RC115 NovDec 2024 - Magazine - Page 36
LEGAL
Who is eligible to claim ITC?
Generally, the ITCs can only be claimed by taxable Canadian corporations. However, taxable Canadian corporations can also claim
the ITCs through both partnerships and limited partnerships that
hold and develop the project. Where a taxable Canadian corporation claims the ITC through a partnership, there are speci昀椀c rules
which provide that the ITC must be allocated to the partners of
ect. This is particularly true where the project will receive project
昀椀nancing.
Labour requirements and other considerations
For all of the ITCs outside of the CTM ITC (and presumably the
EV ITC), in order to qualify for the full ITC, the project proponent
must meet certain labour requirements, including that they pay
certain workers involved in building the project (Covered Workers) a “prevailing wage”, and ensuring that
at least 10 per cent of the tradespeople on the project
site are registered apprentices.
Project proponents must attest that they have met
both the prevailing wage and apprenticeship requirements for their projects. Among other requirements,
this will involve attesting that they have made reasonable e昀昀orts to ensure that the requisite number of
apprentices are employed on the project site, that they
will pay a prevailing wage to their own employees and that they
have taken reasonable steps to ensure that any workers employed
by subcontractors are paid the prevailing wage.
Project proponents should carefully review these requirements,
as not meeting them results in a 10 per cent reduction to the
speci昀椀ed percentage of the ITC in question, in addition to potential
penalties.
It is also noteworthy that labour costs incurred to install eligible
equipment are included for the purposes of determining the capital
“Clean economy investment tax credits (ITCs) are aimed at
incentivizing the decarbonization of the economy in Canada.”
the partnership on a reasonable basis. Where claimed through a
limited partnership, these reasonable allocation rules also apply,
however the allocation of the ITCs to limited partners is further
restricted by the limited partner’s “at-risk amount;” generally, their
net equity participation in the limited partnership that is economically at risk.
As a practice point, project proponents should consult with
their tax advisors in order to ensure that their particular proposed
structure will not limit the ITCs that will be available for the proj-
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