What property qualifies
In order to qualify, in addition to other limitations, clean technology property must:
- Be equipment that is situated in and intended for use exclusively in Canada
- Not have been previously used or acquired for use or lease, for any purpose before acquisition by the taxpayer
If you lease the clean technology property to another person or partnership
If you lease the property to another person or partnership, additional leasing requirements must be met.
The property must be both:
- Leased to a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust or a partnership where all the members are taxable Canadian corporations
- Leased in the ordinary course of carrying on a business in Canada by the taxpayer whose principal
business is any or a combination of the following:
- Selling or servicing property of that type
- Leasing property
- Lending money
- Purchasing conditional sales contracts, accounts receivable, bills of sale or chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services
Clean technology property
The Clean Technology ITC is available for investments in the following types of clean technology property:
- Equipment used to generate electricity from solar, wind (excluding a test wind turbine ), and water energy
- Fixed location electrical energy storage property or pumped hydroelectric energy storage property, excluding equipment that uses any fossil fuel in operation
- Active solar heating equipment, air-source heat pumps and ground-source heat pumps
- Non-road zero-emission vehicles and related charging and refueling equipment, including the use of hydrogen, that is used primarily for such vehicles
- Equipment used exclusively for the purpose of generating electrical energy or heat energy (or a combination of both), solely from geothermal energy, unless it is part of a system that extracts fossil fuels for sale
- Concentrated solar energy equipment
- Small nuclear energy property
- Waste biomass electricity generation equipment or waste biomass heat generation equipment that is acquired after November 20, 2023
- Property that is incorporated into another clean technology property as part of a refurbishment of the other property, where, upon completion, the other property continues to be clean technology property
Ineligible clean technology property due to environmental non-compliance
If you are substantially non-compliant with any environmental laws, by-laws, or regulations that apply to the property when it became available for use, the property cannot be a clean technology property. This means that the property is not eligible for the Clean Technology ITC.
Technical guidance for clean technology property
Technical guidance for clean technology property is available from Natural Resources Canada (NRCan).
Additional tax incentives
Additional tax incentives are available for clean technology property that is also described in Class 43.1 and 43.2. These tax incentives could include Accelerated capital cost allowance.
Refer to: Tax incentives for Class 43.1 and 43.2 property
Determination of capital cost
The capital cost of property generally means your cost of acquiring the property and includes:
- Legal, accounting, engineering or other fees incurred to acquire the property
- Site preparation, delivery, installation, testing, or other costs incurred to put the property into service
- In the case of a property that you manufacture for your own use, material, labour and overhead costs reasonably attributable to the property, but not any profit which might have been earned had the asset been sold
The capital cost of clean technology property must be reduced by:
An amount of any government assistance or non-government assistance you received in or before the tax year in which the property became available for use
An amount you are entitled to or can reasonably be expected to receive and that would be government assistance or non-government assistance if you received it in the year
Amounts of assistance that are repaid in a tax year or are no longer expected to be received in the year may be added to the capital cost of clean technology property for determining the Clean Technology ITC for the year.
The capital cost of clean technology property does not include:
- Expenditures incurred for preliminary work activity, meaning work that is preliminary to the acquisition, construction, fabrication, or installation of clean technology property, including:
- Obtaining a right of access or right of way to a project site or obtaining permits or regulatory approvals (including conducting environmental assessments)
- Performing front-end design or engineering work (including front-end engineering design studies) or process engineering work for the development of the project, including:
- Collecting and analyzing of site data
- Calculating energy, mass, water or air balances
- Simulating and analyzing the performance and cost of process design options
- Selecting the optimum process design
- Conducting feasibility studies or prefeasibility studies
- Clearing or excavating land, except excavation directly related to the installation of clean technology property
- Constructing a temporary access road to the project site
- Drilling of a well
If any part of the capital cost of a taxpayer’s clean technology property is unpaid on the day that is 180 days after the end of the tax year of a taxpayer in which the property became available for use, that part of the cost is added to the capital cost of the property at the time it is paid.