Our experts have been keeping up to speed on the new Clean Economy Investment Tax Credits.
Below is a brief summary on each of the four credits along with some eligibility criteria to get started.
Clean Technology ITC
Refundable ITC on equipment meeting the CRA definition of "Clean Technology Property"
Benefit: 30% refundable (cash) ITC on the cost base of eligible equipment
Who Can Claim: Taxable Canadian Corporations
Deadline: 18 months after fiscal year end (Same as SR&ED)
Eligibility:
- Zero-emission electricity generation technologies. Solar, Wind, Hydro, Modular Nuclear
- Electricity storage systems using zero fossil fuels in operation. Batteries, flywheels, compressed air, pumped hydroelectric, gravity, and thermal energy storage
- Certain active solar heating equipment, air-source heat pumps, and ground-source heat pumps
- Equipment used exclusively for generating electrical energy or heat (or a combination) solely from geothermal energy
- Non-road zero-emission vehicles that are fully electric or powered by hydrogen, and charging or refueling equipment primarily used to support such vehicles
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The Clean Technology Manufacturing ITC
Refundable ITC on equipment that meets CRA use and CCA Class
Benefit: 30% refundable ITC on the cost base of eligible equipment
Who Can Claim: Taxable Canadian Corporations
Deadline: 18 months after fiscal year end (Same as SR&ED)
Eligibility:
- Equipment must be for "Clean Technology Manufacturing" (CTM) use defined as;
- ASA used for 'qualified zero-emission technology manufacturing'
- certain renewable energy equipment (solar, wind, water, geothermal)
- nuclear energy equipment, nuclear fuels, fuel rods heavy water
- equipment for ground source or air source heat pumps
- electrical energy storage equipment for storage of renewable energy or grid-scale storage
- equipment used for hydrogen production from water electrolysis & hydrogen dispensing equipment
- zero-emission vehicles (including the conversion of on-road vehicles), and related equipment used in zero-emission vehicles
- other equipment integral and purpose built to be used in the above equipment
- Qualifying Mineral Activity, producing ASA 'qualifying materials'
- Qualifying materials: Lithium, cobalt, nickel, copper, rare earth, graphite
- Qualifying mineral activity;
- Extraction from mineral deposit or tailing pond
- Processing activities (crushing, screening, smelting, refining, etc.) to increase purity
- Recycling
- Graphite synthesis or spheronization
- Excludes hydrogen and biofuel production, which are covered under other credits.
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The Clean Hydrogen ITC
Refundable ITC on equipment that meets the CRA definition of "Eligible Clean Hydrogen Property"
Benefit: Up to 40% refundable ITC on the cost base of eligible equipment, and 15% refundable ITC on property that converts hydrogen to ammonia
Who Can Claim: Taxable Canadian Corporations, Partnerships
Deadline: 18 months after fiscal year end (Same as SR&ED)
Eligibility:
- Equipment that produces hydrogen on all or substantially all basis from an eligible pathway, either by;
- electrolysis of water, or
- natural gas reforming; this may include pre-reformers, auto-thermal reformers, steam methane reformers, pre-heating equipment, syngas coolers, shift reactors, purification equipment, fired heaters, water treatment and conditioning equipment, equipment used in compression and storage of hydrogen, oxygen production equipment and methanizers
- Clean ammonia equipment, dual‑use electricity and heat equipment or dual-use hydrogen and ammonia equipment
- Ancillary equipment that is used solely to support the functioning of any of the above within a hydrogen or ammonia production process and is physically and functionally integrated with that equipment, and includes systems such as electrical, feed supply, cooling, process material storage, process waste management, or oxygen or nitrogen distribution
- Safety and integrity systems, which may be used as part of a control or monitoring system
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The Carbon Capture, Utilization and Storage (CCUS) ITC
Refundable ITC on Qualified CCUS Expenditures that; are part of a "qualifying CCUS project", and; meet CRA's eligible use criteria.
Benefit: Between 18.75-60% refundable ITC on eligible equipment, depending on activity type
Who Can Claim: Taxable Canadian Corporations, Partnerships
Deadline: 18 months after fiscal year end (Same as SR&ED)
Eligibility:
- Qualified CCUS Project - must be all of the below;
- Capturing CO2 that would otherwise be released into the air, or capturing CO2 from the ambient air, transporting the captured carbon, storing/using the captured carbon
- Expected to support carbon capture in Canada for at least as long as the CCUS review period for the project (20 years)
- NRCan has issued an initial project evaluation
- Projected eligible use or storage of captured carbon is at least 10%
- Equipment utilized for eligible CCUS activities per CRA:
- Capturing CO2 that would otherwise be released into the atmosphere.
- Capturing CO2 from ambient air
- Transporting captured carbon
- Storing captured carbon
- Must be stored in a dedicated geological space, capable of permanent storage
- Storage cannot be used to enhance oil recovery.
- Using captured carbon
- To create concrete where 60% of injected CO2 mineralizes. Validation required.
- *If eligibility of a certain activity is in question, “any technical guide” published by NRCan is to apply conclusively with respect to engineering/scientific matters.
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