2015-0565841M4 Accelerated CCA- Renewable Energy

Principal Issues: 1.General information about accelerated CCA rules for manufacturing or processing equipment and renewable energy sources.

Position: 1. No position taken.

Reasons: 1. General information only..

Author: Dubis, Robert
Section: -

March 16, 2015

XXXXXXXXXX

Dear XXXXXXXXXX:

The office of the Right Honourable Stephen Harper, Prime Minister of Canada, sent me a copy of your correspondence, which I received on January 13, 2015, asking what type of businesses are eligible to claim the accelerated capital cost allowance (CCA).

Under the CCA regime, the Income Tax Act and related regulations provide an accelerated CCA rate for investments in:

*     machinery and equipment used in Canada to manufacture or process goods for sale or lease; or
*     clean energy generation and energy conservation equipment.

Generally, businesses that make new investments in machinery and equipment used in Canada to manufacture or process goods for sale or lease are eligible to claim accelerated CCA on that machinery and equipment. To be eligible for the 50% straight line depreciation rate, the business must have acquired the machinery and equipment after March 18, 2007, and before 2016.

If a taxpayer’s business does not involve manufacturing or processing goods for sale or lease, machinery and equipment used in that business would not qualify for the accelerated CCA related to manufacturing and processing. You can find more information about the current rules in Interpretation Bulletin IT‑147R3, Capital Cost Allowance – Accelerated Write-Off of Manufacturing and Processing Machinery and Equipment, at www.cra.gc.ca/E/pub/tp/it147r3.

Businesses that invest in clean energy generation and energy conservation equipment may be able to claim accelerated CCA on those investments using either the appropriate 30% or 50% per year declining balance method. Eligible equipment includes equipment that generates or conserves energy by various means, including using a renewable energy source like solar energy.  More detailed technical information on the equipment that can qualify for this accelerated CCA regime is published by Natural Resources Canada in the Technical Guide to Class 43.1 and 43.2. The latest editions of this technical guide can be found at www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/Class_431-432_Technical_Guide_en.pdf.

I note your suggestion that all businesses should benefit from accelerated CCA. This is a tax policy issue that would require changes to the Income Tax Act. The Canada Revenue Agency administers and enforces the Act. The Department of Finance Canada is responsible for tax policy and changes to provisions of the Act. I am therefore sending a copy of our correspondence to the Honourable Joe Oliver, Minister of Finance, for his consideration.

I trust the information I have provided and the referral are helpful.

Yours sincerely,

Hon. Kerry-Lynne D. Findlay, P.C., Q.C., M.P.
Minister of National Revenue

c.c.: The Right Honourable Stephen Harper, P.C., M.P.
        Prime Minister of Canada
        Stephen.Harper.C1A@parl.gc.ca

        The Honourable Joe Oliver, P.C., M.P.
        Minister of Finance
        House of Commons
        Ottawa ON  K1A 0A6

Robert Dubis
(905) 721-5191
2015-056584

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2015

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2015