The Liberals are bringing back tax credits for those who invest in provincially registered labour-sponsored venture capital corporations (LSVCCs).
People who purchased shares of labour-sponsored funds used to qualify for a 15% federal tax credit (as well as a similar provincial credit in many cases) on a maximum annual investment of $5,000. Stephen Harper's government was phasing out the federal credit, dropping it to 10% for the 2015 tax year, 5% for 2016, and scheduling it to be eliminated by 2017.
During their election campaign the Liberals pledged to reinstate the federal tax break for LSVCCs, noting that labour-sponsored funds were particularly popular in Quebec where more than 650,000 people claimed the combined federal and provincial credits. Yesterday’s federal budget fulfilled this promise.
Facilitates access to venture capital
"To support provinces that use LSVCC programs to facilitate access to venture capital for small and medium-sized businesses, Budget 2016 proposes to restore the federal LSVCC tax credit to 15% for share purchases of provincially registered LSVCCs prescribed under the Income Tax Act for the 2016 and subsequent taxation years," reads the budget document.
Federally registered LSVCC's, however, are not making a comeback. The Liberals argue that while provincially registered labour sponsored funds have raised significant amounts of money for small and medium-sized businesses, the same cannot be said of the national LSVCC program.
“For this reason, the federal LSVCC tax credit for federally registered LSVCCs will remain at five per cent for the 2016 taxation year and be eliminated for the 2017 and subsequent taxation years,” says the Trudeau government. “The prohibition on new federal LSVCC registrations and the transition rules for federally registered LSVCCs will be maintained.”