For incentive claimants: Avoiding the reduced tax credit rate for Clean Economy ITCs

If you are an employee, you may be looking for: What you need to know about labour requirements for Clean Economy ITCs.

Where applicable, you, as the incentive claimant (the claimant), must elect to meet the labour requirements to claim the Clean Economy ITC at the regular tax credit rate.

The 2 main aspects of the labour requirements are the prevailing wage requirements and the apprenticeship requirements.

On this page

• How the labour requirements affect the credit rate
• When the labour requirements apply
• Prevailing wage requirements
• Apprenticeship requirements
• Consequences of failing to meet the labour requirements
• Contact us

How the labour requirements affect the credit rate

If you elect to meet the labour requirements, you can claim the Clean Economy ITC at the regular tax credit rate.

If you do not elect to meet the labour requirements, you will be eligible to claim the Clean Economy ITC at a reduced tax credit rate, which is 10 percentage points less than the regular tax credit rate. For example, if the regular tax credit rate is 30%, the reduced tax credit rate is 20%.

The regular tax credit rate varies for each Clean Economy ITC (specified tax credit) that has labour requirements:

• Carbon Capture, Utilization, and Storage (CCUS) ITC rates
• Clean Technology ITC rates
• Clean Hydrogen ITC rates

When the labour requirements apply

• The labour requirements apply when any preparation or installation of the specified property is undertaken on or after November 28, 2023. 
• Example: On or after November 28, 2023

  Corporation XYZ Ltd. acquires a specified property on May 1, 2023, and begins the preparation and installation of the specified property on that day. They finish the preparation and installation of the specified property on December 15, 2023. Labour requirements apply and Corporation XYZ Ltd. must elect to meet the labour requirements to claim the ITC at the regular rate. Corporation XYZ Ltd. must meet the labour requirements for the preparation and installation of the specified property that is undertaken from November 28, 2023 through December 15, 2023.

• The labour requirements do not apply:
  • When all the preparation and installation of the specified property is completed before November 28, 2023
    
    Example: Before November 28, 2023

    Corporation XYZ Ltd. acquires a specified property on May 1, 2023, and completes all the preparation and installation of the specified property on May 20, 2023. Labour requirements do not apply, and Corporation XYZ Ltd. does not need to elect to claim the ITC at the regular tax credit rate.

  • If you are claiming a specified tax credit for the acquisition of off-road zero-emission vehicles, or the acquisition and installation of low carbon heat equipment

To claim the ITC at the regular tax credit rate, where labour requirements apply, you must do both of the following when filing your ITC claim:

• Elect to meet both the prevailing wage requirements and the apprenticeship requirements for each installation tax year

 

• Attest that you met both the prevailing wage requirements and the apprenticeship requirements for each installation tax year and for each designated work site

You must keep documents to show that you met both the prevailing wage requirements and the apprenticeship requirements.

Prevailing wage requirements

1. Paying covered workers the prevailing wages

   Each covered worker at a designated work site of a claimant must be paid for their work on the preparation or installation of specified property in accordance with the eligible collective agreement that applies to the worker.

   If covered workers are not subject to an eligible collective agreement

   In this case, you can meet the requirement to pay covered workers the prevailing wages as long as you pay the covered workers for their work on the preparation or installation of a specified property, an amount that is at least equal to a combination of wages (without taking into account overtime) and benefits as specified in the eligible collective agreement that most closely aligns with the covered worker's experience level, tasks, and location.

   You must calculate the amount the worker earns on a per hour or similar basis.

   Note: Covered workers may be employed by the claimant, or employed by another person or partnership (such as a contractor or their subcontractor). Regardless of who employs the covered worker, the claimant is responsible for ensuring that each covered worker at the designated work site is paid the required prevailing wage.

   If the eligible collective agreement used has expired and has not yet been replaced with an updated agreement (for example, negotiations are ongoing), you must adjust the wage and benefit amounts in the agreement by the average Consumer Price Index for each calendar year that begins after it expired.

   Who are your covered workers

   A covered worker is an individual who meets all of the following requirements:

   • Is engaged in the preparation or installation of a specified property at a designated work site as either of the following:
     • An employee of the claimant
     • An employee of a contractor or subcontractor hired by the claimant who is claiming a specified tax credit
   • Carries out work that is primarily manual or physical in nature at the designated work site 
   • Is not an administrative, clerical or executive employee
   • Is not a business visitor to Canada (What is a business visitor?)
   What is an eligible collective agreement for provinces and territories other than Quebec

   For provinces and territories other than Quebec, an eligible collective agreement is :

   • The most recent multi-employer collective bargaining agreement negotiated with a trade union affiliated with Canada’s Building Trades Unions (CBTU) for a given trade in a region or province
   • A project labour agreement:
     • Established with a trade union under the applicable provincial law
     • That covers the work associated with the investments eligible for specified tax credits
     • That provides for covered workers in a given trade wages and benefits that are at least equal to the regular wages (without taking into account overtime) and benefits that covered workers receive from the relevant multi-employer collective agreement negotiated with a trade union affiliated with CBTU

   You can find the most recent multi-employer collective bargaining agreements through sources including the CBTU or trade unions that are affiliated with the CBTU.

   Refer to: Canada’s Building Trades Unions

   What is an eligible collective agreement for Quebec

   In Quebec, an eligible collective agreement is a collective agreement negotiated in accordance with applicable provincial law.

   Refer to: Collective agreements for Quebec

   Covered workers employed by the Claimant

   As the claimant, you are responsible for making sure that you pay the prevailing wage to each covered worker that is your employee at your designated work site.

   To do this, you must:

   • Pay each covered worker for their work on the preparation or installation of specified property according to the eligible collective agreement that applies to the covered worker
     • If no collective agreement applies, pay each covered worker for their work on preparation and installation of specified property in an amount at least equal to a combination of regular wages (without taking into account overtime) and benefits. You can find these wages and benefits in the eligible collective agreement that most closely aligns with the covered worker’s experience level, tasks, and location
   Covered workers employed by another person or partnership

   As the claimant, you are responsible for making sure that each covered worker that is at your designated work site and that another person or partnership (such as a contractor or subcontractor) employs is paid the prevailing wage.

   To make sure you meet the prevailing wage requirements in these circumstances, you can:

   • Include clauses in contracts for contractors that require them and their subcontractors to meet the prevailing wage requirements
   • Include clauses in contracts for contractors and their subcontractors to outline the consequences of failing to meet the prevailing wage requirements
   • Obtain a list of the eligible collective agreements that the contractors or subcontractors used to determine wages and benefits with reasons for the choices made
   • Obtain records from contractors and subcontractors to make sure that covered workers are paid prevailing wages, including:
     • Worker names, employee numbers, job titles, classifications, levels, Red Seal classification
     • Hourly wages and benefits
     • Hours and days worked on the preparation and installation of the specified property at your designated work sites

2. Communicating the prevailing wage requirements

   You must communicate to covered workers:

   • That a designated work site is subject to prevailing wage requirements for covered workers
   • How they can report to the CRA any failures to be paid prevailing wages

   You must communicate this information:

   • By electronic means, or in a notice or poster at the designated work sites
   • In a manner that is readily visible to and accessible by covered workers
   • In plain language explaining what it means for workers

3. Keeping records and documents

   You must keep records to show that you are meeting prevailing wage requirements for all covered workers at your designated work site, whether you, your contractors, or their subcontractors employ them.

   To support that each covered worker gets the prevailing wage, records should include:

   • The selected eligible collective agreements and reason(s) for their selection
   • Details on all of the covered workers you employ, including:
     • Worker names, employee numbers, job titles, classifications, and levels 
     • Hourly wages and benefits
     • Hours and days worked on the preparation and installation of the specified property at your designated work sites
   • Details on all of the covered workers your contractor or their subcontractor employ, including:
     • Worker names, employee numbers, job titles, classifications, and levels 
     • Hourly wages and benefits
     • Hours and days worked on the preparation and installation of the specified property at your designated work sites
   • Documents to show you paid the prevailing wages to covered workers that were your own employees 
   • Documents of the steps you took to make sure that covered workers employed by another person or partnership were paid the prevailing wages, including:
     • Copies of contracts between you and your contractor
     • Copies of invoices from your contractors
   • Documents on how covered workers were informed that the designated work site was subject to the prevailing wage requirements 
   • Any other information to show that you met the prevailing wage requirements 

4. Making elections and attestations for the prevailing wage requirements

   You must complete the election and attestation section on the prescribed form for the ITC you are claiming.

   If the form for the ITC you are claiming is not yet available, you must include a statement that you elect to meet the prevailing wage requirements and the apprenticeship requirements. You also need to add an attestation to the information you include with your return when claiming the ITC.

   Refer to: When the labour requirements apply

   There are consequences if you fail to meet the prevailing wage requirements.

   Refer to: Consequences of failing to meet the labour requirements

Apprenticeship requirements

1. Meeting the apprenticeship requirements

   Generally, you would meet the apprenticeship requirements if you made reasonable efforts to make sure that apprentices who were registered in a Red Seal trade worked at least 10% of the total hours that Red Seal workers worked during the year at your designated work site on the preparation or installation of specified property.

   You do not need to show that you made reasonable efforts if you either:

   • Met or exceeded the 10% threshold

   • Met the lower percentage that may apply if an applicable law or collective agreement restricts the percentage of apprentices below 10%

   Note: Apprentices may be employed by the claimant, or employed by another person or partnership (such as a contractor or their subcontractor). Regardless of who employs the apprentice, the claimant is responsible for ensuring that apprenticeship requirements are met.

   What is a Red Seal trade

   If a province or territory uses the Red Seal Program for a particular trade, it means the relevant Red Seal trade managed by the Canadian Council of Directors of Apprenticeship.

   If a province or territory does not use the Red Seal Program for a particular trade, it means an equivalent provincially registered trade.

   Refer to: Ellis Chart and Welcome to Red Seal

   What is a Red Seal worker

   A Red Seal worker is a covered worker, whose duties are, or are equivalent to, those duties normally performed by workers in a Red Seal trade.

   Make reasonable efforts to meet apprenticeship requirements

   If you have made efforts to meet the apprenticeship requirements, but apprentices registered in a Red Seal trade did not work at least 10% of the total hours worked by Red Seal workers (or the relevant lower percentage if an applicable law or collective agreement restricts the percentage below 10%), your efforts may be deemed to be reasonable efforts to meet the hours of labour requirement.

   To rely on this “deeming rule,” you must do all of the following:

   1. At least every 4 months you must do all of the following:

      • Advertise

        Post a bona fide job advertisement seeking sufficient apprentices to perform those hours of labour at the designated work site. The job advertisement must:

        • Include a commitment to help apprentices participate in a Red Seal trade program and a statement that the job opportunity is open to both existing employees and new hires
        • Be open and readily accessible on the Government of Canada’s Job Bank website and at least 2 other websites either on a continuous basis throughout the year or for at least 30 days from the time of posting

      • Communicate

        Communicate with a trade union and at least one secondary school or post-secondary educational institution for the purpose of facilitating the hiring of the apprentice positions described in the job advertisement. If the designated work site is:

        • Outside of Quebec, the trade union must be affiliated with Canada’s Building Trades Unions (CBTU)
        • In Quebec, the trade union must be recognized under applicable provincial law

      • Confirm

        Receive a written confirmation from the trade union that it provided as many apprentices as reasonably possible to work at the designated work site during the installation year. This no longer applies if the trade union fails to respond within 5 business days of your request.

   2. Consider

      Review and duly consider all applications you get in response to the advertisement for apprenticeship opportunities that you are directly offering. Take reasonable steps to make sure that other persons or partnerships completing work at your designated work site (such as a contractor or subcontractor) also review and duly consider applications for apprenticeship opportunities that they receive.

   3. Attest

      When you file your ITC claim, if you are relying on the deeming rule, you must attest that you have done all of the above. This attestation is separate from the attestation for apprenticeship requirements. Refer to: Making elections and attestations for the apprenticeship requirements.

      You can show that you have met the reasonable efforts requirement without relying on the “deeming rule.” You must take some variation of advertising, communicating, confirming, and considering efforts that better reflect your specific circumstances (such as, shorter time periods for equipment installation). However, if you choose to rely on this “deeming rule,” all of the above requirements apply.

   If the applicable law or collective agreement restricts the percentage of apprentices below 10%

   If the applicable law or collective agreement restricts the percentage of apprentices below 10%, you must make reasonable efforts to make sure that the highest possible percentage has been achieved, without breaking the other applicable rules.

   Example: Restrictions on the percentage of apprentices

   A claimant needed 11 electricians on one day to finish installation of specified property. Under the applicable collective agreement, at the most, there can only be 1 registered apprentice for every 10 journeypersons on site.

   If they all work the same number of hours in the day on the preparation and installation of the specified property, then the highest possible percentage of hours performed by registered apprentices would be 9%.

   The claimant would still be compliant with the apprenticeship requirements because the collective agreement limits the number of registered apprentices.

2. Keeping records and documents

   You must keep records to show that you met the apprenticeship requirements for apprentices and Red Seal workers at your designated work site, whether you, your contractors, or their subcontractors employ them.

   To support that you have met the apprenticeship requirements, records should include:

   • Details on all registered apprentices and Red Seal workers, including:
     • Worker names, employee numbers, job titles, classifications, levels, Red Seal classifications
     • Hourly wages and benefits
     • Hours and days worked on the preparation and installation of the specified property at your designated work sites
   • Documents supporting your calculation of the total hours worked by Red Seal workers during the year and of the hours worked by apprentices registered in a Red Seal trade 
   • If applicable, details of the applicable law or collective agreement that restricted the percentage of registered apprentices to below 10%
   • If applicable, documents supporting the reasonable efforts that you, your contractor, or their subcontractors took to meet the apprenticeship requirements, such as:
     • Copies of archived job advertisements from the Government of Canada’s Job Bank website and at least 2 other websites with the opening and closing dates of the job advertisement
     • Copies of communications you had with trade unions to help fill the apprentice positions described in the job advertisement
     • Written confirmation from the trade union that it provided as many apprentices as reasonably possible for work at the designated work sites
     • Documents showing that you reviewed and considered all of the applications you received in response to the advertisement for apprenticeship opportunities that you directly offered 
     • Documents showing that you took reasonable steps to make sure that other persons or partnerships completing work at your designated work site (such as a contractor or subcontractor) also reviewed and duly considered applications for apprenticeship opportunities that they received 
   • If you are relying on the “deeming rule,” documents showing that you took the necessary actions to meet all the required conditions of the “deeming rule” 
   • Any other information showing that you met the apprenticeship requirements

3. Making elections and attestations for the apprenticeship requirements

   You must complete the election and attestation section on the prescribed form for the ITC you are claiming.

   If the form for the ITC you are claiming is not yet available, you must include a statement that you elect to meet the prevailing wage requirements and the apprenticeship requirements. You also need to add an attestation to the information you include with your return when claiming the ITC.

   Refer to: When the labour requirements apply

   There are consequences if you fail to meet the apprenticeship requirements.

   Refer to: Consequences of failing to meet the labour requirements

Consequences of failing to meet the labour requirements

There are consequences for failing to meet the labour requirements if you elected and attested to meet the labour requirements, and claimed the ITC at the regular rate.

Addition to tax for failing to pay prevailing wages

You will be liable to pay a dollar amount for each day in the installation tax year for each covered worker who was not paid the prevailing wage. The dollar amount is $20 for 2023 and is adjusted for inflation for each calendar year after 2023.

Corrective measures for failing to pay prevailing wages

If you receive a notification from the CRA, you may also take corrective measures by ensuring each covered worker is paid a top-up amount. 

This amount is the difference between the prevailing wages that the covered worker should have been paid and the amount that the covered worker was actually paid for the year, plus interest.

You have one year after getting the notification (or a longer period as indicated in the notification) to cause each covered worker to be paid the top-up amount.

The top-up amount that a covered worker gets is part of the worker’s salary and wages for the year in which they received the amount. The payor can deduct that amount when computing income for the year in which they paid it. The top-up amount does not qualify for any specified tax credit.

For each covered worker that is not paid the top-up amount by the due date specified in the notification from the CRA, you will be liable to pay a penalty of 120% of the top-up amount that the covered worker should have been paid.

Addition to tax for apprenticeship hours not met

You will be liable to pay a dollar amount per hour for each hour where you did not meet the apprenticeship hours requirement. You must multiply this amount by the difference between:

• The total hours of labour that apprentices registered in a Red Seal trade should have performed, and
• The sum of:
  • The total hours of labour that apprentices registered in a Red Seal trade actually performed
  • Any other hours of labour for which you met the apprenticeship requirements

The dollar amount is $50 for 2023 and is adjusted for inflation in each calendar year after 2023.

Gross negligence penalty

Where failure to meet prevailing wage or apprenticeship requirements is intentional or in circumstances amounting to gross negligence, you will be:

• Disentitled to the regular tax credit rate
• Entitled only to the reduced tax credit rate
• Liable to pay a penalty equal to 50% of the difference between the amount of the ITC you claimed at the regular tax credit rate and the amount that you would have been entitled to under the reduced rate

In circumstances amounting to gross negligence, the addition to tax and corrective measures do not apply.

If you have not been grossly negligent, you will still be able to claim the ITC at the regular tax credit rate. However, you will be liable to pay the addition to tax for the prevailing wages that you did not pay. You may also be liable for the top-up amount, and you will be liable for the penalty if the top-up amount is not paid by the due date. You will also be liable for the addition to tax for apprenticeship hours not met.

Contact us

Call the CRA if you have questions about the labour requirements.

Fraser Valley and Interior Tax Services Office

Telephone number

1-855-825-3262 (opens up phone application)1-855-825-3262

Hours

CRA’s Business Enquiries line hours

Day	Hours
Monday to Friday	8 am to 4 pm (PT)
Saturday and Sunday	Closed
Closed on public holidays

By mail

Canada Revenue Agency
Clean Economy Tax Incentives Division
9755 King George Blvd
Surrey BC V3T 5E1

By email

cleaneconomycpb-economiepropredgpo@cra-arc.gc.ca

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