Intake status: Closed – Applications to register with the program are not being accepted. Ministry responsible: Economic Development, Trade and Tourism

Overview

Effective October 24, 2019, the Community Economic Development Corporation Tax Credit program is being phased out, with no additional funding provided after March 30, 2020. Budget has been allocated to support participants already registered with the program through the transition. Important information for registered participants as well as next steps are outlined on this page. Please note: New applications to register with the program will not be accepted.

Any applications to register with the program that were not approved prior to October 24, 2019 will not be processed.

The Community Economic Development Corporation program offers a 30% tax credit to Albertans who invest in Community Economic Development Corporations (CEDCs) that are encouraging rural economic development or making a social impact in their communities.

To participate in the program, eligible investors must purchase shares in a CEDC that successfully registered with the program prior to October 24, 2019.

The CEDC will then provide capital to Eligible Community Businesses (ECBs) that are undertaking initiatives to develop and grow their rural economy or address a social challenge in their community.

There are 2 types of CEDCs supported through the program:

Opportunity Development Co-operatives (ODCs)

Community Economic Development Investment Funds

CEDCs are responsible for applying for tax credit certificates on behalf of their investors.

Tax credits certificates are available on eligible investments made between August 1, 2018 and December 31, 2019.

To be eligible for a tax credit certificate:

the CEDC must have successfully registered with the program prior to October 24

the investor and investment must meet the eligibility requirements

transitional budget must still be available

Tax credit certificates will be offered on a first-come, first-serve basis, until the budget is spent.

Registered participants

Applications to raise additional equity capital

Effective October 24, 2019, no new applications to raise additional equity capital will be accepted.

Any applications to raise additional equity capital that were submitted but not approved prior to October 24, 2019, will not be processed. This includes both first and subsequent applications to raise additional equity capital.

CEDCs that received approval to raise additional equity capital before October 24, 2019, are permitted to continue with their equity raise.

All equity raises through the program must be completed before December 31, 2019. Participants will not be able to apply for a tax credit certificate for investments made after that date.

Applications for tax credit certificates

Tax credit certificates will be processed on a first-come, first-served basis, including those that were submitted prior to October 24, 2019.

Once the budget is spent, no additional tax credit certificates will be issued.

The Government of Alberta will not issue a tax credit certificate for investments made after December 31, 2019. Applications for a tax credit certificate must be submitted by March 30, 2020 for investments made in the 2019 calendar year.

All previously issued tax credit certificates remain valid. Tax credits unused in the first year may still be carried forward for up to 4 additional years.

Funding

Investment funds and ODCs are required to invest the capital raised within a prescribed period of time as outlined in the program guidelines.

For individual investors

The tax credit is refundable.

A $60,000 maximum aggregate credit can be applied per year.

Tax credits may be carried forward for up to 4 years, which means that an investor may receive a credit for more than $60,000, up to a maximum of $300,000 (equal to a $1,000,000 investment). The $60,000 per year tax credit will be allocated to the year the credit is realized as well as the 4 years that follow.

Year 1 Year 2 Year 3 Year 4 Year 5 Investment amount $1,000,000 investment $0 investment $0 investment $0 investment $0 investment Tax credit $300,000 tax credit $240,000 remaining tax credit $180,000 remaining tax credit $120,000 remaining tax credit $60,000 remaining tax credit Eligible to use $60,000 $60,000 $60,000 $60,000 $60,000 Carry forward $240,000 $180,000 $120,000 $60,000 $0 tax credit remaining

For corporate investors

The tax credit is non-refundable.

The tax credit may be carried forward for up to 4 years.

Eligibility

Investors

Both individuals and corporations are able to invest in registered CEDCs under the program. This includes:

accredited investors (such as angel investors)

friends, family, and business associates of the registered CEDC

corporate investors

venture capital corporations

Eligibility for investors is limited to investors who pay personal or corporate taxes in Alberta.

In order to invest in a registered CEDC, an investor must be considered an “eligible investor” as outlined in:

section 35.01 of the Alberta Personal Income Tax Act for an individual

section 25.01 of the Alberta Corporate Tax Act for a corporation

For an investor to be eligible for a tax credit certificate under the CEDC program, they must invest directly in a registered CEDC. Investors cannot invest directly in an ECB and receive a tax credit certificate through the program.

Eligible Community Businesses

Registered investment funds and ODCs are required to invest in ECBs that meet the following requirements:

have no more than 100 employees, including affiliates

be an active business with a permanent establishment in Alberta

if exporting, pay at least 50% of wages to employees who report to work in Alberta

if non-exporting, pay at least 75% of wages to employees who report to work in Alberta

have more than 80% of assets located in Alberta

be engaged in an eligible community business activity

not be a non-profit, charitable or non-taxable corporation/cooperative

not have received funding from a Venture Capital Corporation or an Eligible Business Corporation under the Alberta Investor Tax Credit program as defined in the Investing in a Diversified Alberta Economy Act

ECBs qualify for investments from registered CEDCs through one of 2 streams depending on the municipality they are located in:

economic development stream for rural businesses, or

social impact stream for either rural or urban businesses

Additional information on the eligibility criteria for ECBs, including eligible and ineligible activities and a complete list of urban and rural communities is outlined in the program guidelines package.

Next steps

Step 1: Complete your approved equity capital raise

CEDCs that received approval to raise equity capital before October 24, 2019, are permitted to continue with their equity raise.

All equity raises through the program must be completed before December 31, 2019. Participants will not be able to apply for a tax credit certificate for equity capital raised after that date.

To raise equity capital from investors, a CEDC must ensure its investor purchases shares in the CEDC in exchange for Canadian currency.

An individual investor (including affiliates) must own less than 50% of the voting shares in the registered CEDC.

Once the CEDC has raised its equity capital, it can apply to receive approval for a tax credit certificate on behalf of its investors.

Step 2: Apply for tax credit certificates

Applications for tax credit certificates must be requested through the online application portal prior to March 30, 2020. Tax credit certificates will be approved on a first-come, first-served basis until the budget is expended.

Registered CEDCs must complete and submit a share purchase information form through the online application portal to apply for tax credit certificates on behalf of their investors.

Step 3: Delivery of tax credit certificates

Once a tax credit certificate has been approved, registered CEDCs will be able to access and download their investors’ tax credit certificates through the online application portal.

The CEDCs are responsible for distributing tax credit certificates to their investors.

Step 4: Invest in Eligible Community Businesses

Prior to each investment in an ECB , the registered CEDC must provide information on the ECB it is choosing to invest in. This step can happen any time after registration.

Once approved, the CEDC is able to invest in the ECB in any of the following ways:

direct acquisition of new ECB equity shares issued for the purpose of raising new equity capital

a secured loan to the ECB

acquisition of equity shares from an affiliate of an ECB a debt instrument that meets the criteria in the Investing in a Diversified Alberta Economy Act

Step 5: Establish an Investment Protection Account (IPA)

Registered CEDCs are required to set up an IPA if the CEDC does not plan to immediately invest the equity capital raised into ECBs.

CEDCs allocating less than 80% of equity capital raised into ECBs, are required to deposit 30% of the equity capital raised into an IPA.

After you apply

CEDC program staff will thoroughly evaluate applications to ensure they meet the eligibility requirements outlined in the program guidelines.

Reporting

Registered CEDCs must prepare and file an annual report with the Minister of Economic Development, Trade and Tourism within 6 months following its fiscal year end.

Annual reports must be submitted for each year CEDCs are registered with the program.

The annual report form is available through the online application portal and must include the prescribed information as outlined in the program guidelines.

If a registered CEDC fails to comply with the annual reporting requirements, the tax credit certificates issued to their investors will be revoked and the CEDC will be required to re-pay the amount of the tax credit certificates back to the Government of Alberta.

Additional program details

For more information on the CEDC please refer to the:

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