Clean Economy Investment Tax Credits

There are several types of Clean Economy Tax Credits, including: 

● Clean Technology Investment Tax Credit: Up to 30% refundable tax credit for investments in eligible clean technology projects. 

● Clean Hydrogen Investment Tax Credit: Up to 40% refundable tax credit for investments in clean hydrogen production. 

● The Clean Technology Manufacturing(CTM):Up to 30% for property available for use from 2024 to 2031, reducing over time.

● Carbon Capture, Utilization, and Storage (CCUS) Tax Credit: Up to 60% refundable tax credit for qualified carbon capture expenditures. 

The purpose of the Clean Technology Manufacturing ITC (Investment Tax Credit) is to encourage investment in capital for clean technology manufacturing (CTM) in Canada. This tax credit is available to taxable Canadian corporations, including those in partnerships investing in eligible property.
 
Eligibility and Rates: 
The Clean Technology Manufacturing ITC applies to eligible property acquired and available for use from 2024 to 2034: 
● 30% tax credit for property available for use from 2024 to 2031. 
● 20% tax credit for property available for use in 2032. 
● 10% tax credit for property available for use in 2033. 
● 5% tax credit for property available for use in 2034. 
Labour requirements do not apply to this ITC. 

Eligible Property: 
The ITC is available for “CTM property” used for a “CTM use”. 

CTM property includes: 
● Machinery and equipment for manufacturing or processing (e.g., industrial robots for electric vehicle manufacturing, vats for processing cathode active materials). 
● Tangible property attached to buildings/structures used for manufacturing/processing (e.g., ventilation systems, specialized electrical wiring for solar panel manufacturing equipment). 
● Equipment for mineral extraction and processing (e.g., rock crushers for copper ore, kilns for calcining nickel ore). 
● Specialized tooling (e.g., moulds for casting copper ingots, cutting parts for solar cells). 
● Non-road vehicles and automotive equipment (e.g., electric vehicles for factories, hydrogen-powered vehicles for mining). 

To qualify as CTM property: 
● The property must be new, situated in Canada, and intended for exclusive use in Canada. 
● If leased, the lessee must be a taxable Canadian corporation or a partnership of such corporations, and the equipment must be leased in the ordinary course of business in Canada. 

CTM Use: 
CTM use involves activities related to manufacturing or processing specified types of property, including: 
● Renewable energy equipment (solar, wind, water, geothermal). 
● Electrical storage equipment for grid-scale storage or ancillary services. 
● Air-source and ground-source heat pump systems. 
● Zero-emission vehicles and related charging/hydrogen dispensing equipment. 
● Equipment for hydrogen production by water electrolysis. 
● Components of the above properties. 
● Nuclear energy equipment, nuclear fuels, heavy water, and nuclear fuel rods. 

The CCUS ITC (Carbon Capture, Utilization, and Storage Investment Tax Credit) aims to encourage investment in developing and operating carbon capture, transportation, utilization, and storage capacity in Canada. This tax credit is available to taxable Canadian corporations that invest in eligible property. 

The CCUS ITC offers a refundable tax credit for expenditures incurred from January 1, 2022, to December 31, 2030: 
● 60% for Qualified Carbon Capture Expenditures for capturing carbon from ambient air. 
● 50% for Qualified Carbon Capture Expenditures for capturing carbon from other sources. 
● 37.5% for Qualified Carbon Transportation, Storage, and Use Expenditures. 

Qualified CCUS Project: 
● A Qualified CCUS Project must support a CCUS Process, including capturing carbon dioxide that would otherwise be released into the atmosphere or directly from ambient air, transporting captured carbon, and storing or using captured carbon. 
● It must meet several conditions, such as having a detailed project plan, expected capture of carbon dioxide for at least 20 years, an initial project evaluation by the Minister of Natural Resources, and a projected eligible use percentage of at least 10% annually. 
Eligible Property: 
● Equipment solely for capturing carbon dioxide, not used for hydrogen production, natural gas processing, or acid gas injection. 
● Equipment for preparing or compressing captured carbon for transportation. 
● Equipment generating or distributing energy supporting the CCUS Project, excluding those emitting uncaptured CO2. 
● Transmission equipment for energy supporting the CCUS Project. 
● Water treatment equipment supporting the CCUS Project. 
● Certain dual-use equipment, with only a portion of the cost qualifying. 

Qualified Expenditures: 
● Qualified Carbon Capture Expenditures include costs for capturing carbon. 
● Qualified Carbon Transportation Expenditures cover equipment for transporting captured carbon in Canada. 
● Qualified Carbon Storage Expenditures cover equipment for storing captured carbon in geological formations in Canada. 
● Qualified Carbon Use Expenditures include equipment for using captured carbon in industrial production, specifically for producing concrete. 

The purpose of the Clean Hydrogen ITC (Investment Tax Credit) is to encourage investment in the production of clean hydrogen and clean ammonia in Canada. This tax credit is available to taxable Canadian corporations, including those in partnerships investing in eligible property.
 
Eligibility and Rates:
● For “eligible clean hydrogen property” (excluding “clean ammonia equipment”) acquired and available for use from March 28, 2023, to 2033, the tax credit rate varies based on the carbon intensity of the hydrogen produced: 
_{●40% 
●25% 
● 15%} 
●For clean ammonia equipment used in a clean hydrogen project before 2034, the tax credit rate is 15%. 
●For property acquired and available for use in 2034, these rates are reduced by half. 
●No tax credit is available for property available for use after 2034. 
●Taxpayers not meeting the labour requirements will have their ITC rate reduced by 10 percentage points. 

Eligible Property: 
● Equipment for generating electricity from solar, wind, and water energy. 
● Stationary electricity storage equipment without fossil fuel use. 
● Active solar heating equipment, air-source, and ground-source heat pumps. 
● Non-road zero-emission vehicles and related charging/refueling equipment. 
● Equipment for generating electricity or heat from geothermal energy, excluding systems co-producing fossil fuels. 
● Concentrated solar energy equipment. 
● Small modular nuclear reactors. 

The purpose of the Clean Technology ITC is to encourage investment in the adoption and operation of clean technology property in Canada. This tax credit is available to taxable Canadian corporations and mutual fund trusts that are real estate investment trusts (REITs), including those that are members of a partnership investing in eligible property.

● The clean technology ITC offers a 30% refundable tax credit for eligible property acquired and available for use from March 28, 2023, to December 31, 2033. 
● For property available for use in 2034, the credit rate is reduced to 15%. 
● No tax credit is available for property acquired after 2034.

Labour Requirements: 
To qualify for the full ITC rates, taxpayers must meet labour requirements, including: To qualify for the full ITC rates, taxpayers must meet labour requirements, including: 
● Paying “covered workers” according to a collective agreement or equivalent (prevailing wage requirements). 
● Ensuring at least 10% of work by Red Seal trades is performed by registered apprentices (apprenticeship requirements). 

If these requirements are not met, the ITC rate is reduced by 10 percentage points. 

Eligible Property: 
● Equipment for generating electricity from solar, wind, and water energy. 
● Stationary electricity storage equipment without fossil fuel use. 
● Active solar heating equipment, air-source, and ground-source heat pumps. 
● Non-road zero-emission vehicles and related charging/refueling equipment. 
● Equipment for generating electricity or heat from geothermal energy, excluding systems co-producing fossil fuels. 
● Concentrated solar energy equipment. 
● Small modular nuclear reactors. 

To qualify, businesses must meet specific criteria:
●Type of Business:
Taxable Canadian corporation, including partnerships and mutual fund trusts.
●Project Eligibility:
Investments in clean technology: renewable energy, clean hydrogen, carbon capture, or clean technology manufacturing.
●Geographical Location:
Property must be in Canada, new, and not previously used.
●Labour Requirements:
Must meet specific labour criteria, including paying prevailing wages and employing Red Seal apprentices. Non-compliance can reduce credit rates.
●Documentation and Compliance:
Provide detailed documentation: project plans, financial records, and regulatory compliance proof.

Navigating these criteria can be complex. Leyton specializes in helping businesses like yours determine eligibility and maximize the benefits of the Clean Economy Investment Tax Credit. Contact us to ensure your business qualifies and to receive expert guidance throughout the application process.

Applying for Clean Economy Investment Tax Credits involves several steps:
●Determine Eligibility: Ensure your business and project meet the eligibility criteria.
●Gather Documentation: Collect all necessary documentation, including project plans, financial records, and proof of compliance.
●Submit Application: Complete and submit the application forms to the CRA or the NRCan.
●Consult Experts: Contact our tax credit experts to maximize your claim and ensure full compliance. We’re here to guide you through every step of the process.