What is the CT ITC

The CT ITC is a refundable tax credit for capital invested in the adoption and operation of new clean technology (CT) property in Canada from March 28, 2023, to December 31, 2034.

The CT ITC rate may be up to 30% of the capital cost of CT property that is acquired and that becomes available for use from March 28, 2023, to December 31, 2033.

The CT ITC rate may be up to 15% for property acquired and that becomes available for use in 2034 and will be unavailable after 2034.

 

Who can claim

To claim the CT ITC, you must be:

• A taxable Canadian corporation (including a taxable Canadian corporation that is a member of a partnership)
• A mutual fund trust that is a real estate investment trust (including such a trust that is a member of a partnership)

Employers who elect to meet the labour requirements can avoid claiming the reduced tax credit rate.

Refer to: Avoid the reduced tax credit rate for clean economy ITCs

 

Claiming one or more ITCs

You are able to claim both the CT ITC and the Atlantic investment tax credit.

You can generally claim only one of the clean economy ITCs for the same eligible property. For example, you cannot claim the CT ITC if you claim the Carbon Capture, Utilization, and Storage (CCUS) ITC on the particular property.

You may claim multiple clean economy ITCs for the same project, if the project includes different types of eligible property.

 

What property qualifies

In order to qualify, in addition to other limitations, clean technology (CT) property must:

• Be equipment that is situated in and intended for use exclusively in Canada
• Not have been previously used or acquired for use or lease, for any purpose before acquisition by the taxpayer

If you lease the property to another person or partnership, additional leasing requirements must be met.

The property must be both:

• Leased to a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust or a partnership where all the members are taxable Canadian corporations
• Leased in the ordinary course of carrying on a business in Canada by the taxpayer whose principal business is any or a combination of the following:
• Selling or servicing property of that type
• Leasing property
• Lending money
• Purchasing conditional sales contracts, accounts receivable, bills of sale or chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services

 

 

Eligible CT property

The CT ITC is available for investments in the following types of CT property:

• Equipment used to generate electricity from solar, wind and water energy
• Stationary electricity storage equipment that does not use any fossil fuel in operation (such as batteries and pumped hydroelectric storage)
• Active solar heating equipment, air-source heat pumps and ground-source heat pumps
• Non-road zero-emission vehicles and related charging and refueling equipment that is used primarily for such vehicles
• Equipment used exclusively for the purpose of generating electrical energy or heat energy (or a combination of both), solely from geothermal energy, unless it is part of a system that extracts fossil fuels for sale
• Concentrated solar energy equipment
• Small modular nuclear reactors

 

Technical guidance for CT property

For some CT property that is also described in Class 43.1 or 43.2, Natural Resources Canada (NRCan) has published a Technical Guide to Class 43.1 and 43.2 that applies conclusively with respect to engineering and scientific matters, for the purpose of determining whether a property is Class 43.1 or 43.2.

This includes:

• Active solar heating equipment described in Class 43.1 (see section 2.3 of the guide)
• Ground-source heat pump systems described in Class 43.1 (see section 2.3 of the guide)
• Photovoltaic electrical generation equipment described in Class 43.1 (see section 2.7 of the guide)
• Small-scale hydro-electric installations described in Class 43.1 (see section 2.4 of the guide)
• Water-current, tidal or wave energy equipment described in Class 43.1 (see section 2.15 of the guide)
• Wind energy conversion systems described in Class 43.1 (see section 2.6 of the guide)

Not all technologies described in Class 43.1 and 43.2 are also CT property. For example, some CT types of property described in Class 43.1 or 43.2 have additional requirements to be eligible for the CT-ITC.

This includes:

• Electrical energy storage equipment described in Class 43.1 that does not use fossil fuel in operation (see section 2.19 of the guide noting the additional requirement)
• Geothermal energy equipment described in Class 43.1 that is used exclusively to generate electrical or heat energy (or a combination of both), other than equipment that is part of a system that extracts fossil fuel for sale, and other than equipment that uses any fossil fuel to generate electricity and/or heat energy (see section 2.8 of the guide noting the additional requirements)
• Electric vehicle charging equipment that is used primarily for non-road zero-emissions vehicles described in Class 56 (see section 2.18 of the guide noting the additional requirement)

 

Additional tax incentives

Additional tax incentives are available for CT property that is also described in Class 43.1 and 43.2. These tax incentives could include Accelerated capital cost allowance (ACCA).

Refer to: Tax incentives for Class 43.1 and 43.2 property

 

If you have any questions or need assistance, feel free to reach out to us at PKF Antares Professional Corporation. You can contact us at 403-375-9955 or https://www.pkfantares.com/contact/. We're here to help!