Be it enacted by the Lieutenant-Governor and
House of Assembly in Legislative Session convened, as follows:
Short title
1. This
Act may be cited as the Labour-Sponsored
Venture Capital Tax Credit Act.
Definitions
2. In
this Act
(a) "active business" means a business
carried on in Canada, other than a specified investment business or a personal services
business as defined in the Income Tax Act
(Canada);
(b) "corporation"
means a taxable corporation incorporated under the laws of the province,
another province of Canada or Canada;
(c) "eligible shares" means fully paid, newly issued voting common shares of the
labour-sponsored venture capital corporation, issued on or before December 31,
2014, that are non-redeemable, non-convertible, not restricted in profit
sharing or participation upon dissolution and not eligible for a tax credit
allowed under the Income Tax Act (Canada),
other than under subsection 127.4(2), or a deduction from income under that
Act, other than a deduction under subsection 146(5) of that Act;
(d) "eligible
investor" means an individual who is a resident of the province and who is
at least 19 years of age, or a trust that is governed by a Registered
Retirement Savings Plan where the individual makes contributions to the trust
and those contributions, and no other funds, can reasonably be considered to
have been used by the trust to acquire or subscribe for the share, and the annuitant
under the plan is the individual or a spouse of the individual;
(e) "labour-sponsored venture capital
corporation" means a corporation registered under subsection 204.81(1) of
the Income Tax Act (Canada) that has
subsequently been registered by the minister under this Act; and
(f) "minister" means the minister appointed under the Executive Council Act to administer
this Act.
Share excluded
3. Notwithstanding paragraph
2(c), an eligible share does not include a share that, in the opinion of the
minister, is or will be issued as a result of a transaction or event or a
series of transactions or events the main purpose of which is to claim the tax
credit under this Act.
Registration of
labour-sponsored venture capital corporation
4. (1) A corporation that intends to make an
issue of eligible shares to an eligible investor on or before December 31,
2014, and that meets the criteria prescribed by regulation may apply for
registration under this Act by delivering to the minister, in a form acceptable
to him or her, an application containing the information required by the minister.
(2) The
minister may, in his or her absolute discretion, register a labour-sponsored
venture capital corporation, with conditions that the minister considers
appropriate, on being satisfied that
(a) the
corporation meets the criteria prescribed by regulation; and
(b) the
issue of eligible shares complies or will comply with the purpose of this Act.
(3) Where the minister registers a
labour-sponsored venture capital corporation, the minister shall issue a certificate
of registration.
(4) The
certificate of registration constitutes approval as of the date of
registration, for the labour-sponsored venture capital corporation to raise the
equity capital referred to in the application.
Revocation of certificate of registration
5. The minister may, at any time after a certificate
of registration has been issued, suspend the issuance of provincial tax credits
respecting a labour-sponsored venture capital corporation or revoke the certificate
where
(a) in the opinion of the minister, the registered
labour-sponsored venture capital corporation has not complied with a provision
of this Act or the regulations or the purpose of this Act and the regulations;
(b) the labour-sponsored venture capital
corporation has been suspended or otherwise restricted from issuing shares; or
(c) the labour-sponsored venture capital
corporation has failed to meet another condition required for registration.
Penalty
6. (1)
In each year, the minister shall impose a penalty, at a rate of 3% per year of
the labour-sponsored venture capital corporation's cumulative investment
shortfall, where an investment shortfall occurs that is the difference between
the cumulative amount of capital that is required to be invested in eligible
business entities by year end, as prescribed by the regulations, less amounts
that actually were invested in eligible business entities.
(2) The labour-sponsored venture capital
corporation is required to pay the penalty under subsection (1) within 90 days
of the end of the year in which the investment shortfall occurred and to which
the penalty relates.
(3) Where a
labour-sponsored venture capital corporation is required to pay a penalty under
subsection (1), the minister may assess interest from the date that the payment
is required to be made to the date the payment is made, at a rate prescribed by
regulation.
(4) The minister may remit a penalty under this
section provided that the labour-sponsored venture capital corporation submits
a plan satisfactory to the minister, to meet the investment requirements under
the regulations, and executes that plan to the satisfaction of the minister.
(5) Where the minister has remitted a penalty
under subsection (4), he or she shall refund the amount paid.
Labour-Sponsored
Venture Capital Corporation Trust
7. (1)
A labour-sponsored venture capital corporation shall set aside in a trust fund
an amount of money equal to the amount of the tax credits issued to eligible investors.
(2) The labour-sponsored venture capital
corporation shall appoint a trustee acceptable to the minister to administer
the trust and the trustee shall hold the trust fund in trust jointly, to be
dealt with in accordance with this section, for
(a) the labour-sponsored venture capital corporation;
and
(b) the Crown.
(3) Where the certificate of registration of a
labour-sponsored venture capital corporation is revoked, money then remaining
in the trust fund established under subsection (1) is immediately payable to
the Crown.
(4) A trustee who fails to make the payment to the
Crown required by subsection (3) is liable to the Crown for the amount required
to be paid under that subsection.
(5) Where a labour-sponsored venture capital
corporation has invested in an eligible business entity, the trustee may pay
over to the labour-sponsored venture capital corporation fund, from the trust
fund, an amount prescribed by regulation.
(6) Money held in trust under subsection (1) shall
not be paid out to a person unless the minister consents in writing to that payment.
Tax credit certificate
8. (1) Where a registered labour-sponsored
venture capital corporation has made an issue of eligible shares to an eligible
investor,
(a) upon application from the labour-sponsored
venture capital corporation for tax credit certificates for eligible investors,
the minister shall issue tax credit certificates, entitling each of the
eligible investors to a tax credit equal to 15% of the amount received by the
labour-sponsored venture capital corporation in that calendar year, or within
60 days of the end of the calendar year, for shares issued to those eligible
investors as part of the issue of shares by the labour-sponsored venture
capital corporation; and
(b) notwithstanding paragraph (a), the minister
may authorize the labour-sponsored venture capital corporation to issue tax
credit certificates to eligible investors.
(2) The minister may refuse to issue or limit the
amount on a tax credit certificate under subsection (1) unless the minister is
satisfied that
(a) the
labour-sponsored venture capital corporation and its eligible investors are
complying with this Act;
(b) the
eligible shares do not constitute the type of security that entitles the
holder, in respect of the acquisition of those shares,
(i) to claim a tax credit under the Income
Tax Act (Canada), other than under subsection 127.4(2), against income tax payable,
(ii) to claim a deduction from income under the Income Tax Act, 2000 or the Income
Tax Act (Canada) other than a deduction under subsection 146(5) of the Income Tax Act (Canada), or
(iii) to receive other financial assistance from a
government, municipality or public authority;
(c) no
tax credit has previously been allowed for those shares under the Income Tax Act, 2000 or the Income Tax Act (Canada);
(d) the aggregate of all entitlements in respect
of the eligible investor for all tax credit certificates applied for in the
year does not exceed $750;
(e) the
aggregate of all tax credits under this Act for the year does not exceed the
amount, if any, prescribed by regulation;
(f) other prescribed conditions have been met; and
(g) the labour-sponsored venture capital corporation
or its directors, officers or shareholders are not conducting their business or
affairs in a manner that is contrary to the purpose of this Act and the
regulations.
(3) Notwithstanding subsection (1) and paragraph
(2)(d),
(a) a tax credit issued by the minister within 60
days of December 31, 2004, may not be applied to taxes payable under the Income Tax Act, 2000 in the 2004
taxation year; and
(b) for the 2005 taxation year, the aggregate of
all entitlements in respect of the eligible investor for all tax credit
certificates applied for in the year does not exceed
(i) the lesser of 15% of the amount received by the labour-sponsored venture capital corporation
for eligible shares issued within 60 days of December 31, 2004 and $750, plus
(ii) $750.
Payment to minister where no entitlement
and repayment
9. (1) Where a person has received, directly
or indirectly, the benefit of a tax credit to which the person is not entitled,
the amount of the benefit is payable immediately by that person to the
minister.
(2) A
person who disposes of a share, in respect of which a tax credit has been
allowed, within 8 years from the date of purchase shall pay to the minister
(a) an
amount equal to the tax credits received in respect of those shares, including
interest, where prescribed by regulation; or
(b) a
lesser amount determined under the regulations in prescribed circumstances.
(3) Where a director or officer of a
labour-sponsored venture capital corporation, a member of a group that controls
the labour-sponsored venture capital corporation or a shareholder that controls
the labour-sponsored venture capital corporation permits or acquiesces to a
transaction or event or a series of transactions or events that the person knew
or ought to have known would cause the certificate of registration to be
revoked, that person is jointly and individually liable for the payment under
subsection (2).
(4) An amount required to be paid to the minister
under this Act is a debt due to Her Majesty in right of the province.
Register
10. The minister shall make public
the name and address of a corporation that has been registered or a corporation
whose registration has been revoked, as well as other information the minister
may consider necessary.
Filing of returns with minister
11. Within 180 days after the end of each of the
fiscal years commencing with the fiscal year of registration, and continuing for 8 years after the final sale of
eligible shares in the province, a labour-sponsored venture capital corporation
shall file
a return with the minister setting out the information as required by the
minister.
Maintenance and location of records
12. (1) A labour-sponsored venture capital
corporation that is registered under this Act shall maintain records in the
form and containing the information the minister considers necessary to
determine that this Act and the regulations are being complied with.
(2) The
labour-sponsored venture capital corporation shall keep the records at its
provincial office or at other places approved by the minister.
Appointment of
inspectors
13. (1) The
minister may appoint or designate persons or a class of persons as inspectors
for the purposes of this Act and the regulations.
(2) The minister may authorize a person employed
in the department or a person or class of persons designated under subsection
(1) to perform and exercise those duties imposed and powers conferred by this
Act upon the minister that may, in the opinion of the minister, be conveniently
performed or exercised by that person and the performance or exercise of those
duties or powers by the person so authorized shall be of the same effect as if
they were performed or exercised by the minister.
Inspection of records
14. (1) For the purpose of determining
compliance with this Act, an inspector may, during normal business hours, make
an examination of the books of account, records, financial statements or other
documents of
(a) a
labour-sponsored venture capital corporation that is registered under this Act;
(b) a
person who is or was a shareholder of the labour-sponsored venture capital
corporation; and
(c) an eligible business entity.
(2) In the course of an examination under
subsection (1), the inspector may make copies of those books of account,
records, financial statements or other documents.
Considered refusal
15. Where the minister does not register a
labour-sponsored venture capital corporation within 90 days after receipt of
the application, the minister is considered to have refused to register it.
Extension of time
16. The minister may extend, with or without
conditions, the time limit for the doing of anything under this Act or the
regulations and may grant the extension notwithstanding that the time limit to
be extended has expired.
Offences and penalty
17. (1) A person is guilty of an offence who
(a) refuses or wilfully neglects to produce, as
required under this Act, books of account, records, financial statements or
other documents to a person entitled under this Act to inspect, examine or
audit them;
(b) refuses or wilfully neglects to answer a
question put to him or her by a person entitled under this Act to ask that
question relating to a matter for which an answer is required under this Act;
(c) refuses or wilfully neglects to file a return
or make a report required from him or her under this Act;
(d) files or makes a false or misleading return or
report or gives false or misleading answers or information in a return or report
under this Act, or makes a false or misleading answer to a question put to him
or her by a person entitled to do so relating to a matter concerning which he
or she is required under this Act to answer;
(e) destroys, alters, mutilates, secretes or
disposes of books of account, records, financial statements or other documents
required to be kept under this Act;
(f) fails to produce for inspection when requested
to do so, books of account, records, financial statements or other documents;
or
(g) makes, permits, assents to, or acquiesces in,
the making of false or misleading entries or omissions in the books of account,
records or documents required to be kept under this Act.
(2) Where a labour-sponsored venture capital
corporation registered under this Act is guilty of an offence under subsection
(1),
(a) the
labour-sponsored venture capital corporation is liable on summary conviction to a fine of not less than $5,000 and not
more than $100,000; and
(b) every
director or officer of the labour-sponsored venture capital corporation who
authorized, permitted or acquiesced in the offence is guilty of an offence and
is liable on summary conviction to the penalties provided for the offence
whether or not the labour-sponsored venture capital corporation has been
prosecuted or convicted.
Regulations
18. (1) The Lieutenant-Governor in Council may
make regulations
(a) requiring a person to supply information or
returns respecting a matter required in determining compliance with this Act;
(b) defining a word or expression used but not
defined in this Act;
(c) prescribing
criteria for registration of labour-sponsored venture capital corporations;
(d) prescribing the time period for investment of
capital by the labour-sponsored venture capital corporation into eligible
business entities;
(e) prescribing a maximum amount of tax credits to
be issued in a year in respect of a labour-sponsored venture capital corporation;
(f) prescribing conditions relating to the
repayment of tax credits where an eligible investor has not complied with this
Act;
(g) prescribing the time period for filing returns
or any other information required to be filed under the Act;
(h) prescribing
the manner and method of calculating interest on an amount due under the Act
and unpaid;
(i) prescribing the amount that may be paid to the
labour-sponsored venture capital corporation from the trust funds; and
(j) to generally carry out the purpose of this
Act.
(2) Regulations under this section may be made
retroactive to January
1, 2005.
ŠEarl G. Tucker, Queen's Printer