Feds introduce clean economy investment tax credits

The federal government has created four Clean Economy Investment Tax Credits (ITCs) that will represent $93 billion in federal incentives by 2034–35.

The ITCs are: the Clean Technology ITC, the Carbon Capture Utilization and Storage (CCUS) ITC, the Clean Technology Manufacturing ITC, and the Clean Hydrogen ITC.

With the Royal Assent of Bill C-59, the Fall Economic Statement Implementation Act, 2023, eligible businesses can now apply for and claim the Clean Technology and CCUS ITCs. The Clean Technology ITC and CCUS ITC are anticipated to provide eligible companies approximately $11.4 billion in support through 2027–28.

With the Royal Assent of Bill C-69, the Budget Implementation Act, 2024, No. 1, eligible businesses should be able to apply for tax credits this fall for clean technology manufacturing and clean hydrogen projects.

The Clean Technology ITC will provide support to qualifying taxpayers who are investing capital in specified clean technologies in Canada. The Canada Revenue Agency (CRA) is responsible for administering the Clean Technology ITC, including assessing claims and issuing payments, while Natural Resources Canada (NRCan) is responsible for providing guidance on what qualifies as a clean technology property. Taxpayers may request a technical opinion from NRCan as to whether equipment in a planned or completed project meets the engineering and scientific requirements of Clean Technology property. This is a voluntarily step and any technical opinion issued by NRCan to the taxpayer is not binding on the CRA in determining eligibility and entitlements to the Clean Technology ITC, under section 127.45 of the Income Tax Act.

Examples of eligible clean technologies include clean electricity generation equipment such as wind turbines and solar panels, stationary electrical energy storage, low-carbon heating systems such as ground and air source heat pumps, and non-road zero-emission vehicles.

Carbon Capture, Utilization and Storage

The CCUS ITC, administered jointly by NRCan and the CRA, will provide support to taxable Canadian corporations that incur eligible expenditures for qualified CCUS projects. The CCUS ITC is available to a broad range of CCUS applications and projects across different industrial sectors. For detailed information, including eligible projects and equipment, NRCan’s technical guide for the CCUS ITC, how to submit a CCUS project plan to NRCan, and how to claim the ITCs with the CRA, is now available on the Clean Economy Investment Tax Credits webpages.

The Clean Technology Manufacturing ITC will provide support to Canadian companies that are manufacturing or processing clean technologies and their precursors, providing support for 30 percent of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals.

The Clean Hydrogen ITC will provide a 15 to 40 percent refundable tax credit for investments in projects that produce hydrogen, with the projects that produce the cleanest hydrogen receiving the highest levels of support. Equipment needed to convert hydrogen into ammonia, in order to transport hydrogen, may also be eligible.