Building a Oil & Gas / Industrial project in Alberta? Then you will need to do some cost reporting for the assessing authorities in the location you are building. Review this document to learn about the property assessment & taxation of your next project build.

1. Construction Cost Reporting
Proactive Approach
P R O P E R T Y T A X C O N S U LT I N G
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1.403.508.7770 Energy@altusgroup.com www.altusgroup.com
2020 4th Street SW, Suite 310,
Calgary, AB T2S 1W3 Canada
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Our consultation services:
Lunch ‘n’ Learns: Property Tax 101 Property Assessment & Taxation Estimates Other Resourceful Property Tax Documentation
When planning to construct a major project, it is important to consider the property tax liability, as this operational cost will
exist for the life of the asset.
Property tax has an impact on operational cost, but unlike labor and maintenance costs, there is substantial opportunity to
mitigate it through proper analysis and planning. Strategically locating your build, putting a structure in place for cost codes
that segregates non-assessable costs, requiring contractors to provide detailed spending break downs, and achieving a more
favorable split between Buildings & Structures / Machinery & Equipment costs can impact your property tax bill significantly.
Being proactive allows companies to take advantage of opportunities that can reduce some of the operating cost of the
project, and get a better understanding of construction cost. Tracking data accurately is a key factor in reducing the property
tax.
Abnormal Cost
This area holds significant potential for assessment & tax reduction. Projects are to be valued as if they are the ‘perfect’
project (on schedule, within budget), and built within a 50KM radius of Edmonton (easy access to workforce, construction
materials etc.). As such, tracking material cost escalation, changes, productivity and performance is key to accurately
identifying this non assessable cost.
Structuring Cost Codes
If possible, structure the cost codes so that the chart of accounts corresponds with the non-assessable categories laid out
in the CCRG. For example, mandating that contractors report costs associated with rework under its own code will make it
much easier to accurately identify this non assessable cost.
Contracts
Access to data critical to accurate cost reporting is often a sensitive issue when it comes to lump sum contracts. Contractors
may not want to divulge their productivity factor, markup, margins and so forth. It is important to be aware of this, and include
a clause in the contract which specifies that this information is to be provided if it is needed for property tax reporting
purposes.
Location
Property tax can be a significant operational cost. Tax rates vary significantly from one jurisdiction to the next and final
selection of the location should take this into account. Providing estimates of tax payable for different location alternatives is
one of our specialties.
There is a major difference between the way Machinery & Equipment (M&E) and Buildings & Structures (B&S) are taxed.
Because of depreciation and other factors, it is much more favourable to have assessment dollars taxed as M&E. Classifying
as much cost as possible as M&E will reduce tax payable. Ensure all structures and foundations supporting M&E are classed
as M&E. We aim, on average, to classify no more than 5% - 10% of the total project cost as B&S.
Machinery & Equipment vs Buildings & Structures