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)
53 (1) The definitions regular tax credit rate and specified tax credit in subsection 127.46(1) of the Act are replaced by the following:
- regular tax credit rate
regular tax credit rate means the specified percentage (as defined in subsections 127.44(1), 127.45(1), 127.48(1) and 127.491(1), as the case may be). (taux du crédit d’impôt régulier)
- specified tax credit
specified tax credit means the CCUS tax credit under subsection 127.44(1), the clean technology investment tax credit under subsection 127.45(1), the clean hydrogen tax credit under subsection 127.48(1) and the clean electricity investment tax credit under subsection 127.491(1). (crédit d’impôt déterminé)
(2) Subsection 127.46(2) of the Act is replaced by the following:
Marginal note:Reduced or regular rate
(2) Despite sections 127.44, 127.45, 127.48 and 127.491, the applicable rate for each specified tax credit of an incentive claimant is the reduced tax credit rate unless the incentive claimant elects in prescribed form and manner to meet the prevailing wage requirements under subsection (3) and the apprenticeship requirements under subsection (5) for each installation taxation year in respect of the specified tax credit.
(3) Subsection 127.46(15) of the Act is replaced by the following:
Marginal note:Exception
(15) This section does not apply to the preparation or installation of clean technology property as defined in subsection 127.45(1) that is described in subparagraph (d)(i) of Class 43.1 in Schedule II to the Income Tax Regulations or in Class 56 in Schedule II to the Income Tax Regulations.
(4) Subsections (1) and (2) are deemed to have come into force on April 16, 2024.
(5) Subsection (3) is deemed to have come into force on November 28, 2023 and applies to specified property prepared or installed on or after that date.
54 (1) The definition clean economy allocation provision in subsection 127.47(1) of the Act is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) subsection 127.491(12). (disposition d’allocation pour l’économie propre)
(2) The definition clean economy expenditure in subsection 127.47(1) of the Act is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) the capital cost of clean electricity property as determined under section 127.491. (dépense pour l’économie propre)
(3) The definition clean economy provision in subsection 127.47(1) of the Act is amended by striking out “or” at the end of paragraph (e), by adding “or” at the end of paragraph (f) and by adding the following after paragraph (f):
(g) section 127.491. (disposition pour l’économie propre)
(4) The definition clean economy tax credit in subsection 127.47(1) of the Act is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) a clean electricity investment tax credit (as defined in subsection 127.491(1)). (crédit d’impôt pour l’économie propre)
(5) Section 127.47 of the Act is amended by adding the following after subsection (4):
Marginal note:Multiple tax credits
(4.1) If the cost of a particular property of a partnership is eligible for more than one clean economy tax credit, the partnership may allocate each of those clean economy tax credits to the members of the partnership in accordance with this section and the clean economy allocation provisions, except that no member of the partnership is entitled to more than one clean economy tax credit in respect of that property unless the tax credits are the CCUS tax credit (as defined in subsection 127.44(1)) and the clean hydrogen tax credit (as defined in subsection 127.48(1)) to the extent provided under sections 127.44 and 127.48.
(6) Subsections (1) to (4) are deemed to have come into force on April 16, 2024.
(7) Subsection (5) is deemed to have come into force on March 28, 2023.
55 (1) The definition non-hydrogen or ammonia use in subsection 127.48(1) of the Act is replaced by the following:
- non-hydrogen or ammonia use
non-hydrogen or ammonia 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 an eligible clean hydrogen property, determined without reference to paragraph (b) of that definition. (utilisation autre que pour l’hydrogène ou l’ammoniac)
(2) Subparagraph (c)(vi) of the definition eligible clean hydrogen property in subsection 127.48(1) of the Act is replaced by the following:
(vi) that is incorporated into another property that would not otherwise be described in subparagraphs (i) to (v) if the incorporation causes the other property to satisfy the description in any of subparagraphs (i) to (v). (bien admissible pour l’hydrogène propre)
(3) Paragraph (e) of the definition preliminary clean hydrogen work activity in subsection 127.48(1) of the Act is replaced by the following:
(e) clearing or excavating land, except excavation directly related to the installation of eligible clean hydrogen property. (travaux préliminaires pour l’hydrogène propre)
(4) Subsection 127.48(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) and sections 127.44, 127.45, 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.
(5) Subsection 127.48(4) of the Act is replaced by the following:
Marginal note:Time limit for application
(4) 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 prescribed information has been filed with the Minister.
(6) Paragraph 127.48(6)(b) of the Act is replaced by the following:
(b) subject to paragraph (j), in applying the Fuel LCA Model, an assessment of emissions from the production of hydrogen by the project and upstream emissions from the production of inputs to the hydrogen-production process shall be taken into account;
(7) Paragraph 127.48(6)(d) of the Act is replaced by the following:
(d) if the taxpayer produces hydrogen from eligible hydrocarbons,
(i) any captured carbon that is subject to an ineligible use is deemed not to be captured, and
(ii) any captured carbon that is subject to an eligible use (as defined in subsection 127.44(1)) is deemed to be permanently stored;
(8) The portion of paragraph 127.48(6)(e) of the Act before subparagraph (i) is replaced by the following:
(e) if, in connection with hydrogen production, the taxpayer generates or purchases, or proposes to generate or purchase, electricity that is
(9) Clause 127.48(6)(e)(i)(B) of the Act is replaced by the following:
(B) on-site generation equipment that is used solely to convert any one or a combination of hydrogen, heat described in subparagraph (i)(i) or (ii) or eligible hydrocarbons (with carbon dioxide captured using a CCUS process) into electricity that supports the production of hydrogen from eligible hydrocarbons, the contribution of the electricity to carbon intensity is to be modelled as part of the project,
(10) Subsection 127.48(6) of the Act is amended by striking out “and” at the end of paragraph (h) and by replacing paragraph (i) with the following:
(i) if, in connection with hydrogen production or electricity production in support of hydrogen production, the taxpayer uses heat energy
(i) recovered from hydrogen production, recovered from electricity production by the taxpayer in support of hydrogen production or produced by the taxpayer from the combustion of hydrogen or eligible hydrocarbons (with carbon dioxide captured using a CCUS process), the contribution of the heat to carbon intensity is to be modelled as part of the project,
(ii) recovered from a non-hydrogen production process of the taxpayer, or purchased from a vendor that produced the heat from eligible hydrocarbons or recovered the waste heat from a production process, the contribution of the heat to carbon intensity is to correspond with the input carbon intensity of purchased steam in the Fuel LCA Model, and
(iii) from a source other than as described in subparagraph (i) or (ii), the carbon intensity of the project is deemed to be greater than 4.5;
(j) the contribution to carbon intensity of the following may be disregarded:
(i) delivering, collecting, recovering, treating or recirculating water, and
(ii) energy used to compress hydrogen beyond 30 bar;
(k) emissions related to the production of the following substances or types of energy produced in conjunction with hydrogen shall be attributed to hydrogen production:
(i) off-gas (including tail gas and other fuel gas),
(ii) oxygen,
(iii) nitrogen, if the nitrogen is not used by the taxpayer in another production process or sold for commercial use, and
(iv) heat from hydrogen production;
(l) emissions related to heat produced in conjunction with electricity production by the taxpayer in support of hydrogen production shall be attributed to hydrogen production, if the heat is not used by the taxpayer in another production process or sold for commercial use;
(m) emissions associated with energy used in the purification of hydrogen shall be attributed to hydrogen production; and
(n) the Clean Hydrogen Investment Tax Credit – Carbon Intensity Modelling Guidance Document published by the Government of Canada is to apply conclusively with respect to the calculation of carbon intensity, except as otherwise required under this section.
(11) The portion of paragraph 127.48(10)(a) of the Act before subparagraph (iii) 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, or
(12) Subsection 127.48(11) of the Act is replaced by the following:
Marginal note:Repayment of assistance
(11) 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 capital cost of a particular eligible clean hydrogen property under paragraph (10)(c) 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 eligible clean hydrogen 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 (21)(c) has not occurred in respect of the particular property.
(13) Subsection 127.48(13) of the Act is replaced by the following:
Marginal note:Unpaid amounts
(13) For the purposes of this section, where any part of the capital cost of a taxpayer’s particular eligible clean hydrogen 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 hydrogen 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 eligible clean hydrogen property that is deemed to be acquired by the taxpayer at the time the amount is paid, provided that a transaction or event described in paragraph (21)(c) has not occurred in respect of the particular property.
Marginal note:Property deemed in respect of qualified project
(13.1) A property is deemed to have been acquired in respect of a qualified clean hydrogen project if
(a) the property was acquired in respect of a clean hydrogen project that was not a qualified clean hydrogen project because the Minister of Natural Resources was not accepting the filing of clean hydrogen project plans during the taxation year in which the property was acquired; and
(b) in a subsequent taxation year, the project becomes a qualified clean hydrogen project.
(14) Subsection 127.48(15) of the Act is replaced by the following:
Marginal note:Annual information reporting requirement
(15) If a clean hydrogen tax credit was deducted in any taxation year by a taxpayer in respect of a qualified clean hydrogen project, the taxpayer shall file, with its return of income for each taxation year that begins or ends during the compliance period in respect of the project, a prescribed form containing prescribed information in respect of the operations of the project.
(15) Section 127.48 of the Act is amended by adding the following after subsection (16):
Marginal note:Shared filing
(16.1) If more than one person is required by this section to file any documentation or information with the Minister or the Minister of Natural Resources in respect of a clean hydrogen project (including, but not limited to, a revised clean hydrogen project plan, a form described in subsection (15) or a compliance report described in subsection (16)), the filing with full and accurate disclosure by any one of such persons of the documentation or information is deemed to have been made by each person to whom the relevant requirement applies.
(16) Subsection 127.48(25) of the Act is replaced by the following:
Marginal note:Recovery and recapture — partnerships
(25) Subject to section 127.47, if subsection (12) has at any time applied to add an amount in computing the clean hydrogen tax credit of a current or former member of a partnership, subsections (18) to (23) apply to determine amounts in respect of the partnership as if the partnership was a taxable Canadian corporation, its fiscal period were its taxation year and it had deducted all of the clean hydrogen tax credits that were previously added in computing the clean hydrogen tax credit of any member of the partnership because of the application of subsection (12) in respect of its partnership interest.
(17) Subsections 127.48(27) and (28) of the Act are replaced by the following:
Marginal note:Election by member
(27) A taxable Canadian corporation 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 subsection (25) in respect of the partnership.
Marginal note:Joint and several, or solidary, liability
(28) 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 subsection (25) in respect of the partnership for a fiscal period — that is not added to the tax payable
(a) of a qualifying taxpayer under subsection (26); or
(b) of a taxable Canadian corporation because of subsection (27) and paid by the corporation by its filing-due date for its taxation year that includes the end of the fiscal period.
Marginal note:Former member liability
(28.1) If a particular taxpayer was, at the time that an amount is determined because of subsection (25) in respect of the partnership for a taxation year, no longer a member of the partnership, the particular taxpayer’s liability for tax because of subsection (28) is limited to the total of all amounts each of which is an amount determined for the particular taxpayer under subsection (2) because of its membership in the partnership.
(18) Subsections (1) to (3) and (5) to (17) are deemed to have come into force on March 28, 2023.
(19) Subsection (4) is deemed to have come into force on April 16, 2024.
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