Using Tax Exemptions to Encourage Conservation
In the early 1990s, property values in the islands rose dramatically. Some long-time residents struggled to keep up with the resulting rise in property taxes. Owners of large, natural properties were faced with the difficult choice to sell their land, or subdivide or log the land to help cover the costs.
Concerned that the trend in rising property values might trigger a major loss of ecosystem values in the islands, the Islands Trust searched for a way to encourage private land conservation. Property owners in B.C. are rewarded for forestry and agricultural activities with property tax exemptions. The Islands Trust proposed using property tax exemptions to reward land conservation.
Properties left in their natural state put few demands on taxable services. In fact, natural ecosystems give back to their communities, providing clean water and air, wind and noise breaks, and beauty to the properties around them. A property tax exemption for conserving natural values compensates people for providing a benefit to their community.
NAPTEP (Natural Area Protection Tax Exemption Program)
NAPTEP is a conservation tax exemption program offered by the Islands Trust and Islands Trust Fund. NAPTEP provides an annual tax exemption of 65% of the assessed value of land protected with a conservation covenant. By encouraging landowners to protect land with covenants, the program assists local governments in achieving their goal to protect ecosystem values without the need to spend tax revenue to purchase the land.
To apply for the tax exemption, a landowner registers a conservation covenant with the Trust Fund Board on their property's title, permanently protecting the natural values on their land. With a covenant on the property, the landowner is then eligible to receive a Natural Area Exemption Certificate from Trust Council, providing the tax exemption for the portion of land protected by the covenant.
Legislation, Regulation, and Policies
The Islands Trust's power to provide property tax exemptions for conservation is provided in section 7.1 of the Islands Trust Act. The Act outlines which taxes NAPTEP provides exemption from, how a tax exemption certificate is issued, and the penalty if the covenant is breached and certificate cancelled.
The Islands Trust Natural Area Protection Tax Exemption Regulation identifies the types of natural values and amenities eligible for the exemption program. They include areas relatively undisturbed that are:
- good examples of important ecosystems such as forests over 80 years old, woodlands, water features, sparsely vegetated natural areas, coastal bluffs, etc.
- key habitat for native plant species or plant communities
- critical habitat for native animal species in relation to breeding, rearing, feeding or staging
- special geological features
The Act requires the Islands Trust seek the agreement of each regional district board before implementing NAPTEP on the islands in their jurisdiction. The following Trust Council bylaws identify these agreements and the islands eligible for NAPTEP:
Islands Trust Council Bylaw No. 115 prescribes the fees for issuing Natural Area Exemption Certificates. Trust Council Policy Administrative on Natural Area Protection Tax Exemption Program sets out the application process for the program and authorized covenant holders.
To qualify for NAPTEP, a landowner must protect natural features on their land with a conservation covenant. The Islands Trust Fund created a standard covenant with minimum requirements needed to enter into the program. View the Annotated Standard Covenant for NAPTEP.
Financial Implications of NAPTEP
The tax exemptions available through NAPTEP do not decrease government taxation income. To compensate, exempted taxes are shifted to other taxpayers in the tax jurisdiction. This practice is the same for other tax exemption programs (e.g. Homeowner Grants, Agricultural Land Reserve exemptions, Heritage property exemptions). Because taxes are shifted not just to other island property owners, but throughout regional districts and the province, our experience with NAPTEP is that for each new landowner who joins the program, non-NAPTEP property owners see an increase in property taxes that amounts to pennies at most.
For more information, read Hypothetical Tax Shift in the Thetis Island Local Trust Area (Cowichan Valley Regional District)
Property Tax Incentive Programs in Other Jurisdictions
In 2008, the Province of Nova Scotia implemented the Conservation Property Tax Exemption program. The program exempts a landowner from paying property taxes on the portion of a property protected with a covenant (easement). The program also provides a grant to municipalities in lieu of taxes to compensate for lost revenue. For more information, visit the Government of Nova Scotia.
In 2009, the Province of Ontario introduced the Conservation Land Tax Incentive Program. The program provides tax relief on properties identified by the Province as having eligible natural features. A covenant is not required, but applicants must prove the land is in a natural state. Applicants must apply for the program each year to receive the tax exemption. For more information, visit the Ministry of Natural Resources.