- Property Classification and Tax Treatment of Farm Properties
- The Process
- Property Codes
- Related Information
To provide information about how the Municipal Property Assessment Corporation (MPAC) collects data as part of its process for valuing farm properties.
Section 19(1) of the Assessment Act directs MPAC to assess land based on its current value. However, section 19(5) of the Assessment Act provides MPAC with the authority to value farm property at their value as farms, and not at their potential resale value for other uses, such as shopping plazas or subdivisions.
Accurate data is necessary to produce accurate current value assessments. This data is updated regularly using a variety of sources, including:
- land title documents registered at the Ontario Land Registry Offices;
- building permits issued by local municipalities;
- discussions and correspondence with property owners;
- on-site property inspections; and
Section 10 of the Assessment Act provides MPAC with the right of access to all land and buildings for the purpose of making a proper assessment, provided that:
- MPAC staff visiting a property produces proper MPAC-issued identification;
- the inspection is conducted at a reasonable time; and
- the inspection or request for information is for the purpose of determining the assessment of the property.
Sections 10 and 11 of the Assessment Act require a property owner to provide MPAC with all requested information relating to the assessment of that property, either at the time of inspection where an adult is present, or by responding to a letter. This information is required to be returned within a reasonable time.
Property Classification and Tax Treatment of Farm Properties
Properties assessed as farmland are, by default, taxed at the residential rate until the farm property classification is approved by the Ministry of Agriculture, Food and Rural Affairs (OMAFRA).
Farm properties that meet the requirements of Section 8 of Ontario Regulation 282/98 will be identified as eligible for the farm property class by OMAFRA and are typically taxed at 25% of the municipal residential rate.
It should be noted that municipalities have the option to apply a tax ratio of less than 25% if they pass a bylaw on or before April 30 of the tax year.
Farmland that does not qualify for inclusion in the farm property class is valued as farmland but included in the residential property class and taxed at the full residential rate.
If the farm house is occupied by the farmer, the farm residence and one acre of farmland surrounding it is included in the residential property class and taxed at the full residential rate. If the farm house is occupied by a non-farmer, the residence and any land and/or buildings not used for farm purposes are included in the residential property class and taxed at the full residential rate.
If a property owner disagrees with the amount of farmland assessment or whether or not the property should be assessed as farmland under section 19(5) of the Assessment Act, the owner may file a Request for Reconsideration (RfR) with MPAC.
However, if the property is not in the farm property class and the owner believes it qualifies , the owner may file a RfR with OMAFRA. Prior to filing a RfR with OMAFRA, issues regarding the assessed value or whether it should be assessed as farmland under section 19(5) of the Assessment Act have to be resolved with MPAC.
For additional information on OMAFRA’s Farm Property Class Taxation Program and the handling of disputes relating to the Farm Property Class, please refer to Sections 29-31 of Ontario Regulation 282/98 and the information provided on the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) website.
If someone over the age of 18 is home, the MPAC property inspector shows an MPAC-issued identification card, and explains the purpose of the visit. All information collected from a property inspection or verification is updated on MPAC’s database. The inspector may also take photographs of the property for their records.
MPAC will usually complete a physical inspection of a farm property when:
- a building permit is issued by a municipality;
- a farm property is sold (this activity is referred to as a sales investigation)
- a farm is inspected for assessment update purposes;
- a property owner submits a Request for Reconsideration; or
- a property owner files an appeal with the Assessment Review Board.
When an MPAC representative is inspecting a farm the following steps are taken:
- where an adult is present at the property, the MPAC staff member shows MPAC-issued identification and explains the purpose of the visit;
- the MPAC representative will determine occupancy and use of land and buildings on the farm property (i.e.,tenants)
- the MPAC representative will review and inspect all buildings on the property to ensure MPAC’s records accurately reflect size, condition, building characteristics and amenities;
- the MPAC representative may also take photographs of the property for their records;
- the MPAC representative will review all farmland with reference to the land classification system. This applies not only to cleared lands, but to all other lands such as swamp, gullies, forested areas, etc., which are part of the farm;
- they will discuss the characteristics of the farmland with the farmer including whether the farmland has been tiled and the type of tiling will be recorded along with the corresponding acres;
- they will record the type of farming operation; and
- the MPAC representative will record the source of the information, (i.e., who they spoke with) and the date of the inspection along with a contact phone number.
MPAC uses property codes to identify the physical characteristics reflecting the predominant use of the property. Click here to view a complete list of Property Codes, refer to the 200 series for farm properties.
Properties that are farmed by the owner and/or tenant are valued using rates based on bona fide farmer-to-farmer sales.
Although no specific definition of farmland is provided in the Assessment Act, farmland is generally described as “any tract of land devoted solely to agricultural purposes, under the management of a tenant or owner,” including but not limited to:
- field crops;
- livestock raising, breeding and grazing (i.e., cattle, swine);
- poultry rearing, hatchery;
- dairy farming;
- fruit orchards and vineyards;
- maple syrup producing properties (subject to criteria set out in Ontario Regulation 286/04);
- board and maintenance of horses (subject to criteria set out in Ontario Regulation 100/05);
- horticulture, including sod, nursery stock, and Christmas trees;
- fish farming including licensed ponds that are used to propagate/culture and sell bass and trout;
- fur farming; and
This definition of farmland does not include the use of a property to the extent it is used for:
- retailing of goods or services;
- storage of primary agricultural commodities for others as a business operation;
- maintenance of livestock or other animals for recreational purposes;
- manufacturing of primary agricultural commodities;
- the breeding and raising of pets.
The primary factors used in determining a farm’s current value assessment are farmland, residence, residence site, farm outbuildings and other buildings.
Farmland values are based on the land’s agricultural capability and other factors, such as location. The value of a farm is not based on other potential uses for the land (e.g., development). In determining farmland rates, only sales of land to be used for farm purposes are analyzed.
Farmland is classified into six different quality classes, with Class 1 farmland having the highest agricultural capability and therefore the most valuable type of farmland. All farms in Ontario are assigned to a farm neighbourhood for establishing a current value. Farm neighbourhoods capture differences in location and seek to take into account common factors such as climatic region, soil type and suitability, and similar properties selling for similar prices per acre. Within each farm neighbourhood, adjustments are made to reflect different soil quality classification.
1) Climatic Zones
Climate has an effect on the variety of crops that can be grown, the yield per acre and the risk involved in production. Ontario has been divided into seven climatic zones on the basis of:
- length of growing season;
- summer and winter mean temperatures; and
The climatic zones indicate the length of the growing season. For example, climatic zone 1 indicates a good growing season because it is the longest in Ontario while climatic zone 7 indicates a fair growing season because it is the shortest in Ontario. Generally, the further north, the shorter the growing season and therefore crop options are reduced.
2) Soil Quality
MPAC uses a Land Classification Point System as a guide for valuing farmlands based on the agricultural capability. The land is assigned to different classifications based on factors which measure the agricultural capability of the soil.
The two soil types found throughout Ontario are mineral and organic.
Mineral Soil Classification
Mineral soil is the inorganic layer of earth composed of sand, silt, and clay, in varying amounts, with less than 20% organic matter in the surface layer. It is the most predominant soil type found throughout Ontario.
There are six classes of mineral farmland.
Class 1 - This land has good drainage, good loam texture, and is nearly level. A high level of farm production is possible.
Class 2 - This land is subject to moderate limitations for farm crop production. These limitations may include soil texture, drainage, rolling topography, moderate erosion, moderate stoniness, or a combination of two or more of these factors.
Class 3 - This land has similar limitations to those of Class 2 but to a greater extent.
Class 4 - This land is subject to severe limitations in farm crop production such as susceptibility to erosion, too stony, or too poorly drained to be cultivated frequently.
Class 5 - This land is generally unsuited to cultivation, but can be used for grazing. It is subject to similar limitations as Class 4, but to a greater extent.
Class 6 - This land should be kept in vegetation because of steepness of slope, severe erosion, shallow soil, or other features that make cultivation impractical. It may be suitable for moderate grazing.
The factors that affect the classification of land are:
- Topography can be classified as level, gently sloping, rolling, hilly or steep.
- Soil texture refers to the makeup of the land and identifies it as being either sand, sandy loam, loam, clay loam or clay.
- Stoniness refers to the amount of stones in the soil. Three stoniness classifications are used: stone free, moderately stony or very stony. Very stony means that the land has too much stone for cultivation, but is suitable for use as pasture.
- Drainage refers to the ease of movement of water and air in the soil or to the height of the water table. Drainage is categorized as rapid, good, fair or poor.
- Flooding refers to the periodic flooding of land by overflow from streams or rivers.
- Erosion refers to the loss of soil by water and wind. The three classifications used are none (no surface soil removed), moderate and severe (all surface soil removed).
- Depth to Bedrock refers to the depth of the soil over the underlying bedrock.
Organic soil, or more commonly called peat or muck, has developed from plant residues that have been preserved by the presence of a high water table.
There are six classes of organic farmland:
Class 1 - This land has no water, topographical or Ph limitations and is deep and level. These soils are at an intermediate stage of decomposition.
Class 2 - This land has one limitation which restricts its use in a minor way. The limitation may be woodiness, extreme acidity or alkalinity expressed by a Ph factor, flooding, topography, depth or climate.
Class 3 - This land has moderately severe limitations which restrict the variety of crops or require special development and management practices such as crop rotation and fertilization.
Class 4 - This land has severe limitations which restrict the variety of crops or require special development and management practices such as crop rotation and fertilization.
Class 5 - This land has such severe limitations that it is restricted to the production of perennial forage or other specially adapted crops.
Class 6 - This land is capable of only producing indigenous crops. Improvement practices are not feasible.
The following factors are considered by MPAC when classifying organic soil:
- stages of decomposition;
- the acidity or alkalinity of the soil, as expressed by a Ph factor;
- wood content as expressed as a percentage of the organic volume;
- depth of organic material over sand, silt, loam, clay, marl, or bedrock ; and
- the granular texture of the sub-soil.
Important Note about the Farm Forestry Exemption (FFE)
Section 3.(1)19 of the Assessment Act allows an exemption of one acre of wooded land for every ten acres on a farm property.
The following are some of the factors considered MPAC when applying a farm forestry exemption:
- the forestry exemption cannot exceed 20 acres under individual ownership in any one municipality ;
- in instances where there are two or more portions of forestry land of different soil classes, the exemption will be based on the values of the highest rated land ; and
- in instances where the land is leased, the entire parcel must be leased and used for farming purposes in order to qualify for a forestry exemption.
B) Farm Structures
A farm outbuilding is any improvement, other than a residence, that is used for farming operations (e.g., a barn, silo, grain bin, etc.). Farm outbuildings are valued on the depreciated replacement cost approach, taking into account their design, age, size, quality of construction, etc.
For information about how the cost approach is applied to farm structures, see Cost Approach: A Report on MPAC Methodology on Agricultural Structures.
When an MPAC representative is valuing farm structures or outbuildings, the following steps are generally taken:
- describe and record each farm structure, by type (i.e., bank barn, implement shed, etc.) based on design and use;
- measure the farm structure if necessary; and
- record the size, age, type of construction, condition, height, quality and number of storeys;
- Usage (i.e.,farm, residential or commercial/industrial purposes).
C) Residential Structures
Residences and residential auxiliary buildings and the land associated with them which is not used for farm purposes are assessed at their current value. Refer to the Assessment Procedure for the Residential Data Collection through the Property Inspection Process.
- Both primary and secondary residential structures are assessed using the cost approach and are valued based on their size, age, condition, quality and amenities.
- The structure value plus the land associated with the structure, normally one acre, is placed in the residential property class.
- If a farm residence is occupied by the person(s) farming the property, the land associated with the residences, normally one acre, is valued at the farmland rate.
- If the residence is occupied by someone other than the person(s) farming the property, it is considered a non-farm residence and the non-farm land/buildings are valued and classed at the residential rate.