Bill 39 - An Act to Amend the Small Business Investor Tax Credit Act

BILL 39

An Act to Amend the Small Business Investor Tax Credit Act

Her Majesty, by and with the advice and consent of the Legislative Assembly of New Brunswick, enacts as follows:

1 Section 1 of the Small Business Investor Tax Credit Act, chapter S-9.05 of the Acts of New Brunswick, 2003, is amended

(a) by repealing the definition “eligible investor” and substituting the following:

“eligible investor” means (investisseur admissible)

(a) an individual who is a natural person at least 19 years of age and to whom section 11 of the New Brunswick Income Tax Act applies,

(b) a corporation to which section 12 of the New Brunswick Income Tax Act applies, or

(b) by repealing the definition “individual”.

2 Section 2 of the Act is amended by striking out “For the purposes of this Act” and substituting “For the purposes of paragraphs 6(1)(c), 10(e) and 13(g) and (h)”.

3 The heading “Shares of qualifying trust deemed to be those of individual” preceding section 4 of the Act is repealed and the following is substituted:

Shares of qualifying trust deemed to be those of eligible investor

4 Section 4 of the Act is repealed and the following is substituted:

Shares of qualifying trust deemed to be those of eligible investor

4 For the purposes of paragraph 11(d), subparagraph 11(e)(iii) and subsections 14(1) and (4), an eligible investor who is an individual shall be deemed to have purchased, held or disposed of shares that are purchased, held or disposed of by a qualifying trust for that investor.

5 Paragraph 7(2)(c) of the Act is repealed and the following is substituted:

(c) the amounts that will be deductible or deducted under section 61.1 of the New Brunswick Income Tax Act during a particular year by all eligible investors will not exceed the amount prescribed by regulation.

6 Section 11 of the Act is amended

(a) by striking out the portion preceding paragraph (a) and substituting the following:

11 An investment plan of a corporation applying for registration under section 6 and every investment plan of a corporation registered under this Act shall contain or make provision for the following:

(b) in paragraph (d)

( i) by repealing subparagraph (i) and substituting the following:

( i) for each eligible investor who is an individual, the full name, social insurance number and residential address of the eligible investor,

( ii) by adding after subparagraph (i) the following:

( i.1) for each eligible investor that is a corporation, the name, business number and head office address of the eligible investor,

( i.2) for each eligible investor that is a trust, the name, account number and residence address of the eligible investor,

7 Section 13 of the Act is amended by striking out the portion preceding paragraph (a) and substituting the following:

13 A corporation registered under this Act shall not use the funds raised by its specified issue in respect of which a tax credit certificate has been or may be issued under this Act for

8 Section 14 of the Act is amended

(a) by repealing subsection (1) and substituting the following:

14( 1) If an eligible investor is an individual who has paid, or whose qualifying trust has paid, during the calendar year or within 60 days following the calendar year, for eligible shares issued by a corporation registered under this Act as part of its specified issue, the corporation shall apply to the Minister on behalf of the eligible investor for a tax credit certificate in respect of a tax credit to be claimed by the eligible investor under section 61.1 of the New Brunswick Income Tax Act.

(b) by adding after subsection (1) the following:

14( 1.1) If an eligible investor is a corporation or a trust that has paid during the taxation year for eligible shares issued by a corporation registered under this Act as part of its specified issue, the corporation registered under this Act shall apply to the Minister on behalf of the eligible investor for a tax credit certificate in respect of a tax credit to be claimed by the eligible investor under section 61.1 of the New Brunswick Income Tax Act.

( i) by striking out “subsection (1)” and substituting “subsection (1) or (1.1)”;

( ii) in the French version by striking out “demandé” and substituting “réclamé”;

(d) in subsection (3) by striking out “subsection (1)” and substituting “subsection (1) or (1.1)”;

(e) by repealing subsection (4) and substituting the following:

14( 4) If an eligible investor is an individual, the amount of the tax credit referred to in subsection (1) that may be claimed each year by the eligible investor is equal to 30% of all amounts not exceeding $250,000 paid during the time period referred to in subsection (1) by the eligible investor or by a qualifying trust of the eligible investor to a corporation registered under this Act in consideration for eligible shares issued by the corporation as part of its specified issue.

(f) by adding after subsection (4) the following:

14( 5) If an eligible investor is a corporation or a trust, the amount of the tax credit referred to in subsection (1.1) that may be claimed each taxation year by the eligible investor is equal to 15% of all amounts not exceeding $500,000 paid during the taxation year referred to in subsection (1.1) by the eligible investor to a corporation registered under this Act in consideration for eligible shares issued by the corporation registered under this Act as part of its specified issue.

9 The Act is amended by adding after section 14 the following:

Prohibition regarding eligible investors

14.1( 1) The following definitions apply in this section.

“affiliate”, if used to indicate a relationship between corporations, means any corporation when one is the subsidiary of the other, or both are subsidiaries of the same corporation or (affilié)

(a) each of them is controlled by the same person or the same group of persons, or

(b) one of them is controlled by one person and the other is controlled by

( i) a spouse, parent, grandparent, child, grandchild, brother or sister of that person, or

( ii) a parent, grandparent, child, grandchild, brother or sister of the spouse of that person, residing in the same residence.

“associate”, if used to indicate a relationship with an eligible investor that is a corporation or a trust, means (associé)

(a) a corporation of which the eligible investor owns, directly or indirectly, shares carrying 10% or more of the outstanding voting rights for the election of the directors of the corporation,

(b) a partner of the eligible investor,

(d) a trust or estate

( i) in which the eligible investor has, in the opinion of the administrator, a substantial beneficial interest, or

( ii) for which the eligible investor serves as trustee or in a similar capacity.

14.1( 2) If an eligible investor is a corporation or a trust, the eligible investor shall not make or hold an investment in a corporation registered under this Act if the eligible investor, either alone or in conjunction with one or more of the following persons, will own, directly or indirectly, shares carrying 50% or more of the votes for the election of the directors of the corporation registered under this Act or will, in any manner, control the corporation registered under this Act:

(a) associates or affiliates of the eligible investor;

(b) shareholders of the eligible investor or their associates or affiliates;

(d) officers of the eligible investor or their associates.

10 Section 15 of the Act is amended

(a) by repealing subsection (1) and substituting the following:

15( 1) On receipt of an application under subsection 14(1) or (1.1), the Minister shall, subject to subsection (2), issue a tax credit certificate to the eligible investor indicating the amount of the tax credit and the taxation year in respect of which the credit may be claimed, unless the Minister considers that the corporation registered under this Act or its directors, officers or shareholders are conducting its business or affairs in a manner that is contrary to the spirit and intent of this Act and the regulations.

(b) by repealing subparagraph (2)(b)(i) and substituting the following:

( i) to claim a tax credit under the New Brunswick Income Tax Act, other than a tax credit under section 35 or 61.1, or both, of that Act, against tax otherwise payable,

11 Subsection 16(1) of the Act is amended in the portion preceding paragraph (a) by adding “to a corporation” after “has been issued”.

12 The Act is amended by adding after section 18 the following:

Recovery of tax credit on receivership or bankruptcy

18.1 If a corporation registered under this Act is in receivership or in bankruptcy within the four years immediately following the issuance of its eligible shares, the corporation shall immediately pay to the Minister an amount of money equal to the following percentage of the total amount of all tax credits for which tax certificates were issued or may be issued under this Act in respect of all eligible shares of the corporation that were issued as part of its specified issue within that period of time:

(48 - n)/ 48

where

n is the number of months that the eligible shares were held.

13 Section 19 of the Act is amended by striking out “a corporation” and substituting “a corporation registered under this Act”.

14 Section 20 of the Act is repealed and the following is substituted:

Recovery of tax credit where no entitlement

20 If an eligible investor receives, directly or indirectly, the benefit of all or part of a tax credit in respect of which the eligible investor is not entitled, the eligible investor shall immediately pay the amount of the benefit to the Minister.

15 Section 22 of the Act is amended

(a) in subsection (1) in the portion preceding paragraph (a) by striking out “a corporation” and substituting “a corporation registered under this Act”;

(b) in subsection (2) by striking out “a corporation” and substituting “a corporation registered under this Act”.

CONSEQUENTIAL AMENDMENTS AND COMMENCEMENT

New Brunswick Income Tax Act

16( 1) Section 38 of the New Brunswick Income Tax Act, chapter N-6.001 of the Acts of New Brunswick, 2000, is amended by striking out “50.1” and substituting “61.1”.

16( 2) Subsection 49.1(1) of the Act is amended in the definition “tax otherwise payable” by striking out “sections 50, 50.1 and 61” and substituting “sections 50, 61 and 61.1”.

16( 3) Subsection 50(1) of the Act is amended in the definition “tax otherwise payable” by striking out “50.1” and substituting “61.1”.

16( 4) Subdivision i.1 of Division B of Part I of the Act is repealed.

16( 5) Subsection 61(1) of the Act is amended in the definition “tax otherwise payable under this Part” by striking out “50.1” and substituting “61.1”.

16( 6) The Act is amended by adding after section 61 the following:

Small business investor tax credit

61.1( 1) The following definitions apply in this section.

“eligible investor” means eligible investor as defined in the Small Business Investor Tax Credit Act. (investisseur admissible)

“eligible share” means eligible share as defined in the Small Business Investor Tax Credit Act. (action admissible)

“qualifying trust” means qualifying trust as defined in the Small Business Investor Tax Credit Act. (fiducie admissible)

“small business investor tax credit” means the aggregate of the tax credit amounts shown on all tax credit certificates issued to an eligible investor in respect of a taxation year under section 15 of the Small Business Investor Tax Credit Act. (crédit d’impôt pour les investisseurs dans les petites entreprises)

61.1( 2) If, in respect of a taxation year, an eligible investor has been issued a tax credit certificate under section 15 of the Small Business Investor Tax Credit Act, there may be deducted from the tax otherwise payable by the eligible investor under this Act in respect of that taxation year the lesser of

(a) the total of

( i) the eligible investor’s small business investor tax credit allowed for that taxation year under subsection 14(4) or (5) of the Small Business Investor Tax Credit Act, and

( ii) the amount, if any, of the eligible investor’s unused balance applied in accordance with subsection (5), and

(b) $75,000.

61.1( 3) An eligible investor who is entitled to a deduction under this section shall file, with the eligible investor’s return of income for any taxation year in respect of which a deduction is claimed under this section, a copy of the relevant tax credit certificates issued under section 15 of the Small Business Investor Tax Credit Act.

61.1( 4) If an eligible investor is an individual referred to in paragraph (a) of the definition “eligible investor”, or a qualifying trust of the individual, the deduction under subsection (2) for a taxation year may be made in respect of a tax credit certificate issued in respect of eligible shares acquired and paid for by the eligible investor or a qualifying trust of the eligible investor in the taxation year or within 60 days after the end of the taxation year.

61.1( 5) If, in respect of a taxation year, an eligible investor has been issued a tax credit certificate under section 15 of the Small Business Investor Tax Credit Act and the eligible investor’s small business investor tax credit that may be deducted for that taxation year in subparagraph (2)(a)(i) exceeds the eligible investor’s tax otherwise payable under this Act for that taxation year, the eligible investor may, to the extent that it was not deducted in another taxation year,

(a) deduct any of this unused balance of the small business investor tax credit from the eligible investor’s tax otherwise payable in any one or more of the three taxation years preceding that taxation year, or

(b) deduct any of this unused balance of the small business investor tax credit from the eligible investor’s tax otherwise payable in any one or more of the seven taxation years following that taxation year.

61.1( 6) No deduction shall be made under paragraph (5)(a) for a taxation year preceding the 2003 taxation year if the eligible investor is an individual referred to in paragraph (a) of the definition “eligible investor”.

61.1( 7) No deduction shall be made under paragraph (5)(a) for a taxation year preceding the 2014 taxation year if the eligible investor is a corporation or trust referred to in paragraph (b) or (c) of the definition “eligible investor”.

Commencement

17 This Act shall be deemed to have come into force on January 1, 2014.