Budget 2025 Implementation Act, No. 1 (S.C. 2026, c. 3)
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Assented to 2026-03-26
PART 1Amendments to the Income Tax Act and Other Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
48 (1) The formula and its description in the definition qualifying income limit in subsection 127.1(2) of the Act is replaced by the following:
$500,000 × [($60 million − A) ÷ $60 million]
where
- A
- is
(a) nil, if $15 million is greater than or equal to the amount (in paragraph (b) referred to as the “taxable capital amount”) that is the total of the corporation’s taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year and the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of each associated corporation for the associated corporation’s last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, and
(b) in any other case, the lesser of $60 million and the amount by which the taxable capital amount exceeds $15 million; (plafond de revenu admissible)
(2) Subparagraph (f)(i) of the definition refundable investment tax credit in subsection 127.1(2) of the Act is replaced by the following:
(i) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures (other than expenditures of a capital nature) incurred by the taxpayer in the year, and
(3) Subsection 127.1(2.01) of the Act is replaced by the following:
Marginal note:Addition to refundable investment tax credit
(2.01) In the case of a taxpayer that is a Canadian-controlled private corporation or an eligible Canadian public corporation, and is not a qualifying corporation or an excluded corporation, the refundable investment tax credit of the taxpayer for a taxation year is the amount determined by the formula
(40% × (A − B)) + (C − D)
where
- A
- is the total of
(a) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures (other than expenditures of a current nature) incurred by the taxpayer in the year, and
(b) is all amounts determined under paragraph (a.1) of the definition investment tax credit in subsection 127(9) in respect of expenditures for which an amount is included in paragraph (a);
- B
- is the total of
(a) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection (3) to have been so deducted for the year) that can reasonably be considered to be in respect of the total determined for A, and
(b) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined for A;
- C
- is the total of
(a) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures (other than expenditures of a capital nature) incurred by the taxpayer in the year, and
(b) all amounts determined under paragraph (a.1) of the definition investment tax credit in subsection 127(9) in respect of expenditures for which an amount is included in paragraph (a); and
- D
- is the total of
(a) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection (3) to have been so deducted for the year) that can reasonably be considered to be in respect of the total determined for C, and
(b) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined for C.
(4) Subsection (1) applies to taxation years that begin on or after December 16, 2024.
(5) Subsections (2) and (3) apply in respect of property acquired on or after December 16, 2024 and, in the case of lease costs, to expenditures incurred on or after December 16, 2024.
49 (1) Section 127.42 of the Act is amended by adding the following after subsection (8):
Marginal note:Deemed rebate in respect of fuel charges
(9) An amount for a designated province included in the total of all amounts deemed by this section to have been paid on account of tax payable for a taxation year is deemed to have been paid during the taxation year as a rebate in respect of charges levied under Part 1 of the Greenhouse Gas Pollution Pricing Act in respect of the designated province.
(2) Subsection (1) applies to the 2021 and subsequent taxation years.
50 (1) The portion of subsection 127.421(2) of the Act before the formula is replaced by the following:
Marginal note:Deemed amount 2019-2023
(2) A corporation that files, on or before December 31, 2024, a return of income for a particular taxation year ending in 2023 (other than a final return on dissolution) is deemed to have paid on a date specified by the Minister of Finance, on account of tax payable under this Part for that taxation year, the total of all amounts, each of which is an amount, for each designated province, for each calendar year that is 2019, 2020, 2021, 2022 and 2023, determined by the formula
(2) The portion of subsection 127.421(3) of the Act before the formula is replaced by the following:
Marginal note:Deemed amount after 2023
(3) A corporation that files a return of income for a particular taxation year ending in a calendar year after 2023 (other than a final return on dissolution) is, if the return is filed on or before July 15 of the following calendar year, deemed to have paid on October 1st of that calendar year, on account of tax payable under this Part for the particular taxation year, the amount determined by the formula
(3) Subsection 127.421(6) of the Act is replaced by the following:
Marginal note:Payment — not taxable
(6) There is not to be included in computing the income of a corporation for a taxation year an amount that is deemed under subsection (2) or (3) to have been paid on account of tax payable under this Part for a taxation year.
(4) Subsections 127.421(8) and (9) of the Act are replaced by the following:
Marginal note:Predecessor corporation — before 2023
(8) For the purpose of subsection (2), where there has been an amalgamation of two or more corporations before 2023, the corporation filing a return of income in 2023 is deemed to be the same corporation as and a continuation of each predecessor corporation that was registered with the Minister to make remittances required under section 153 under the corporation’s 2023 business number.
Marginal note:Predecessor corporation — 2023 and subsequent years
(9) For the purposes of subsections (2) and (3), the number of persons employed by a corporation in a calendar year after 2022 is deemed to be nil in that year if the corporation is formed by an amalgamation in that calendar year.
(5) Subsection 127.421(11) of the Act is replaced by the following:
Marginal note:Deemed taxation year
(11) For the purposes of subsections (2) and (3), if a corporation has more than one taxation year ending in the same calendar year, the particular taxation year is the first taxation year that ends in that calendar year.
(6) Subsections (1) to (5) are deemed to have come into force on June 20, 2024.
51 (1) Subparagraph (c)(iii) of the definition dual-use equipment in subsection 127.44(1) of the Act is replaced by the following:
(iii) incorporated into another property that would not otherwise be described in paragraph (a) or (b) or subparagraphs (i) and (ii) if the incorporation causes the other property to satisfy the description in paragraph (a) or (b) or subparagraph (i) or (ii); or
(2) Paragraph (e) of the definition preliminary CCUS work activity in subsection 127.44(1) of the Act is replaced by the following:
(e) clearing or excavating land, except excavation directly related to the installation of property that is described in Class 57 or 58 of Schedule II to the Income Tax Regulations or that is dual-use equipment. (travaux préliminaires de CUSC)
(3) Subparagraph (b)(ii) of the description of A in the definition qualified carbon capture expenditure in subsection 127.44(1) of the Act is replaced by the following:
(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 supplied to a qualified CCUS project over the project’s total CCUS project review period is of the total mass of water expected to be processed by the equipment in that period, based on the project’s most recent project plan,
(4) Paragraphs (a) and (b) of the definition specified percentage in subsection 127.44(1) of the Act are replaced by the following:
(a) qualified carbon capture expenditure if incurred in respect of carbon capture
(i) directly from ambient air
(A) after 2021 and before 2036, 60%,
(B) after 2035 and before 2041, 30%, or
(C) after 2040, 0%, or
(ii) other than directly from ambient air
(A) after 2021 and before 2036, 50%,
(B) after 2035 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 2036, 37 1/2%,
(ii) after 2035 and before 2041, 18 3/4%, or
(iii) after 2040, 0%. (pourcentage déterminé)
(5) Subsection 127.44(1) of the Act is amended by adding the following in alphabetical order:
- excluded CCUS equipment
excluded CCUS equipment, in respect of a CCUS project of a taxpayer, means equipment that
(a) is expected to be used in the production of hydrogen and would be required to produce hydrogen even if no CCUS process was applied by the taxpayer to produce the hydrogen;
(b) is expected to be used for
(i) natural gas processing, or
(ii) acid gas injection; or
(c) is oxygen production equipment. (matériel de CUSC exclu)
(6) Subsection 127.44(3) of the Act is replaced by the following:
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, 127.491 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.
(7) Subparagraph 127.44(9)(b)(ii) of the Act is amended by striking out “or” at the end of clause (B) and by replacing clause (C) with the following:
(C) for which an investment tax credit or any other clean economy tax credit (as defined in subsection 127.47(1)) is deducted, or
(D) in respect of a specified natural gas energy system (as defined in subsection 127.491(1)), if a clean electricity investment tax credit (as defined in subsection 127.491(1)) is deducted by any person in respect of any property that is part of the system,
(8) Subsection 127.44(17) of the Act is replaced by the following:
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, 2026 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.
(9) Subsections (1), (2), (5) and (8) are deemed to have come into force on January 1, 2022.
(10) Subsection (3) is deemed to have come into force on March 28, 2023.
(11) Subsection (4) is deemed to have come into force on November 4, 2025.
(12) Subsections (6) and (7) are deemed to have come into force on April 16, 2024.
52 (1) The definition small modular nuclear reactor in subsection 127.45(1) of the Act is repealed.
(2) The definition non-clean technology use in subsection 127.45(1) of the Act is replaced by the following:
- non-clean technology use
non-clean technology use means a use of a particular property at a particular time that would, if the property were acquired at that time, result in the property not being a clean technology property, determined without reference to paragraph (b) of the definition clean technology property. (utilisation non concernée par la technologie propre)
(3) Subparagraphs (d)(i) to (vii) of the definition clean technology property in subsection 127.45(1) of the Act are replaced by the following:
(i) described in subparagraph (d)(ii), (iii.1), (v), (vi) or (xiv) of Class 43.1 in Schedule II to the Income Tax Regulations, but excluding a test wind turbine (within the meaning assigned by subsection 1219(3) of the Income Tax Regulations),
(ii) described in subparagraph (d)(xviii) or (xix) of Class 43.1 in Schedule II to the Income Tax Regulations, but excluding equipment that uses any fossil fuel in operation,
(iii) described in subparagraph (d)(i) of Class 43.1 in Schedule II to the Income Tax Regulations,
(iv) described in Class 56 in Schedule II to the Income Tax Regulations,
(iv.1) described in subparagraph (d)(xxi) of Class 43.1 or subparagraph (b)(ii) of Class 43.2 in Schedule II to the Income Tax Regulations and used primarily to charge or dispense hydrogen to property described in Class 56 in Schedule II to the Income Tax Regulations,
(v) equipment that is
(A) part of a system that does not extract fossil fuels for sale,
(B) used exclusively for the purpose of generating electrical energy or heat energy, or a combination of electrical energy and heat energy, solely from geothermal energy, and
(C) described in subparagraph (d)(vii) of Class 43.1 in Schedule II to the Income Tax Regulations,
(vi) concentrated solar energy equipment,
(vii) small nuclear energy property, or
(viii) incorporated into another property described in any of subparagraphs (i) to (vii), as part of a refurbishment of the other property provided that on completion of the refurbishment the other property is still described in any of subparagraphs (i) to (vii). (bien de technologie propre)
(4) The definition clean technology property in subsection 127.45(1) of the Act, as amended by subsection (3), is amended by striking out “or” at the end of subparagraph (d)(vii) and by replacing subparagraph (d)(viii) with the following:
(viii) waste biomass electricity generation equipment or waste biomass heat generation equipment that is acquired after November 20, 2023, determined without reference to subsection (4), or
(ix) incorporated into another property described in any of subparagraphs (i) to (viii), as part of a refurbishment of the other property provided that on completion of the refurbishment the other property is still described in any of subparagraphs (i) to (viii). (bien de technologie propre)
(5) Paragraph (g) of the definition concentrated solar energy equipment in subsection 127.45(1) of the Act is replaced by the following:
(g) eligible transmission equipment, as defined in subsection 1104(13) of the Income Tax Regulations;
(6) Paragraph (d) of the definition excluded equipment in subsection 127.45(1) of the Act is replaced by the following:
(d) a vehicle; and
(7) Paragraphs (b) to (d) of the definition specified percentage in subsection 127.45(1) of the Act are replaced by the following:
(b) subject to paragraph (a),
(i) on or after March 28, 2023 and before January 1, 2034, 30%, and
(ii) after December 31, 2033 and before January 1, 2035, 15%; and
(c) after December 31, 2034, nil. (pourcentage déterminé)
(8) Subsection 127.45(1) of the Act is amended by adding the following in alphabetical order:
- nuclear facility
nuclear facility includes a single site, contiguous sites and adjacent sites where nuclear fission reactors are located or will be located. (installation nucléaire)
- preliminary work activity
preliminary work activity means an activity that is preliminary to the acquisition, construction, fabrication or installation by or on behalf of a taxpayer of property including, but not limited to, a preliminary activity that is
(a) obtaining a right of access or right of way to a project site or obtaining permits or regulatory approvals (including conducting environmental assessments);
(b) performing front-end design or engineering work (including front-end engineering design studies) or process engineering work for the development of the project, including
(i) collecting and analyzing of site data,
(ii) calculating energy, mass, water or air balances,
(iii) simulating and analyzing the performance and cost of process design options,
(iv) selecting the optimum process design, and
(v) conducting feasibility studies or pre-feasibility studies;
(c) clearing or excavating land, except excavation directly related to the installation of clean technology property;
(d) constructing a temporary access road to the project site; or
(e) drilling of a well. (travaux préliminaires)
- refurbishment
refurbishment means significant alterations, renovations, improvements or additions to a property to substantially
(a) extend its useful life;
(b) increase its capacity; or
(c) improve its efficiency. (remise en état)
- small nuclear energy property
small nuclear energy property means property that
(a) is part of a fixed location system that is used all or substantially all to generate electrical energy or heat energy, or a combination of electrical energy and heat energy, from nuclear fission as determined on an annual basis;
(b) is located at a nuclear facility where, at the time the property becomes available for use, the total combined gross-rated thermal generating capacity of all planned and existing nuclear fission reactors at the facility is reasonably expected not to exceed 1,400 megawatts thermal;
(c) is
(i) a reactor,
(ii) a reactor vessel,
(iii) a reactor control rod,
(iv) a moderator,
(v) cooling equipment,
(vi) heat generating equipment,
(vii) nuclear fission fuel handling equipment,
(viii) a containment structure,
(ix) electrical generating equipment,
(x) equipment for the distribution of heat energy within the system, or
(xi) equipment that is physically and functionally integrated with property described in any of subparagraphs (i) to (x) and that is ancillary equipment (such as control equipment) used solely to support the functioning of property described in any of subparagraphs (i) to (x); and
(d) is not
(i) nuclear fission fuel,
(ii) property used in nuclear waste disposal or storage,
(iii) transmission equipment,
(iv) distribution equipment,
(v) a vehicle,
(vi) property that would be included in Class 17 in Schedule II to the Income Tax Regulations if that Class were read without reference to its paragraph (a.1),
(vii) equipment used to export heat energy from the system, or
(viii) a building or other structure. (bien pour l’énergie nucléaire de petite taille)
(9) Subsection 127.45(1) of the Act is amended by adding the following in alphabetical order:
- eligible bioenergy fuel
eligible bioenergy fuel means fuel that is combusted in the operation of a system described in paragraph (a) of the definition waste biomass electricity generation equipment and that is
(a) specified waste material; or
(b) fuel that has been produced using equipment that is
(i) part of the system, and
(ii) described in subparagraph (b)(v) or (vi) of the definition waste biomass electricity generation equipment. (carburants admissibles pour la bioénergie)
- gaseous biofuel
gaseous biofuel has the same meaning as in subsection 1104(13) of the Income Tax Regulations. (biocarburants gazeux)
- liquid biofuel
liquid biofuel has the same meaning as in subsection 1104(13) of the Income Tax Regulations. (biocarburants liquides)
- solid biofuel
solid biofuel has the same meaning as in subsection 1104(13) of the Income Tax Regulations. (biocarburants solides)
- specified waste material
specified waste material has the same meaning as in subsection 1104(13) of the Income Tax Regulations. (déchets déterminés)
- spent pulping liquor
spent pulping liquor has the same meaning as in subsection 1104(13) of the Income Tax Regulations. (liqueur résiduaire)
- waste biomass electricity generation equipment
waste biomass electricity generation equipment means property that
(a) is part of a system that meets the following conditions
(i) the system is used solely for the purpose of generating electrical energy, or a combination of electrical energy and heat energy, determined without reference to the recovery of chemicals from spent pulping liquor,
(ii) the system consumes material all or substantially all of the energy content (expressed as the higher heating value of the material) of which is specified waste material, as determined on an annual basis,
(iii) the system is on a single site, or on contiguous sites or adjacent sites that function as a single integrated site, at which the activities described in subparagraphs (i) and (ii) are carried out, and
(iv) the system meets the following heat rate on an annual basis
A ≥ (2 × B + C) ÷ (D + E ÷ F)
where
- A
- is 13,000 BTU per kilowatt-hour,
- B
- is the energy content of fossil fuel (expressed as the higher heating value of the fuel) consumed by the system in BTU,
- C
- is the energy content of eligible bioenergy fuel or any other fuel other than fossil fuel (expressed as the higher heating value of the fuel) consumed by the system in BTU,
- D
- is the gross electrical energy produced by the system in kilowatt-hours,
- E
- is the net useful energy in the form of heat exported from the system to a thermal host in BTU, and
- F
- is 3,412 BTU per kilowatt-hour;
(b) is
(i) electrical generating equipment,
(ii) heat generating equipment used primarily for the purpose of producing heat energy to operate equipment described in subparagraph (i), determined without reference to the recovery of chemicals from spent pulping liquor,
(iii) equipment that generates both electrical and heat energy,
(iv) heat recovery equipment used primarily for the purpose of conserving energy, or reducing the requirement to acquire energy, by extracting for reuse thermal waste that is generated by equipment described in this paragraph,
(v) equipment that
(A) is used to produce solid biofuel, liquid biofuel or gaseous biofuel used solely to operate equipment described in any of subparagraphs (i) to (iii) or (vi), from material all or substantially all of the energy content (expressed as the higher heating value of the material) of which is specified waste material, as determined on an annual basis, and
(B) is described in any of subparagraphs (d)(xi), (xiii), (xvi) or (xx) of Class 43.1 in Schedule II to the Income Tax Regulations,
(vi) equipment that is used to upgrade the combustibility of specified waste material used all or substantially all to operate equipment described in this subparagraph or in any of subparagraphs (i) to (iii) or (v),
(vii) equipment for the distribution of heat energy within the system,
(viii) equipment that is physically and functionally integrated with equipment described in any of subparagraphs (i) to (vii) and that is ancillary equipment (such as control equipment) used primarily to support the functioning of equipment described in any of subparagraphs (i) to (vii), or
(ix) described in any of subparagraphs (i) to (viii) that is incorporated into a system that would not otherwise be described in paragraph (a) if the incorporation causes the system to satisfy the description in paragraph (a); and
(c) is not
(i) a building or other structure,
(ii) transmission equipment,
(iii) distribution equipment,
(iv) equipment used to export heat energy from the system,
(v) equipment for the storage of feedstock or fuel,
(vi) pollution abatement equipment,
(vii) a vehicle, or
(viii) property described in Class 57 or 58 of Schedule II to the Income Tax Regulations. (matériel générateur d’électricité à partir de déchets de biomasse)
- waste biomass heat generation equipment
waste biomass heat generation equipment means property that
(a) is part of a system that meets the following conditions
(i) the system is used solely for the purpose of generating heat energy,
(ii) the system consumes material all or substantially all of the energy content (expressed as the higher heating value of the material) of which is specified waste material, other than spent pulping liquor, as determined on an annual basis, and
(iii) the system is on a single site, or on contiguous sites or adjacent sites that function as a single integrated site, at which the activities described in subparagraphs (i) and (ii) are carried out;
(b) is
(i) heat generating equipment,
(ii) equipment that
(A) is used to produce solid biofuel, liquid biofuel or gaseous biofuel used solely to operate equipment described in any of subparagraphs (i) or (iii), from material all or substantially all of the energy content (expressed as the higher heating value of the material) of which is specified waste material, other than spent pulping liquor, as determined on an annual basis, and
(B) is described in any of subparagraphs (d)(xi), (xiii), (xvi) or (xx) of Class 43.1 in Schedule II to the Income Tax Regulations,
(iii) equipment that is used to upgrade the combustibility of specified waste material, other than spent pulping liquor, used all or substantially all to operate equipment described in this subparagraph or in subparagraph (i) or (ii),
(iv) equipment for the distribution of heat energy within the system,
(v) equipment that is physically and functionally integrated with equipment described in any of subparagraphs (i) to (iv) and that is ancillary equipment (such as control equipment) used primarily to support the functioning of equipment described in subparagraphs (i) to (iv), or
(vi) described in any of subparagraphs (i) to (v) that is incorporated into a system that would not otherwise be described in paragraph (a) if the incorporation causes the system to satisfy the description in paragraph (a); and
(c) is not
(i) equipment used for the purpose of producing heat energy to operate electrical generating equipment,
(ii) a building or other structure,
(iii) equipment used to export heat energy from the system,
(iv) equipment for the storage of feedstock or fuel,
(v) pollution abatement equipment,
(vi) a vehicle, or
(vii) property described in any of Class 17, 57 or 58 of Schedule II to the Income Tax Regulations. (matériel générateur de chaleur à partir de déchets de biomasse)
(10) Section 127.45 of the Act is amended by adding the following after subsection (1):
Marginal note:Interpretive rule — small nuclear energy property
(1.1) For the purpose of this section, where a qualifying taxpayer has a leasehold interest in a small nuclear energy property
(a) subject to subsection (4), the taxpayer is deemed to acquire the property when it acquires the leasehold interest in the property;
(b) the capital cost of the leasehold interest in the property to the taxpayer is deemed to be its capital cost of the property; and
(c) the property is deemed to be disposed of by the taxpayer when it ceases to hold the leasehold interest in the property for proceeds of disposition equal to the fair market value of the property at the time it ceases to hold the leasehold interest.
(11) Subsection 127.45(3) of the Act is replaced by the following:
Marginal note:Time limit for application
(3) A payment on account of tax payable shall not be deemed to be paid under subsection (2) if the taxpayer does not file with the Minister the prescribed form containing prescribed information referred to in subsection (2) in respect of the amount on or before the later of December 31, 2026 and the day that is one year after the taxpayer’s filing-due date for the year and, if the prescribed form is filed after the taxpayer’s filing-due date for the year, no payment by the taxpayer is deemed to arise under that subsection until the prescribed form containing the prescribed information has been filed with the Minister.
(12) Paragraph 127.45(5)(a) of the Act is replaced by the following:
(a) not include any amount
(i) in respect of which an amount was previously deducted under this section by any person,
(ii) in respect of which any other clean economy tax credit (as defined in subsection 127.47(1)) was deducted by any person,
(ii.1) in respect of any part of the capital cost of a property if a CCUS tax credit (as defined in subsection 127.44(1)) or a clean hydrogen tax credit (as defined in subsection 127.48(1)) was deducted by any person in respect of that property,
(iii) that has, by virtue of section 21, been added to the cost of a property, or
(iv) that is in respect of an expenditure incurred for a preliminary work activity;
(13) Section 127.45 of the Act is amended by adding the following after subsection (5):
Marginal note:Environmental compliance
(5.1) A property that would otherwise be clean technology property of a qualifying taxpayer is deemed not to be a clean technology property of the taxpayer if, at the time the property becomes available for use by the taxpayer, there is substantial non-compliance by the taxpayer with the requirements of any environmental law, by-law or regulation of Canada, a province, a municipality, or a municipal or public body performing a function of government in Canada that is applicable in respect of the property.
Marginal note:Compliance — reasonable efforts
(5.2) The following rules apply in respect of a qualifying taxpayer’s property described in subparagraph (d)(viii) of the definition clean technology property in subsection (1):
(a) where the property is temporarily operated in a manner that is a non-clean technology use solely because of a deficiency, failing or shutdown of the system of which it is a part, and that deficiency, failing or shutdown is beyond the control of the taxpayer, the property is deemed, for the purposes of subsections (11), (12), (16) and (17), not to be operated in a manner that is a non-clean technology use during the period of the deficiency, failing or shutdown, if the taxpayer makes all reasonable efforts to rectify the circumstances within a reasonable time; and
(b) for the purpose of paragraph (a), the system referred to in that paragraph may include property of another person or partnership if
(i) the property would reasonably be considered to be part of the system if the property were owned by the taxpayer,
(ii) the property utilizes electrical energy or heat energy obtained from the system,
(iii) the operation of the property is necessary for the system to avoid operation in a manner that is a non-clean technology use, and
(iv) at the time the system first became operational, the deficiency, failing or shutdown in the operation of the property could not reasonably have been anticipated to occur within five calendar years after that time.
(14) Subsection 127.45(6) of the Act is replaced by the following:
Marginal note:Deemed deduction
(6) 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) and subsection 53(2) and sections 127.44, 127.48, 127.49, 127.491 and 129, 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.
(15) Subsection 127.45(7) of the Act is replaced by the following:
Marginal note:Repayment of assistance
(7) Where 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 government assistance or non-government assistance that was applied to reduce the cost of a particular property under paragraph (5)(b.1) for a preceding taxation year, the amount repaid (or no longer expected to be received) is to be added to the cost to the taxpayer of a separate clean technology property that is deemed to be acquired in the particular year for the purposes of this section, provided that a transaction or event described in paragraph (11)(c) has not occurred in respect of the particular property.
(16) Subsection 127.45(9) of the Act is replaced by the following:
Marginal note:Unpaid amounts
(9) For the purposes of this section, where any part of the capital cost of a taxpayer’s particular clean technology property is unpaid on the day that is 180 days after the end of the taxation year in which a deduction in respect of a clean technology investment tax credit would otherwise be available in respect of the particular property, such amount is to be
(a) excluded from the capital cost of the particular property in the year; and
(b) added to the capital cost of a separate clean technology property that is deemed to be acquired at the time the amount is paid, provided that a transaction or event described in paragraph (11)(c) has not occurred in respect of the particular property.
(17) Section 127.45 of the Act is amended by adding the following after subsection (18):
Marginal note:Election by member to pay tax
(18.1) A qualifying taxpayer that is a member of a partnership during a fiscal period of the partnership may elect, in prescribed form and manner, to add to its tax payable under this Part for its taxation year that includes the end of the fiscal period the total amount of tax determined for that fiscal period because of subsections (16) and (17) in respect of the partnership.
Marginal note:Joint and several, or solidary, liability
(18.2) Each current or former member of a partnership is jointly and severally, or solidarily, liable for any portion of the amount of tax — determined because of subsections (16) and (17) in respect of the partnership for a fiscal period — that is not added to the tax payable
(a) of a qualifying taxpayer under subsection (17); or
(b) of a qualifying taxpayer because of subsection (18.1) and paid by the qualifying taxpayer by its filing-due date for its taxation year that includes the end of the fiscal period.
Marginal note:Former member liability
(18.3) If a particular taxpayer was, at the time that an amount is determined because of subsections (16) and (17) in respect of a property of the partnership for a taxation year, no longer a member of the partnership, the particular taxpayer’s liability for tax because of subsection (18.2) is limited to the total of all amounts each of which is an amount determined for the particular taxpayer under subsection (2) in respect of the property because of its membership in the partnership.
(18) Subsections (1) to (3), (6) to (8), (10) to (12) and (15) to (17) are deemed to have come into force on March 28, 2023.
(19) Subsections (4), (9) and (13) are deemed to have come into force on November 21, 2023.
(20) Subsection (5) is deemed to have come into force on November 17, 2025.
(21) Subsection (14) is deemed to have come into force on April 16, 2024.
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