Intake status: Open – Applications are being accepted
Ministry responsible: Economic Development and Trade

Overview

Alberta-based investors in Community Economic Development Corporations (CEDCs) that are encouraging rural economic development or making a social impact in their communities are eligible for the CEDC Tax Credit which, with an annual budget of $3,000,000, offers them a 30% tax credit.

To participate in the program, eligible investors must purchase shares in a CEDC that has registered with the program. The CEDC will then provide capital to Eligible Community Businesses 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 that can register with the program:

  • Opportunity Development Co-operatives (ODCs)
  • Community Economic Development Investment Funds

Only registered CEDCs can apply to the program directly. CEDCs are responsible for applying for tax credit certificates on behalf of their investors.

The program is offered on a first-come, first-serve basis.

Funding

Investment funds and ODCs are required to register with the program to raise capital and apply for a tax credit on behalf of their investor.

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

Community Economic Development Corporations

Investment Funds

In order to be eligible to register under the CEDC program, a Community Economic Development Investment Fund must:

  • have equity capital of at least $10,000
  • be registered under the Alberta Business Corporations Act
  • not be registered as an Alberta Investor Tax Credit (AITC) Venture Capital Corporation under the Investing in a Diversified Alberta Economy Act
  • have a share structure consisting of only common shares that have no special rights or restrictions and/or common shares that have rights or restrictions related only to the redemption of the shares by the corporation

Opportunity Development Cooperatives

In order to be eligible to register under the CEDC program, an ODC must:

  • have a minimum of $10,000 from at least one, or a combination of:
    • the issuance of membership shares
    • the issuance of investment shares
    • raising money through member loans
  • have a share structure consisting of special rights related only to redemption of shares by the corporation, or shares having special rights to vote for directors

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, or
  • section 25.01 of the Alberta Corporate Tax Act for a corporation

For an investor to be eligible for a tax credit under the CEDC program, they must invest directly in a registered CEDC. Investors cannot invest directly in an Eligible Community Business (ECB).

Eligible Community Businesses

Registered investment funds and ODCs are required to invest in Eligible Community Businesses (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 AITC 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.

How to apply

The CEDC program operates on a first-come, first-served basis. CEDCs can fill out and submit their applications through the online application portal. Once the annual CEDC budget has been allocated, the online application portal will close and reopen at the beginning of the next fiscal year with a new budget.

Step 1. Read the guidelines

Program guidelines.

Step 2. Create a user account and log in through the online application portal

 

Online application portal

 

Step 3. Register as a CEDC

CEDC applicants are required to register with the program as either an Investment Fund or an ODC.

To register, the applicant is required to complete and submit an online application. As part of their submission, applicants are required to provide:

  • a community economic development plan outlining
    • the broad community the eligible CEDC intends to support
    • a high level overview of the social or economic development challenge that the eligible CEDC will attempt to help overcome
  • financial statements
  • a shareholder register using the supplied template accessible through the application
  • any other documentation required to support the application

Once the eligibility requirements are met, a certificate of registration will be provided to the applicant within 30 days of registration.

Step 4: Apply for approval to raise equity capital

After successfully registering with the CEDC program, CEDCs are automatically approved to raise up to $50,000 in equity capital, exclusive of the $10,000 required for registration, by the end of the first year of registration.

CEDCs that need to raise additional equity capital are required to apply for approval through the CEDC online application portal.

Step 5: Raise equity capital

After successfully registering with the CEDC program, the CEDC can raise the approved amount of equity capital. 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 6: Apply for tax credit certificates

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. Share purchase forms for eligible investments must be submitted within 90 days of the end of the calendar year.

Tax credit certificates will be granted on a first-come, first-served basis until the annual budget is fully allocated.

Step 7: Delivery of tax credit certificates

Once a tax credit 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 8: Invest in an Eligible Community Business

Prior to each ECB investment, 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 9: Establish an Investment Protection Account (IPA)

Registered CEDCs are required to set up an IPA if the CEDC does not plan to 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 and Trade within 6 months following its fiscal year end.

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

Additional program details

For more information on the CEDC please refer to the:

Contact

To connect with the CEDC program:

Email: cedc.program@gov.ab.ca