Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Definitions

• 211.92 (1) The following definitions apply in this Part and in section 127.44.

  actual eligible use percentage

  actual eligible use percentage, in respect of a CCUS project, for a period means the amount, expressed as a percentage, determined by the formula

  A ÷ B

  where

  A

  is the quantity of captured carbon that the CCUS project supported for storage or use in eligible use during the period, and

  B

  is the total quantity of captured carbon that the CCUS project supported for storage or use in both eligible use and ineligible use during the period. (pourcentage réel d’utilisation admissible)

  exempt corporation

  exempt corporation at any time, means a corporation that does not have an ownership interest, whether directly or indirectly, in a qualified CCUS project in respect of which $20 million or more of qualified CCUS expenditures are expected to be incurred (based on the most recent project evaluation issued by the Minister of Natural Resources for the project). (société exonérée)

  first project period

  first project period, in respect of a CCUS project, means the period that begins on the first day of commercial operations — or, if the project has not yet commenced operations, the day on which, according to the most recent project plan, operations are expected to begin — and ends

  • (a) if that day is before October of a calendar year, on December 31 of the calendar year that includes the fourth anniversary of that day; or

  • (b) if that day is after September of a calendar year, on December 31 of the calendar year that includes the fifth anniversary of that day. (première période du projet)

  first recovery taxation year

  first recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the first project period. (première année d’imposition de recouvrement)

  fourth project period

  fourth project period, in respect of a CCUS project, means the five calendar years following the end of the third project period. (quatrième période du projet)

  fourth recovery taxation year

  fourth recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the fourth project period. (quatrième année d’imposition de recouvrement)

  knowledge sharing CCUS project

  knowledge sharing CCUS project means a qualified CCUS project that

  • (a) is expected to incur qualified CCUS expenditures of $250 million or more based on the most recent project evaluation issued by the Minister of Natural Resources for the project; or

  • (b) has incurred $250 million or more of qualified CCUS expenditures before the first day of commercial operations of the project. (projet de CUSC requérant l’échange de connaissances)

  knowledge sharing report

  knowledge sharing report, in respect of a CCUS project, means

  • (a) an annual operations knowledge sharing report containing the information described by the Minister of Natural Resources in the CCUS-ITC Technical Guidance Document as published by the Minister of Natural Resources and amended from time to time, in the form annexed to the CCUS-ITC Technical Guidance Document; and

  • (b) the construction and completion knowledge sharing report containing the information described in the CCUS-ITC Technical Guidance Document referred to in paragraph (a). (rapport sur l’échange de connaissances)

  knowledge sharing taxpayer

  knowledge sharing taxpayer means a taxpayer that claimed a CCUS tax credit for a taxation year ending before the project start-up date of a knowledge sharing CCUS project. (contribuable échangeant des connaissances)

  project period

  project period, in respect of a CCUS project, means any of the first project period, the second project period, the third project period and the fourth project period. (période de projet)

  project start-up date

  project start-up date means the day that is 120 days before the first day of commercial operations. (jour du début du projet)

  recovery taxation year

  recovery taxation year, in respect of a CCUS project, means any of the first recovery taxation year, the second recovery taxation year, the third recovery taxation year and the fourth recovery taxation year. (année d’imposition de recouvrement)

  relevant project period

  relevant project period means

  • (a) in respect of the first recovery taxation year, the first project period;

  • (b) in respect of the second recovery taxation year, the second project period;

  • (c) in respect of the third recovery taxation year, the third project period; and

  • (d) in respect of the fourth recovery taxation year, the fourth project period. (période de projet pertinente)

  reporting-due day

  reporting-due day means the later of December 31, 2025 and

  • (a) in respect of an annual climate risk disclosure report, the day that is nine months after the day on which the reporting taxation year for the report ends;

  • (b) in respect of an annual operations knowledge sharing report,

    • (i) if the report is the first such report,

      • (A) where the project start-up date is before October 1 in a calendar year, June 30 of the following calendar year, and

      • (B) where the project start-up date is after September 30 in a calendar year, June 30 of the second calendar year after the calendar year which includes the the project start-up date, and

    • (ii) if the report is not the first report, each June 30 of the first four calendar years immediately following the calendar year which includes the June 30 referred to in subparagraph (i); and

  • (c) in respect of the construction and completion knowledge sharing report, the last day of the sixth month beginning after the project start-up date. (date d’échéance du rapport)

  reporting period

  reporting period means

  • (a) in respect of the construction and completion knowledge sharing report, the period that begins on the first day an expenditure for a CCUS project is incurred and ends on the project start-up date of the knowledge sharing CCUS project; and

  • (b) in respect of an annual operations knowledge sharing report, each period that begins on the project start-up date and ends on the last day of the calendar year ending immediately before the reporting-due day for the annual operations knowledge sharing report. (période de déclaration)

  reporting taxation year

  reporting taxation year means

  • (a) the first taxation year of a taxpayer in which a CCUS tax credit was deducted, in respect of a CCUS project of the taxpayer; and

  • (b) each taxation year that

    • (i) begins after a taxation year referred to in paragraph (a), and

    • (ii) ends before the twenty-first calendar year after the end of the taxation year which includes the first day of commercial operations of the CCUS project. (année d’imposition de la déclaration)

  second project period

  second project period, in respect of a CCUS project, means the five calendar years following the end of the first project period. (deuxième période du projet)

  second recovery taxation year

  second recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the second project period. (deuxième année d’imposition de recouvrement)

  third project period

  third project period, in respect of a CCUS project, means the five calendar years following the end of the second project period. (troisième période du projet)

  third recovery taxation year

  third recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the third project period. (troisième année d’imposition de recouvrement)

• Marginal note:Recovery of development tax credit

  (2) A taxpayer shall pay a tax under this Part, for a particular taxation year that includes the first day of commercial operations of a CCUS project, or for any preceding year, equal to the amount, if any, by which the taxpayer’s cumulative CCUS development tax credit for the immediately preceding taxation year exceeds its cumulative CCUS development tax credit for the particular taxation year.

• Marginal note:Acceleration of recovery tax

  (3) If the actual eligible use percentage for a CCUS project for any period described in subparagraph (c)(i) or (ii) of the definition qualified CCUS project in subsection 127.44(1) is less than 10%, then for the purposes of applying subsections (4) and (5)

  • (a) the actual eligible use percentage of the project for the relevant project period to which the period relates, and for each subsequent project period, is deemed to be nil;

  • (b) the relevant project period for the particular recovery taxation year is deemed to include each subsequent project period; and

  • (c) those subsections do not apply to a subsequent recovery taxation year in respect of the project.

• Marginal note:Development credits recovery amount

  (4) If the projected eligible use percentage of a CCUS project for the relevant project period in respect of a particular recovery taxation year exceeds the actual eligible use percentage of the CCUS project for that period by more than five percentage points, there shall be added to the tax otherwise payable under this Part for the particular recovery taxation year by a taxpayer that deducted a CCUS tax credit in respect of the CCUS project an amount equal to the amount determined by the formula

  A − B − C

  where

  A

  is the amount of the taxpayer’s cumulative CCUS development tax credit for the taxation year that includes the first day of commercial operations;

  B

  is the amount that would be determined for A if the projected eligible use percentage for the relevant project period were equal to its actual eligible use percentage; and

  C

  is the total of all amounts, each of which is an amount previously paid by the taxpayer as a tax under this Part in respect of the disposition or export of a property in relation to the project because of subsection (9), to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

• Marginal note:Refurbishment credits recovery amount

  (5) If the projected eligible use percentage of a CCUS project for the relevant project period in respect of a particular recovery taxation year exceeds the actual eligible use percentage of the CCUS project for that period by more than five percentage points, there shall be added to the tax otherwise payable under this Part for the particular recovery taxation year by a taxpayer that deducted a CCUS tax credit in respect of the CCUS project, an amount equal to the amount determined by the formula

  A − B − C

  where

  A

  is the total of all amounts, each of which is the amount that is the taxpayer’s CCUS refurbishment tax credit under subsection 127.44(5) for the year or a previous taxation year;

  B

  is the amount that would be determined for A if the projected eligible use percentage for the relevant project period were equal to its actual eligible use percentage; and

  C

  is the total of all amounts, each of which is an amount previously paid by the taxpayer as a tax under this Part in respect of the disposition or export of a property in relation to the project because of subsection (10), to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

• Marginal note:Extraordinary eligible use reduction

  (6) For the purposes of determining a taxpayer’s liability for tax under this Part for a taxation year, subsection (7) applies if

  • (a) the actual eligible use percentage for a qualified CCUS project during a project period is significantly reduced due to extraordinary circumstances, for bona fide reasons outside the control of the taxpayer and each person or partnership that does not deal at arm’s length with the taxpayer;

  • (b) the taxpayer requests in writing, on or before the taxpayer’s filing-due date for the year, that the Minister consider the potential application of this subsection and subsection (7); and

  • (c) the Minister is satisfied that the taxpayer has taken all reasonable steps to attempt to rectify the extraordinary circumstances, and that it is appropriate, having regard to all the circumstances, to apply this subsection and subsection (7).

• Marginal note:Effect of extraordinary circumstances

  (7) If the conditions set out in subsection (6) are met for a taxation year,

  • (a) if the qualified CCUS project’s operations are affected by extraordinary circumstances for all or substantially all of the project period, then no amount is payable by the taxpayer for the year under subsections (3) to (5) in respect of the project; and

  • (b) in any other case, the portion of the project period during which the project’s operations are affected by the extraordinary circumstances shall be disregarded for the purpose of calculating the actual eligible use percentage for the project period.

• Marginal note:Shutdown

  (8) For the purposes of determining a taxpayer’s liability for tax under this Part for a recovery taxation year, if a qualified CCUS project is inoperative for all or a portion of a relevant project period,

  • (a) if the project is inoperative for all or substantially all of the period, then no amount is payable by the taxpayer for the year under subsections (3) to (5) in respect of the project; and

  • (b) in any other case, the portion of the project period during which the project is inoperative shall be disregarded for the purpose of calculating the actual eligible use percentage for the project period.

• Marginal note:Development property disposition

  (9) Except where subsection (11) applies, if at any time in a particular taxation year a taxpayer disposes of or exports from Canada a property for which the taxpayer’s qualified CCUS expenditure resulted in the determination of a cumulative CCUS development tax credit for a previous taxation year, or would so result for the particular year but for this subsection, the following rules apply:

  • (a) if the time is before the total CCUS project review period of the CCUS project to which the expenditure relates, the expenditure is deemed not to be a qualified CCUS expenditure in respect of the CCUS project for the purpose of determining the taxpayer’s cumulative CCUS development tax credit for the particular year and any subsequent taxation years; and

  • (b) if the time is during the total CCUS project review period of the CCUS project to which the expenditure relates, there shall be added to the tax otherwise payable by the taxpayer under this Part for the year the amount determined by the formula

    A × B × C ÷ D − E

    where

    A

    is the qualified CCUS expenditure in respect of the property as determined for the taxation year that includes the first day of commercial operations,

    B

    is the appropriate specified percentage,

    C

    is the amount, not exceeding the amount determined for D, equal to

    • (i) if the property is disposed of to a person who deals at arm’s length with the taxpayer, the proceeds of disposition of the property, or

    • (ii) if the property is disposed of to a person who does not deal at arm’s length with the taxpayer, or is exported from Canada but not disposed of, the fair market value of the property at that time,

    D

    is the taxpayer’s capital cost of the property, and

    E

    is the total of all amounts, each of which can reasonably be considered to be the portion of any amount previously paid by the taxpayer because of subsection (4) in respect of the property, to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

• Marginal note:Refurbishment property disposition

  (10) Except where subsection (11) applies, if at any time in a particular taxation year during the total project review period of a CCUS project a taxpayer disposes of or removes from Canada a property for which the taxpayer’s qualified CCUS expenditure resulted in the determination of a CCUS refurbishment tax credit for the year or a previous taxation year, then there shall be added to the tax otherwise payable by the taxpayer under this Part for the year the amount determined by the formula

  A × B × C ÷ D − E

  where

  A

  is the qualified CCUS expenditure in respect of the property;

  B

  is the appropriate specified percentage;

  C

  is the amount, not exceeding the amount determined for D, equal to

  • (a) if the property is disposed of to a person who deals at arm’s length with the taxpayer, the proceeds of disposition of the property, or

  • (b) if the property is disposed of to a person who does not deal at arm’s length with the taxpayer, or is exported from Canada, the fair market value of the property;

  D

  is the taxpayer’s capital cost of the property; and

  E

  is the total of all amounts, each of which can reasonably be considered to be the portion of any amount previously paid by the taxpayer because of subsection (5) in respect of the property, to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

• Marginal note:Election — CCUS project sale

  (11) If at any time a qualifying taxpayer (referred to in this subsection as the “vendor”) disposes of all or substantially all of its property that is part of a qualified CCUS project of the taxpayer to another taxable Canadian corporation (referred to in this subsection as the “purchaser”) and the vendor and the purchaser jointly elect in prescribed form to have this subsection apply, the following rules apply:

  • (a) the purchaser is deemed to have made the qualifying expenditures of the vendor at the times incurred by the vendor;

  • (b) the provisions of this Act that applied to the vendor in respect of the property that are relevant to the application of the Act in respect of the property after that time are deemed to have applied to the purchaser and, for greater certainty, the purchaser is deemed to have claimed the tax credits determined under section 127.44 that could have been claimed by the vendor, before that time, in respect of the CCUS project;

  • (c) any project plans that were prepared or filed by the vendor in respect of the CCUS project before that time are deemed to have been filed by the purchaser;

  • (d) the purchaser is or will be liable for amounts in respect of the property for which the vendor would be liable under this Part in respect of actions, transactions or events that occur after that time as if the vendor had undertaken them or otherwise participated in them; and

  • (e) subsections (9) and (10) do not apply to the vendor in respect of the disposition of property to the purchaser.

• Marginal note:Partnerships

  (12) Subject to section 127.47, if subsection 127.44(11) has at any time applied to add an amount in computing the CCUS tax credit of a member of the partnership, then for the purposes of this Part, subsections (2) to (11) shall apply to determine amounts in respect of the partnership as if the partnership were a taxable Canadian corporation, its fiscal period were its taxation year and it had deducted all of the CCUS tax credits that were previously added in computing the CCUS tax credit of any member of the partnership under subsection 127.44(2) because of the application of subsection 127.44(11) in respect of its partnership interest.

• Marginal note:Member’s share of tax

  (13) Unless subsection (14) applies, if, in a taxation year, a taxpayer is a member of a partnership, the amount that can reasonably be considered to be the taxpayer’s share of any amount of tax determined because of subsection (12) in respect of the partnership for its fiscal period ending in the taxation year shall be added to the taxpayer’s tax otherwise payable under this Part for the taxation year.

• Marginal note:Election by member to pay tax

  (14) 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 (12) in respect of the partnership.

• Marginal note:Joint, several and solidary liability

  (15) Each member of a partnership is jointly and severally, or for civil law, solidarily, liable for any portion of the amount of tax — determined because of subsection (12) in respect of the partnership for a taxation year — that is not added to the tax payable

  • (a) of a member of the partnership under subsection (13); or

  • (b) of a taxable Canadian corporation because of subsection (14) and paid by the corporation by its filing-due date for the year.