The Government of Québec introduced amendments to the Regulation respecting the equalization scheme under the Act respecting municipal taxation. The Regulation grants the government authority to establish an equalization scheme to support municipalities in maintaining fiscal capacity and equitable service delivery.

The amendments address municipalities that have undergone an amalgamation or total annexation. They introduce a mechanism to provide a “neutrality amount” to certain municipalities affected by these structural changes, in addition to the standard equalization payments. This ensures that municipalities do not experience sudden fiscal losses or disruptions in service provision due to amalgamation or annexation. A neutrality amount is calculated based on the difference between the equalization amounts the former municipalities would have received and the equalization amount allocated to the new municipality for the relevant fiscal year. The regulation specifies that if the resulting difference is zero or negative, no neutrality payment is granted. For amalgamations effective before January 1, 2021, the neutrality amount is multiplied by a factor of 1.1167 to account for historical adjustments.

The Regulation also defines key terms to clarify its application. A “former municipality” is a local municipality that existed immediately prior to an amalgamation or annexation, while a “new municipality” is one resulting from such changes. These definitions are critical for applying the equalization scheme accurately, as they determine which historical economic and property data are considered in calculations. Section 5.1 establishes that the economic health index used for a new municipality is the smallest and most recent index among the former municipalities, unless an updated index for the newly formed entity is available.

Other amendments refine computation rules for standardized property values, dividends, and equalization amounts to account for changes in municipal boundaries. These rules ensure continuity and consistency in the allocation of resources, with specific provisions for the fiscal year in which amalgamation or annexation occurs and for subsequent years. Property assessment rolls from former municipalities are adjusted according to existing municipal territorial organization legislation, and factors are applied based on population size or annexing municipality characteristics.

The amendments also make technical changes, updating references to sections and categories within the existing regulation and creating a dedicated division for neutrality amounts. This provides clarity and ensures that municipalities understand how their equalization payments and additional neutrality payments are calculated.

Quebec (1439/2025) December 23, 2025
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