|Policy Status||In force|
|Agency||•Natural Resources Canada
|Related Policies||Canadian Renewable Conservation Expenses (CRCE)|
|Policy Supersedes||Income Tax Act - Accelerated Capital Cost Allowance|
•Taxes and Tax Incentives
•Biomass for Heat
•Biomass for Power
•Multiple Renewable Energy Sources
|Policy Sector||•Multi-sectoral Policy|
|Description||The accelerated Capital Cost Allowance (CCA), under Class 43.1 and 43.2 of Schedule II to the Income Tax Regulations, allows investors an accelerated write-off of certain equipments used to produce energy in a more efficient way or to produce energy from alternative renewable sources.
A 50% accelerated CCA is provided under Class 43.2 for eligible equipment that generated either (1) heat for use in an industrial process or (2) electricity by using a renewable energy source (e.g. wind, solar, small hydro), waste fuel (e.g. landfill gas, manure, wood waste) or making efficient use of fossil fuels (e.g. high efficiency cogeneration systems).
Class 43.2 was introduced in 2005 and is currently available for assets acquired on or after February 23, 2005 and before 2012. For assets acquired before February 23, 2005, accelerated CCA is provided under Class 43.1, at 30-percent. The eligibility criteria for these classes are generally the same except that cogeneration systems that use fossil fuels must meet a higher efficiency standard for Class 43.2 than that for Class 43.1. Systems that only meet the lower efficiency standard continue to be eligible for Class 43.1.
Budget 2005 also extended Class 43.1 to include the distribution assets of district energy systems and certain equipment used to produce biogas (largely methane) from the anerobic digestion of farm manure, where the biogas is used to generate electricity. Assets acquired during the next seven years in eligible district energy systems using high-efficiency cogeneration and biogas production systems will be eligible for the new 50-per-cent CCA rate.
Budget 2007 extended Class 43.2 eligibility to an emerging source of renewable energy - wave and tidal energy - and to a broader range of applications involving active solar heating, photovoltaic, stationary fuel cells, production of biogas from organic waste, and pulp and paper waste fuels. Budget 2007 also extended eligibility for Class 43.2 to assets acquired before 2020.
Budget 2008 expanded eligibility for accelerated CCA under Class 43.2 to several additional applications including: (a) ground source heat pumps used for space heating and hot water; biogas production systems that use animal waste and sewage treatment residue as inputs and those that produce biogas for commercial use; electrical or thermal generating systems that use purchased biogas; and systems that produce bio-oil or heat from specified waste sources.
Budget 2010 expanded further eligibility for accelerated CCA under Class 43.2 to include: (a) heat recovery equipment used in a broader range of applications; and (b) distribution equipment used in district energy systems that rely primarily on ground source heat pumps, active solar systems or heat recovery equipment.
Budget 2011 proposes to expand eligibility for accelerated CCA under Class 43.2 to include equipment that generates electricity using waste heat from sources such as industrial processes.
Eligible equipment will include electrical generating equipment, control, feedwater and condensate systems, and other ancillary equipment, but not buildings or other structures, heat rejection equipment (such as condensers and cooling water systems), transmission equipment or distribution equipment. For example, this measure includes equipment that generates electricity from waste heat produced by diesel engines used to compress natural gas on pipelines or to generate electricity. The new provision will apply to eligible assets acquired on or after March 22, 2011.