Business

Medical pot grow-ops won't get tax break in B.C.

Julia Ratcliffe, a technical consultant with The Bug Factory, a company that supplies insects for natural pest control, examines marijuana plants for pests at the MediJean medical marijuana facility in Richmond, B.C., on Friday March 21, 2014. The B.C. government says medical marijuana companies won
Julia Ratcliffe, a technical consultant with The Bug Factory, a company that supplies insects for natural pest control, examines marijuana plants for pests at the MediJean medical marijuana facility in Richmond, B.C., on Friday March 21, 2014. The B.C. government says medical marijuana companies won't be able to take advantage of a property tax break that was designed for agriculture. THE CANADIAN PRESS/Darryl Dyck
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By James Keller, The Canadian Press

VANCOUVER - Medical marijuana producers setting up shop in British Columbia won't be able to claim a lucrative property tax break designed for farms and other agricultural operations, the provincial government said Tuesday.

Mayors in B.C. have been warning for months that commercial grow-ops could get out of paying nearly 90 per cent of their property taxes if they're lumped together with farms, even if they're operating on expensive industrial land.

The province's agriculture minister, Norm Letnick, said medical marijuana facilities are complex industrial operations — and that's how they'll be taxed.

"Local governments are concerned — and fairly so — that there might be some extra costs associated with these facilities," Letnick said in an interview.

"We're talking about a federally regulated narcotic, so it's different than growing mushrooms or cherries or tomatoes in a greenhouse."

The debate over how to tax medical marijuana operations is happening as governments across the country figure out how to deal with an expected influx of such facilities.

New federal rules took effect in April that shift marijuana production to licensed commercial producers, rather than patients, who were previously allowed to grow their own. An ongoing court case has meant that some patients are still growing at home, but the commercial system has proceeded.

Health Canada has approved 13 producers, including five in B.C., though many more are expected to join them. There is no cap on the number of commercial growers and Health Canada is currently reviewing hundreds of applications.

B.C.'s property tax rules set rates based on a list of factors, including how the land is being used. Agricultural rates are up to 87.5 per cent lower than other tax categories.

Some mayors were concerned that allowing medical marijuana operations in industrial areas to claim the farm credit would downgrade the value of land that is taxed at a much higher rate.

For example, Maple Ridge Mayor Ernie Daykin said a piece of land that would normally generate more than $30,000 in property taxes could be worth just a few hundred dollars if it was considered a farm.

"It's going to be a pharmaceutical, industrial application," said Daykin.

"It (Tuesday's announcement) will allay the fears of a number of municipalities that could have seen a significant hit on the taxes they could collect on a valuable piece of property."

At the same time, the province also confirmed marijuana production would be considered a "farm use" within the Agricultural Land Reserve, 4.7 million hectares of protected farmland located across the province.

James Poelzer of Agrima Botanicals, a medical marijuana operation in Maple Ridge that's close to receiving final approval, said it doesn't make sense to consider marijuana production farming in one context but not in another.

"I don't really know how much closer you can get to farming or agriculture than growing plants," he said.

"We're not doing anything to try and exploit or avoid taxes. What we're doing is growing plants — that's our sole business."

Agrima Botanicals' facility is located within the Agricultural Land Reserve, though Poelzer said the company is currently paying industrial property tax rates.

Poelzer said his company likely would have applied for the farm tax break, but he said it's not a make-or-break issue for his company.

The decision to consider marijuana production "farm use" within the Agricultural Land Reserve also means local governments will not be able to prevent medical pot facilities in those areas.

Some municipalities, such as the Township of Langley, have passed bylaws banning marijuana facilities on agricultural land and restricting them to industrial areas.

But Langley Mayor Jack Froese said the provincial government has effectively overridden the town's bylaw when it comes to the Agricultural Land Reserve.

"Having an intensive operation, that's challenging, and in industrial land, we have a lot more authority and bylaws," he said.

"We want to make sure that the new system protects our residents and is safe for the people working there."

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