The Labour-Sponsored Funds Tax Credit

If you acquired or purchased an approved share from a Labour-sponsored venture capital corporation, you may be able to claim a credit on your tax return. To qualify, you need to be the first registered holder of the share, and you need to claim the credit correctly on your income tax return.

Understanding the Labour Sponsored Venture Capital Corporation Tax Credit

The LSVCC tax credit is designed to reward investors who help small and medium-sized companies obtain the capital they need to thrive and grow, and it provides a 15 percent credit on approved investments up to $5,000.

Labour-sponsored venture capital corporations tend to be corporations tied to labour unions. In order for their shareholders to qualify for this credit, these corporations must be federally, provincially or territorially approved.

Federal, Provincial and Territorial LSVCCs

If you invest in approved shares of the capital stock of a federally registered LSVCC, you may claim the Labour-sponsored funds tax credit. However, if the LSVCC is provincially or territorially registered, you can only claim the federal tax credit if your province or territory offers a credit.

Completing Your Tax Return

When completing your income tax return, note the net cost of your LSVCC shares on line 413. Multiply this amount by 15 percent, and write the product on line 414, up to a maximum of $750.

If your province or territory offers credits for LSVCC investments, claim them on your provincial or territorial return.

Acquiring Qualifying Stock at the Beginning of the Year

The CRA allows you to report LSVCC acquired at the beginning of the year on your previous year’s return.

For example, if you are the first holder of an approved share and you acquire it between Jan 1, 2015 and Feb 29, 2015, you are allowed to report those amounts on your 2014 income tax return. If you do not report all of those amounts on your 2014 return, you are allowed to claim them on your 2015 return.

Similarly, if you acquire approved stock between Jan 1, 2016 and March 1, 2016, you can report those amounts on your 2015 return, and you can report any remaining amounts on your 2016 return.

For example, imagine you purchase $7,000 of federally approved LSVCC shares in Jan of 2016, you report $5,000 on your 2015 return and claim a credit of $750. As a result, you ware allowed to report the remaining $2,000 on your 2016 return and claim a $300 tax credit.

LSVCC Shares and Registered Retirement Savings Accounts

If you purchase an LSVCC share for your spouse or common-law partner’s Registered Retirement Savings account, either of you may claim the Labour-sponsored funds tax credit. However, you can only claim the eligible amounts once. You cannot both report duplicate amounts.