Annual lists 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

Ottawa, February 7, 2000
2000-009

Finance Minister Announces Minor Change to the Redemption Requirements for Federal LSVCCs

Finance Minister Paul Martin today announced that he would propose a minor change affecting federally-registered labour-sponsored venture capital corporations (LSVCCs). The proposed change provides an exemption from the rules governing the recovery of the federal LSVCC tax credit.

Shares in federally-registered LSVCCs that qualify for the federal LSVCC tax credit must be held for a minimum period. Where a share is redeemed prior to the expiry of the minimum period, the federal LSVCC tax credit for the share is generally recovered. In the case of shares issued before March 6, 1996, there is no recovery of the tax credit for a share redeemed more than five years after the day on which the share was issued. For shares issued after March 5, 1996, the recovery applies where a share is redeemed less than eight years after the day on which it was issued.

The proposed change will, for the purpose of the recovery provisions, treat a share redeemed in February or on March 1st as having been redeemed 30 days later. For example, existing LSVCC shares issued on March 1, 1995 and redeemed on February 29, 2000 would be exempt from a recovery of the federal LSVCC tax credit that was associated with the original acquisition of the shares.

This measure is intended to accommodate taxpayers wishing to acquire new LSVCC shares in the first 60 days of a year with the proceeds from the redemption of LSVCC shares. In these circumstances, a taxpayer would generally be entitled to claim a tax credit for the preceding year in respect of an acquisition of the new shares and would not be subject to a tax penalty with respect to the redemption of the existing shares. In addition, any necessary changes will be made to ensure that an LSVCC's registration cannot be revoked as a result of having redeemed LSVCC shares in these circumstances. It is proposed that this change apply from the inception of the rules governing the recovery of the LSVCC tax credit.

___________________
For further information: