The federal Finance department released a package of technical proposals today that are designed to facilitate the phasing out of tax breaks for labour-sponsored venture capital corporations (LSVCC).
The government announced plans to eliminate the federal LSVCC tax credit by 2017 in the most recent federal budget. Earlier this year, it initiated consultations on the tax rules for LSVCCs, in order to devise an orderly phase out process. Today, it released a package of draft technical legislative proposals for changes to the tax rules.
In its consultation, Finance sought public input on potential technical changes to the rules related to investment requirements, wind-ups, redemptions, and other rules regarding LSVCCs. Based on the feedback received during the consultations, it is now proposing technical transition rules, including: a proposal to remove investment requirements and penalties for federal LSVCCs that give notice of their intent to exit the program; and, allowing LSVCCs to issue new classes of shares that would not be subject to investment rules, but would not merit the tax credit either.
Additionally, Finance said that it will accommodate any technical, coordinating changes to provincial legislation meant to facilitate the orderly phase-out of the federal tax credit.
Comments on the draft legislative proposals are due by January 27, 2014. The government says that it will then introduce legislation to implement its proposals, taking into account comments received.