CRA Guidance on New Clean Technology Investment Tax Credits

Canada is a global leader in clean technology and innovation, ranking second in the world on the 2024 Global Cleantech Innovation Index and accounting for 13% of companies on the Global Cleantech 100. Despite success in the sector, experts have pointed to a gap in the ability of Canadian cleantech startups to scale up.  

On June 21, 2024, the Canada Revenue Agency (CRA) released guidance on two investment tax credits (ITCs) aimed at incentivizing the adoption of cleantech in Canada. The ITCs are intended to spur capital investment in the nation's adoption and operation of clean technology property.

The ITCs in question include the Carbon Capture, Utilization, and Storage (CCUS) ITC and the Clean Technology ITC. The Senate passed the credits on June 19, 2024, as part of Bill C-59. The CRA and Natural Resources Canada will administer the CCUS and Clean Technology ITCs.

The CCUS ITC relates to acquiring property used for carbon capture, transportation, utilization and storage capacity in Canada. The CCUS ITC is available for a broad range of CCUS applications in different industrial sectors, including concrete, plastics, and fuels. Credit rates for this ITC vary depending on the type of expenditure and the acquisition year. According to the CRA, companies may claim from 18.75% to 60% of eligible, qualified carbon transportation, storage, or use expenditures incurred from January 1, 2022, to December 31, 2040.

The Clean Technology ITC is a refundable tax credit for capital invested in adopting and operating new clean technology. Eligible property for the tax credit includes zero-emission vehicles for non-road use, such as mining, and equipment used to generate electricity from resources such as solar, wind, and water. According to the CRA, the Clean Technology ITC rate covers up to 30% of the capital cost of CT property that is acquired and becomes available for use from March 28, 2023, to December 31, 2033.

The federal government has also recently passed two additional cleantech ITCs focused on Clean Hydrogen and Clean Technology Manufacturing, respectively. These ITCs form part of Bill C-69, which received royal assent on June 20, 2024. At the time of this article, the CRA has not yet released guidance on the additional credits.