“The big concern for mortgage brokers is the ability to have financial options available to them and their clients,” Dean Koeller, immediate-past president of the Alberta Mortgage Brokers Association, told MortgageBrokerNews.ca. “We have a list of 70 MICs across the country that are supporting us on this legislation change.
"Some have suggested that they will close down due to an inability to meet the new ownership levels, others will have to divest a significant portion of their investments to provide shareholders with the equity to pay tax penalties. Others will not be able to grow due to related party issues or ownership issues or tax penalties being imposed.”
Koeller’s brother, Dale, VP of private lender Calvert Home Mortgage, will represent those shared concerns in Ottawa today. The underwriter is scheduled to address a Finance standing committee on proposed changes to the country’s federal tax regime as part of the government's omnibus crime Bill C-13. The legislation is meant to shore up tax loopholes around investment corporations, among other key areas.
Chief among the amendments concerning MICs is the move to limit to less than 10 per cent any one individual's shareholdings in a MIC where only a portion of that investment is held in an RRSP or RRIF. Currently, the Income Tax Act allows for 25 per cent stake.
Dale Koeller will also share industry concerns about a proposal to expand the definition of partners of “a related party,” in terms of MIC shareholders, to include any blood, marital or adoptive relative and not just a spouse or minor child.
MIC managers argue that could reduce the scope of ownership and add high levels of punitive taxes for certain shareholders. The new legislation will have the effect of taxing RRSP and RRIF income and capital gains immediately, with no transition or notice period.
“It is important to note that the impact of these rules changes will have a varying effect from company to company,” said Dean Koeller, Calvert’s CFO. But “either way, if MICs have less capital resources or are not operating at all, this will reduce the financial resources that brokers will have available to assist their clients with their financial needs.”
A clause-by-clause hearing will take place in Ottawa on Nov. 4, with the committee expected to report back to the House next week. Mortgagebrokernews.ca is a division of KMI Media.
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