Manses Subject to Underused Housing Tax (UHT) Reporting

With very deep regret, I report that a formal appeal to the CRA on this topic has been submitted and denied. Accordingly, we have sent a broadcast e-mail to the 400 or so congregations that report owning manses, specifically to the ChurchHub primary contact and to the treasurer.

Please refer to the sample completed UHT form under Downloads.

This matter will undoubtedly stir up some concern and objections—including refusal to do it. I am very sympathetic to that view, but it is our job to flag the risk. There is an apparent duty to file—with penalty for noncompliance—even though no tax liability is likely to arise.

My thanks to Houston Mo in Pacific Mountain Regional Council for overseeing the due diligence on this.

Erik Mathiesen
Executive Officer, Finance

What is the Underused Housing Tax?

The UHT is a new annual federal 1% tax on the value of vacant or underused housing owned by non-Canadians and some Canadian companies/trusts. It is intended to deter non-residents and some companies/trusts from passively investing in Canadian real estate and to make housing more available to Canadian residents.

Because of the unique United Church Trust Model Deed and resulting trust structure for holding real property, our legal advice is that church manses are inadvertently caught up in this based on legal technicalities. Church trustees who hold title to a manse should file an annual UHT return (UHT-2900) out of an abundance of caution. Each trustee who is affected needs to file separately, including their personal social insurance number.

Why is the UHT needed?

The General Council Office, working with Pacific Mountain Regional Council, sought legal advice on this matter and submitted an appeal to the CRA. The appeal was declined. As silly as this requirement is, we recommend filing the return to avoid a potential $5,000 fine per year, even though virtually no manse will have a tax liability. Unless something changes, filers should complete a separate form for both the 2022 and 2023 years.

Note: Any incorporated ministries that own a house will typically be exempt because charity direct ownership is exempt. The argument that our congregations are charities holding title was dismissed.

Who should file?

All non-Canadian property owners and some companies/trusts are required to file the UHT-2900 form with the Canada Revenue Agency (CRA) by April 30 annually. The tax itself will likely not apply to most—if any—manses if they are occupied (exemptions 510 or 520). However, all non-Canadian property owners and some companies/trusts are required to file even if they will be exempt from paying the tax.

If a church manse title is held in the name of “the Trustees of XYZ United Church,” which is considered best practice, filing is technically required. Even worse, each and every trustee should file.

If title is held in the name of “The United Church of Canada” or in the name of the local church with no mention of trustees, then no filing is required because direct charity ownership is exempt. We are not making this up!

How to file the UHT-2900

You must have a valid CRA tax identifier number. Individual trustees should file a form and use their SIN as the identifier.

If any properties do not have a Canadian postal code, when filing the UHT form leave the postal code blank. Do not use the postal code of your local post office as this may negate your exemption.

Others have spoken to Canada Revenue Agency, and they see no issue with not having a postal code to put on the form (only road access properties will have a postal code).

Not having a postal code means that you will also be unable to access the “Underused housing tax vacation property designation tool,” but it is not necessary to do so if you are exempt as above, and the tool is not helpful in any event.

Filing extension for 2022 and 2023

The minimum penalty for late filing is $5,000 per property for any individual owner. Although April 30, 2023, was the deadline to file your UHT-2900, the CRA has extended the filing deadline to April 30, 2024, this year only, to give affected owners more time to comply. Penalties and interest will be waived provided the returns for tax years 2022 and 2023 are filed by April 30, 2024.

Possible exemptions for Canadians for the 2024 tax year

Ottawa is proposing to largely scrap filing requirements that would affect many Canadian and permanent resident homeowners and some Canadian corporations. Unless something changes in the coming weeks, the most prudent thing to do is to file a separate form for each of 2022 and 2023.

Questions?

If you have further questions, please contact CRAHelp@united-church.ca.