2019-0798971M4 CCA class for zero-emission / electric vehicles

Principal Issues: Whether there are plans to include electric cars in a capital cost allowance (CCA) class other than Class 10.1.

Position: See response.

Reasons: Budget 2019.

Author: El-Kadi, Randa
Section: Budget 2019 - Proposed legislation - sections 64, 65, 66, 67.2, 67.41, 68 and 69 of the NWMM

April 24, 2019

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Diane Lebouthillier, Minister of National Revenue, received your correspondence of March 1, 2019, in which you ask whether there are plans to include electric cars in a capital cost allowance (CCA) class other than Class 10.1. She has asked me to reply on her behalf.

You are concerned that restricting the write-off for properties in Class 10.1 is a disincentive for businesses to convert to electric vehicles.

The Canada Revenue Agency is responsible for administering and enforcing the Income Tax Act and the Income Tax Regulations, whereas the Department of Finance Canada is responsible for developing federal tax policy, amending the legislation, and proposing changes to the regulations that are related to tax policy. Therefore, you may want to direct future queries relating to tax policy to the Department of Finance for their consideration.

However, I am pleased to advise you that Budget 2019, which was tabled on March 19, 2019, proposes to support business investment in zero-emission vehicles. This includes adding two new CCA classes for such vehicles that are acquired after March 18, 2019: one class with a CCA rate of 30% essentially for automobiles except taxicabs and others used for lease and rent, and another class with a CCA rate of 40% essentially for automobiles for lease or rent and taxicabs. Capital costs in the first class will be deductible up to a limit of $55,000 plus sales tax. This is higher than the capital cost limit of $30,000 plus sales tax that currently applies to passenger vehicles. The CCA will apply on a declining‑balance basis in these classes.

The budget also proposes an enhanced first-year CCA for eligible zero-emission vehicles acquired after March 18, 2019, and before 2028, providing an effective CCA first-year rate as follows:

*    100% for vehicles acquired after March 18, 2019, and before 2024;
*    75% for vehicles acquired after 2023 and before 2026; and
*    55% for vehicles acquired after 2025 and before 2028.

Any remaining balances will be subject to the applicable CCA rate referenced above.

For more information on the proposal, I invite you to refer to Part 2, “Affordable Electricity Bills and a Clean Economy,” in Chapter 2 of Budget 2019. You can access this information at budget.gc.ca/2019/docs/plan/toc-tdm-en.html.

I trust the information I have provided is helpful.

Sincerely,

Geoff Trueman
Assistant Commissioner
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency

Randa El-Kadi
613-670-9054
2019-079897

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