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In order to encourage early adoption of clean technologies across Canada, and in response to the significant clean-technology incentives promulgated under the U.S. Inflation Reduction Act...
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In order to encourage early adoption of clean technologies
across Canada, and in response to the significant clean-technology
incentives promulgated under the U.S. Inflation Reduction
Act, the Federal Government of Canada introduced the following
refundable, clean economy investment tax credits
("ITCs") over the course of Budgets 2022
to 2024:
Clean Technology ("Clean Tech")
ITC
Carbon Capture, Utilization and Storage
("CCUS") ITC
Clean Hydrogen ("CH") ITC
Clean Technology Manufacturing
("CTM") ITC
Clean Electricity ITC
On Thursday, June 20, 2024, the enabling legislation for the
first four of the above five ITCs (Bill C-59 and Bill C-69)
received royal assent - an important legislative step toward the
enactment of legislation which will have wide ranging impact across
many key Canadian industry verticals.
Taxable Canadian corporation or REIT that is a member of a
partnership (subject to partnership rules)
Excludes: individuals, trusts (other than
REIT), pension funds
Clean technology
property
Situated in Canada and intended for use exclusively in
Canada
Has not been previously used, or acquired for use or lease
If the property is leased to another person, that person be a
qualifying taxpayer or partnership all members of which are taxable
Canadian corporations, and the lease must be in the ordinary course
of taxpayer's business of selling or servicing the property or
of financing the acquisition of the property
Types of qualifying equipment:
Electricity generation systems, including
solar, wind and water (small hydro, run-of-river, wave, and
tidal);
Fossil-fuel free stationary electricity storage
equipment, including batteries, flywheels,
supercapacitors, and certain storage;
Low-carbon heat equipment, including active
solar heating equipment, air-source heat pumps and ground-source
heat pumps;
Industrial zero-emission vehicle and
related charging or refueling equipment;
Eligible geothermal equipment, including
pipes, pumps, heat exchangers;
Concentrated solar energy equipment used
all or substantially all to generate heat or electricity, or a
combination, exclusively from concentrated sunlight; or
Small modular nuclear reactors used all
or substantially all to generate electrical energy or heat energy,
or a combination, from nuclear fission.
Filing
requirements
File prescribed form within 1 year after filing-due date for the
taxation year (no late filings)
Recapture
10 calendar years
CCUS ITC
Timing
Qualified CCUS Expenditure incurred
2022 - 2030
2031 - 2040
Property prepared or
installed on or after
Nov. 28, 2023
/
Nov. 28, 2023
/
Meets labour
requirements
Yes
No
Yes
No
CCUS ITC
CCUS projects capturing carbon
dioxide directly from ambient air
60%
50%
30%
20%
CCUS projects capturing carbon dioxide other than
directly from ambient air
50%
40%
25%
15%
CCUS projects transporting,
storing, or using carbon dioxide
37.5%
27.5%
18.75%
8.75%
Qualifying
taxpayer
Taxable Canadian corporation; or
Taxable Canadian corporation that is a member of a
partnership (subject to partnership rules)
Use in connection with a qualified clean hydrogen project
(government verification required) of the acquiring taxpayer in
Canada
Has not been previously used, or acquired for use or lease
Situated in Canada
Types of qualifying equipment:
Electrolysis equipment used all or
substantially all to produce hydrogen through electrolysis of water
;
Natural gas reforming equipment used all or
substantially all to produce hydrogen through natural gas
reforming, including certain specified equipment;
Clean ammonia equipment used for the sole
purpose of producing ammonia;
Dual-use electricity and heat equipment that
is part of a clean hydrogen project and that supports the
production of hydrogen by reforming natural gas and that is certain
energy generation equipment, certain electrical transmission
equipment, or certain energy distribution equipment;
Dual-use hydrogen and ammonia equipment that
is part of a clean hydrogen project used for the generation of
oxygen and nitrogen to be used in both hydrogen and ammonia
production;
Integrated ancillary equipment to any of the
equipment described above and used solely to support the
functioning of such equipment within a hydrogen or ammonia
production process as part of certain specified subsystems; or
Safety and monitoring equipment used as part
of a control, monitoring or safety system solely to support any of
the equipment descried above.
Cannot be excluded property
Filing
requirement
File prescribed form within 1 year after filing-due date (no
late filings)
Annual reporting
obligations
Information reporting
CI reporting
Recapture
20 calendar years
CTM ITC
Timing
(property acquired and becomes
available for use)
2024 - 2031
2032
2033
2034
CTM ITC
30%
20%
10%
5%
Qualifying
taxpayer
Taxable Canadian corporation; or
Taxable Canadian corporation that is a member of a
partnership (subject to partnership rules)
Situated in Canada and intended for use
exclusively in Canada
Has not been previously used, or acquired for use or
lease
If the property is leased to another person, that person be a
qualifying taxpayer or partnership all members of which are taxable
Canadian corporations, and the lease must be in the ordinary course
of carrying on a business in Canada by taxpayer whose principal
business is one of the specified activities (or any combination
thereof)
Types of qualifying equipment:
Certain machinery and equipment used for manufacturing or
processing
Certain tangible property attached to buildings and other
structures used for manufacturing or processing or that is required
for machinery or equipment
Certain property used for mineral extraction and
processing:
Certain specialized tolling
Certain non-road vehicles and automotive equipment
CTM use
The use of the property must be:
all or substantially all for certain qualified zero-emission
technology manufacturing activities; or
in a qualifying mineral activity producing all or substantially
all qualifying materials (i.e., lithium, cobalt,
nickel, copper, rare earth elements; and graphite).
Filing
requirement
File prescribed form within 1 year after filing-due date (no
late filings)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
