Legislative Proposals Relating to the Income Tax Act
EV Supply Chain Investment Tax Credit
1 (1) Paragraph 12(1)(t) of the Income Tax Act is replaced by the following:
Marginal note:Investment tax credit
(t) the amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6), 127.491(11) or 127.492(6) in respect of a property acquired or an expenditure made in a preceding taxation year in computing the taxpayer's tax payable for a preceding taxation year to the extent that it was not included in computing the taxpayer's income for a preceding taxation year under this paragraph or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e), subparagraph 53(2)(c)(vi) to (vi.5) or (h)(ii) or for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);
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(2) Subsection (1) is deemed to have come into force on January 1, 2024.
2 (1) The portion of subsection 13(7.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deemed capital cost of certain property
(7.1) For the purposes of this Act, where section 80 applied to reduce the capital cost to a taxpayer of a depreciable property or a taxpayer deducted an amount under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6), 127.491(11) or 127.492(6) in respect of a depreciable property or received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, depreciable property, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other than
(2) Paragraph 13(7.1)(e) of the Act is replaced by the following:
(e) where the property was acquired in a taxation year ending before the particular time, all amounts deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6), 127.491(11) or 127.492(6) by the taxpayer for a taxation year ending before the particular time,
(3) The description of I in the definition undepreciated capital cost in subsection 13(21) of the Act is replaced by the following:
- I
- is the total of all amounts deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6), 127.491(11) or 127.492(6), in respect of a depreciable property of the class of the taxpayer, in computing the taxpayer's tax payable for a taxation year ending before that time and subsequent to the disposition of that property by the taxpayer,
(4) The portion of paragraph 13(24)(a) of the Act before subparagraph (i) is replaced by the following:
(a) subject to paragraph (b), for the purposes of the description of A in the definition undepreciated capital cost in subsection (21) and of sections 127, 127.1, 127.44, 127.45, 127.48, 127.49, 127.491 and 127.492, the property is deemed
(5) Subsections (1) to (4) are deemed to have come into force on January 1, 2024.
3 (1) The portion of paragraph (l) in the description of B in the definition adjusted taxable income in subsection 18.2(1) of the Act before subparagraph (i) is replaced by the following:
(l) an amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6), 127.491(11) or 127.492(6) in respect of a property acquired in a preceding taxation year in computing the taxpayer's tax payable for a preceding taxation year to the extent that it
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
4 (1) Paragraph 87(2)(qq.1) of the Act is replaced by the following:
Marginal note:Continuation of corporation
(qq.1) for the purposes of sections 127.44, 127.45, 127.48, 127.49, 127.491 and 127.492 and Part XII.7, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
5 (1) Paragraph 88(1)(e.31) of the Act is replaced by the following:
(e.31) for the purposes of sections 127.44, 127.45, 127.48, 127.49, 127.491 and 127.492 and Part XII.7, at the end of any particular taxation year ending after the subsidiary was wound up, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary;
(2) Paragraph 88(2)(c) of the Act is replaced by the following:
(c) for the purpose of computing the income of the corporation for its taxation year that includes the particular time, paragraph 12(1)(t) shall be read as follows:
"(t) the amount deducted under subsection 127(5) or (6), 127.44(3), 127.45(6), 127.48(3), 127.49(6), 127.491(11) or 127.492(6) in computing the taxpayer's tax payable for the year or a preceding taxation year to the extent that it was not included under this paragraph in computing the taxpayer's income for a preceding taxation year or is not included in an amount determined under paragraph 13(7.1)(e) or 37(1)(e) or subparagraph 53(2)(c)(vi) to (vi.5) or (h)(ii) or the amount determined for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.1(6);".
(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2024.
6 (1) The definition government assistance in subsection 127(9) of the Act is replaced by the following:
- government assistance
government assistance means assistance from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, other than as an excluded loan (as defined in subsection 12(11)), as a deduction under subsection (5) or (6) or a deemed payment on account of tax payable under subsection 127.44(2), 127.45(2), 127.48(2), 127.49(2), 127.491(2) or 127.492(2); (aide gouvernementale)
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
7 (1) Subsection 127.44(3) of the Act is replaced by the following:
Marginal note:Deemed deduction
(3) For the purposes of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2), sections 127.45, 127.48, 127.49, 127.491, 127.492 and 129 and Part XII.7, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer's tax otherwise payable under this Part for the year.
(2) Clause 127.44(9)(b)(ii)(C) of the Act is replaced by the following:
(C) for which an investment tax credit, a clean technology investment tax credit (as defined in subsection 127.45(1)), a clean hydrogen tax credit (as defined in subsection 127.48(1)), a CTM investment tax credit (as defined in subsection 127.49(1)), a clean electricity investment tax credit (as defined in subsection 127.491(1)) or an EV supply chain investment tax credit (as defined in subsection 127.492(1)) is claimed, or
(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2024.
8 (1) Subsection 127.45(6) of the Act is replaced by the following:
Marginal note:Deemed deduction
(6) For the purposes of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2) and sections 127.44, 127.48, 127.49, 127.491, 127.492 and 129, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer's tax otherwise payable under this Part for the year.
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
9 (1) The definition clean economy tax credit in subsection 127.47(1) of the Act is amended by striking out "or" at the end of paragraph (c), by adding "or" at the end of paragraph (d) and by adding the following after paragraph (d):
(e) an EV supply chain investment tax credit (as defined in subsection 127.492(1)). (crédit d'impôt pour l'économie propre)
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
10 (1) Subsection 127.48(3) of the Act is replaced by the following:
Marginal note:Deemed deduction
(3) For the purposes of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2) and sections 127.44, 127.45, 127.49, 127.491, 127.492 and 129, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer's tax otherwise payable under this Part for the year.
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
11 (1) Subsection 127.49(6) of the Act is replaced by the following:
Marginal note:Deemed deduction
(6) For the purposes of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2) and sections 127.44, 127.45, 127.48, 127.491, 127.492 and 129, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer's tax otherwise payable under this Part for the year.
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
12 (1) Subsection 127.491(11) of the Act is replaced by the following:
Marginal note:Deemed deduction
(11) For the purposes of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2) and sections 127.44, 127.45, 127.48, 127.49, 127.492 and 129, the amount determined under subsection (2) for a qualifying entity for a taxation year is deemed to have been deducted from its tax otherwise payable under this Part for the year.
(2) Subsection (1) is deemed to have come into force on April 16, 2024.
13 (1) The Act is amended by adding the following after section 127.491:
Marginal note:Definitions
127.492 (1) The following definitions apply in this section.
- CAM production
CAM production means the production of cathode active materials to be used as inputs to the manufacturing of battery cells used in the powertrain of electric vehicles, other than production that is a qualifying mineral activity as defined in subsection 127.49(1). (production de MAC)
- electric vehicle
electric vehicle means a motor vehicle that is
- EV assembly
EV assembly means the final assembly of electric vehicles. (assemblage de VE)
- EV battery production
EV battery production means the manufacturing of battery cells, or battery modules, to be used in the powertrains of electric vehicles. (production de batteries pour VE)
- EV building property
EV building property means property of a taxpayer
(a) situated in Canada and intended for use exclusively in Canada;
(b) included in paragraph (q) of Class 1 in Schedule II to the Income Tax Regulations;
(c) that is used, or to be used, all or substantially all to house CTM property (as defined by subsection 127.49(1)) that is used in EV assembly, EV battery production or CAM production; and
(d) that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired (determined without reference to paragraph (4)(b)) by the taxpayer. (immeuble pour VE)
- EV supply chain investment tax credit
EV supply chain investment tax credit of a qualifying taxpayer for a taxation year means the total of all amounts, each of which is the specified percentage of the capital cost to the taxpayer of EV building property acquired by the taxpayer in the year. (crédit d'impôt à l'investissement dans la chaîne d'approvisionnement de VE)
- government assistance
government assistance has the same meaning as in subsection 127(9). (aide gouvernementale)
- qualifying group
qualifying group means a related group of corporations. (groupe admissible)
- qualifying investment
qualifying investment means, at the relevant time, the ownership of CTM property (as defined in subsection 127.49(1)) by a taxpayer with an aggregate capital cost (as determined under section 127.49) of not less than $100 million, where
(a) the taxpayer was entitled to a CTM investment tax credit (as defined in subsection 127.49(1)) in respect of the capital cost of the property;
(b) the entitlement to the CTM investment tax credit referred to in paragraph (a) did not arise due to the application of subsection 127.49(8); and
(c) subsection 127.49(12) has not applied in respect of the property. (placement admissible)
- qualifying minority interest
qualifying minority interest means ownership of
(a) at least 10% of the issued share capital (having full voting rights under all circumstances) of a corporation; and
(b) shares of the capital stock of the corporation having a fair market value of at least 10% of the fair market value of all of the issued shares of the capital stock of the corporation. (participation minoritaire admissible)
- qualifying taxpayer
qualifying taxpayer means a taxable Canadian corporation that, at the relevant time,
(a) holds
(b) is a member of a qualifying group and one or more members of the group holds qualifying investments described in each of subparagraphs (a)(i) to (iii);
(c) holds
(d) is a member of a qualifying group, and one or more members of the group
(e) where paragraph (c) or (d) applies in respect of another taxpayer, is the unrelated corporation in subparagraph (c)(ii) or (d)(ii), as applicable. (contribuable admissible)
- specified percentage
specified percentage means, in respect of an EV building property of a taxpayer that is acquired
Marginal note:EV supply chain investment tax credit
(2) If a qualifying taxpayer files with its return of income for a taxation year a prescribed form containing prescribed information, the taxpayer is deemed to have paid on its balance-due day for the year an amount on account of the taxpayer's tax payable under this Part for the year equal to the taxpayer's EV supply chain investment tax credit for the year.
Marginal note:Time limit for application
(3) If the qualifying taxpayer files with the Minister a prescribed form containing prescribed information referred to in subsection (2) after its filing-due date for the year but on or before the day that is one year after that date, subsection (2) applies to the taxpayer except that no payment is deemed to arise under that subsection until the prescribed form containing prescribed information has been filed with the Minister.
Marginal note:Time of acquisition
(4) For the purpose of this section, EV building property is deemed not to have been acquired by a taxpayer until the later of
Marginal note:Special rules — adjustments
(5) For the purpose of this section, the capital cost of EV building property of a taxpayer shall
(a) not include any amount
(i) in respect of which an amount was previously deducted under this section by any person,
(ii) in respect of which any other clean economy tax credit (as defined in subsection 127.47(1)) was deducted by any person,
(iii) in respect of any part of the capital cost of a property if a CCUS tax credit (as defined in subsection 127.44(1)) or a clean hydrogen tax credit (as defined in subsection 127.48(1)) was deducted by any person in respect of that property, or
(iv) that has, by virtue of section 21, been added to the cost of a property;
(b) be determined without reference to subsections 13(7.1) and (7.4);
(c) be reduced by the total of all amounts, each of which can reasonably be considered to be in respect of the property and is
(i) an amount of any government assistance or non-government assistance received by the taxpayer in or before the taxation year in which the property was acquired, or
(ii) an amount not described in subparagraph (i) that, in the taxation year, the taxpayer is entitled to or can reasonably be expected to receive and that would be government assistance or non-government assistance if it were received by the taxpayer; and
(d) be determined with reference to subsections 127(11.6) to (11.8) in respect of an expenditure or cost to the taxpayer except that
(i) the reference in subsection 127(11.6) to subsection 127(11.5) is to be read as a reference to section 127.492,
(ii) the reference in subsection 127(11.6) to subsection 127(26) is to be read as a reference to subsection 127.492(8), and
(iii) the term "qualified expenditure" is to be read as an expenditure eligible to be added to the capital cost of an EV building property.
Marginal note:Deemed deduction
(6) For the purpose of this section, paragraph 12(1)(t), subsection 13(7.1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2) and sections 127.44, 127.45, 127.48, 127.49, 127.491 and 129, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer's tax otherwise payable under this Part for the year.
Marginal note:Repayment of assistance
(7) Where a taxpayer has, in a particular taxation year, repaid (or has not received and can no longer reasonably be expected to receive) an amount of government assistance or non-government assistance that was applied to reduce the cost of a particular property under paragraph (5)(c) for a preceding taxation year, the amount repaid (or no longer expected to be received) is to be added to the cost to the taxpayer of a separate property that is deemed to be acquired in the particular year for the purposes of this section, provided that a transaction or event described in paragraph (10)(c) has not occurred in respect of the particular property.
Marginal note:Unpaid amounts
(8) For the purpose of this section, where any part of the capital cost of a taxpayer's particular EV building property is unpaid on the day that is 180 days after the end of the taxation year in which a deduction in respect of an EV supply chain investment tax credit would otherwise be available in respect of the property, such amount is to be
(a) excluded from the capital cost of the particular property in the year; and
(b) added to the capital cost of a separate EV building property that is deemed to be acquired at the time the amount is paid, provided that a transaction or event described in paragraph (10)(c) has not occurred in respect of the particular property.
Marginal note:Tax shelter investment
(9) Subsection (2) does not apply if an EV building property – or an interest in a person or partnership that has, directly or indirectly, an interest in, or for civil law, a right in, such property – is a tax shelter investment for the purpose of section 143.2.
Marginal note:Recapture — conditions for application
(10) Subsection (11) applies in a taxation year of a taxpayer if
(a) the taxpayer acquired an EV building property in the year or any of the preceding 10 calendar years;
(b) the taxpayer became entitled to an EV supply chain investment tax credit in respect of the capital cost, or a portion of the capital cost, of the property; and
(c) in the year,
Marginal note:Recapture of credit
(11) If this subsection applies, there shall be added to the taxpayer's tax otherwise payable under this Part for the year the lesser of
(a) the amount of the taxpayer's EV supply chain investment tax credit in respect of the property, and
(b) the amount determined by the formula
A × (B ÷ C)
where
- A
- is the amount of the taxpayer's EV supply chain investment tax credit in respect of the property,
- B
- is
- C
- is the capital cost of the property on which the EV supply chain investment tax credit was deducted.
Marginal note:Certain non-arm's length transfers
(12) Subsections (10) and (11) do not apply to a taxpayer (in this subsection referred to as the "transferor") that disposes of a property to a taxable Canadian corporation (in this subsection referred to as the "purchaser") related to the transferor, if the purchaser acquired the property in circumstances where the property would be EV building property to the purchaser (but for paragraph (d) of the definition EV building property in subsection (1)).
Marginal note:Certain non-arm's length transfers — recapture deferred
(13) If subsections (10) and (11) do not apply because of subsection (12), subsection 127(34) applies with such modifications as the circumstances require, including that the reference to subsection 127(33) be read as subsection 127.492(12).
Marginal note:Recapture event reporting requirement
(14) If subsection (11), (12) or (13) applies to a taxpayer for a taxation year, the taxpayer shall notify the Minister in prescribed form and manner on or before the taxpayer's filing-due date for the year.
Marginal note:EV supply chain investment tax credit — purpose
(15) The purpose of this section is to encourage major investments in Canada by integrated manufacturers in each of the three critical segments of the electric vehicle supply chain.
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
14 (1) Paragraph 152(1)(b) of the Act is replaced by the following:
(b) the amount of tax, if any, deemed by any of subsections 120(2) or (2.2), 122.5(3) to (3.003), 122.51(2), 122.7(2) or (3), 122.72(1), 122.8(4), 122.9(2), 122.91(1), 125.4(3), 125.5(3), 125.6(2) or (2.1), 127.1(1), 127.41(3), 127.42(2) or (3), 127.421(2) or (3), 127.44(2), 127.45(2), 127.48(2), 127.49(2), 127.491(2), 127.492(2) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year.
(2) Subsection 152(4) of the Act is amended by adding the following after paragraph (b.95):
(b.96) a prescribed form that is required to be filed by the taxpayer under subsection 127.492(14) is not filed as and when required, and the assessment, reassessment or additional assessment is made in relation to transactions or events described in subsections 127.492(10) to (13) before the day that is
(3) Paragraph 152(4.01)(b) of the Act is amended by adding the following after subparagraph (xv):
(xvi) the transactions or events referred to in paragraph (4)(b.96);
(4) Subsections (1) to (3) are deemed to have come into force on January 1, 2024.
15 (1) Paragraph 157(3)(e) of the Act is replaced by the following:
(e) 1/12 of the total of the amounts each of which is deemed by subsection 125.4(3), 125.5(3), 125.6(2) or (2.1), 127.1(1), 127.41(3), 127.44(2), 127.45(2), 127.48(2), 127.49(2), 127.491(2) or 127.492(2) to have been paid on account of the corporation's tax payable under this Part for the year.
(2) Paragraph 157(3.1)(c) of the Act is replaced by the following:
(c) 1/4 of the total of the amounts each of which is deemed by subsection 125.4(3), 125.5(3), 125.6(2) or (2.1), 127.1(1), 127.41(3), 127.44(2), 127.45(2), 127.48(2), 127.49(2), 127.491(2) or 127.492(2) to have been paid on account of the corporation's tax payable under this Part for the taxation year.
(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2024.
16 (1) Paragraph 163(2)(d.1) of the Act is replaced by the following:
(d.1) the amount, if any, by which
(i) the amount that would be deemed by subsection 127.44(2), 127.45(2), 127.48(2), 127.49(2) 127.491(2) or 127.492(2), as the case may be, to be paid for the year by the person if that amount were calculated by reference to the information provided in the return or form filed for the year pursuant to that subsection
exceeds
(ii) the amount that is deemed by subsection 127.44(2), 127.45(2), 127.48(2), 127.49(2), 127.491(2) or 127.492(2), as the case may be, to be paid for the year by the person,
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
17 (1) Subsection 220(2.2) of the Act is replaced by the following:
Marginal note:Exception
(2.2) Subsection (2.1) does not apply in respect of a prescribed form, receipt or document, or prescribed information, that is filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11) or paragraph (m) of the definition investment tax credit in subsection 127(9), or subsection 127.44(17), 127.45(3), 127.48(4), 127.49(3), 127.491(7) or 127.492(3).
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
18 (1) Subparagraph 241(4)(d)(vi.2) of the Act is replaced by the following:
(v1.2) to a person employed or engaged in the service of an office or agency of the Government of Canada solely for the purposes of administering or enforcing sections 127.44 to 127.492 and 211.92 to 211.95 or the evaluation or formulation of related policies or guidelines,
(2) Subsection (1) is deemed to have come into force on January 1, 2024.
- Date modified: