Friday, December 8, 2017

Bill C-323 dies — a sacrificial lamb?

Sacrificial lamb: someone or something that suffers so that someone or something more important can succeed  ~ Macmillan Dictionary

Suffers — or in the case of Bill C-323, An Act to amend the Income Tax Act (rehabilitation of historic property) — dies.

Today, there’s good news and bad news.  Well, I’ve already told you the bad news.

Last week the House of Commons Standing Committee on Environment and Sustainable Development (ENVI) effectively pulled the plug on Bill C-323.  It happened just as the committee was about to start clause-by-clause consideration of the bill (the usual last step before reporting a bill back to the House).  John Aldag, Liberal MP for the B.C. riding of Cloverdale — Langley City, made a motion that the committee recommend that the House not proceed further with the bill.  The motion passed (the Liberal members voting for it, the opposition members against) — and that was that. [1]

The full House will have the final say, and apparently can debate the matter for an hour, but there can be no doubt of the result.

Bill C-323 — a private member’s bill proposed by Peter Van Loan, an opposition member, and one that would have had an impact on tax revenues — was always going to be a long shot.  It’s remarkable that it made it this far. [2]

It’s clear the Liberals on the ENVI committee (all of whom had voted for the bill at Second Reading, except for one who didn’t vote) had mixed feelings about the demise of the bill.  The motion/report begins: “The Committee is supportive of the principle of Bill C-323 and believes that financial incentives, including tax credits, which encourage investment in the rehabilitation of historic properties and heritage places is necessary; however ….”

There then follows a list of concerns with the bill.  Most of the concerns the government had expressed earlier during the Second Reading debate.  Chief among these are:

  • “tax changes undertaken outside the [annual] budget process make it more difficult to ensure a coherent and consistent approach to fiscal management”
  • unclear effect on federal revenue (the Parliamentary Budget Officer assessed costs at $55 to $67 million in the first five years; officials from the Department of Finance stated it could be as high as $90 million a year) — Mr. Aldag later referred to the bill as a “deluxe model”, suggesting perhaps that it was too broad in terms of the number and kind (commercial and residential) of eligible properties
  • the cost to the government of administering the tax credit.

A new concern was also raised: The lack of consultation and collaboration on the measures in the bill with provinces and territories, as well as municipal and Indigenous governments.

This point is a good one, especially as, in our harmonized income tax regime, the provinces and territories would end up incurring a (small) part of the cost of any tax credit claimed.

On the bigger issue of the impact on revenue: In introducing his motion to kill the bill, Mr. Aldag had mentioned a nagging question — whether claims that the tax credits might actually make more money for the treasury than they cost were justified.  The ENVI committee had heard evidence from both the National Trust for Canada and the National Trust for Historic Preservation that the U.S. historic tax credit, the model for Bill C-323, returned $1.20 to $1.25 of tax revenue resulting from commercial rehabilitation projects for every $1.00 paid out.  But it also heard some skepticism about this.  The Department of Finance folks questioned whether the “incremental benefit” of the credit to revenues might be less, in that some of the projects that made use of the credit might have been built anyway, and would therefore have generated tax revenue without the tax credit.

As I see it, while this question might be interesting for further study, it is largely beside the point.  Some projects for rehabilitation of historic buildings might go ahead without the tax incentive, but they might not be as large or comprehensive as they would have been with access to the incentive.  And without the accountability measures that go along with historic tax credits projects almost certainly wouldn’t be as respectful of heritage features.

Even if a heritage tax credit returns only half of what it costs, that is still a lot more than most tax credits!

And then there’s the considerable spin-off effects of rehabilitation projects in their neighbourhoods and communities.  The Finance folks didn’t look at that.  As Conservative members of the committee later complained:  “… [T]heir analyses neglected to analyze the economic spinoffs such measures would have on the Canadian economy and the additional tax revenues such economic activity would generate.”

Now for the good news!

You may recall that the ENVI committee examined Bill C-323 as part of a bigger study of the federal role in heritage.  The committee’s report, “PRESERVING CANADA’S HERITAGE: THE FOUNDATION FOR TOMORROW” was released a few days ago, on December 4th.  Please, please have a look! [3]

The report has 17 terrific recommendations, including:
  • the federal government introduce legislation to, among other things, provide a statutory underpinning for the protection for federal heritage buildings; bring federal Crown corporations (like Canada Post and the CBC) under the Federal Heritage Buildings Review Office (FHBRO) policy and purview; and ensure that federal actions do not adversely effect national historic sites or properties and buildings designated by provinces and municipalities (gold star for that one!)

  • the government adopt a “heritage first” policy requiring federal departments and agencies to, when appropriate, give preference to existing heritage buildings when considering leasing or purchasing space

  • the government restore the funding level for the National Cost-Sharing Program to a minimum of $10 million a year (this program, for work on national historic sites, is chronically oversubscribed and is scheduled to return to a measly $1 million in funding next April)

  • the government consider supporting a main streets initiative modelled on Main Street America to encourage public and private investment in commercial historic buildings in rural areas and small cities (Main Street America is a program of the National Main Street Center, an offshoot of the National Trust for Historic Preservation)

  • the government support an Indigenous-led initiative that would be responsible for determining how places that are important to Canada’s Indigenous peoples should be protected and preserved, and for enhancing the capacity of Indigenous communities to preserve places important to them

And then there is:
  • the federal government establish a tax credit for the restoration and preservation of buildings listed on the Canadian Register of Historic Places

Sound familiar?! [4]  A phoenix arising from the ashes of Bill C-323?

But this one, like all the other good things in the report, is just a recommendation — not yet a real bill or policy or funding commitment.

Hon. Catherine McKenna

The Minister of Environment and Climate Change, Catherine McKenna, has 120 days to respond to the ENVI committee’s report.  So until about April 1, 2018.

She could just come back with: “Very nice, thanks so much.”

The Minister needs to know that people all across the country want to hear a clear and earnest commitment to act on the report.  Heritage groups Canada-wide need to speak up with one voice.

The National Trust for Canada is orchestrating just that. [5]

Stay tuned.

Note 1: The ENVI committee’s brief report on the bill is here

Note 2: OHA+M has devoted a lot of ink to Bill C-323 and its progress. See “Finally, a federal tax incentive for heritage?” and several later posts.

Note 3: The ENVI report is here.

Note 4: One can’t help sympathizing with the sentiments of the Conservative Party (in its dissenting opinion on the report, on page 65):

The Conservative Members of the Committee … question how the Liberal Members can simultaneously recommend the establishment of a federal tax credit for the restoration and preservation of buildings listed on the Canadian Register of Historic Places in Recommendation 11 and reject Bill C-323 which accomplishes exactly that objective. This is particularly surprising in light of the fact that a number of Liberal Members have publicly spoken out in favour of exactly such a tax credit program. We are disappointed that the Liberal Members of the Committee appear to have been instructed by the Office of the Minister of Environment and Climate Change to vote against this critical tool for protecting Canada’s historic sites.

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