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The federal government has decided against changing the tax treatment of real estate investment trusts (REITs) as a way to tackle the housing crisis.

“While more needs to be done to ensure that Canadians are not subject to renovictions and that rental units are affordable for Canadians, the government understands that REITs provide a critical channel for new investment in rental units,” the Department of Finance wrote in a statement, which was first reported by CoStar. “In this spirit, no changes to the tax treatment of REITs are being considered at this time.”

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REITs are not taxed on the income and gains generated in the trust, but instead flow these out to unitholders.

The Liberals first targeted REITs in their 2021 election platform, arguing that “large corporate owners of residential properties such as [REITs] are amassing increasingly large portfolios of Canadian rental housing, making your rent more expensive.”

Despite the reprieve issued last week, the government still “intends to restrict the purchase and acquisition of existing single-family homes by very large, corporate investors,” as stated in the 2024 federal budget. A consultation will begin this year and more details of the government’s plans will be released in the 2024 fall economic statement, the budget said.

The tax community also is waiting for enabling legislation for the increase to the capital gains inclusion rate that’s set to take effect June 25.

Advising clients is difficult without seeing even draft legislation. For example, the government hasn’t indicated how capital losses from previous years may be allocated in 2024 before and after June 25, or whether the $250,000 threshold is indexed.

Legislation won’t come this week, as the House of Commons is off until May 21. In the interim, we review the state of the government’s major tax and estate-planning promises since our last update.

Proposals from the 2024 federal budget in legislation

On April 30, the feds tabled Bill C-69 to implement proposals from the 2024 federal budget. The bill included:

Changes to the underused housing tax (UHT) outlined in the fall economic statement also were included in C-69. A consultation for those changes wrapped up in January. During that consultation, industry organizations and tax professionals called on Ottawa to extend its proposed UHT filing exemption relief back to 2022. However, this change was not made in C-69.*

Budget proposals not in legislation

The capital gains changes, the increase to the lifetime capital gains exemption and the Canadian Entrepreneurs’ Incentive were not in Bill C-69.

Budget proposals moving forward

The Canada Revenue Agency (CRA) confirmed in an email to Investment Executive that its automatic tax filing pilot will commence this summer.

“There are no legislative changes required for the CRA to undertake this pilot,” the agency said. “The CRA plans to consult with stakeholders, community organizations, and tax professionals on the next phase of Canada’s automatic tax filing plan beyond 2025.”

Proposals in Bill C-59

In November, the federal government tabled Bill C-59 to implement measures from the 2023 federal budget and fall economic statement. This bill has reached the report stage in the House of Commons and is being studied by the Standing Senate Committee on National Finance.

The bill contains legislation to implement the following key proposals:

Proposals passed into law

No major income tax proposals have passed into law in 2024.

Proposals with no major updates since our last check-in

  • The Liberals promised in their 2019 election platform to raise the CPP and QPP survivor’s benefit by 25%, and the matter is being studied as part of the 2022-2024 Triennial Review of the CPP. The 2024 federal budget proposed ending eligibility for survivor pensions if a couple is legally separated, and this change is in Bill C-69.
  • The Aging at Home Benefit was proposed in the Liberals’ 2021 election platform. The National Seniors Council presented a report on aging at home to the Minister of Labour and Seniors and the Minister of Health on Sept. 29, 2023. The report is being reviewed.
  • These promises from the 2019 election platform were mentioned in Finance Minister Chrystia Freeland’s 2021 mandate letter, and appeared in the 2024 pre-budget report of the Standing Committee on Finance, but did not appear in the budget itself:
    • make the Canada Caregiver Credit refundable
    • implement a Career Extension Tax Credit for working seniors
  • A proposal to increase the guaranteed income supplement by $500 for single seniors and by $750 for couples, beginning at age 65, was included in the mandate letter for former Seniors Minister Kamal Khera, but no progress has been announced since.
  • Nothing has been announced with regards to these 2019 election promises:
      • increasing the Canada Child Benefit by 15% for kids younger than one year old
      • making EI maternity and parental benefits tax-exempt
      • doubling the child disability benefit

With files from Rudy Mezzetta

*This article has been updated to state that Bill C-69 did in fact address the UHT.