Here is the text from the Federal 2007 Budget webpage regarding child care:
Supporting the Creation of New Child Care Spaces
In Budget 2006, Canada’s New Government introduced the Universal Child Care Plan, a two-pronged strategy to provide support for families with children. In July 2006, parents began receiving support of $100 per month for every child under age 6, to be used for the priorities identified by parents as they determine how best to balance home, work and other commitments. Recognizing that parents often choose to use child care services, the Government also committed to provide $250 million annually to support the creation of up to 25,000 new spaces beginning in 2007–08.
Building on consultations with other governments and service providers, the Government is delivering on this commitment in Budget 2007.
Budget 2007 proposes to provide a 25-per-cent investment tax credit to businesses that create new child care spaces in the workplace to a maximum of $10,000 per space created. It also proposes to provide annual additional funding of $250 million to provinces and territories to support the creation of child care spaces that are responsive to the needs of parents, and are administered in an efficient and accountable manner. This funding will continue to grow over time as a result of the annual 3-per-cent escalator that is part of the renewed CST.
Funding will flow through the CST, beginning in 2008–09, upon completion of discussions with provinces and territories on how best to make use of those new investments and to ensure reporting and accountability to Canadians. While these discussions are ongoing and to fully honour the commitment made in Budget 2006, Budget 2007 provides a transition payment to provinces and territories of $250 million for 2007–08 to support the child care spaces objective, allocated on an equal per capita basis.
Moreover, Budget 2007 announces the extension of existing funding of $850 million, provided within the CST in support of federal-provincial-territorial arrangements established in 2000 and 2003 for early childhood development and early learning and child care. These federal funding arrangements will be extended to 2013–14.
These actions will increase support for children through the CST to $1.1 billion in 2008–09. This support will grow to almost $1.3 billion by 2013–14.
This transfer to provinces and territories is only one way that the federal government provides support for children.
Federal Support for Early Learning and Child Care The Government of Canada will provide nearly $5.6 billion in 2007–08 in support of early learning and child care through transfers, direct spending and tax measures:
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Investment Tax Credit for Child Care Spaces
Budget 2007 proposes to introduce a tax credit to encourage businesses to create licensed child care spaces for the children of their employees and, potentially, for children in the surrounding community. The tax credit, which will be delivered as part of the existing investment tax credit provisions, will be available to eligible businesses that create one or more new child care spaces in a new or existing licensed child care facility.
The measure will provide eligible taxpayers with a non-refundable investment tax credit equal to 25 per cent of eligible expenditures, to a maximum credit of $10,000 per child care space created. Taxpayers eligible for this new credit will be those that carry on a business in Canada. Further, the provision of child care spaces must be ancillary to one or more businesses of the taxpayer that do not include the provision of such spaces.
Eligible expenditures will include the cost of depreciable property (other than specified property) and the amount of specified start-up costs, acquired or incurred solely for the purpose of the creation of the new child care space at a licensed child care facility.
Eligible depreciable property will include the cost or incremental cost of the building or portion of the building in which the child care facility is located, as well as the cost of furniture, appliances, computer equipment, audio-visual equipment, playground structures and playground equipment. The specified start-up costs will include initial start-up costs such as landscaping costs for the children’s playground, architect’s fees, costs of initial regulatory inspections, initial licensing fees, building permit costs and costs to acquire children’s educational material.
Eligible expenditures will not include specified property. Specified property will include motor vehicles and property that is, or is located in or is attached to, a residence of the employer, of an employee of the employer, of a person who holds an interest in the employer, or of any person related to the employer. The credit will not be available for any of the ongoing or operating expenses of the child care facility such as supplies, wages, salaries, utilities, etc.
Unused credits may be carried back 3 years and forward 20 years by eligible taxpayers to reduce federal income taxes otherwise payable in those years. All or part of the credit arising in respect of the cost of the acquired property upon which a taxpayer’s credit is computed will be recaptured in certain circumstances. The credit will be recovered against the investment tax credit balance if, at any time within the five calendar years after the creation of the new child care space, the new child care space ceases to be available or property that was an eligible expenditure in respect of the child care space is sold, or leased, to another person or is converted to another use.
The amount to be recaptured will be 25 per cent of the lesser of
· the eligible expenditure that was taken into account in determining the credit, and
· the proceeds of disposition of the eligible property or, if the eligible property is disposed of to a related party, the fair market value of the property at the time of the disposition.
If the application of the recapture rule results in an investment tax credit balance at the end of a taxation year being less than zero, the taxpayer will be required to add the negative balance to tax payable.
The tax credit will be available in respect of eligible expenditures that are incurred on or after March 19, 2007.
http://www.budget.gc.ca/2007
Investment Tax Credit for Child Care Spaces
(39) That, for taxation years that end on or after March 19, 2007, a taxpayer carrying on a business in Canada, other than a business that is the provision of child care services, be allowed to add, in computing its investment tax credit at the end of the taxation year, an amount incurred on or after March 19, 2007 in respect of the creation of each new child care space in a licensed child care facility, equal to the lesser of $10,000 and 25 per cent of the taxpayer’s eligible expenditures in respect of the child care space.
(40) That, for the purpose of paragraph (39),
(a) an eligible expenditure be an expenditure, incurred for the sole purpose of the creation of the new child care space in a licensed child care facility operated for the benefit of children of the employees of the taxpayer, or of children of the employees and other children, that is
(i) incurred to acquire depreciable property of a prescribed class (other than a specified property), or
(ii) a specified child care start-up cost;
(b) a specified property be a property that is a motor vehicle or a property that is, or is located in or attached to, a residence of
(i) the taxpayer,
(ii) an employee of the taxpayer,
(iii) a person who holds an interest in the taxpayer, or
(iv) a person related to a person referred to in any of clauses (i) to (iii); and
(c) a specified child care start-up cost be the cost (other than the cost of a property included in clause (a)(i)) of
(i) landscaping to create an outdoor play area for children,
(ii) initial fees for licensing, regulatory and building permits,
(iii) architectural fees for designing the child care facility, and
(iv) children’s educational material.
(41) That, if in a specified taxation year in respect of a property the cost of which included one or more eligible expenditures of a taxpayer in respect of a child care space, the taxpayer disposes of the property, or the child care space ceases to be available, there be added to the taxpayer’s tax otherwise payable under Part I of the Act for the specified taxation year, an amount that is 25 per cent of the lesser of
(a) that portion of the cost of the property that was an eligible expenditure that was taken into account in computing the investment tax credit; and
(b) the amount that is
(i) if the property is disposed of to a person with whom the taxpayer deals at arm’s length, the proceeds of disposition of the property, and
(ii) in any other case, the fair market value of the property.
(42) That, for the purposes of paragraph (41),
(a) a disposition of a property include a lease of the property by the taxpayer, or a change of use of the property to a non-specified use (being any use other than the provision of child care services); and
(b) a specified taxation year in respect of a property be a taxation year that ends on or before the day that is 60 months after the day on which the taxpayer acquired the property.
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