Tax Incentives for Industry

Tax Incentives for Industry

Class 43.1, 43.2 and CRCE

Canadian tax law makes alternative energy sources, such as solar, wind and biofuels, more fiscally attractive for industry.

Under Classes 43.1 and 43.2 in the Income Tax Regulations, certain capital expenditures on systems that produce heat and/or electric power efficiently from fossil fuels or from alternative renewable energy sources are eligible for accelerated capital cost write-offs, at 30 and 50 percent, respectively, on a declining balance basis. Without these accelerated write-offs, many of these assets would be depreciated at annual rates of 4 percent to 20 percent.

In addition to the Class 43.1 or Class 43.2 capital cost allowance, the Income Tax Regulations allow expenses incurred during the development and start-up of renewable energy and energy conservation projects (i.e. Canadian Renewable and Conservation Expenses [CRCE]) to be fully deducted or financed through flow-through shares.

To qualify as CRCE, expenses must be incurred for a project for which it is reasonable to expect at least 50 percent of the capital costs incurred would be the capital costs of equipment described in Class 43.1 or 43.2.

For technical information on Class 43.1, 43.2 and CRCE, order the free guide Class 43.1 Technical Guide and Technical Guide to Canadian Renewable and Conservation Expenses (CRCE), which is available from Natural Resources Canada at the following address:

Class 43.1/43.2 Secretariat
CanmetENERGY - Ottawa
Natural Resources Canada
1 Haanel Drive, Building 3, Room 204
Nepean ON K1A 1M1
Tel.: 613-996-0890
Fax: 613-995-7868

For general information on CRCE or Class 43.1/43.2, visit the Canada Revenue Agency Web site or contact:

Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency
320 Queen Street
16th Floor, Tower A
Place de Ville
Ottawa ON K1A 0L5
Tel.: 613-957-8953
Fax: 613-957-2088