Canada still moving forward with tax that could hit vacation homes

While Canadian officials made clear several months ago that seasonal homes that are not winterized would be exempt from the tax, the Canadian plan continues to worry both Americans who own property in Canada and sympathetic politicians in Southern Ontario.

Noting that his family has owned a home in Fort Erie’s Thunder Bay Colony for a century – and that his mother has spent parts of all her 94 years there – Eric Clauss of Buffalo said: “The tax is not really something that’s appropriate for people that are committed to the community like she is. It’s our understanding that this tax is a way to respond to land speculators. But if you want to go after land speculators, don’t go after somebody who’s been there for 100 years.”

Meanwhile, Tony Baldinelli, the member of the Canadian House of Commons who represents Niagara Falls and Fort Erie, took to the floor of the Parliament in Ottawa earlier this month to object to the proposed tax, saying it would harm Americans who own homes on the Niagara Peninsula.

“These longtime property owners are considered valued members of our Niagara community,” Baldinelli said. “They are part of our social fabric and they support our local economies. It would be wrong to target them specifically in Niagara with a punitive levy such as the Underused Housing Tax.”

So far, though, the Canadian government of Prime Minister Justin Trudeau is continuing to push the new tax – which, if approved by Parliament, would have to be paid for the first time in April 2023 for the 2022 tax year.

The tax isn’t really aimed at Americans who own properties along Canada’s Lake Erie waterfront. Instead, Canadian officials have said, it’s aimed at foreign investors who in recent years have snapped up condos in Toronto and Vancouver, thereby exacerbating a shortage of affordable housing in both cities.

Authors of the proposed tax tried to insulate vacation properties from the new tax in a number of ways. In addition to adding a provision exempting homes that are not winterized and homes located on roads that are not maintained in the winter, foreign owners won’t have to pay a tax on a vacation home if they occupy it for more than four weeks a year or if those properties are located in a census agglomeration with fewer than 30,000 residents.

But Americans who own vacation homes on the Niagara Peninsula raise several concerns about those exemptions. They question how the Canadian government will keep track of which properties are winterized and which aren’t. They say that some families use their homes for weekends for a few weeks every summer, but that those visits may not add up to the four-week stay required to be exempt from the tax. And they worry that Fort Erie’s population in the last Canadian census was 30,710 – meaning the town is just a bit too populated to qualify for the exemption the Canadian government wrote for vacation homes in smaller communities.

“My cottage isn’t even heated or insulated, so I might have a chance to squeak out of this,” said JoAnn Boehm of the Town of Tonawanda, whose parents built a cedar cottage in Ridgeway, Ont., in 1963, and who has spent time there nearly every summer of her life. “But I have a number of friends on the waterfront that are scared to death about this tax.”

Ellen and Gerald Stay, longtime Williamsville residents who now split their time between Florida and Fort Erie, are among them. Ellen Stay said she and her husband would probably want to sell their longtime home in the Thunder Bay Colony if the tax is implemented.

Asked how much more the couple would have to pay annually in Canadian taxes if the proposal is finalized, she said: “We think, at a minimum, it will be $20,000. … It’s just too much. It’s absurd.”

So far, such arguments have not been able to sway Canada’s Liberal government to further amend the tax to clearly exempt vacation properties in Southern Ontario. But Baldinelli, the member of the Canadian House of Commons, said in an interview that the tax proposal could still be amended either when the House of Commons takes up the proposal or when the Canadian Senate considers it.

“The one good thing is that we’re still debating the legislation and it has not yet passed, so that still allows us to bring forward the issues and possibly get some changes,” Baldinelli said.

Meanwhile, Rep. Brian Higgins, a Buffalo Democrat, identified two courses of action he could take if the Canadian Parliament actually approves the tax. He said the tax likely violates the U.S.-Mexico-Canada Agreement, the trade deal linking the three countries, so he could file a legal challenge. Higgins said he also could propose a reciprocal, retaliatory 1% tax on properties that Canadians own in the U.S.

Higgins, who spoke to U.S. Trade Representative Katherine Tai about the issue two weeks ago, stressed that Canada appeared to be imposing the new tax on Niagara Peninsula vacation home owners without intending to do so.

“These are not foreign nationals that are buying up property in Vancouver and Toronto,” he said. “This is a unique class of cottage and and property owners that use their properties on a seasonal basis, that contribute to the community.”

They’re people like Jerry Clauss, Eric Clauss’ 94-year-old mother. She said that when she’s at Fort Erie’s Thunder Bay Colony, she tries to walk along the beach for three or four miles a day, picking up trash that others have left on the sand.

“It’s very much a community, and I kind of pride myself in that,” she said.

Even so, Eric Clauss said he and his siblings may someday be forced to sell if the tax is implemented. And it’s just that sort of possibility that’s prompting Nick Dubanow, a Fort Erie town councilor, to draw up a resolution suggesting that the Canadian government amend the tax proposal to more clearly exempt local vacation home owners, lest it disturb the deep ties between Buffalo and Southern Ontario.

“I genuinely don’t think our federal government thinks through the consequences of the decisions they make,” Dubanow said.