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Objectives and Description:

Class 43.1 provides an accelerated rate of write-off (30 percent per year, on a declining balance basis) for investments that produce heat for use in an industrial process or electricity by using fossil fuel efficiently or by using renewable energy sources. The specific criteria are set out in Schedule II of the Income Tax Regulations. The purpose of Class 43.1 is to assist such investments by allowing businesses to write-off the capital cost of these assets at a rate faster than would be the case if the costs were written-off over the useful life of the assets, thus improving the after-tax rate of return on these investments. Budget 2005 proposed that a new capital cost allowance class would be created for highly fossil-fuel efficient and renewable energy generation equipment. The rate of write-off for this class will be 50 percent on a declining balance basis. The new class will apply to eligible investments that occur on or after February 23, 2005 up to 2020.