After you claim
If your claim is accepted as filed, you will be notified on your notice of assessment or reassessment.
There are additional reporting responsibilities if you claimed the Clean Electricity ITC for a qualified natural gas energy system.
If a recapture of your credit is required
You will have to calculate a recapture of the Clean Electricity ITC if you did one of the following:
You acquired a clean electricity property (other than qualified natural gas energy equipment) in the year or any of the preceding 10 calendar years
Or
You acquired a clean electricity property that is qualified natural gas energy equipment in the year or any of the preceding 20 calendar years
You became entitled to a Clean Electricity ITC for the capital cost or a portion of the capital cost of the property
The clean electricity property (or another property that incorporates the clean electricity property) was:
- disposed of
- converted to an ineligible use
- exported from Canada
The recapture amount is calculated based on the proportion of the value of the property that was used before its conversion to an ineligible use, its export, or its disposition.
When recapture applies to a clean electricity property
When recapture applies to a clean electricity property you must add to your tax otherwise payable for the year, the amount determined by the formula (A – B) x (C + D), where:
- variable A is the amount of your Clean Electricity ITC for the particular property
- variable B is the portion of any recovery tax you previously paid for the property
- variable C is the amount, not exceeding the original capital cost of the property, equal to:
- the proceeds of disposition of the property (if the property is disposed of to an arm’s length person), or
- the fair market value of the property (in any other case)
- variable D is the capital cost of the property on which the Clean Electricity ITC was deducted
Both taxpayers and partnerships must report recapture events to the CRA in the prescribed form and manner by the taxpayer’s filing-due date for the year in which the recapture event occurs or, in the case of a partnership, on or before the day when a return is required by section 229 of the Income Tax Regulations to be filed for the fiscal period of the partnership in which the recapture event occurs.
Recapture does not apply on the disposition of a property if the property was previously converted to an ineligible use or exported from Canada. This ensures that recapture is not triggered twice for the same property.
This recapture amount will not exceed the Clean Electricity ITC amount deducted on particular property.
Certain related party transfers
You may defer the recapture if you dispose of clean electricity property to a related qualifying entity. The property must continue to be clean electricity property to the purchaser. The requirement that the property must not have been previously used is removed.
Both taxpayers and partnerships must report this to the CRA in the prescribed form and manner by the taxpayer’s filing-due date for the year in which the transfer occurs or, in the case of a partnership, on or before the day when a return is required by section 229 of the Income Tax Regulations to be filed for the fiscal period of the partnership in which the transfer occurs.
Generally the transferee is considered to have claimed the credits the transferor received for the property. This ensures that the transferee is subject to recapture if it changes the use of the property to an ineligible use, disposes of it, or exports it.
Until the prescribed form to report the related-party transfer is available, include the following information in a letter with your return:
- Capital cost of the property
- Capital cost allowance class
- Clean electricity property description
- Date the clean electricity property became available for use
- Date of the transfer
- Name and business number of the related-party transferee
- Amount of the Clean Electricity ITC received by the related-party transferor
If your claim needs a review
Some claims may be selected for further review.
If your claim requires a review, it is because the CRA requires further information about the projects 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 if you have met the various requirements, including the labour requirements.
After the CRA finishes reviewing the documents you provide, the CRA will provide you with a written summary of the review findings.
If the CRA finds that no changes need to be made to the claim, then no further action is required and the review 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 review findings before the review 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
For information about the objection and appeals processes, refer to Objections and appeal rights under the Income Tax Act.