.
