RC115 NovDec 2024 - Magazine - Page 37
cost subject to the ITC. Consideration may need to be given in your
project contracts with respect to the allocation of labour costs to the
eligible equipment vs. ineligible equipment.
Filing of a project plan
The legislation for the CCUS Tax Credit and the Clean Hydrogen
ITC require the project proponent 昀椀le a project plan with Natural
Resources Canada (NRCan), which NRCan will then review in
order to verify that the project will meet the requirements of the
relevant ITC, and additionally will review the expenditure characterization provided by the taxpayer in order to determine and verify
what expenditures will qualify for the relevant ITC. Similar rules
apply for the Clean Electricity ITC, in respect of natural gas power
generation equipment where abated by carbon capture. NRCan will
also provide a non-binding opinion as to whether certain equipment will qualify for the Clean Tech ITC or the Clean Electricity
ITC. While non-binding, this opinion should signi昀椀cantly reduce
the risks associated with future ITC disputes or eligibility.
For the Clean Tech ITC, the CTM ITC, and the Clean Electricity
ITC the taxpayer must 昀椀le a prescribed form with prescribed information with the return of income for the year in which the project
becomes operational (as discussed below).
Further compliance requirements exist for many of these ITCs.
Engineering the Top100
Timing for Receipt of ITC
For the ITCs outside of the CCUS Tax Credit, the ITC will be paid
by the government following 昀椀ling of the tax return of the taxpayer
for the year in which the equipment becomes “available for use”.
Generally, this would be in Q3 of the year following when the
project becomes operational. For the CCUS Tax Credit, the ITC is
payable annually, based on the capital spend on quali昀椀ed CCUS
expenditures in the previous taxation year.
Risk mitigation strategies
Tax insurance is becoming available for many of the potential issues
discussed above, in addition to many others that arise due to the
complex legislation involved in these incentives. ITC speci昀椀c insurance products are also entering the market to help insure receipt of
ITCs, and we suspect insurance may play an important role for may
ITC eligible projects, in particular where there is project 昀椀nancing.
Further, the taxpayer may wish to request a binding ruling from the
Canada Revenue Agency con昀椀rming their ITC entitlement
The Clean Economy ITCs are designed to reduce the carbon
footprint of many industrial and power generation projects and
have the potential to transform the Canadian economy over their
lifetime. More speci昀椀cally, ITCs are designed to assist emerging, or
less economical technologies to compete with traditionally more
carbon intensive projects. Due to their complexity, project proponents should discuss any potential projects with their commercial
project and tax advisors early in the project development cycle to
ensure that they properly understand the interaction of the rules for
these ITCs with their particular circumstances.
Don't miss your chance to connect with a concentrated pool of
engineering talent actively seeking job opportunities.
Committed
to Protection
October
and Growth
16th, 2024
At Aon, we help clients around
the world protect and grow
their businesses. We are proud
of our years of support for the
Canadian construction industry.
aon.com
789 Yonge St,
Toronto, ON
Recruit Emerging Talent
Showcase
your projects
Delivering climate-ready
infrastructure solutions today that will
make a difference
tomorrow.
Build
Valuable
Connections
contact nick@actualmedia.ca
RENEWCANADA.NET
NOVEMBER/DECEMBER 2024– RENEW CANADA 37
