Series 3: Property Investments and Savings Plans

Folio 8: Resource Properties

Chapter 2: Tax Incentives for Clean Energy Equipment

Summary

The Income Tax Act and Income Tax Regulations include the following measures to encourage Canadian taxpayers to make investments in qualifying clean energy generation and energy conservation projects:

• an accelerated capital cost allowance (CCA) for investments in clean energy generation and energy conservation equipment;
• a first-year enhanced CCA for investments in clean energy generation and energy conservation equipment which allows a taxpayer to fully deduct the capital cost of eligible properties in the first year they are available for use by the taxpayer;
• Canadian renewable and conservation expense (CRCE), which is a category of expenditures relating to the development of eligible clean energy generation and energy conservation projects that may be deducted in full in the year incurred, carried forward indefinitely for use in future tax years or renounced under a flow-through share agreement; and
• Atlantic investment tax credit of 10% of the cost of prescribed energy generation and conservation properties.

The purpose of this Chapter is to describe these incentives and the criteria necessary to benefit from them.

Responsibility for administering the tax incentives is shared between the CRA and Natural Resources Canada (NRCan). According to subsection 13(18.1), the Technical Guide to Class 43.1 and 43.2, which is published by NRCan, applies conclusively with respect to engineering and scientific matters that arise when determining whether a property qualifies for accelerated CCA. The guide provides technical information on eligible properties that meet the requirements of the particular paragraph or subparagraph of Class 43.1, ineligible properties that are specifically excluded from Class 43.1, tables of typical capital costs for the different technologies and the relevant forms necessary to obtain a technical opinion from NRCan on the scientific and engineering requirements. This guide is available on the NRCan web page entitled Tax Incentives for Clean Energy Technologies described in Class 43.1 and 43.2.

For the purposes of the definition of CRCE in subsection 66.1(6), the Technical Guide to Canadian Renewable and Conservation Expenses (CRCE) published by NRCan applies conclusively with respect to engineering and scientific matters. This guide is also available on the NRCan web page entitled Tax Incentives for Clean Energy Technologies described in Class 43.1 and 43.2.

The Canada Revenue Agency (CRA) issues income tax folios to provide a summary of technical interpretations and positions regarding certain provisions contained in income tax law. Due to their technical nature, folios are used primarily by tax specialists and other individuals who have an interest in tax matters. While each paragraph in a chapter of a folio may relate to provisions of the law in force at the time it was written (see the Application section), the information provided is not a substitute for the law. The reader should, therefore, consider the chapter’s information in light of the relevant provisions of the law in force for the particular tax year being considered.

The CRA may have published additional guidance and detailed filing instructions on matters discussed in this Chapter and other topics that may be of interest. See the CRA’s Forms and publications web page for this and other topics that may be of interest.

Discussion and interpretation

Abbreviations and definitions used

2.1 The following abbreviations are used in this Chapter and have the meaning contained in the Act:

CCA – capital cost allowance;

CCEE – cumulative Canadian exploration expense as defined in subsection 66.1(6);

CEE – Canadian exploration expense as defined in subsection 66.1(6);

CEE(CRCE) – Canadian renewable and conservation expense included in paragraph (g.1) of the definition of CEE in subsection 66.1(6);

CRCE – Canadian renewable and conservation expense as defined in subsection 66.1(6) and subsection 1219(1) of the Regulations;

FTS – flow-through share as defined in subsection 66(15). For more information refer to the CRA web page Flow-through shares;

PBC – principal-business corporation as defined in subsection 66(15). For more information refer to Income Tax Folio S3-F8-C1, Principal-business Corporations in the Resource Industries; and

UCC – undepreciated capital cost as defined in subsection 13(21).

2.2 The term primarily is usually considered to be a threshold of more than 50%. In establishing whether a particular property is used primarily for the purpose of a given activity, different factors are examined such as the proportion of time that it is used in this activity or the relative proportions of the output that is generated from the property. In addition to this quantitative test, the circumstances may require a qualitative assessment of the taxpayer’s main purpose in using the property.

2.3 Generally, the phrase all or substantially all means at least 90%.

Accelerated CCA

2.4 A taxpayer may claim CCA only on property described in Schedule II of the Regulations that was acquired for the purpose of earning income. For general information relating to CCA, refer to Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance and the CRA web page Claiming capital cost allowance (CCA).

2.4.1 The Government of Canada's 2018 Fall Economic Statement introduced the Accelerated Investment Incentive which creates an enhanced CCA for certain eligible properties (referred to as first-year enhanced CCA). A taxpayer can claim it only for the year in which the eligible property first becomes available for use. Generally, property described in Class 43.1 or 43.2 which is acquired after November 20, 2018 and put into use before 2028 will meet the definition of accelerated investment property in subsection 1104(4) of the Regulations. Such property will be eligible for the first-year enhanced CCA if all other requirements are met.

General rules

2.5 Clean energy generation and energy conservation technologies are a key component of the Government’s approach to promoting sustainable economic growth and can contribute to a reduction in emissions of greenhouse gases and air pollutants. One way to promote these technologies is to allow a business to reduce its taxable income in the early years of an asset’s operation by claiming CCA at a high rate. This accelerated CCA is an exception to the general practice of setting CCA rates based on the useful life of an asset.

2.6 Class 43.1 and Class 43.2 of Schedule II of the Regulations provide accelerated CCA rates for qualifying investments in clean energy generation and energy conservation equipment situated in Canada. Class 43.1 is the permanent class and has a 30% CCA rate on a declining balance basis. This Class includes a detailed description of the different types of eligible properties.

2.7 Class 43.2 has a 50% CCA rate on a declining balance basis. Most of the equipment that is described in Class 43.1 will qualify for the 50% CCA rate under Class 43.2 when the property is acquired before 2025. However, the following equipment only qualifies for the 30% CCA rate in Class 43.1:

• mid-efficiency, fully or partially fossil-fuelled cogeneration systems;
• electric vehicle charging stations set up to supply more than 10 kW but less than 90 kW of continuous power; and
• electrical energy storage equipment connected to one of the above systems and stand-alone electrical energy storage systems meeting particular efficiency requirements.

2.8 Where a depreciable property qualifies for Class 43.1 or 43.2, it cannot be included in another class even though the property may otherwise meet the requirements of that other class.

2.9 Class 43.1 deals with the following two broad categories of equipment as listed in the Table of eligible properties:

• equipment described in paragraphs (a) to (c) of Class 43.1; and
• equipment described in any of the subparagraphs of paragraph (d) of Class 43.1.

2.10 Eligible input sources for equipment included in Class 43.1 or 43.2 are:

• renewable energy sources such as wind, solar, small hydro, geothermal, wave or tidal energy;
• eligible waste fuels defined in subsection 1104(13) of the Regulations such as biogas, bio-oil, digester gas, landfill gas, municipal waste, plant residue, pulp and paper waste, and wood waste or producer gas and in some cases spent pulping liquor; and
• fossil fuels (other than solution gas) where the designated heat rate is satisfied and in certain other situations described in subparagraph (d)(ix) of Class 43.1.

Property eligible for Class 43.1 or 43.2

2.11 The depreciable property must:

• be situated in Canada;
• be acquired by a taxpayer for use by the taxpayer for the purpose of earning income from a business carried on in Canada or from property situated in Canada, or the property must be acquired by a taxpayer in order to be leased to a lessee who will use the property for the same income earning purpose; and
• subject to certain exceptions, not have been used for any purpose before the taxpayer acquired the property.

2.12 Reconditioned and remanufactured equipment is excluded from Class 43.1 or 43.2 even if the reconditioning makes the equipment more energy efficient by current standards.

2.13 Used equipment that is depreciable property may generally be included in Class 43.1 or 43.2, if it:

• was included in Class 43.1 or 43.2, respectively, by the vendor;
• remains at the same location at which it was used by the vendor; and
• has been acquired by the taxpayer not more than five years from the time it became available for use to the vendor as determined pursuant to subsections 13(26) to (31).

2.14 The testing and commissioning of otherwise new equipment prior to the purchaser taking possession will not normally result in a finding that the property was used prior to its acquisition. However, a property will be considered to have been used where the vendor has used it regularly for demonstration purposes.

2.15 An eligible property must satisfy all the conditions for inclusion in Class 43.1 or 43.2 on an annual basis. There is a limited exception in subsection 1104(14) of the Regulations for a property that is part of an eligible system that was previously operated in a qualifying manner. Such property is considered to be operated in the required manner during a period of deficiency, failure or shutdown of the system that is beyond the taxpayer’s control if the taxpayer makes all reasonable efforts to rectify the problem within a reasonable time. Under subsection 1104(15), this exception also applies where another person or partnership owns property that provides a steam host which is necessary for the taxpayer’s system to operate in the manner required by Class 43.1 or 43.2.

2.16 If the exception does not apply and the property no longer qualifies for Class 43.1 or 43.2, pursuant to subsection 13(5), the UCC of the property will be transferred from Class 43.1 or 43.2 to the other class in which it is described as of the beginning of the particular tax year. Similarly, if in a following year, the property satisfies the annual requirements for inclusion in Class 43.1 or 43.2, the property will be reclassified into Class 43.1 or 43.2 as of the beginning of the tax year. For more information, refer to ¶1.123 to 1.131 of Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

2.17 Properties described in subparagraphs (c)(i), (d)(vii), (d)(viii), (d)(ix), (d)(xi), (d)(xiii), (d)(xiv), (d)(xvi) and subparagraph (d)(xvii) of Class 43.1 and paragraph (a) of Class 43.2 may be included in Class 43.1 or 43.2 only if they are in compliance with environmental laws, by-laws and regulations at the time the property first becomes available for use.

Specified energy property rules

2.18 In general, the specified energy property rules limit the amount of CCA that passive investors may deduct to the amount of income from such property.

2.19 Specified energy property within the meaning of subsection 1100(25) of the Regulations generally means property included in Class 43.1 or 43.2. However, the definition excludes properties used primarily for certain income earning purposes, in particular:

1. a property acquired to be used by the owner primarily for the purpose of earning income from a business carried on in Canada (other than the business of selling the energy generated from the property),
2. a property that is acquired to be used by the owner primarily for the purpose of earning income from another property situated in Canada; or
3. a property that is leased by (i) a corporation whose principal business is the renting or leasing of properties described in subparagraph 1100(25)(b)(iii) of the Regulations or (ii) a partnership that meets the conditions in subparagraph 1100(25)(b)(iv) and that is leased to:
   • a person who can reasonably be expected to use the property primarily for the purpose of earning income from business or property as described in ¶2.19(a) or (b); or
   • a corporation or partnership that meets the principal business test described in ¶2.21 or a partnership that meets the conditions in paragraph 1100(26)(b).

2.20 According to subsection 1100(24), if a property is a specified energy property, CCA cannot be deducted to the extent that it would create or increase a loss from all such properties owned by the taxpayer. Essentially, the amount of CCA that may be claimed on a specified energy property is limited to the income earned from specified energy property and certain other similar energy conservation properties and thus, the CCA deduction cannot be used to shelter the taxpayer’s other sources of income.

2.21 The specified energy property rules do not apply to corporations (or a partnership that meets the prescribed conditions in paragraph 1100(26)(b)) whose principal business (the principal business test) throughout the year is:

• manufacturing or processing;
• mining operations; or
• the sale, distribution or production of electricity, natural gas, oil, steam, heat or any other form of energy or potential energy.

Accelerated Investment Incentive – First-year enhanced CCA

2.21.1 Under the first-year enhanced CCA, a taxpayer is entitled to fully deduct the capital cost of eligible Class 43.1 or 43.2 property in the first year the property becomes available for use by the taxpayer. This measure applies to property acquired after November 20, 2018. As reflected in the table below, it will be gradually phased out starting in 2024 and will no longer be in effect for properties that become available for use after 2027. For general information relating to measures adopted as part of the 2018 Fall Economic Statement, refer to the web page Accelerated Investment Incentive. For details describing when a property is put into use, refer to ¶1.32 to 1.37 of Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.

2.21.2 For property which is an accelerated investment property, after the year of acquisition, the general CCA calculations are applicable. For more information relating to CCA, refer to Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance, as well as the web pages Claiming capital cost allowance (CCA) and the Accelerated Investment Incentive.

2.21.3 The availability of the first-year enhanced CCA does not override the application of the specified energy property rules described in ¶2.18 to 2.21. A property might be an accelerated investment property described in Class 43.1 or 43.2 and also be a specified energy property within the meaning of subsection 1100(25) of the Regulations. In such a case, the CCA deduction for the tax year will be limited as described in ¶2.20 and in Examples 1 and 2.

General positions

Purpose test

2.22 As a general rule most properties described in Class 43.1 must be used by the taxpayer, or the lessee of the taxpayer, primarily for the particular purpose of generating, collecting, storing or conserving energy, including the production of bio-oil, biogas and producer gas (the Purpose Test).

2.23 However, for certain properties, the Purpose Test can be met by someone other than the owner or the lessee of the equipment. For example:

• A taxpayer owns heat recovery equipment that extracts thermal waste generated directly in an industrial process, other than a process that generates electricity. The taxpayer enters into a contract with an arm’s length customer for the sale of the thermal waste and as a result the customer does not have to acquire energy. The Purpose Test described in subparagraph (d)(iv) of Class 43.1 will be met.
• A taxpayer owns equipment and uses it in a system that converts wood waste or plant residue into bio-oil. The bio-oil is then sold to an arm’s length customer who uses it primarily for the purpose of generating heat used directly in an industrial process. The Purpose Test described in subparagraph (d)(xi) of Class 43.1 will be met.

2.24 The term industrial process as used in paragraph (d) of Class 43.1 generally means an operation in which goods are manufactured or processed.

Eligible and ineligible properties for Classes 43.1 and 43.2

2.25 Detailed information on eligible and ineligible properties is available in the Technical Guide to Class 43.1 and 43.2 on the NRCan web page entitled Tax Incentives for Clean Energy Technologies described in Class 43.1 and 43.2.

2.26 Generally, a building or part of a building is specifically excluded from the description of eligible property in Class 43.1. However, there are some exceptions, for example:

• a solar collector that is not a window and that is integrated into a building is eligible property under subparagraph (d)(i) of Class 43.1;
• an electrical generating plant, including a powerhouse, is eligible property under subparagraph (d)(ii) of Class 43.1;
• a solar cell or module that is integrated into a building is eligible property under subparagraph (d)(vi) of Class 43.1.

2.27 Transmission equipment is usually specifically excluded from the description of eligible property in Class 43.1. However, transmission equipment is eligible for inclusion for properties described in the following subparagraphs of Class 43.1: (d)(ii) small-scale hydro-electric installation, (d)(v) wind energy conversion system, (d)(vi) fixed location photovoltaic equipment, (d)(vii) equipment for generating electrical energy, heat energy or both, solely from geothermal energy, and (d)(xiv) property using water-current, tidal or wave energy.

2.28 The determination of whether equipment is electrical generating equipment or transmission equipment, which is defined in subsection 1104(13) of the Regulations, is generally based on whether the electricity is ready to be put on transmission lines. A generating system typically ends at the point where the electricity is ready for use.

Canadian renewable and conservation expense (CRCE)

2.29 CRCE includes certain intangible expenditures incurred in respect of the development of a project for which it is reasonable to expect that at least 50% of the capital cost of depreciable property to be used in the project would qualify for inclusion in Class 43.1 or 43.2.

2.30 In order to qualify as CRCE, the expenditures must:

• be payable to a person or partnership with whom the taxpayer is dealing at arm's length; and
• not be specifically excluded from CRCE under subsection 1219(2) of the Regulations.

2.31 The term project is interpreted to include activities carried out to identify the objectives of the project, designing the process for achieving such objectives and completing the planned undertaking.

2.32 Examples of the types of expenditures that qualify as CRCE include the cost of certain pre-feasibility and feasibility studies, environmental assessment expenditures, the cost of socio-economic studies, and expenditures for negotiating power purchase agreements. For more information on the type of expenditures that qualify as CRCE, refer to the NRCan Technical Guide to Canadian Renewable and Conservation Expenses (CRCE).

2.33 Expenditures on a project that is subsequently abandoned may still qualify as CRCE if at the time the expenditures were incurred, it was reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in the proposed project would qualify for inclusion in Class 43.1 or 43.2.

2.34 Office expenses, management expenses, accounting expenses, marketing expenses and most business travelling expenses do not qualify as CRCE because they are incurred in respect of the management or administration of the business.

2.35 Different types of security payments made in relation to a qualifying project (for example, payments to guarantee the completion and performance of the project or for network upgrades) required by some provincial authorities do not qualify as CRCE. Also, any costs incurred with respect to the posting of the guarantee represent financing costs, which do not qualify as CRCE.

2.36 Expenditures to acquire an intellectual property or to develop a patent are generally included in the capital cost of depreciable property described in Class 14. However, if Class 14 does not apply, the expenditures may qualify for inclusion in Class 14.1.

2.37 Expenditures incurred to develop new technologies for renewable energy equipment do not qualify as CRCE. These activities may benefit from the incentives relating to scientific research and experimental development. For more information, refer to the CRA web page Scientific Research and Experimental Development Tax Incentive Program.

Geothermal energy

2.37.1 In addition to the general rules described in ¶2.29 to 2.37, for a project for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in the project would be the capital cost of any property that is described in subparagraph (d)(vii) of Class 43.1 (which is equipment used primarily to generate electrical energy, heat energy, or both, solely from geothermal energy), the following expenses may also qualify as CRCE, provided that they are incurred after March 21, 2017:

• the cost of drilling geothermal wells; and
• expenses incurred solely to determine the extent and quality of a geothermal resource, such as for example, the cost of completing an exploratory well.

2.37.2 However, the cost of completing either (i) a production well or (ii) an exploratory well that is used for production (including small-scale heat or electricity production) will not qualify as CRCE but may form part of the cost of depreciable property and may be eligible for an inclusion in Class 43.2 of the Regulations.

2.37.3 CRCE treatment will be available for expenses in geothermal projects only if, in the year incurred, such expenses meet the requirements of all applicable environmental laws, by-laws and regulations.

Test wind turbines

2.38 Usually, expenditures incurred for the acquisition and installation of depreciable property do not qualify as CRCE. However, expenditures for a test wind turbine that is part of a wind farm project and that meets the requirements set out in subsection 1219(3) of the Regulations will qualify as CRCE.

2.39 In order for a wind turbine to qualify as a test wind turbine, the taxpayer must obtain a joint determination from the CRA and NRCan with respect to the legislative requirements in subsection 1219(3) of the Regulations. For more information, refer to the NRCan Technical Guide to Canadian Renewable and Conservation Expenses (CRCE).

2.40 Generally, a test wind turbine must:

• otherwise meet the requirements of a wind energy conversion system under subparagraph (d)(v) of Class 43.1;
• be installed at the site of a planned wind farm project;
• meet certain spacing and capacity requirements; and
• test the level of electrical energy production from wind prior to the construction of the wind farm project.

2.41 There can be more than one test wind turbine for each wind farm project.

General overview – deductions

2.42 Expenditures incurred by a taxpayer that qualify as CRCE are CEE and are reported on the Form T2Sch12. These expenditures are added to the taxpayer’s CCEE pool and may be deducted by the taxpayer in the tax year that they are incurred or carried forward indefinitely for deduction in future tax years.

2.43 Any consideration received by a taxpayer for property or services, the cost of which was CRCE, will be deducted from the taxpayer’s CCEE pool under subsection 66(12.1). For example, if the taxpayer has disposed of feasibility studies, the cost of which previously qualified as CEE(CRCE), the taxpayer will reduce its CCEE pool by the amount of the consideration received.

Partnerships

2.44 A partnership cannot deduct CRCE. Instead, the partner’s CEE(CRCE) will include its share of the partnership’s CEE (CRCE), if the taxpayer is a member of the partnership at the end of the partnership’s fiscal period. For more information on partnerships, refer to Income Tax Folio S4-F16-C1, What is a Partnership?

2.45 A taxpayer who disposes of all of its interest in a partnership during the partnership fiscal period does not share in the partnership’s CEE(CRCE) for that fiscal period. Similarly, any portion of CEE(CRCE) of the partnership that has been included in a partner’s CEE(CRCE) cannot be transferred to a third party who acquires the partnership interest.

2.46 The partner adds its share of the partnership’s CEE(CRCE) to its own CCEE pool. Under clause 53(2)(c)(ii)(C), the adjusted cost base of the partner’s partnership interest is reduced to reflect the partner’s share of the partnership’s CEE(CRCE).

Acquisition of control

2.47 Where a corporation is subject to an acquisition of control, the CCEE pool that exists immediately before the acquisition of control becomes subject to the successor rules in section 66.7 (successored CCEE). After the acquisition of control, the successor corporation may deduct the successored CCEE only to the extent of production income from a Canadian resource property as defined in subsection 66(15) that is owned by the corporation immediately before the acquisition of control. For more information on Canadian resource properties refer to Interpretation Bulletin IT-125R4 (Archived) – Dispositions of Resource Properties and ¶1.21 of Income Tax Folio S3-F8-C1.

2.48 A taxpayer who is a PBC operating in clean energy generation and energy conservation industries may have CCEE but will likely not own Canadian resource property. Therefore, after the acquisition of control, successored CCEE will become unusable. To address this issue, the taxpayer is entitled to claim the maximum available CEE in the tax year that ends immediately before the acquisition of control according to subsection 66.1(3). This may create a non-capital loss that could be deducted in future tax years subject to certain restrictions. For more information concerning the loss restriction rules, refer to Interpretation Bulletin IT-232R3, Losses - Their Deductibility in the Loss Year or in Other Years.

Flow-through shares – subsection 66(15)

2.49 FTSs help corporations that are PBCs which operate in the clean energy generation and energy conservation industries to finance their development activities. A PBC may renounce expenditures that qualify as CRCE to its investors who subscribe for FTSs. The possibility of renouncing CRCE is of particular advantage to PBCs that are not currently taxable, as it allows the PBC to transfer the resource expenses to the investor. For more information, refer to Income Tax Folio S3-F8-C1 and the CRA web page, Flow-through shares (FTSs). Guide T100 – Instructions for the Flow-Through Share Program provides information on reporting procedures regarding the flow-through share program.

Principal-business corporation defined in subsection 66(15)

2.50 In the context of clean energy generation and energy conservation industries, a PBC includes a corporation the principal business of which is any of, or a combination of:

• the generation or distribution of energy, or the production of fuel using property described in Class 43.1 or 43.2, and
• the development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project would qualify for inclusion in Class 43.1 or 43.2.

2.51 A PBC also includes a corporation, all or substantially all of the assets of which are shares or debt of another PBC that is related to the corporation otherwise than because of a right referred to in paragraph 251(5)(b). For more information on related persons, refer to Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.

Flow-through shares

2.52 A share or a right is an FTS under subsection 66(15) if:

• it is:
  • a share issued by a PBC (other than a prescribed share which is defined in subsections 6202.1(1) and (2) of the Regulations) or
  • a right to acquire a share of the capital stock of a PBC (other than a prescribed right which is defined in subsections 6202.1(1.1) and (2.1));
• it is issued pursuant to a written agreement with an investor under which the PBC agrees to incur CEE(CRCE) in an amount equal to the consideration received for the share or the right and renounce this amount in favour of the investor within a specific period of time; and
• it is issued for consideration that does not include property transferred by the investor on a tax-deferred basis.

2.53 If the risk of loss to the investor is limited or it may be reasonable to consider that there is an obligation to repay or return all or part of the original investment, these shares or rights are considered prescribed shares or prescribed rights, respectively, and are not FTSs. For more information refer to the CRA web page Flow-through shares.

Atlantic investment tax credit

2.54 The Atlantic investment tax credit in subsection 127(9) is a credit equal to 10% of the capital cost of prescribed energy generation and conservation properties that are used primarily for the purpose of the following activities:

• manufacturing or processing goods for sale or lease;
• farming or fishing;
• logging;
• storing grain; or
• harvesting peat

and the activities are carried on in the Atlantic provinces, the Gaspé Peninsula and their associated offshore regions.

2.55 The Atlantic investment tax credit applies to the following qualified properties which are defined in subsection 127(9):

• prescribed energy generation and conservation property which includes all the properties described in Class 43.1 and 43.2 acquired by the taxpayer after March 28, 2012; and
• prescribed energy generation and conservation properties that are leased in the ordinary course of carrying on business in Canada by a corporation:
  • whose principal business is leasing property, lending money, purchasing conditional sales contracts and account receivables;
  • who manufactured and leased the property and the lessor’s principal business is manufacturing the property it sells or leases; or
  • whose principal business is selling or servicing properties described in Classes 43.1 or 43.2.

2.56 Where a prescribed energy generation and conservation property is leased, the lessee must use the leased qualified property in the activities described in ¶2.54.

Table of eligible properties

Application

This updated Chapter, which may be referenced as S3-F8-C2, is effective as of August 2, 2019.

This Chapter was first published on April 20, 2017. The history of updates to this Chapter can be viewed in the Chapter History page.

Except as otherwise noted, all statutory references herein are references to the 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.

Links to jurisprudence are provided through CanLII.

Income tax folios are available in electronic format only.

Reference

Subsections 66(1), 66(2), 66(12.1), 66(12.6), 66(12.61), 66(12.66), and the definitions of Canadian resource property, flow-through share, principal business corporation in subsection 66(15), the definition of Canadian exploration expense in subsection 66.1(6) and the definitions of qualified property and specified percentage in subsection 127(9) (also, sections 51, 66.7, 85, 85.1, 86, 87, subsections 13(5), 13(26) to 13(31), 14(5), paragraph 96(1)(d) and clause 53(2)(c)(ii)(C)) of the Act.

Section 1219, subsections 1100(24), 1100(25), 1100(26), 1102(21), 1102(22), 1104(13), 1104(14), 1104(15), 1104(17), 1219(2), 1219(3), 4600(3), 6202.1(1), 6202.1(1.1) and 6202.1(2), 6202.1(2.1) of the Regulations.

Class 43.1 and Class 43.2 of Schedule II to the Regulations.