Looking to do some good for the planet and save some corporate taxes while you’re at it? The Canadian Department of Finance has you covered.

In August 2023, draft legislation was released regarding the Clean Technology Investment Tax Credit and the Carbon Capture, Utilization, and Storage Investment Tax Credit. Both of these programs provide refundable tax credits to Canadian corporations, incentivizing them to make purchasing and operational decisions that will help Canada reach its climate goals.

Clean Technology Investment Tax Credit

This program provides investment tax credits (ITCs) of up to 30% for eligible clean technology property acquired after March 27, 2023 and will be available until 2034. It is intended to spur investment in non-fossil fuel energy adoption. Some of the items that qualify for the credit are:

  • Green electricity generating equipment, such as solar, wind, or water
  • Stationary electricity storage equipment
  • Active solar heating equipment
  • Some geothermal heating or electricity equipment
  • Non-road zero-emission vehicles and related charging equipment

In order to qualify for the credit, the equipment must be situated in and intended to be used in Canada and must be purchased new from the retailer or manufacturer.

Carbon Capture, Utilization, and Storage Investment Tax Credit

The August 2023 release updates draft legislation originally released in August 2022. The program provides ITCs for qualified expenditures related to carbon capture, utilization, and storage projects between 2021 and 2041. The credits available are as follows:

  • 60% for expenditures related to ambient air carbon capture
  • 50% for other carbon capture expenditures
  • 37.5% for carbon transportation, storage, or use expenditures

The ITC rates above will be in place until 2030, at which point they will be cut in half until 2041.

Labour Requirement

Both of these ITCs have labour requirements that mirror similar provisions in the United States Inflation Reduction Act. Failing to meet these requirements will result in a 10% reduction of the ITC. These requirements, proposed to take effect in October 2023, including paying prevailing wages and using apprentices at the designated work site.

More to Come…

In addition to these ITCs, there are three more programs in the group of Clean Investment Tax Credits proposed in Budget 2023:

  • Clean Electricity Investment Tax Credit – to support eligible investments in technologies required for generation and storage of clean electricity, as well as its transmission between provinces and territories.
  • Clean Hydrogen Investment Tax Credit – to support the production of clean hydrogen.
  • Clean Technology Manufacturing Tax Credit – to support the purchase of new machinery and equipment used to manufacture or process clean technologies and extract, process, or recycle critical minerals.

With these tax incentives on the horizon, Canadian corporations that are planning for the green economy boom will be well supported by the government in their efforts during this challenging transition. If you are curious about how these programs apply to your corporation, get in touch with us and our professionals can assist in finding all of the tax credits that apply to your project.

Additional Resources

Department of Finance – August 4, 2023 News Release    https://www.canada.ca/en/department-finance/news/2023/08/government-consults-canadians-on-budget-2023-measures-to-grow-the-clean-economy-close-tax-loopholes-and-deliver-tax-relief-for-canadians.html

Department of Environment and Climate Change – Big Five Clean Investment Tax Creditshttps://www.canada.ca/en/environment-climate-change/news/2023/04/minister-guilbeault-highlights-the-big-five-new-clean-investment-tax-credits-in-budget-2023-to-support-sustainable-made-in-canada-clean-economy.html

Department of Finance – CCUS ITC Detailshttps://www.canada.ca/en/department-finance/news/2022/08/additional-design-features-of-the-investment-tax-credit-for-carbon-capture-utilization-and-storage-recovery-mechanism-climate-risk-disclosure-and-k.html

Written by: Rob Fahie, CPA Candidate

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