Budget 2016 proposes new measures that are intended to encourage
investment in technologies that help reduce emissions of greenhouse
gases and air pollutants. In particular, the Government proposes to
expand the range of property in respect of which accelerated rates
of capital cost allowance ("CCA") may be
The CCA regime under the Income Tax Act allows for
deductions to be claimed in respect of certain depreciable property
at rates provided in the Income Tax Regulations (the
"Regulations"). For CCA purposes,
property is divided into a series of classes and the rate of CCA
that may be claimed in respect of a particular property is
dependent on its CCA class.
Under the Regulations, CCA in respect of property in Classes
43.1 and 43.2 may be claimed, on a declining-balance basis, at
accelerated rates of 30 per cent and 50 per cent, respectively.
Property in Classes 43.1 and 43.2 includes specific clean energy
equipment that generates or conserves energy by using a renewable
source, using a fuel from waste, or making efficient use of fossil
Budget 2016 proposes to expand the range of property that is
included in Classes 43.1 and 43.2 to include certain electric
vehicle charging stations and a broader array of electrical energy
The new CCA proposals will apply in respect of newly eligible
property acquired for use on or after March 22, 2016 that has not
been used, or acquired for use, before March 22, 2016.
Electric Vehicle Charging Stations
Currently, electric vehicle charging stations generally fall
within Class 8, which provides a CCA rate of 20 per cent,
calculated on a declining-balance basis. Budget 2016 proposes that
electric vehicle charging stations set up to supply at least 90
kilowatts of continuous power will be eligible for inclusion in
Class 43.2 (and, therefore, will attract a CCA rate of 50 per
cent). Electric vehicle charging stations set up to supply between
10 kilowatts and 90 kilowatts of continuous power will be eligible
for inclusion in Class 43.1 (with a corresponding CCA rate of 30
For these purposes, eligible equipment of a taxpayer will
include equipment downstream of an electricity meter, including
charging stations, transformers, distribution and control panels,
circuit breakers, conduits, wiring and related electrical energy
storage equipment, provided that more than 75 per cent of the
annual electricity consumed in connection with the equipment is
used to charge electric vehicles.
Electrical Energy Storage
Currently, only a limited range of equipment ancillary to
eligible generation equipment is included in Classes 43.1 and 43.2.
Where storage equipment does not qualify for inclusion in an
accelerated CCA class, it is generally included in Class 8 (which
qualifies for a CCA rate of 20 per cent).
Budget 2016 proposes to clarify and expand the range of
ancillary storage equipment that is eligible for inclusion in Class
43.2 where it is part of an electricity generation system that is
itself eligible for inclusion in Class 43.2. Similarly, storage
equipment that is part of an electricity generation system that is
eligible for inclusion in Class 43.1 will be included in Class
Stand-alone electrical energy storage equipment with round trip
efficiency of greater than 50 per cent is also proposed to be
eligible for accelerated CCA by inclusion in Class 43.1. Fuel cells
that use hydrogen produced by electrolysis equipment, where all or
substantially all of the electricity used to power the electrolysis
process is generated from specified renewable energy sources, will
remain eligible for inclusion in Class 43.2 regardless of its round
trip efficiency. Moreover, the eligible generation sources will be
expanded to include electricity generated by the other renewable
energy sources included in Class 43.2, including geothermal, waves,
tides, and the kinetic energy of flowing water.
Eligible electrical energy storage property will include
batteries, flywheels and compressed air energy storage, as well as
any ancillary equipment and structures.
Eligible electrical energy storage property will not include
pumped hydroelectric storage, hydroelectric dams and reservoirs, or
a fuel system where hydrogen is produced by stream reformation of
Certain uses of electrical energy storage equipment will also be
excluded from eligibility for accelerated CCA, including back-up
electricity generation, motor uses (e.g., in battery electric
vehicles), and mobile uses (e.g., consumer batteries).
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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