Ottawa, May 3, 2010
Archived - Draft Income Tax Regulations Released Concerning Capital Cost Allowance for Oil Sands Projects and Clean Energy Generation Equipment
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- Draft Regulations (Oil Sands)
- Explanatory Notes (Oil Sands)
- Draft Regulations (Clean Energy Generation)
- Explanatory Notes (Clean Energy Generation)
The Honourable Jim Flaherty, Minister of Finance, today released draft amendments to the Income Tax Regulations to implement enhancements to the accelerated capital cost allowance (CCA) for clean energy generation equipment and the phase-out of the accelerated CCA for oil sands projects. These amendments implement measures announced in Budget 2007 in the case of oil sands projects and Budget 2008 in the case of clean energy generation equipment.
The accelerated CCA for oil sands will be maintained for oil sands assets acquired before 2012 that are required for the completion of project phases on which major construction commenced before March 19, 2007. For assets acquired for project phases that had not commenced major construction as of that date, the accelerated CCA will be gradually reduced over the years 2011 to 2014, to 90 per cent, 80 per cent, 60 per cent and 30 per cent, respectively, of the otherwise allowable accelerated CCA. No accelerated CCA may be claimed on these assets after 2014, though the regular 25-per-cent (declining balance) CCA rate will continue to apply.
Accelerated CCA at 50 per cent per year on a declining balance basis is provided under CCA Class 43.2 to encourage investment by businesses in specified clean energy generation equipment. The proposed amendments broaden Class 43.2 to include ground source heat pump systems used in applications such as water and space heating. They also extend Class 43.2 to biogas equipment using a broader range of eligible fuels, and relax certain usage limitations on eligible waste-to-energy equipment. These amendments will apply to eligible assets acquired on or after February 26, 2008.
In addition, the proposed amendments clarify that in an eligible ground source heat pump system, costs related to underground piping used for production or operational purposes, including drilling and related costs to install the piping, are included in Class 43.2. For uniformity, it is proposed that Class 43.2 be extended to include similar underground costs in the case of geothermal electricity and landfill gas projects that are already eligible for Class 43.2. The cost of drilling wells that are not expected to be used for production will continue to be treated as Canadian Renewable and Conservation Expenses. The proposed amendments relating to piping and drilling costs will apply to costs incurred on or after today’s date.
The draft regulations and related explanatory notes accompany this release. References to “Announcement Date” in these documents refer to today’s date.
The Government of Canada invites comments from stakeholders regarding the draft amendments until July 6, 2010, and will proceed with these regulatory changes at an early opportunity to implement the proposed amendments, taking into account any comments received.
Comments may be submitted to the Tax Legislation Division at the Department of Finance at ConsultationsACCA-DPAA@fin.gc.ca. Once received by the Department of Finance, all submissions will be subject to the Access to Information Act and may be disclosed in accordance with its provisions. Should you express an intention that your submission be considered confidential, the Department will make all efforts to protect this information within the requirements of the law.
For further information, media may contact:
Office of the Minister of Finance
Department of Finance
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