A tax loophole that gave medical marijuana factories a massive tax break is being nipped in the bud by the B.C. government.
“The government has made the decision that medical marijuana as well as any other federally regulated narcotic will not be eligible for farm classification for property taxes,” Coralee Oakes, Minister of Community, Sport and Cultural Development told the Times Colonist on Tuesday.
Many local governments have been raising the alarm about the so-called “llama loophole” that enabled new medical marijuana grow-ops to claim farm status to avoid paying property taxes.
The term dates to 2012, when a Chilliwack business owner, who had placed llamas on his land, successfully argued that his commercial property was being used for agriculture. That saw his property tax bill in 2013 drop to about $1,400 from the previous year’s $156,800.
The province will continue to view medical-marijuana production as an allowable farm use within the Agricultural Land Reserve that should not be prohibited by local government bylaws, Oakes said. This is consistent with the Agricultural Land Commission’s interpretation of the Agricultural Land Commission Act.
Oakes said with the change taking effect for property assessments in the 2015 taxation year, the large, industrial-like growing operations will be taxed according to the physical infrastructure being built.
“Local governments were really concerned with how do we grapple with the taxation piece with the fire and policing and all of those. So we just wanted to ensure there was clarification from assessment purposes what will be going forward,” Oakes said.
The announcement was cheered by Juan de Fuca Electoral Area director Mike Hicks who has raised the potential for massive property tax losses to local governments.
“That’s wonderful. Not that I advocate more taxes for anyone but it only makes sense,” Hicks said.
A new grow-op is planned in an Otter Point industrial park – next to Hicks’ new Juan de Fuca administrative headquarters. Hicks says the owners have said they have no intention of claiming the farm tax status but the potential lost tax revenue is huge.
“If the value of the property was $495,000 – $195,000 for the building, $300,000 for the land – the present taxes would be $7,300. If and when they apply [for farm status], their tax bill will be $172,” Hicks said.
“The interested companies that are trying to establish in Juan de Fuca in our industrial park are bending over backward to say they want to pay their fair share of taxes,” Hicks said.
Federal regulations for medical marijuana came into effect April 1.