Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))
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Act current to 2024-10-14 and last amended on 2024-07-01. Previous Versions
PART IIncome Tax (continued)
DIVISION EComputation of Tax (continued)
SUBDIVISION CRules Applicable to all Taxpayers (continued)
Marginal note:Definitions
127.43 (1) The following definitions apply in this section.
- assistance
assistance means an amount, other than a prescribed amount or an amount deemed under subsection (2) to have been paid, that would be included under paragraph 12(1)(x) in computing an eligible entity’s income for any taxation year if that paragraph were read without reference to subparagraphs 12(1)(x)(v) to (vii). (montant d’aide)
- eligible entity
eligible entity, for a taxation year, means
(a) a qualifying corporation for the taxation year;
(b) an individual other than a trust; or
(c) a partnership. (entité déterminée)
- qualifying corporation
qualifying corporation, for a particular taxation year, means a particular corporation that meets the following conditions:
(a) it is a Canadian-controlled private corporation or would be a Canadian-controlled private corporation absent the application of subsection 136(1); and
(b) it is the case that
$15,000,000 > A + B
where
- A
- is the particular corporation’s taxable capital employed in Canada (in this formula, within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year, and
- B
- is the total of all amounts, each of which is the taxable capital employed in Canada of a corporation that is associated in the particular taxation year with the particular corporation for the associated corporation’s last taxation year that ended before the beginning of the particular taxation year. (société admissible)
- qualifying expenditure
qualifying expenditure means an outlay or expense prescribed by regulation that is made or incurred by an eligible entity during the qualifying period in the course of the eligible entity’s ordinary commercial activities. (dépense admissible)
- qualifying location
qualifying location, of an eligible entity, means real or immovable property (other than property that is a self-contained domestic establishment, or part of such a self-contained domestic establishment, the land subjacent to the self-contained domestic establishment and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the self-contained domestic establishment as a residence) in Canada used by the eligible entity primarily in the course of its ordinary commercial activities. (emplacement admissible)
- qualifying period
qualifying period means the period that begins on September 1, 2021 and ends on December 31, 2022. (période d’admissibilité)
- total per location expense
total per location expense, for a qualifying location of an eligible entity for a taxation year, means the lesser of
(a) the amount determined by the formula
A − B
where
- A
- is the total of all amounts, each of which is a qualifying expenditure of the eligible entity made or incurred in the taxation year in respect of the qualifying location (or, for the first taxation year that ends after 2021, the qualifying expenditures made or incurred in respect of the qualifying location from the start of the qualifying period to the end of that first taxation year), and
- B
- is the total of all amounts, each of which is an amount of assistance that
(i) the eligible entity has received, is entitled to receive or can reasonably be expected to receive, in respect of amounts described in A, and
(ii) has not been repaid before the end of the taxation year pursuant to a legal obligation to do so; and
(b) the amount determined by the formula
$10,000 − C
where
- C
- is the total of all amounts, each of which is a qualifying expenditure in respect of the qualifying location and
(i) is a qualifying expenditure of the eligible entity, in respect of which an amount under subsection (2) or (3) is deemed to have been paid in a prior taxation year, or
(ii) is a qualifying expenditure of another eligible entity that is affiliated during the qualifying period with the eligible entity, in respect of which an amount under subsection (2) or (3) is deemed to have been paid in any taxation year. (dépense totale par emplacement)
- total ventilation expense
total ventilation expense, of an eligible entity for a taxation year, means the lesser of
(a) the total of all amounts, each of which is a total per location expense for a qualifying location of the eligible entity for the taxation year; and
(b) the amount determined by the formula
$50,000 × X − Y
where
- X
- is
(i) 100%, unless the eligible entity is affiliated at any time in the qualifying period with one or more other eligible entities that are deemed to have paid an amount under subsection (2) in respect of the qualifying period, or, in the case of a partnership, has a member that is deemed to have paid an amount under subsection (3) in respect of the partnership,
(ii) a percentage assigned to the eligible entity under an agreement, if
(A) the agreement is entered into by the eligible entity and each eligible entity that
(I) is affiliated with the eligible entity in the qualifying period, and
(II) is deemed to have paid an amount under subsection (2) in respect of the qualifying period, or, in the case of a partnership, has a member that is deemed to have paid an amount under subsection (3) in respect of the partnership,
(B) the agreement is filed in prescribed form and manner with the Minister by the eligible entity and each eligible entity referred to in clause (A),
(C) the agreement assigns, for the purposes of this definition, a percentage in respect of each eligible entity referred to in clause (A), and
(D) the total of all the percentages assigned under the agreement does not exceed 100%, and
(iii) in any other case, nil, and
- Y
- is the total of all amounts, each of which is the total ventilation expense of the eligible entity for a prior taxation year in respect of which an amount is deemed to have been paid under subsection (2) or (3). (dépense totale de ventilation)
Marginal note:Refundable tax credit
(2) An eligible entity (other than a partnership) that files a prescribed form containing prescribed information with its return of income for a taxation year that ends after 2021 is deemed to have, on its balance-due day for the year, paid on account of its tax payable under this Part for the year an amount equal to 25% of its total ventilation expense for the taxation year.
Marginal note:Refundable tax credit — partnership
(3) If an eligible entity (other than a partnership) is a member of a partnership at the end of a fiscal period of the partnership that ends after 2021 and that ends in a taxation year of the eligible entity — and the partnership files an information return in prescribed form containing prescribed information for that fiscal period and the eligible entity files a prescribed form containing prescribed information with its return of income for the taxation year — then the eligible entity is deemed to have paid, on the eligible entity’s balance-due day for the taxation year on account of the eligible entity’s tax payable under this Part for the taxation year, an amount determined by the formula
0.25 × A × B
where
- A
- is the total ventilation expense of the partnership for the fiscal period; and
- B
- is the specified proportion of the eligible entity for the fiscal period of the partnership.
Marginal note:Partnerships
(4) For the purposes of this section,
(a) the fiscal period of a partnership is deemed to be its taxation year; and
(b) if an eligible entity is a member of a particular partnership that is a member of another partnership, the eligible entity is deemed
(i) to be a member of the other partnership, and
(ii) to have a specified proportion in the other partnership for a fiscal period of the other partnership equal to its specified proportion of the particular partnership — for the last fiscal period of the particular partnership that ends in the fiscal period of the other partnership — multiplied by the particular partnership’s specified proportion of the other partnership for the fiscal period of the other partnership.
Marginal note:When assistance received
(5) For the purposes of this Act other than this section, and for greater certainty, an amount that an eligible entity is deemed under subsection (2) or (3) to have paid is assistance received by it from a government immediately before the end of the taxation year to which it relates.
Marginal note:Affiliated entities
(6) For the purposes of this section, if two eligible entities are affiliated with the same eligible entity, they are deemed to be affiliated with each other.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- 2022, c. 5, s. 6
Marginal note:Definitions
127.44 (1) The following definitions apply in this section, Part XII.7 and in Schedule II to the Income Tax Regulations.
- captured carbon
captured carbon means captured carbon dioxide that
(a) would otherwise be released into the atmosphere; or
(b) is captured directly from the ambient air. (carbone capté)
- CCUS process
CCUS process means the process of carbon capture, utilization and storage that includes the
(a) capture of carbon dioxide
(i) that would otherwise be released into the atmosphere, or
(ii) directly from the ambient air; and
(b) storage or use of the captured carbon. (processus de CUSC)
- CCUS project
CCUS project means a project that is intended to support a CCUS process by
(a) capturing carbon dioxide
(i) that would otherwise be released into the atmosphere, or
(ii) directly from the ambient air;
(b) transporting captured carbon; or
(c) storing or using captured carbon. (projet de CUSC)
- CCUS tax credit
CCUS tax credit means an amount deemed under subsection (2) to have been paid by a taxpayer on account of its tax payable under this Part for the year. (crédit d’impôt pour le CUSC)
- dedicated geological storage
dedicated geological storage means a geological formation that is
(a) located in a designated jurisdiction;
(b) capable of permanently storing captured carbon;
(c) authorized and regulated for the storage of captured carbon under the laws of the designated jurisdiction; and
(d) a formation in which no captured carbon is used for enhanced oil recovery. (stockage géologique dédié)
- designated jurisdiction
designated jurisdiction means
(a) the provinces of British Columbia, Saskatchewan and Alberta; and
(b) any other jurisdiction within Canada (including the exclusive economic zone of Canada) or the United States for which a designation by the Minister of the Environment under subsection (13) is in effect. (juridiction désignée)
- dual-use equipment
dual-use equipment means property, other than property described in Class 57 or 58 of Schedule II to the Income Tax Regulations, that is part of a CCUS project of a taxpayer that is described in any of the following paragraphs (and, in the case of property acquired before the first day of commercial operations of the CCUS project, that is verified by the Minister of Natural Resources as being described in any of the following paragraphs):
(a) equipment that is not used for natural gas processing or acid gas injection, and that
(i) generates electrical energy, heat energy or a combination of electrical and heat energy, if more than 50% of either the electrical energy or heat energy that is expected to be produced over the total CCUS project review period, based on the most recent project plan, is expected (not including equipment that supports the CCUS project indirectly by way of an electrical utility grid) to directly support
(A) a qualified CCUS project, unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a qualified CCUS project, or
(B) a qualified clean hydrogen project as defined in subsection 127.48(1), unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a qualified CCUS project,
(ii) delivers, collects, recovers, treats or recirculates water, or a combination of any of those activities, in support of a qualified CCUS project,
(iii) is equipment that directly transmits electrical energy from a system described in subparagraph (i) to a qualified CCUS project and more than 50% of the electrical energy to be transmitted by the equipment over the total CCUS project review period, based on the most recent project plan, is expected to support the qualified CCUS project or a qualified clean hydrogen project as defined in subsection 127.48(1), or
(iv) is equipment that distributes electrical or heat energy;
(b) equipment that is physically and functionally integrated with the equipment described in paragraph (a) (for greater certainty, excluding construction equipment, furniture, office equipment and vehicles) and that is ancillary equipment used solely to support the functioning of equipment described in paragraph (a) within a CCUS process as part of
(i) an electrical system,
(ii) a fuel supply system,
(iii) a liquid delivery and distribution system,
(iv) a cooling system,
(v) a process material storage and handling and distribution system,
(vi) a process venting system,
(vii) a process waste management system, or
(viii) a utility air or nitrogen distribution system;
(c) property that is
(i) used as part of a control, monitoring or safety system solely to support the equipment described in paragraphs (a) or (b),
(ii) a building or other structure all or substantially all of which is used, or to be used, for the installation or operation of equipment described in paragraph (a), (b) or subparagraph (i), or
(iii) used solely to convert another property that would not otherwise be described in paragraph (a) or (b) or subparagraphs (i) and (ii) if the conversion causes the other property to satisfy the description in the paragraphs (a) or (b) or subparagraphs (i) or (ii); or
(d) equipment used solely to refurbish property described in paragraphs (a) or (b) or subparagraphs (c)(i) and (ii) that is part of the CCUS project of the taxpayer. (matériel à double usage)
- eligible use
eligible use means
(a) the storage of captured carbon in dedicated geological storage; or
(b) the use of captured carbon in producing concrete in Canada or the United States using a qualified concrete storage process. (utilisation admissible)
- first day of commercial operations
first day of commercial operations means the day that is 120 days after the day on which captured carbon dioxide is first delivered to a carbon transportation, carbon storage or carbon use system for the purpose of storage or use on an ongoing operational basis. (premier jour des activités commerciales)
- ineligible use
ineligible use means
(a) the emission of captured carbon into the atmosphere, other than
(i) for the purposes of system integrity or safety, or
(ii) incidental emission made in the ordinary course of operations;
(b) the storage or use of captured carbon for enhanced oil recovery; and
(c) any other storage or use that is not an eligible use. (utilisation non admissible)
- non-government assistance
non-government assistance has the same meaning as in subsection 127(9). (aide non gouvernementale)
- preliminary CCUS work activity
preliminary CCUS work activity means an activity that is preliminary to the acquisition, construction, fabrication or installation by or on behalf of a taxpayer of property that is described in Class 57 or 58 of Schedule II to the Income Tax Regulations or that is dual-use equipment in respect of the taxpayer’s CCUS project including, but not limited to, a preliminary activity that is
(a) obtaining permits or regulatory approvals;
(b) performing front-end design or engineering work, including front-end engineering design studies (or equivalent studies as determined by the Minister of Natural Resources) but excluding detailed design or engineering work in relation to specific property included in Class 57 or Class 58;
(c) conducting feasibility studies or pre-feasibility studies (or equivalent studies as determined by the Minister of Natural Resources);
(d) conducting environmental assessments; or
(e) clearing or excavating land. (travaux préliminaires de CUSC)
- projected eligible use percentage
projected eligible use percentage, in respect of a CCUS project, for a period is the amount, expressed as a percentage, determined by the formula
A ÷ B
where
- A
- is the quantity of captured carbon that the CCUS project is expected, based on the project’s most recent project plan, to support for storage or use in eligible use during the period; and
- B
- is the total quantity of captured carbon that the CCUS project is expected, based on the project’s most recent project plan, to support for storage or use in both eligible use and ineligible use during the period. (pourcentage d’utilisation admissible prévu)
- project plan
project plan means a plan for a CCUS project that
(a) reflects a front-end engineering design study (or an equivalent study as determined by the Minister of Natural Resources) for the CCUS project;
(b) describes the quantity of captured carbon that the CCUS project is expected to support for storage or use in each calendar year over its total CCUS project review period, in
(i) eligible use, and
(ii) ineligible use;
(c) contains information required in guidelines published by the Minister of Natural Resources; and
(d) is filed with the Minister of Natural Resources, in the form and manner determined by that Minister,
(i) before the project’s first day of commercial operations, or
(ii) if the project’s first day of commercial operations occurs before the Minister of Natural Resources accepts plan filings, within 90 days after the first day on which such filings are accepted. (plan de projet)
- qualified carbon capture expenditure
qualified carbon capture expenditure of a taxpayer for a taxation year means an amount that is the portion of an expenditure incurred by the taxpayer to acquire a property in the year, in respect of a qualified CCUS project of the taxpayer, determined by the formula
A × (B + C + D + E) × F
where
- A
- is, in respect of property acquired by the taxpayer in the year (other than property situated outside of Canada),
(a) the capital cost of property described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in)
(i) paragraph (a) of Class 57 in Schedule II to the Income Tax Regulations, or
(ii) any of paragraphs (d) to (g) of Class 57 in Schedule II to the Income Tax Regulations in relation to equipment described in paragraph (a) of that Class, or
(b) the proportion of the capital cost of dual-use equipment that,
(i) if the equipment is described in subparagraph (a)(i) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the amount of energy expected to be produced for use in a qualified CCUS project over the project’s total CCUS project review period is of the total amount of energy expected to be produced by the equipment in that period (determined without regard to energy produced and consumed by the equipment in the process of producing energy), based on the project’s most recent project plan,
(ii) if the equipment is described in subparagraph (a)(ii) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the mass of water expected to be returned from a qualified CCUS project over the project’s total CCUS project review period is of the total mass of water expected to be returned to the equipment in that period, based on the project’s most recent project plan,
(iii) if the equipment is described in subparagraph (a)(iii) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the amount of electrical energy expected to be transmitted by the equipment for use in a qualified CCUS project over the total CCUS project review period is of the total amount of electrical energy expected to be transmitted by the equipment in that period (determined without regard to electrical energy consumed by the equipment in the process of transmission), based on the project’s most recent project plan, and
(iv) if the equipment is described in subparagraph (a)(iv) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the amount of electrical or heat energy expected to be distributed by the equipment (or if it is equipment that expands the capacity of existing equipment, the electrical or heat energy expected to be distributed by the existing and new equipment) for use in a qualified CCUS project over the total CCUS project review period is of the total amount of electrical or heat energy expected to be distributed by the equipment (or the existing and new equipment) in that period (determined without regard to energy consumed by the equipment in the process of distribution), based on the project’s most recent project plan;
- B
- is
(a) if the time of the expenditure is after the first project period, nil, or
(b) in any other case, the projected eligible use percentage for the first project period;
- C
- is
(a) if the time of the expenditure is after the second project period, nil, or
(b) in any other case, the projected eligible use percentage for the second project period;
- D
- is
(a) if the time of the expenditure is after the third project period, nil, or
(b) in any other case, the projected eligible use percentage for the third project period;
- E
- is the projected eligible use percentage for the fourth project period; and
- F
- is
(a) if the time of the expenditure is before the second project period, 0.25,
(b) if the time of the expenditure is during the second project period, 0.33,
(c) if the time of the expenditure is during the third project period, 0.5, and
(d) if the time of the expenditure is during the fourth project period, 1. (dépense admissible pour le captage du carbone)
- qualified carbon storage expenditure
qualified carbon storage expenditure of a taxpayer for a taxation year means an amount that is the capital cost incurred by the taxpayer to acquire in the year, in respect of a qualified CCUS project of the taxpayer, a property (other than property situated outside of Canada) that is
(a) expected, based on the qualified CCUS project’s most recent project plan before the time the expenditure is incurred, to support storage of captured carbon solely in a manner described in paragraph (a) of the definition of eligible use; and
(b) described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in)
(i) paragraph (c) of Class 57 in Schedule II to the Income Tax Regulations, or
(ii) any of paragraphs (d) to (g) of Class 57 in Schedule II to the Income Tax Regulations in relation to equipment described in paragraph (c) of that Class. (dépense admissible pour le stockage du carbone)
- qualified carbon transportation expenditure
qualified carbon transportation expenditure of a taxpayer for a taxation year means an amount that is the portion of an expenditure incurred by the taxpayer to acquire a property in the year in respect of a qualified CCUS project of the taxpayer, determined by the formula
A × (B + C + D + E) × F
where
- A
- is, in respect of property acquired by the taxpayer in the year (other than property situated outside of Canada), the capital cost of property described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in)
(a) paragraph (b) of Class 57 in Schedule II to the Income Tax Regulations, or
(b) any of paragraphs (d) to (g) of Class 57 in Schedule II to the Income Tax Regulations in relation to equipment described in paragraph (b) of that Class;
- B
- is
(a) if the time of the expenditure is after the first project period, nil, or
(b) in any other case, the projected eligible use percentage for the first project period;
- C
- is
(a) if the time of the expenditure is after the second project period, nil, or
(b) in any other case, the projected eligible use percentage for the second project period;
- D
- is
(a) if the time of the expenditure is after the third project period, nil, or
(b) in any other case, the projected eligible use percentage for the third project period;
- E
- is the projected eligible use percentage for the fourth project period; and
- F
- is
(a) if the time of the expenditure is before the second project period, 0.25,
(b) if the time of the expenditure is during the second project period, 0.33,
(c) if the time of the expenditure is during the third project period, 0.5, and
(d) if the time of the expenditure is during the fourth project period, 1. (dépense admissible pour le transport du carbone)
- qualified carbon use expenditure
qualified carbon use expenditure of a taxpayer for a taxation year means an amount that is the capital cost incurred by the taxpayer to acquire in the year, in respect of a qualified CCUS project of the taxpayer, a property (other than property situated outside of Canada) that is
(a) described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in) any of paragraphs (a) to (e) of Class 58 in Schedule II to the Income Tax Regulations; and
(b) expected, based on the qualified CCUS project’s most recent project plan before the time the expenditure is incurred, to support storage or use of captured carbon solely in a manner described in paragraph (b) of the definition of eligible use. (dépense admissible pour l’utilisation du carbone)
- qualified CCUS expenditure
qualified CCUS expenditure means a
(a) qualified carbon capture expenditure;
(b) qualified carbon transportation expenditure;
(c) qualified carbon storage expenditure; or
(d) qualified carbon use expenditure. (dépense de CUSC admissible)
- qualified CCUS project
qualified CCUS project means a CCUS project of a taxpayer that meets the following conditions:
(a) it is expected, based on the project’s most recent project plan, to support the capture of carbon dioxide in Canada for a period that is at least equal to the total CCUS project review period for the project;
(b) an initial project evaluation has been issued by the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources, in respect of the project;
(c) based on the most recent project plan for the project, its projected eligible use percentage equals or exceeds 10% in each of the following periods:
(i) if the first project period begins after September of a calendar year, the period beginning on the first day of commercial operations and ending on December 31 of the following calendar year, and
(ii) each calendar year of the project’s total CCUS project review period, other than a period that includes a year referred to in subparagraph (i); and
(d) it is not a project that is
(i) operated to service a unit (as defined under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations) for which the commissioning date (as defined under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations) was on or before April 7, 2022, and
(ii) undertaken for the purpose of complying with emission standards that apply, or will apply, under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations. (projet de CUSC admissible)
- qualified concrete storage process
qualified concrete storage process means a process evaluated against the ISO 14034:2016 standard Environmental management — Environmental technology verification for which a validation statement confirming that at least 60% of the captured carbon that is injected into concrete is expected to be mineralized and permanently stored in the concrete has been issued by a professional or organization that
(a) is accredited as a verification body, under ISO 14034:2016, Environmental management – Environmental technology verification and ISO/IEC 17020:2012, Conformity assessment — Requirements for the operation of various types of bodies performing inspection, by the Standards Council of Canada, the ANSI National Accreditation Board (U.S.) or any other accreditation organization that is a member of the International Accreditation Forum; and
(b) meets the requirements of a third-party inspection body described in ISO/IEC 17020:2012, Conformity assessment — Requirements for the operation of various types of bodies performing inspection. (processus de stockage dans le béton admissible)
- qualifying taxpayer
qualifying taxpayer means a taxable Canadian corporation. (contribuable admissible)
- specified percentage
specified percentage means, in respect of a
(a) qualified carbon capture expenditure if incurred in respect of carbon capture
(i) directly from ambient air
(A) after 2021 and before 2031, 60%,
(B) after 2030 and before 2041, 30%, or
(C) after 2040, 0%, or
(ii) other than directly from ambient air
(A) after 2021 and before 2031, 50%,
(B) after 2030 and before 2041, 25%, or
(C) after 2040, 0%; and
(b) qualified carbon transportation expenditure, qualified carbon storage expenditure or qualified carbon use expenditure if incurred
(i) after 2021 and before 2031, 37 1/2%,
(ii) after 2030 and before 2041, 18 3/4%, or
(iii) after 2040, 0%. (pourcentage déterminé)
- total CCUS project review period
total CCUS project review period, in respect of a CCUS project, means the period beginning on the first day of commercial operations of the project and ending on the last day of the fourth project period. (période totale d’examen du projet de CUSC)
Marginal note:Tax credit
(2) Where a qualifying taxpayer files a prescribed form containing prescribed information on or before its filing-due date for a taxation year, the taxpayer is deemed to have paid on its balance-due day for the year an amount on account of its tax payable under this Part for the year equal to the total of
(a) the amount, if any, by which the taxpayer’s cumulative CCUS development tax credit for the year exceeds its cumulative CCUS development tax credit for the immediately preceding taxation year, and
(b) the taxpayer’s CCUS refurbishment tax credit for the year.
Marginal note:Deemed deduction
(3) For the purposes of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2), sections 127.45, 127.48, 127.49 and 129 and Part XII.7, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer’s tax otherwise payable under this Part for the year.
Marginal note:Cumulative CCUS development tax credit
(4) For the purposes of this Act, a taxpayer’s cumulative CCUS development tax credit for a taxation year is the total of all amounts, each of which is, in respect of an expenditure incurred for a qualified CCUS project of the taxpayer before the first day of commercial operations of the CCUS project
(a) a qualified CCUS expenditure incurred in the year or a previous taxation year by the taxpayer multiplied by the applicable specified percentage; or
(b) an amount required because of subsection (11) to be added in computing the taxpayer’s cumulative CCUS development tax credit at the end of the year or a previous year.
Marginal note:CCUS refurbishment tax credit
(5) For the purposes of this Act, a CCUS refurbishment tax credit of a taxpayer for a taxation year is the total of all amounts, each of which is, in respect of an expenditure incurred for a qualified CCUS project of the taxpayer in the year and during the total CCUS project review period
(a) a qualified CCUS expenditure incurred in the year by the taxpayer multiplied by the applicable specified percentage; or
(b) an amount required because of subsection (11) to be added in computing the taxpayer’s CCUS refurbishment tax credit at the end of the year.
Marginal note:Changes to project or eligible use
(6) A taxpayer with a qualified CCUS project shall file, within 90 days after the occurrence of either of the events described in paragraph (a) or (b), a revised project plan for the project with the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources if, before the first day of commercial operations of the project,
(a) the Minister of Natural Resources determines that there has been a material change to the project and requests that the taxpayer file a revised project plan for the project; or
(b) there has been a reduction (as compared to the most recent project plan for the project) of more than five percentage points in the projected eligible use percentage in respect of the project during any project period.
Marginal note:Revised project evaluation
(7) If a taxpayer files a revised project plan in accordance with subsection (6), the Minister of Natural Resources shall issue a revised project evaluation with all due dispatch.
Marginal note:Qualified CCUS project determination
(8) For the purposes of this section and Part XII.7,
(a) the Minister may, in consultation with the Minister of Natural Resources, determine that one or more CCUS projects is one project or multiple projects
(i) at any time before an initial project evaluation of a CCUS project has been issued by the Minister of Natural Resources, or
(ii) if a taxpayer is required to file a revised project plan because of subsection (6), after the revised project plan has been submitted, but before a revised project evaluation has been issued by the Minister of Natural Resources in respect of the revised project plan,
(b) any determination under paragraph (a) is deemed to result in the CCUS project or CCUS projects, as the case may be, being one project or multiple projects, as the case may be;
(c) for each project determined under paragraph (a), a project plan shall be filed by a taxpayer with the Minister of Natural Resources (in the form and manner determined by the Minister of Natural Resources) on or before the day that is 180 days after the determination is made; and
(d) the Minister of Natural Resources may request from a taxpayer all reasonable documentation and information necessary for the Minister of Natural Resources to fulfill a responsibility under this section, including final detailed engineering designs, and may refuse to verify an expenditure or issue an initial project evaluation or a revised project evaluation under this section if such documentation or information is not provided by the taxpayer on or before the day that is 180 days after it was requested.
Marginal note:Special rules — adjustments
(9) For the purposes of this section and Part XII.7,
(a) the capital cost to a taxpayer of a property that is described in Class 57 or 58 of Schedule II to the Income Tax Regulations or that is dual-use equipment shall be
(i) determined without reference to subsections 13(7.1) and (7.4), and
(ii) reduced by the total of all amounts, each of which can reasonably be considered to be in respect of the property and is
(A) an amount of any non-government assistance received by the taxpayer in or before the taxation year in which the property was acquired, or
(B) an amount that is not described in clause (A) that, in the taxation year, the taxpayer is entitled to receive or can reasonably be expected to receive and that would be non-government assistance if it were received by the taxpayer;
(b) the amount of a qualified CCUS expenditure of a taxpayer in a taxation year in respect of a CCUS project shall not include
(i) any amount in respect of an expenditure incurred by the taxpayer before 2022 or after 2040,
(ii) any amount in respect of any expenditure incurred
(A) to acquire property that has been used for any purpose by any person or partnership before it was acquired by the taxpayer,
(B) for which a tax credit was previously deducted under this section, by any person in respect of the property to which the expenditure relates (other than an expenditure for repair or replacement of that property), or
(C) for which an investment tax credit, a clean technology investment tax credit (as defined in subsection 127.45(1)), a clean hydrogen tax credit (as defined in subsection 127.48(1)) or a CTM investment tax credit (as defined in subsection 127.49(1)) is claimed,
(iii) any amount in respect of an expenditure incurred for a preliminary CCUS work activity,
(iv) any amount that has, by virtue of section 21, been added to the cost of a property,
(v) an expenditure that is incurred by a taxpayer on or after the first day of commercial operations of the CCUS project to the extent that the total of all such amounts exceeds 10% of the total of all qualified CCUS expenditures incurred by the taxpayer before the first day of commercial operations of the CCUS project, or
(vi) except where subsection 211.92(11) applies, an expenditure incurred by a taxpayer to acquire a property that is disposed of, or exported from Canada, by the taxpayer in the same taxation year as it was acquired;
(c) except for the purposes of subparagraph (b)(i), and subject to subsection (12), if a taxpayer has acquired property outside Canada, the expenditure is deemed to have been incurred, and the property acquired, at the time it is imported into Canada;
(d) subsections 127(11.6) to (11.8) apply in this section in respect of an expenditure or cost to a taxpayer except that
(i) the reference in subsection 127(11.6) to subsection 127(11.5) shall be read as a reference to section 127.44,
(ii) the reference in subsection 127(11.6) to subsection 127(26) shall be read as a reference to subsection 127.44(12), and
(iii) the term “qualified expenditure” is to be read as “qualified CCUS expenditure”;
(e) if an expenditure of a taxpayer would be a qualified CCUS expenditure, except that the expenditure is incurred in a different taxation year from the year in which the related property is acquired, the expenditure is deemed to be incurred, and the property is deemed to be acquired, in the later of the two years;
(f) for the purposes of determining whether a process is a CCUS process, whether a property is described in Class 57 or 58 of Schedule II to the Income Tax Regulations or whether a property is dual-use equipment, the technical guide published by the Department of Natural Resources shall apply conclusively with respect to engineering and scientific matters;
(g) if the taxpayer has failed to file a revised project plan required to be filed under subsection (6) by the deadline in that subsection,
(i) subject to subparagraph (ii), a taxpayer’s projected eligible use percentage for a CCUS project is deemed to be nil for the total CCUS project review period until such time as the taxpayer has filed the revised project plan, and
(ii) once the taxpayer has filed the revised project plan, subparagraph (i) is deemed never to have applied;
(h) subject to paragraph (e), an expenditure is deemed to have been incurred in respect of a qualified CCUS project during a particular taxation year if
(i) it is incurred in the particular taxation year, in respect of a CCUS project that was not a qualified CCUS project at any time during the particular taxation year because the Minister of Natural Resources was not accepting the filing of project plans before or during the particular taxation year, and
(ii) in a subsequent taxation year, the project becomes a qualified CCUS project; and
(i) a building or other structure is deemed to be property described in paragraph (f) of Class 57 of Schedule II to the Income Tax Regulations, in relation to equipment described in paragraph (a) of Class 57, if
(i) the building or other structure is not otherwise described in Class 57 or 58 of that Schedule and is not dual-use equipment, and
(ii) all or substantially all of the building or other structure is used for the installation or operation of a combination of property that is described in any of paragraphs (a) to (e) of Class 57 of Schedule II, paragraphs (a) to (c) of Class 58 of that Schedule or paragraph (a) or (b) or subparagraph (c)(i) of the definition dual-use equipment in subsection (1).
Marginal note:Repayment of assistance
(10) If a taxpayer has, in a particular taxation year, repaid (or has not received and can no longer reasonably be expected to receive) an amount of non-government assistance that was applied to reduce the capital cost of a property under subparagraph (9)(a)(ii) for a preceding taxation year, the amount repaid (or no longer expected to be received) shall be added to the capital cost to the taxpayer of a property acquired for the purpose of determining the taxpayer’s qualified CCUS expenditure (under the relevant paragraph of that definition) for the particular year.
Marginal note:Partnerships
(11) Subject to section 127.47, if, in a particular taxation year of a qualifying taxpayer who is a member of a partnership, an amount would be determined under subsection (2) in respect of the partnership, for its taxation year that ends in the particular year, if the partnership were a taxable Canadian corporation and its fiscal period were its taxation year, the portion of that amount that can reasonably be considered to be the taxpayer’s share thereof shall be added in computing the tax credit of the taxpayer under subsection (2) at the end of the particular year.
Marginal note:Unpaid amounts
(12) For the purposes of this section, a taxpayer’s expenditure that is unpaid on the day that is 180 days after the end of the taxation year in which the expenditure is otherwise incurred is deemed
(a) not to have been incurred in the year; and
(b) to be incurred at the time it is paid.
Marginal note:Designation of jurisdiction
(13) For the purposes of this section and Part XII.7, the following rules apply in relation to the definition designated jurisdiction in subsection (1):
(a) if the Minister of the Environment determines that a jurisdiction within Canada or the United States has sufficient environmental laws and enforcement governing the permanent storage of captured carbon
(i) the Minister of the Environment may designate the jurisdiction for the purposes of this section and Part XII.7,
(ii) the designation under subparagraph (i) shall specify the time at and after which it is in effect, which time may, for greater certainty, precede the time at which the designation is made, and
(iii) the Minister of the Environment shall publish on a website maintained by the Government of Canada the designation referred to in subparagraph (i); and
(b) the provinces of British Columbia, Saskatchewan and Alberta are deemed to have been designated by the Minister of the Environment in accordance with this subsection.
Marginal note:Revocation of designation
(14) If a jurisdiction makes significant changes to its environmental laws or enforcement governing the permanent storage of captured carbon, and the Minister of the Environment determines that as a result of those changes a jurisdiction designated pursuant to subsection (13) has ceased to have sufficient environmental laws or enforcement governing the permanent storage of captured carbon, the following rules apply:
(a) the Minister of the Environment may revoke the designation of the jurisdiction designated under subsection (13);
(b) the revocation under paragraph (a) shall specify the time at and after which it is in effect, which time shall not begin sooner than 30 days after the revocation is made; and
(c) the Minister of the Environment shall publish on a website maintained by the Government of Canada the revocation referred to in paragraph (a).
Marginal note:Jurisdiction not designated
(14.1) In applying this section and Part XII.7 in respect of a CCUS project of a taxpayer,
(a) if an expenditure of the taxpayer is incurred at a time that a geological formation, described in the taxpayer’s most recent project plan in respect of the CCUS project as capable of permanently storing captured carbon, is
(i) located in a jurisdiction that is not a designated jurisdiction, that jurisdiction is deemed to be a designated jurisdiction at that time if it was so designated at the time of an earlier qualified CCUS expenditure of the taxpayer in respect of the project, or
(ii) not authorized and regulated for the storage of captured carbon under the laws of the designated jurisdiction, that geological formation is deemed to be so authorized and regulated if it was so at the time of an earlier qualified CCUS expenditure of the taxpayer in respect of the project;
(b) if neither subparagraph (a)(i) nor subparagraph (a)(ii) apply in respect of a particular expenditure, then
(i) for the purposes of calculating a qualified carbon capture expenditure or a qualified carbon transportation expenditure in respect of the particular expenditure, neither the description of A in the definition projected eligible use percentage in subsection (1) nor the description of A in the definition actual eligible use percentage in subsection 211.92(1), for any period, include any quantity of expected or actual storage of carbon in a geological formation located in a jurisdiction that, at the time that the particular expenditure is incurred, is not dedicated geological storage because it is located in a jurisdiction that is not a designated jurisdiction or is not authorized and regulated for the storage of captured carbon under the laws of a designated jurisdiction,
(ii) a qualified carbon storage expenditure in respect of a qualified CCUS project does not include the cost of property to the extent that the property is expected to support the storage of carbon in a geological formation located in a jurisdiction that, at the time that the particular expenditure is incurred, is not dedicated geological storage because it is located in a jurisdiction that is not a designated jurisdiction or is not authorized and regulated for the storage of captured carbon under the laws of a designated jurisdiction; and
(c) for the purposes of calculating the actual eligible use percentage in respect of the CCUS project for any period, the description of A in the definition actual eligible use percentage in subsection 211.92(1) includes any quantity of carbon stored in a geological formation to which paragraph (a) applies.
Marginal note:Purpose
(15) The purpose of this section and Part XII.7 is to encourage the investment of capital in the development and operation of carbon capture, transportation, utilization and storage capacity in Canada.
Marginal note:Tax shelter investment
(16) Subsections (2) and (3) do not apply in respect of a CCUS project if a property used in the project — or an interest in a person or partnership that has, directly or indirectly, an interest in, or for civil law, a right in, a property used in the project — is a tax shelter investment for the purpose of section 143.2.
Marginal note:Late filing
(17) The Minister may accept the late filing by a qualifying taxpayer of the prescribed form containing prescribed information referred to in subsection (2) until the later of December 31, 2025 and one year after the filing-due date referred to in subsection (2), but no payment by the taxpayer is deemed to arise under that subsection until the prescribed form containing prescribed information has been filed with the Minister.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- 2024, c. 15, s. 35
- 2024, c. 17, s. 80
- Date modified: