Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 124044r
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
The meaning of the term ‘rent-geared-to-income’ housing
This letter is further to our interpretation letter dated [mm/dd/yyyy], […], which provided information on the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of rent-geared-to-income (“RGI”) housing. You subsequently requested a ruling on whether the supply of RGI housing includes the supply of market affordable housing to low-to-moderate-income households as these households also benefit from government subsidies. We apologize for the delay in responding.
In addition, in your telephone conversation with […][a CRA official] on [mm/dd/yyyy], you requested a ruling on whether funding that is provided by […][Administrators] pursuant to the funding formula set out in […][Provincial Act B] constitutes ‘government funding’ for municipal designation purposes.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand the facts as follows from the information you provided and from information posted on the Internet:
1. […][Provincial Act A] was enacted by the Province […]
2. Effective [mm/dd/yyyy], [Provincial Act A] was repealed and replaced by […][Provincial Act B]
3. […][The purpose of the legislation in Provincial Act B].
4. […]. Subsection […] of […][Regulation X under Provincial Act B] states that […][the organizations] set out in [...] of that Regulation are designated as [Administrators] under subsection [...] of […][Provincial Act B].
5. Neither [Provincial Act B] nor its Regulations define the terms ‘affordable housing’ or ‘market affordable housing’.
6. […] of [Provincial Act B], section […] states:
“rent-geared-to-income assistance” means […];
[Administrators]
7. According to […][the relevant Provincial Ministry] ([…][the Ministry]) […] affordable housing programs are overseen by local [Administrators] under the legislative authority of [Provincial Act B]. To meet local housing needs, [Administrators] use […] funds to establish, administer and fund housing […] programs and services. [Administrators] can also provide housing directly.
8. According to [the Ministry], joint federal and provincial funding is available for [Administrators] through the Investment in Affordable Housing (“IAH”) program that provides funding to improve access to affordable housing across the Province. Canada Mortgage and Housing Corporation (“CMHC”) and [the Ministry] have entered into bi-lateral agreements to provide for the IAH program.
* [Administrators] have the flexibility to select […][ the program components].
9. [The Ministry] will enter into agreements […] with [Administrators] for the purpose of establishing the roles and responsibilities of [Administrators] as well as an accountability framework for [Administrators] and the Province.
10. Each housing provider is required to enter into an agreement with an [Administrator] that defines the terms of the particular program including the funding and the ongoing requirements to provide affordable housing for the term of that program. […].
[…][The Corporation]
11. […](the “Corporation”) was incorporated in [yyyy] under the legislative authority of [Provincial Act A], with a [housing mandate] in […][Region Y] of the Province.
12. According to […], since [yyyy], the Corporation has been [...][administering] affordable housing for [Region Y] and is dedicated to providing and advocating for quality affordable housing through a combination of programs and services. The Corporation provides […][housing options].
13. […][About the subsidized rent program][…].
14. […][About the rent assistance program].
15. […] of [Regulation X] under [Provincial Act B], lists [Region Y] as the [Administrator] for the service area of [Region Y]. According to the Corporation’s website, the Corporation acts as the [Administrator] on behalf of [Region Y] to administer social housing in the region.
16. The Corporation has stated that it provides […][certain types of housing subsidies].
17. The Corporation was determined to be a municipality pursuant to paragraph (b) of the definition of “municipality” in subsection 123(1) of the ETA, effective [mm/dd/yyyy].
RULING REQUESTED
You would like to know:
1. Whether the supply of market affordable housing for low-to-moderate-income households is included in the definition of RGI housing under the administrative policy and eligibility criteria for municipal designation purposes.
2. Whether funding that is provided by [Administrators] to housing providers under the funding formula set out in [Provincial Act B] constitutes ‘government funding’ for municipal designation purposes.
As noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretation Services, the Canada Revenue Agency (CRA) will not issue a ruling where all of the pertinent facts cannot be established. In this case, we are unable to issue a written ruling as (a) your request is general in nature and (b), the eligibility for municipal designation depends on a number of specific conditions being met. However, we are pleased to provide an interpretation, which is a general explanation of the applicable provisions, and how the legislation and/or administrative policy may apply.
INTERPRETATION GIVEN
Municipal designations
Municipal designation is an exercise of statutory discretion guided by administrative policy and eligibility criteria to grant a tax benefit to a person who is engaged in an activity contemplated by the Minister of National Revenue to qualify for this benefit. Accordingly, a person may be designated to be a municipality where the person is engaged in an activity contemplated under the administrative policy and eligibility criteria. Whether any service is a municipal service will be a question of fact, where an evaluation of the pertinent facts and documentary evidence is made on a case-by-case basis. The ETA does not define the phrase “municipal service” nor does it set out legislative criteria for municipal designation.
Rent-geared-to-income housing
The supply of long-term residential accommodation to tenants on an RGI basis by a charity, non-profit organization or co-operative housing corporation that receives government funding to assist it in providing this accommodation qualifies as a municipal service for designation purposes. The eligibility criteria that apply to this activity are outlined in GST/HST Info Sheet GI-124, Municipal Designation of Organizations Providing Rent-Geared-to-Income Housing (GI-124).
Info Sheet GI-124 states that an organization can be designated as a municipality if it meets all four eligibility criteria listed below:
1. the organization is a charity, a cooperative housing corporation, a non-profit organization or a public institution;
2. the organization supplies long-term residential accommodation within a program to provide housing to low-to-moderate-income households;
3. more than 10% of the housing units in a particular housing project are provided on an RGI basis; and
4. the organization receives funding from a government or municipality to assist it in providing the accommodation within a program to provide housing to low to moderate-income households.
Under the administrative policy and eligibility criteria, RGI housing means housing for individuals (tenants) whose eligibility for occupancy or reduced lease payments depends on a means or income test. As a result, an organization must demonstrate that the rent for the RGI units is calculated in relation to the tenant’s household income or that there is an income-based test for occupancy in an RGI unit. Where this is the case, the supply of long-term residential accommodation to tenants on an RGI basis is an activity that may qualify as a municipal service for designation purposes, providing the other criteria are met.
Terms such as ‘market affordable housing’ and ‘affordable housing’ are broad or overarching terms that commonly refer to a full range of housing options that meet the general requirements of affordability based on household income. It is impossible to definitively state whether CRA’s administrative policy and eligibility criteria will apply to all, or only a subset, of these housing options without examining each case. As municipal designation is an administrative process, before municipal status can be granted, the housing provider must demonstrate with documentary evidence that the activity for which municipal designation is being requested satisfies the CRA’s administrative policy and eligibility criteria. This means that a particular type of affordable housing will not automatically qualify as RGI housing for municipal designation purposes, unless the CRA’s administrative policy and eligibility criteria is completely satisfied.
Government Funding
One of the eligibility criteria listed above requires that in order to be designated as a municipality, an organization must receive government funding to subsidize the provision of RGI housing to individual tenants. Government funding may be provided by a municipality (including a determined municipality), by a province or territory, or by the federal government. Acceptable types of funding include on-going subsidies that make up the difference between the organization’s costs to operate the housing units and the RGI paid by the tenants to the organization, and certain capital funding. The funding received must be linked to the organization’s provision of RGI housing within a program to provide housing to low-to-moderate income households. An example of capital funding would be where an organization is required to provide RGI housing for [#] years pursuant to the funding agreement. If the organization does not respect this condition, it will be required to repay the capital funding to the funding organization. Such funding would be considered to be linked to the provision of RGI housing.
Where an organization such as an [Administrator] has been determined to be a municipality pursuant to paragraph (b) of the definition of “municipality” in subsection 123(1) of the ETA, funding provided by such as organization will be considered acceptable funding if it is linked to the recipient’s provision of RGI housing within a program to provide housing to low-to-moderate-income households.
Designated municipalities - rebates
An organization that has been designated to be a municipality may be entitled to the public service body (PSB) rebate of the GST/HST paid on eligible property and services acquired by it, but only to the extent that the eligible property or services acquired are intended for consumption, use or supply in the course of the activities for which it has been designated (e.g., in the course of providing RGI housing).
The PSB rebate calculation is based on the “non-creditable tax charged” in respect of property or services paid or payable in a claim period. Generally, non-creditable tax charged is the GST/HST paid or payable on an eligible purchase or expense that a PSB cannot recover in any other way (for example, input tax credits [ITCs], refunds, rebates) other than by claiming the PSB rebate. For more information on how to calculate the PSB rebate for a designated municipality, please refer to GST/HST Guide RC4034, GST/HST Public Service Bodies’ Rebate. For detailed information on the non-creditable tax charged, refer to GST/HST Memorandum 13.5, Non-creditable Tax Charged.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 416-200-6519. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Marlon Latchana
Municipal Sectors Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
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