After you claim

If your claim is accepted as filed, you will be notified on your notice of assessment or reassessment.

In some situations you may have to repay all or part of the credit. 

On this page

• Repaying credit amounts to the CRA
• If your claim needs a review
• If you disagree with our decision

Repaying credit amounts to the CRA 

You must track and account for your actual use of captured CO2.

You may have to pay a Part XII.7 tax on credit amounts you have already received if:

• The actual eligible use percentage is lower than the projected eligible use percentage
  • Recovery of development tax credit before operations begin 
  • Development credits recovery amount
  • Refurbishment credits recovery amount
  • Acceleration of recovery tax
• You disposed of property or exported it from Canada
  • Development property disposition
  • Refurbishment property disposition

The actual eligible use percentage is lower than the projected eligible use percentage

Recovery of development tax credit before operations begin 

Up to and including the tax year that includes the first day of commercial operations you are required to pay a tax under Part XII.7 of the Income Tax Act to recover the CCUS ITC in circumstances where the projected eligible use percentage of a CCUS project is reduced before operations begin. You will have to pay a tax, for a particular tax 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 your cumulative CCUS development tax credit for the immediately preceding tax year exceeds your cumulative CCUS development tax credit for the particular tax year.

In the case of qualified carbon capture expenditures and qualified carbon transportation expenditures, the qualifying portion of expenditures is determined by multiplying the expenditure (as described in variable A) by the projected eligible use percentage for each project period (and then using variable F in those definitions to arrive at the overall qualifying portion). Projected eligible use percentage is determined from the project plan as, in general terms, from the division of projected eligible use during the relevant period by the projected total use (that is, ineligible use plus eligible use) during the same period, expressed as a percentage.

Development credits recovery amount 

This provides for a recovery of a portion of the CCUS development tax credits (starting with the first day of commercial operations).

If the actual eligible use percentage is more than five percentage points below the projected eligible use percentage for the relevant project period but still meets or exceeds the 10% minimum, the credit is recalculated using the actual eligible use percentage for the applicable project period. Generally, the recovery tax is the difference between the cumulative CCUS development credits previously computed and the amount the of the cumulative CCUS development credits using the actual eligible use percentage.

The recovery of CCUS development tax credits is only relevant in relation to tax credits for qualified carbon capture expenditures and qualified carbon transportation expenditures.

The development credits recovery amount must be added to Part I tax for the particular recovery taxation year by a taxpayer that deducted a CCUS ITC in respect of the CCUS project. The amount is determined by the formula A - B - C, where:

• Variable A is the amount of the taxpayer's cumulative CCUS development tax credit for the tax year that includes the first day of commercial operations
• Variable 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
• Variable C is the total of all amounts previously paid by the taxpayer  as tax under Part I for the disposition or export of a property in relation to the project (because of subsection 211.92(9) of the ITA), to the extent that the amount did not reduce the tax payable in a preceding tax year

Refurbishment credits recovery amount 

There is a recovery tax to recover the CCUS refurbishment tax credit (starting with the first day of commercial operations).

If the actual eligible use percentage is more than five percentage points below the projected eligible use percentage for the relevant project period but still meets or exceeds the 10% threshold, the CCUS refurbishment tax credit must be recalculated using the actual eligible use percentage for the applicable project period. Generally, the recovery tax is the difference between the CCUS refurbishment tax credit previously computed and the amount the credit is recalculated using the actual eligible use percentage for the applicable project period.

The recovery of CCUS refurbishment tax credits is only relevant in relation to tax credits for qualified carbon capture expenditures and qualified carbon transportation expenditures.

The refurbishment credits recovery amount must be added to Part I tax for the particular recovery taxation year by a taxpayer that deducted a CCUS ITC in respect of the CCUS project. The amount is determined by the formula A - B - C, where:

• Variable A is the total of the taxpayer's CCUS refurbishment tax credit for the year or a previous tax year
• Variable 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
• Variable C is the total of all amounts previously paid by the taxpayer as a tax under Part I in respect of the disposition or export of a property in relation to the project 

Acceleration of recovery tax

You may have to pay an acceleration of recovery tax if the actual eligible use percentage of a CCUS project falls below 10% during any year of the project’s total CCUS project review period. This could occur, for example, if a CCUS project switched to enhanced oil recovery as its use of captured carbon. A qualified CCUS project in effect must plan to operate for at least 20 years to be eligible for the CCUS tax credit. The projected eligible use percentage is required to be greater than or equal to 10% in every year for the project to be eligible for the CCUS tax credit. 

If the actual eligible use percentage for a CCUS project for any period is less than 10%, then for the purposes of  calculating the development credits recovery amount and the refurbishment credits recovery amount: 

• 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
• The relevant project period for the particular recovery taxation year is deemed to include each subsequent project period

As a result, any CCUS ITC’s that are recoverable for that period, or any subsequent recovery period become payable by the taxpayer under Part XII.7.

Effect of extraordinary circumstances and shutdown

You disposed of property or exported it from Canada

Development property disposition

This recovery tax (recapture) may apply to you if you have not made an election on a CCUS project sale. 

If at any time before the total CCUS project review period you dispose of a property or export a property from Canada and you claimed a CCUS development tax credit in respect of an expenditure for the property, the expenditure is deemed not to be a qualified CCUS expenditure of the CCUS project for the purpose of determining your cumulative CCUS development tax credit for the tax year in which the disposition or export occurred and any subsequent tax years. As a result, you must recalculate the cumulative CCUS development tax credit for the current year.

If you dispose of a property or export a property from Canada during the total CCUS project review period and you claimed a CCUS development tax credit in respect of a qualified CCUS expenditure for the property, you must determine if you have recapture using the formula A x B x C ÷ D – E, where:

• Variable A is the qualified CCUS expenditure in respect of the property as determined for the tax year that includes the first day of commercial operations
• Variable B is the appropriate specified percentage
• Variable C is the amount, not exceeding the amount determined for D, equal to: 
  • If the property is disposed of to a person who deals at arm's length with you, proceeds of disposition of the property
  • If the property is disposed of to a person who does not deal at arm's length with you, or is exported from Canada but not disposed of, the fair market value of the property at that time 
• Variable D is your capital cost of the property
• Variable E is the total of all amounts, each of which can reasonably be considered to be the portion of any amount you previously paid as a development credits recovery amount for the property, to the extent that the amount did not reduce tax payable under this recapture provision in a preceding tax year

Refurbishment property disposition

This recovery tax (recapture) may apply to you if you have not made an election on a CCUS project sale.  

If at any time in a particular tax year during the total project review period of a CCUS project you dispose of or remove from Canada a property for which you claimed a CCUS refurbishment tax credit in respect of a qualified CCUS expenditure for the property, you must determine if you have recapture using the formula A x B x C ÷ D – E:

• Variable A is the qualified CCUS expenditure in respect of the property
• Variable B is the appropriate specified percentage
• Variable C is the amount, not exceeding the amount determined for D, equal to:
  • If the property is disposed of to a person who deals at arm's length with you, the proceeds of disposition of the property
  • If the property is disposed of to a person who does not deal at arm's length with you, or is exported from Canada, the fair market value of the property
• Variable D is your capital cost of the property
• Variable E is the total of all amounts, each of which can reasonably be considered to be the portion of any amount you previously paid for a refurbishment credits recovery amount for the property, to the extent that the amount did not reduce tax payable under this recapture provision in a preceding tax year

Election: CCUS project sale

You may make an election to avoid recovery tax (recapture) in certain circumstances.

The election may be available where a qualifying taxpayer (the vendor) disposes of all or substantially all of its properties that are part of a qualified CCUS project of the taxpayer to another taxable Canadian corporation (the purchaser).

The vendor and the purchaser must jointly elect in prescribed form. If this election is made, the purchaser will assume the relevant tax history of the vendor so that recovery taxes under Part XII.7 can apply appropriately at a later time.

• The purchaser is deemed to have made the qualifying CCUS expenditures that were incurred by the vendor at the same time as were incurred by the vendor.
• The provisions of the ITA that applied to the vendor in respect of the CCUS project properties that are relevant to the application of the ITA in respect of the CCUS project properties are deemed to have applied to the purchaser. In particular, the purchaser is deemed to have claimed the CCUS tax credits (determined under section 127.44 of the ITA) that were deducted by the vendor against its taxes payable in respect of the expenditures incurred for the CCUS project properties before the disposition of the CCUS project properties by the vendor.
• Any project plans that were prepared or filed by the vendor in respect of the CCUS project properties are deemed to have been filed by the purchaser.
• The purchaser is or will be liable for amounts in respect of the CCUS project properties for which the vendor would be liable under Part XII.7 regarding actions, transactions or events that occur after the dispositions of the CCUS project properties, as if the vendor had undertaken them or otherwise participated in them.

Partnerships

If at any time a member of a partnership was allocated a CCUS ITC, then Part XII.7 amounts are to be determined as if the partnership were a taxable Canadian corporation (with a tax year rather than a fiscal period) and as if the deemed corporation had claimed all the CCUS tax credits that were claimed by any member of the partnership.

The amount of Part XII.7 tax determined in respect of the partnership must be allocated to the partnership members and added to their tax payable. All members of the partnership are liable to pay a share of any tax payable under Part XII.7 unless there was an election by a member to pay the entire amount of the tax. 

If your claim needs a review

Some claims may be selected for audit.

If your claim is selected for an audit, it is because the CRA requires further information about the project(s) or expenditures being claimed.

In some cases, the CRA may request an on-site or virtual meeting to ask further questions or clarify details. You may be asked to provide supporting documents to verify expenses and confirm that you have met the various requirements, including the labour requirements.

After the CRA finishes reviewing the documents provided, the CRA will provide you with a written summary of the audit findings.

If the CRA finds that no changes need to be made to the claim, then no further action is required and the audit will be closed.

If the CRA determines that changes need to be made to the claim, you will have 30 days to respond to the written summary of the audit findings before the changes are confirmed, and your return is assessed or reassessed.

If you disagree with our decision

If you disagree with the CRA's final decision, you still have some recourse options.

For information about filing an objection, refer to: Resolving disputes (Open in a new tab)

For information about the objection and appeals processes, refer to: Objections and appeal rights under the Income Tax Act

Effect of the credit in the subsequent tax year

The amount of the credit you received in a year (as a refund or a deduction against tax otherwise payable) in respect of a particular property must be applied to reduce the capital cost of the property in the subsequent tax year.