Chapter History S3-F8-C2, Tax Incentives for Clean Energy Equipment

Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in a chapter of an income tax folio, including amendments to the information originally contained in an interpretation bulletin that has been cancelled and replaced with a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update August 2, 2019

The Summary has been revised to add the second bullet referring to the first‑year enhanced CCA.

¶2.4.1 has been added to describe the operation of the first‑year enhanced CCA. The measure was enacted by Bill C-97, Budget Implementation Act, 2019, No. 1, S.C. 2019, c. 29. The new rules provide for a temporary enhanced first-year CCA rate in respect of a wide range of depreciable properties, including a temporary first-year CCA rate of 100% in respect of eligible clean energy equipment.

¶2.17 has been revised to remove the word “proposed” in reference to subparagraph (d)(xvii) of Class 43.1.

Example 1 has been revised to remove the first list item, which is no longer relevant because it describes a situation under an expired provincial program. The item formerly read as follows: “A homeowner acquires and installs a solar photovoltaic panel on the roof of his principal residence. He enters into an agreement with the provincial power authority to sell all of the electricity generated from the solar panel. The solar panel meets the requirements under subparagraph (d)(vi) of Class 43.1. However, because the taxpayer uses the solar panel primarily to generate and sell the energy produced the solar panel is a specified energy property. CCA deductions are limited in accordance with the specified energy property rules.”

¶2.21.1 to 2.21.3 have been added under a new heading, Accelerated Investment Incentive – First-year enhanced CCA. These new paragraphs reflect legislative changes made by Bill C‑97, Budget Implementation Act, 2019, No. 1, S.C. 2019, c. 29. These changes provide for a temporary enhanced first-year CCA rate in respect of a wide range of depreciable properties, including a temporary first‑year capital cost allowance rate of 100% in respect of eligible clean energy equipment.

¶2.27 has been revised to refer to water-current, tidal or wave energy instead of referring to wave or tidal energy.

The Table of eligible properties at the end of the Chapter has been revised to change the description of two qualifying properties to correspond to the descriptions used in the revised Technical Guide to Class 43.1 and 43.2. Specifically:

• “Geothermal electrical or heat generation equipment” is now referred to as Geothermal energy equipment; and
• “Kinetic energy of flowing water or wave or tidal energy equipment” is now referred to as Water-current or wave energy equipment.

Update February 27, 2019

General revisions have been made to the Chapter to improve readability.

Revisions have been made to ¶2.7, ¶2.20 and ¶ 2.27, and ¶2.37.1 to ¶2.37.3 have been added to include changes announced with Budgets 2017 and 2018. In particular:

1. Budget 2018 proposed to extend the accelerated CCA for assets acquired before 2025 (the measure was otherwise scheduled to expire at the end of 2019); and
2. Budget 2017 introduced measures for certain costs incurred as part of an eligible geothermal project, such as:
   1. eligible geothermal energy equipment under Classes 43.1 and 43.2 is expanded to include geothermal equipment that is used primarily for the purpose of generating heat or a combination of heat and electricity;
   2. geothermal heating is made an eligible thermal energy source for use in a district energy system; and
   3. expenses incurred for the purpose of determining the extent and quality of a geothermal resource and the cost of all geothermal drilling (e.g., including geothermal production wells), for both electricity and heating projects, will qualify as a Canadian renewable and conservation expense.