Recent Case Law Development: Property Tax Assessment of the Structures in a Wireless Telecommunications System

This article originally appeared in the November/December 2017 issue of the Canadian Property Tax Association newsletter.

On August 1, 2017, the Court of Québec, sitting in appeal of a decision of the Tribunal administratif du Québec (the “TAQ”)¹, rendered an important decision concerning the property tax assessment of the components of a wireless telephony system².

The appellants (collectively referred to herein as “Vidéotron”) are contesting the TAQ’s finding that Vidéotron’s wireless telephony system and all of its components were “immovables” within the meaning of section 900 of the Civil Code of Québec (the “CCQ”) and thus should be entered on the municipal property assessment roll pursuant to the Act respecting municipal taxation (the “Act”).

Relevant facts and the TAQ’s decision

Vidéotron’s wireless telephony system started operating in 2010. It consists of 1,200 base stations located throughout Quebec, which are generally installed on buildings that do not belong to Vidéotron. Its installations and equipments are entered on the property tax rolls of all municipalities in which they are located.

Vidéotron filed more than 150 applications with the TAQ regarding equipments that it maintains have not lost their movable qualification and thus should not be entered on the assessment rolls of a total of 27 municipalities.

The legislative provisions at issue in this matter are section 1 of the Act and article 900 CCQ, both dealing with the concept of immovables, and section 67 of the Act which concerns wireless telecommunications systems. Section 1 of the Act defines an “immovable” as follows:  

1. In this Act, unless the context indicates otherwise,
…
“immovable” means
(1)   an immovable within the meaning of article 900 of the Civil Code;
(2)   subject to the third paragraph, a movable that is permanently attached to an immovable referred to in paragraph 1;
…
As regards an immovable referred to in paragraph 1 of the definition of “immovable” in the first paragraph and in paragraphs 1, 2.1 and 13 to 17 of section 204, paragraph 2 of that definition refers only to a movable that, in addition to being permanently attached to the immovable, ensures the utility of the immovable. However, that paragraph does not refer to such a movable that is used, to whatever extent, for the operation of an enterprise or for the carrying on of activities in the immovable.

Article 900 CCQ provides as follows:

900. Land, and any constructions and works of a permanent nature located thereon and anything forming an integral part thereof, are immovables.

Plants and minerals, as long as they are not separated or extracted from the land, are also immovables. Fruits and other products of the soil may be considered to be movables, however, when they are the object of an act of disposition.

Section 67 of the Act sets out a specific rule for the exclusion from the roll of certain immovables that otherwise should be included on it. However, it provides that structures forming part of a wireless telecommunications system are to be entered on the roll. The section reads as follows:  

67. The structures forming part of a telecommunications system other than a television, radio or wireless telecommunication system are not to be entered on the roll.

The second and fourth paragraphs of section 66 apply, with the necessary modifications, to the case provided for in this section.

However, conduits, underground galleries, access shafts or other structures that exclusively house apparatus or installations, together with their accessories, actually used in the operation of the system, except a switching station, are not to be entered on the roll.

In its decision rendered on June 11, 2014, the TAQ took the view that all of Vidéotron’s equipment and installations at issue should be entered on the roll as they are “structures” within the meaning of the Act, and immovables pursuant to section 1 of the Act and article 900 CCQ.  Moreover, the TAQ found that Vidéotron’s equipments at issue were movables permanently attached to an immovable and thus becoming immovables pursuant to section 1 of the Act.

Vidéotron’s grounds for appeal

Vidéotron argued before the Court of Québec that the TAQ has confused the concepts of “structures” and “components” by expanding the meaning of “structure” to include all of the components of its wireless telephony network, without determining whether such components are actually “structures” within the meaning of the Act.

Vidéotron also points out that the equipments at issue are not integrated into the land beneath it, or into any building, whereas the TAQ has concluded that light equipments such as system modules, routers and media converters were structures, despite the fact that they are merely placed on racks without being attached thereto, are not permanently attached to or integrated with the building they are located in and can easily be moved or removed without leaving any damage in the process.

Vidéotron claims that the TAQ wrongfully considered the equipments at issue to be structures for the reason that they are interconnected by DC, RF or fibre optic cables, as the latter can all be easily disconnected.

Vidéotron maintains that the TAQ erred by characterizing the equipments at issue as constructions of a permanent nature located on land, within the meaning of article 900 CCQ, since all such equipment is installed on buildings owned by third parties and is not in contact with the land.

With respect to the TAQ’s alternative conclusion that the equipments at issue are movables permanently attached to an immovable and thus immovables pursuant to section 1 of the Act, Vidéotron argues that the TAQ erred by confusing the concepts of immovable and of unit of assessment (section 41.1 of the Act).

Finally, Vidéotron alleges that while some of the equipments at issue are small and/or light, and others are heavier, they are generally all replaceable and movable. Consequently, such equipments are not an integral part of the buildings they are located in and thus not immovables.

Decision of the Court of Québec

The Court of Québec concludes that the TAQ is not justified in characterizing Vidéotron’s entire network as immovable. The Court points out that even though a structure is generally an immovable, an immovable is not necessarily a structure. Thus, some structures may not be immovables, and if that is the case, they should not be entered on the assessment roll.

The Court explains that the TAQ must first identify the structures that are part of Vidéotron’s wireless network and then determine whether they are in fact immovables before declaring that they must be entered on the property assessment roll. By simply characterizing the entire network as an immovable, the TAQ fails to perform that exercise.

The Court also dismisses the TAQ’s reasoning that central importance must be given to the concept of network integrity, since the expert evidence shows that several components of Vidéotron’s wireless network are not attached to or incorporated into any building and are completely functional even if removed from the network.

As for the TAQ’s alternative conclusion, the Court points out that in order to conclude that equipment is immovable, it must be permanently attached to a building and ensure the building’s utility. It is obvious however that Vidéotron’s equipments do not serve to ensure the utility of the buildings they are located in. The Court thus dismisses and finds unfounded the TAQ’s reasoning that one must rather determine the utility of the equipment for the unit of assessment. As the uncontradicted evidence shows that several of the items of equipment in question are mobile, severable from and independent of the host buildings on which they are installed, the Court concludes that the TAQ erred in deciding that they have become permanently attached to an immovable.

In light of the foregoing, the Court of Québec overturns the TAQ’s decision and returns the file to it in order for it to determine, in accordance with the guidelines set out by the Court, which of the structures in Vidéotron’s wireless telephony network should be entered on the property assessment roll.