Private lender: Battle lost; war continues

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A private lender spearheading the industry’s charge against a bill poised to limit funding options is conceding Ottawa will pass that legislation – and likely before the Christmas break, say pundits.

“While I was pleased to represent the industry in this initiative,” said Dale Koeller, VP for Calgary-based Calvert Home Mortgage, “it is clear that there is not the political will at this time to make any changes to Bill C-13.”

Koeller appeared before the Senate’s standing committee on finance last week, reiterating the concerns he shared last month with the House of Commons committee examining the same legislation.

Neither appearance won the kind of concessions industry associations AMBA and MBABC, along with several MICS and others private lenders had hoped for in supporting Koeller’s lobby efforts against legislation.

While the government billed C-13 as a way of closing tax loopholes around investment corporations, among other key areas, the broker channel has balked at the ways it intends to do it.

Chief among the bill’s amendments was the decision to move MICs to a “prohibited investment” list in terms of RRSP and RRIF tax exemptions. In practical terms, it means that members of a family – or related individuals – lose that tax advantage if their collective ownership of any class of shares in a MIC or syndicate is more than 10 per cent.

That ceiling used to be set at 25 per cent. The definition of “related individuals” has also been altered, and will now extend to any blood, marital or adoptive relative and not just a spouse or minor child.

Koeller and others are concerned that the broker channel will lose several of the small MICs, as they reshuffle their ownership structures. The net result could be smaller lenders and a loss of overall funding for private lending clients.

“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 and the immediate-past president of AMBA. 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.”

The government is now hinting that Bill-13 will be among key legislation passed into law before the winter break. The bill has already won House approval, with the house expected to do the same this week.

Dale Koeller isn’t yet ready to give up the fight entirely;.

“We as an industry will continue to work with politicians and the Department of Finance to determine ways to address their concerns of tax avoidance while not impacting an important and valuable resource that MICs provide to the Canadian public,” he said Monday.

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