Bill 69 - An Act to Amend the Small Business Investor Tax Credit Act

BILL 69

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 share” and substituting the following:

“eligible share” means (action admissible)

(a) in the case of a corporation that is registered under section 7 or 13.2, a newly issued share of the capital stock of the corporation if the share is issued as part of a specified issue, but does not include a replacement share, and

(b) in the case of an association that is registered under section 13.2, a newly issued share issued as part of a specified issue that is not eligible for a tax credit allowed pursuant to the federal Act or a deduction from income pursuant to that Act other than a deduction pursuant to subsection 146(5) of that Act and that, if the share was the only share owned by the member, would entitle a member to vote in the affairs of the association, but does not include a replacement share;

(b) by repealing the definition “replacement share” and substituting the following:

“replacement share” means (action de remplacement)

(a) a share issued as part of a specified issue where the purchaser has, at any time after December 10, 2002, disposed of a share of any class of shares of a corporation that is registered under section 7, or

(b) a share issued as part of a specified issue where the purchaser has, at any time after February 4, 2014, disposed of a share of any class of shares of a corporation or association that is registered under section 13.2;

“specified issue” means an issue of shares by a corporation registered under section 7 or a corporation or association registered under section 13.2. (émission déterminée)

(d) by adding the following definitions in alphabetical order:

“association” means an association as defined in the Co-operative Associations Act; (association)

“community economic development plan” means a plan submitted to the Minister by a corporation or an association as part of the application for registration under subsection 13.1(1); (plan de développement économique communautaire)

“defined community” means a group of persons situated within the Province that may be reasonably distinguished by common geographic, economic or cultural characteristics; (communauté définie)

“eligible business” means a corporation registered under section 7 or a corporation or association registered under section 13.2; (entreprise admissible)

2 Section 2 of the Act is repealed and the following is substituted:

2 For the purposes of paragraphs 3(g) and (h), 6(1)(c), 10(e), 13.1(1)(b) and 13.5(f), one corporation or association is associated with another corporation or association if it is associated with the other corporation or association within the meaning of section 256 of the federal Act, except that the relevant time for determining the association shall be at the time the corporation is registered under section 7 or the corporation or association is registered under section 13.2 rather than the taxation year of the corporation or association.

3 The heading “REGISTRATION OF CORPORATION” preceding section 6 of the Act is repealed and the following is substituted:

REGISTRATION OF CORPORATIONS OTHER THAN COMMUNITY ECONOMIC DEVELOPMENT CORPORATIONS

4 Subsection 6(1) of the Act is amended in the portion preceding paragraph (a) by striking out “under this Act” and substituting “under section 7”.

5 Section 7 of the Act is amended

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

(b) in subsection (2) in the portion preceding paragraph (a) by striking out “under this Act” and substituting “under this section”.

6 Subsection 8(1) of the Act is amended by striking out “registers a corporation” and substituting “registers a corporation under section 7”.

7 Section 9 of the Act is amended by striking out “under this Act” and substituting “under section 7”.

8 The Act is amended by adding the following after section 13:

REGISTRATION OF COMMUNITY ECONOMIC DEVELOPMENT CORPORATIONS OR ASSOCIATIONS

Application for registration

13.1( 1) A corporation or association that intends to make a specified issue of shares and that meets the criteria set out in section 13.5 may apply for registration under section 13.2 by delivering to the Minister an application, in a form acceptable to the Minister, that includes the following:

(a) a copy of the constitution of the corporation or the association;

(b) a copy of the most recent financial statements of the corporation or the association, and of its associated corporations or associated associations, which have been prepared or reviewed by a person who is a licensed or registered member of an accounting association that is regulated under a private Act of the Province;

(d) a certificate in writing signed by all the directors of the corporation or association certifying that the information contained in the application is complete and accurate;

(e) any information prescribed by regulation; and

(f) any other information that the Minister may require in order to ensure compliance with this Act and the regulations.

13.1( 2) An application for registration shall be accompanied by the application fee prescribed by regulation, which is non-refundable.

Requirements for registration

13.2( 1) Subject to subsection (2) and on payment of the application fee referred to in subsection 13.1(2), the Minister may register a corporation or association under this section, with such conditions that the Minister considers appropriate,

(a) if the corporation or association satisfies the Minister that

( i) the corporation or association meets the criteria set out in section 13.5,

( ii) the proposed community economic development plan complies with the spirit and intent of this Act and the regulations,

( iii) the constitution of the corporation provides that no individual is a specified shareholder of the corporation as that term is defined by section 248 of the federal Act and as if the reference to 10% in that definition were read as a reference to 20%,

( iv) the specified issue complies with the provisions of the Securities Act or any part of that Act that may be prescribed by regulation, and

( v) the corporation or association meets any other conditions for registration that are prescribed by regulation, and

(b) if the Minister is of the opinion that the proposed use of the capital to be raised by the specified issue, as set out in the community economic development plan, will benefit the operations of the corporations or associations that are located in New Brunswick.

13.2( 2) The Minister shall not register a corporation or association under subsection (1) unless the Minister is satisfied that

(a) the corporation or association will raise immediately after registration, or within such period of time as is permitted by the Minister, capital on the issue of eligible shares as part of a specified issue as set out in the community economic development plan in an amount that is not less than an amount prescribed by regulation and not greater than an amount or aggregate amount prescribed by regulation,

(b) the corporation or association will issue immediately after registration, or within such period of time as is permitted by the Minister, eligible shares as part of a specified issue as set out in the community economic development plan to all eligible investors named in the plan, and

(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 individuals will not exceed the amount prescribed by regulation.

Certificate of registration

13.3( 1) Where the Minister registers a corporation or association under section 13.2, the Minister shall issue a certificate of registration and the corporation or association shall be deemed to be registered as of the date on the certificate of registration.

13.3( 2) The certificate of registration constitutes approval, as at the date of registration, for the corporation or association to raise the amount of capital referred to in the community economic development plan through the sale of eligible shares in respect of which the Minister may issue tax credit certificates under this Act.

Condition of registration

13.4 It is a condition of registration under section 13.2 that the corporation or association shall pay, in respect of each of the four years after the date of each certificate of registration issued to the corporation or association under subsection 13.3(1), at least the percentage prescribed by regulation of its wages and salaries to individuals who are residents of New Brunswick.

Criteria for eligibility

13.5 The following are the criteria referred to in section 13.1 for eligibility of a corporation or association for registration:

(a) the corporation or association is incorporated under the laws of, or registered to carry on business in, the Province;

(b) the corporation or association has a constitution that

( i) restricts the business of the corporation or association to

( A) operating or carrying on business that is an active business or to evaluating and making investments in one or more active businesses based on a set of criteria defined by the corporation or association,

( B) providing information to and educating investors in the defined community as to the role of capital in business, the value of equity investments to the defined community and the rights and obligations of corporations and shareholders,

( C) investing the capital raised by a specified issue in respect of which a tax credit certificate has been or may be issued under this Act, in businesses located within the defined community as outlined in the community economic development plan and that meet the criteria prescribed by regulation, if any,

( D) exercising ownership rights with respect to the investments made by the corporation or association, and

( E) providing the administrative support necessary to carry on the business of the corporation or association, including preparation of annual reports and the holding of meetings of shareholders and the Board of Directors;

( ii) describes the defined community for which the corporation or association was formed;

( iii) makes provisions for annual general meetings of the shareholders;

(c) the corporation or association has a Board of Directors, elected by the shareholders at a general meeting of the shareholders, consisting of not less than six individuals who are residents of the community in which the corporation or association carries on business;

(d) the corporation or association is not a non-profit, charitable or non-taxable corporation or association;

(e) in the case of a corporation, the corporation has authorized capital consisting of at least one class of voting equity shares without par value;

(f) the total assets of the corporation or association, and its associated corporations and associated associations, do not exceed $40,000,000, calculated in the manner prescribed by regulation, at the time of registration under section 13.2;

(g) in the case of a corporation, all or substantially all of the fair market value of the assets of the corporation is attributable to

( i) assets used in an active business, or

( ii) shares of another corporation where all or substantially all of the fair market value of the assets of that corporation is attributable to assets of that corporation used in an active business or that the other corporation has a constitution that restricts the corporation from operating or carrying on business that is an active business or to evaluating and making investments in one or more active businesses based on a set of criteria defined by the corporation;

(h) the corporation or association does not carry on business or operations in any activity prescribed by regulation or has a constitution that restricts the corporation or association to investing in investments of another corporation or another association that does not carry on business or operations in an activity prescribed by regulation; and

(i) the corporation or association meets all other criteria that may be prescribed by regulation.

Investment requirements

13.6( 1) A corporation or association registered under section 13.2 shall meet the investment requirements prescribed by regulation.

13.6( 2) The Minister may extend, with or without conditions, the time limit for meeting the investment requirements prescribed by regulation and may grant the extension even though the time limit to be extended has expired.

13.6( 3) The Minister may impose a penalty on a corporation or association registered under section 13.2 that fails to meet the investment requirements prescribed by regulation.

Application of sections 12 and 13 and sections 14 to 38

13.7 Sections 12 and 13 and sections 14 to 38 apply with the necessary modifications to a corporation or association registered under section 13.2.

9 Subsection 39(1) of the Act is amended

(a) by repealing paragraph (c.1) and substituting the following:

(c.1) prescribing fees for the purposes of sections 6, 13.1 and 14;

(b) by adding after paragraph (g) the following:

(g.1) respecting the penalty referred to in subsection 13.6(3), including the amount of the penalty, the time limit for paying the penalty, interest on the penalty and a refund of the penalty;

CONSEQUENTIAL AMENDMENT AND COMMENCEMENT

New Brunswick Income Tax Act

10 Section 61.1 of the New Brunswick Income Tax Act, chapter N-6.001 of the Acts of New Brunswick, 2000, is amended by adding after subsection (7) the following:

61.1( 8) No deduction shall be made under paragraph (5)(a) for a taxation year preceding the 2014 taxation year if the eligible investor is an individual referred to in paragraph (a) of the definition “eligible investor” and the eligible share is purchased from a corporation or association registered under section 13.2 of the Small Business Investor Tax Credit Act.

Commencement

11 This Act or any provision of it comes into force on a day or days to be fixed by proclamation.