New Brunswick’s Small Business Investor Tax Credit
New Brunswick’s Small Business Investor Tax Credit initiative is an underutilized program that chamber members should venture to learn more about. Particularly with enhancements in 2013 and 2014, the program has expanded its scope and (perhaps because it isn’t used as often as it could be) doesn’t have a cap on its use. Below is a brief overview of the program, with full details found here: http://www2.gnb.ca/content/gnb/en/departments/finance/taxes/credit.html. Chamber members are encouraged to contact a legal and/or financial professional before applying to the program.
Selected Investor Information
The program provides a 30% non-refundable personal income tax credit of up to $75,000 per year (i.e. for investments of up to $250,000 per investor) for individuals. To be eligible for the tax credit, an investment must be made by a minimum of three individuals for a total minimal amount of $10,000 (and a minimum of $1,000 per investor). The credit received may be carried forward seven years or carried back three years. Of note, shares acquired via of an investment under the Small Business Investor Tax Credit (SBITC) program must be held for a minimum of four years. Investors cannot use financial assistance from any government, municipality or public authority in the acquisition of the shares in the business. Effective for the 2014 taxation year, the Small Business Investor Tax Credit will be enhanced to allow New Brunswick corporations and trusts to be eligible for a 15% non-refundable corporate income tax credit on eligible investments up to $500,000. This translates into a tax credit of $75,000 for New Brunswick corporate and trust investors who invest in eligible small businesses in the province.
Selected Corporation Information
Businesses from all sectors are eligible to participate in the SBITC program after applying for and receiving a Certificate of Registration. The business must be incorporated and registered to carry on business in New Brunswick and have net tangible assets of less than $40 million. Additionally, the corporation’s assets and income must all (or substantially all) be used to generate active business income in New Brunswick, with at least 75% of wages and salaries paid to individuals who are residents of the province in each of the four years following the investment. Funds raised through the program must be used as “active business income,” and not for strictly financial purposes (such as lending, purchasing shares of another person, investment outside of New Brunswick, payment of dividends, etc.).
Program History and Usage
The program began in 2003 with some updates to its criteria in 2007. From statistics gathered early in 2013 by department officials, there were 526 approved applications since the program’s inception – with usage increasing year-over-year. The program has been used in the information and communications technology, professional services and retail sectors most often. This has led to $96.8 million in total investment and $29.1 million in tax credits to individual investors.
A challenge for the expanded use and growth of this program are restrictions on publicizing corporate registration in the program due to compliance issues with New Brunswick’s Financial and Consumer Services Commission. The FAQ section from the finance department website above states, in part: “The Government of New Brunswick cannot disclose which businesses/corporations are registered under the Small Business Investor Tax Credit program...In order for a potential investor to determine is a corporation is registered, the potential investor must ask the corporation to see the official Certificate of Registration.”