CED Investment Co-operatives
Building pools of capital for investment in local communities
A Community Economic Development Corporation/Co-operative (CEDC) is a pool of funds raised by selling investment shares under New Brunswick’s Small Business Investor Tax Credit program. This program provides a 50% rebate to anyone living in the province and a 15% rebate to NB companies. In most cases, CEDC shares are RRSP and TFSA eligible, meaning these funds can be self-directed into a CEDC with investors receiving the benefits of both programs. The capital raised through CEDC offerings is then invested into small businesses that help create meaningful jobs and build local economies.
“New Brunswickers invest about $680 million per year into RRSPs alone. Only 2% of that comes back to our local economy.”
The Co-operative Enterprise Council has been a leader in the development of the CEDC program and worked tirelessly for nearly a decade (through three successive governments) to advocate for the creation of the CEDC investor tax credit program. In 2016, we were thrilled with the passing of legislation and want to sincerely thank the Financial and Consumer Services Commission and the NB Dept of Finance for all their support and help in making this happen.
Unfortunately, it is not enough for legislation to be in place. Setting up and running a CEDC is a major undertaking and requires specialized skills and knowledge. The Co-operative Enterprise Council has spent the past five years advocating for funding and resources to help build the capacity of communities and organizations to use the CEDC and was able to do some small pilot projects in several communities across New Brunswick with the support of the Economic and Social Inclusion Corporation. However, this was just a drop in the bucket compared to the demand and interest.
Pan-Canadian Community Investment Organization Project
In response to this need, CECNB partnered with the Canadian Community Economic Development Network and the BC Community Impact Investment Coalition on a project proposal to Employment and Social Development Canada aimed at building the capacity of Community Investment Organizations (CIO) across the country to use investor tax credit programs. This funding has allowed us to begin working together on the following objectives in September 2020:
To increase dialogue and information-sharing through the creation of two regional (Maritimes and Western Canada) and a national CIO Learning Committee.
To conduct an economic impact study on the NS CEDIF program which has been operating for 20+ years and raised nearly $100 million for local business development.
To develop resources, how-to guides, promotional materials, and educational sessions to build awareness and capacity of communities to develop community economic development investment funds.
To digitize the application and management systems of CED investor tax credit programs to lessen the extensive paperwork and administrative burden on CIOs through a customized online platform.
CECNB is the project leader for the Atlantic Region and to date, we have struck a CIO Learning Committee with representation from a broad spectrum of organizations from across the Maritimes who have previous experience using CED investor tax credit programs. We meet regularly to discuss the challenges and opportunities of these programs and to gather resources and information for the development of a “CED Investment Funds Guide”, a comprehensive step-by-step resource manual specific to the programs in each province. We have also engaged a software development company, Tapestry Community Capital, to design the CIO online platform and we are currently BETA testing this platform with several community investment organizations. And last but far from least, we conducted an Economic Impact Study on the Nova Scotia CEDIF program. See the astounding results here!
Stay tuned for updates and contact us for information about how your community can use the CEDC investor tax credit to build your local economy!
Frequently Asked Questions
Why invest in a CEDC?
CEDCs create an opportunity for people to channel their investment dollars into their local economy. New Brunswickers who invest in a registered CEDC receive 50% of their investment back (to a maximum of $125,000 per year) through a non-refundable provincial income tax credit. Corporations receive a 15% provincial tax credit (maximum $75,000 per year). Should an investor not be able to use the entire credit in a given year, it can be carried forward or applied back three years.
CEDCs have other appealing features such as being RRSP and TFSA eligible. This means that New Brunswickers who self-direct their RRSPs into CEDCs are eligible to get both the 50% provincial tax credit as well as the benefits of the RRSP or TFSA.
2. What types of CEDC are there?
“Company” CEDC: Enables corporation or co-operative owners to raise funds to be invested directly into their own company.
“Fund” CEDC: Also known as a “blind pool”, these CEDC funds are raised for investments into other for-profit corporations or co-operatives. They are similar to mutual funds, with the important distinction being the money stays in our province.
3. What kind of businesses qualify to be a CEDC?
A CEDC can be any kind of for-profit corporation or co-operative provided they meet the definition of an active business under Canada’s Income Tax Act subsection 125(7). In short, this means that the business must generate revenue by actively selling a product or service. However, there are exceptions if the business employs at least 5 people.
An example of a business that is not “active” would be property or housing rental (unless it employs 5 people). Otherwise, any for-profit co-operative or corporation able to sell investment shares can apply to be a CEDC. You may already have a business that you want to raise capital for, or you may start a new enterprise, the choice is entirely up to you.
Charities and non-profits cannot be a CEDC nor the recipient of CEDC investment funds. However they can incorporate a separate for-profit business as a CEDC under their umbrella. For charities, there are some special restrictions that need to be looked into before proceeding.
4. How do I find out more?
Contact us at admin@cecnb.ca or find more information about Community Economic Development Funds on FCNB’s website.