2024-1027501E5 Stacking of investment tax credits and CCA

Principal Issues: A multi-year example to illustrate the stacking of various investment tax credits (i.e., Nova Scotia Capital Investment Tax Credit, Atlantic Investment Tax Credit and the Clean Technology Investment Tax Credit) available to a hypothetical taxpayer's capital investment in a clean technology property. This example also illustrates the CCA calculations for the property during the phase-out period of the accelerated investment incentive property (i.e., full-expensing) incentive.

Author: Verlinden, Nicole
Section: 127.45, 127(5), 127(9), 20(1)(a), Class 43.1, Class 43.2, Reg. 1104(4), Reg. 1100(2) and Nova Scotia Income Tax Act, RSNS 1989, c. 217 and the Capital Investment Tax Credit Regulations made under Section 49A of the Income Tax Act, R.S.N.S.

October 21, 2024

XXXXXXXXXX                                                               Nicki Verlinden
                                                                                       2024-102750

Dear XXXXXXXXXX,

Re: Stacking of the Clean Technology Investment Tax Credit, the Atlantic Investment Tax Credit and the Nova Scotia Capital Investment Tax Credit

I am writing in response to your inquiry regarding the mechanics of stacking certain capital investment tax incentives that are available to a taxpayer for the acquisition of solar panels to be used in that taxpayer’s business, specifically:

- the Clean Technology Investment Tax Credit (“Clean Tech ITC”);

- the Atlantic Investment Tax Credit (“AITC”);

- the Nova Scotia Capital Investment Tax Credit (“NS CITC”); (footnote 1)

- the capital cost allowance (“CCA”), notably, the availability of CCA Classes 43.1 and 43.2; and

- the accelerated investment incentive (also referred to as the “full expensing for clean energy equipment” incentive). (footnote 2)

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Unless otherwise stated, all references to a statute are to the relevant provision of the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended (the “Act”), or, where appropriate, the Income Tax Regulations, C.R.C., c.945, as amended (the “Regulations”).

Throughout this letter there are also references to the Nova Scotia Income Tax Act, RSNS 1989, c. 217 (“NS ITA”) and the Capital Investment Tax Credit Regulations made under Section 49A of the Income Tax Act, R.S.N.S. 1989, c. 217 (“NS CITC Regulations”).

I: Hypothetical scenario

The following outlines the hypothetical facts that will form the basis for our analysis and conclusions in this letter.

- Taxpayer was incorporated under the laws of Nova Scotia and is a taxable Canadian corporation, as defined in subsection 89(1) of the Act.

- Taxpayer is not a Canadian-controlled private corporation, as defined in subsection 125(7).

- The Taxpayer’s only business is the manufacturing of goods for sale through a permanent establishment located in Halifax, Nova Scotia, Canada and it earns income from that business.

- Note: The Taxpayer’s principal activity is not included the list of NAICS Canada classes in paragraph 4(c) of the NS CITC Regulations.

- Taxpayer’s taxation year is from January 1 to December 31.

- Taxpayer does not have any properties in its undepreciated capital cost (“UCC”) Classes 43.1 and 43.2, nor will it acquire or dispose of any properties in those classes, unless otherwise specified in this hypothetical scenario.

- Taxpayer acquires new depreciable capital property with a capital cost of $10,000,000 on September 21, 2024 (herein referred to as the “Property”) from an arm’s length seller.

- The Property becomes “available for use” (footnote 3) on November 1, 2024.

- The Property is equipment used to generate electricity from solar energy that is described in subparagraph (d)(vi) of Class 43.1 (i.e., fixed location photovoltaic equipment that is situated in Canada and used by the Taxpayer primarily for the purpose of generating electrical energy from solar energy).

- All of the electricity generated by the Property will be used by the Taxpayer for the purpose of manufacturing its goods for sale and the Property will be an integral and essential part of the Taxpayer’s manufacturing operations. For clarity, the Taxpayer will not sell the electricity that it generates from the Property.

- The Property is intended for use exclusively in Halifax, Nova Scotia in the Taxpayer’s manufacturing business.

- Taxpayer will not receive non-government assistance (footnote 4) in respect of the acquisition of the Property.

- Unless otherwise specified in the analysis that follows, the Taxpayer will not receive any government assistance (footnote 5) in respect of the acquisition of the Property.

- Taxpayer will file its income tax returns on or before its filing due-date (footnote 6) for the respective taxation years, which in this case will be on or before June 30.

- Taxpayer will elect to meet the labour requirements in section 127.46 in respect of the preparation and installation of the Property, and the Taxpayer will meet those requirements at all relevant times.

- The specified energy property rules, (footnote 7) which limit a taxpayer’s CCA deduction, will not apply because the Taxpayer meets one of the exceptions in subsections 1100(25) or (26) of the Regulations.

- The Property will be part of an “approved project” of the Taxpayer for which an eligibility certificate will be issued to the Taxpayer for purposes of the NS CITC on or before December 31, 2024. For more information on this, see Appendix A of this letter.

- By December 31, 2024, the Taxpayer will decide to apply for its tax-credit certificate as soon as possible some time between December 31, 2024 and its filing due-due for that taxation year (i.e., June 30, 2025). For more information on this, see Appendix A of this letter.

- We have assumed that the Taxpayer will receive the tax-credit certificate specifying the amount of the NS CITC that may be claimed by the Taxpayer by the time it files its income tax return for its 2024 taxation year. For more information, see Appendix A.

II. Relevant Income Tax Implications for Taxpayer in its December 31, 2024 taxation year

A. Deduction from income – CCA

CCA is an elective deduction from income and the Taxpayer’s ability to claim CCA on depreciable property that it acquires will depend on when the property becomes “available for use”. (footnote 8) The Taxpayer will acquire the Property and the Property will become available for use during its 2024 taxation year.

The capital cost of the Property is $10,000,000, which will be included in the UCC of Class 43.2, (footnote 9) pursuant to Element A of that definition in subsection 13(21), based on its date of acquisition.

The Property meets the definition of accelerated investment incentive property (“AIIP”) in subsection 1104(4) of the Regulations and therefore it will be eligible for the first-year enhanced CCA deduction. (footnote 10) In general, AIIP is depreciable property that is (i) new, (ii) acquired by a taxpayer after November 20, 2018 and (iii) becomes available for use before 2028. (footnote 11)

The Taxpayer may deduct up to $7,500,000 as CCA in respect of the Property (footnote 12) from its income from a business for its 2024 taxation year, which is computed as follows:

Capital Cost of the Property determined under Element A of UCC $10,000,000

Add: adjustment for accelerated investment incentive $5,000,000

(i.e., 1/2 X $10M (footnote 13) )

Subtotal for purposes of computing first-year CCA in 2024 15,000,000

CCA deduction (Class 43.2 – 50% (footnote 14) ) $7,500,000

B. NS CITC

The NS CITC is a refundable corporate tax credit for capital costs directly related to acquiring qualified property (footnote 15) for use in Nova Scotia as part of an approved project. (footnote 16)

The Taxpayer can make a claim for the NS CITC in its 2024 taxation year, provided that the Taxpayer has been issued a tax-credit certificate at the time of filing its 2024 income tax return (see Appendix A for a summary of the conditions for the NS CITC).

The amount of the NS CITC that the Taxpayer can claim in its income tax return for its 2024 taxation year is specified on the tax-credit certificate, which is issued to the Taxpayer pursuant to subsection 49A(6) of the NS ITA. Subsection 49A(7A) of the NS ITA provides that this amount is equal to 25% of the capital cost of the qualified property (after it is reduced for government assistance directly related to its acquisition).

The AITC, the Clean Tech ITC and the NS CITC are not considered government assistance for purposes of the NS CITC. (footnote 17)   Therefore, the NS CITC will be $2.5 million (i.e., 25% x $10 million).

The NS CITC is deemed to be a payment on account of the Taxpayer’s tax payable under the NS ITA, on its balance due-day for its December 31, 2024 taxation year-end, (footnote 18) and therefore may be deducted from the Taxpayer’s taxes payable for its December 31, 2024 taxation year. (footnote 19) To the extent that the deemed payment is in excess of the Taxpayer’s taxes payable for the year, it will be refunded to the Taxpayer. (footnote 20)

C. Clean Tech ITC

The Clean Tech ITC is a refundable tax credit for capital invested in the adoption and operation of new clean technology property in Canada from March 28, 2023, to December 31, 2034.

The Clean Tech ITC is available to the Taxpayer in respect of the capital cost of a clean technology property, which is defined in subsection 127.45(1) of the Act. The Property will meet the definition of a clean technology property, based on the hypothetical facts (see Appendix B for more details).

The Taxpayer is entitled to the Clean Tech ITC in its December 31, 2024 taxation year because the Property will be available for use in that taxation year. (footnote 21)

In claiming the Clean Tech ITC on its 2024 income tax return, the Taxpayer will follow the instructions in the attached website: How to claim the credit - Canada.ca. Note that the Taxpayer cannot make a claim for the Clean Tech ITC after June 30, 2026, which is one year after the Taxpayer’s filing due-date for its 2024 taxation year. (footnote 22)

The capital cost of the clean technology property (i.e., the Property) without reference to the adjustments in subsection 127.45(5) is $10,000,000. Paragraph 127.45(5)(b) provides that the capital cost of the Property is to be determined without reference to subsections 13(7.1) and (7.4) of the Act and subparagraph 127.45(5)(b.1)(ii) requires that the capital cost of the Property (i.e., $10,000,000) be reduced for an amount of government assistance in respect of the Property that, in the taxation year (i.e., 2024), the Taxpayer is entitled to or can reasonably be expected to receive. (footnote 23)  

(i) Government Assistance

Government assistance, as defined in subsection 127.45(1) by reference to the definition of this term in subsection 127(9), 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)) or as a deduction under subsection 127(5) or 127(6) or a deemed payment on account of tax payable under subsection 127.44(2), 127.45(2), 127.48(2) or 127.49(2).

The NS CITC will meet the definition of government assistance, but the AITC and the Clean Tech ITC will not in light of the specific exclusions for a deduction under subsection 127(5) (footnote 24) and a deemed payment on account of tax payable under subsection 127.45(2).

(ii) “Can reasonably be expected to receive”

The Taxpayer is entitled to deduct the NS CITC from its tax otherwise payable for a taxation year when it receives the tax-credit certificate. (footnote 25) The tax-credit certificate will not be issued to the Taxpayer in 2024, based on the hypothetical facts, which state that the Taxpayer will apply for this certificate after December 31, 2024 and before its filing-due date (i.e., June 30, 2025).

Whether or not a taxpayer can reasonably be expected to receive government assistance at a particular point in time is a question of fact that is to be determined on a case-by-case basis taking into account all the relevant facts and circumstances.

By December 31, 2024, the Taxpayer can reasonably be expected to receive the NS CITC, based on the hypothetical facts, and is therefore required to reduce the capital cost of the Property (i.e., $10,000,000) by the amount of the NS CITC that it can reasonably be expected to receive (i.e., $2,500,000). This results in an “adjusted” capital cost of clean technology property of $7,500,000.

The Clean Tech ITC for the Taxpayer will be $2,250,000 (i.e., 30% (footnote 26) x $7,500,000), based on the hypothetical facts.

The Clean Tech ITC is deemed to be a payment on account of the Taxpayer’s tax payable, on its balance due-day for its December 31, 2024 taxation year-end. (footnote 27) Therefore, to the extent that the deemed payment is in excess of the Taxpayer’s federal taxes payable for the year, it will be refunded to the Taxpayer.

D. AITC

The AITC is an investment tax credit available to taxpayers that make capital investments in certain industry sectors operating in the Atlantic Region of Canada. (footnote 28) It is computed by multiplying 10% (footnote 29) by the capital cost of qualified property acquired (footnote 30) by a taxpayer in the year.

The Taxpayer is entitled to the AITC in its December 31, 2024 taxation year-end because the Property is available for use in 2024.

The Property will meet the definition of a qualified property, based on the hypothetical facts (see Appendix C for more details).

To make a claim for the AITC, the Taxpayer must file a prescribed form containing prescribed information on or before June 30, 2026, which is one year after the Taxpayer’s filing due-date for its 2024 taxation year. (footnote 31)   The prescribed form for the Taxpayer is T2SCH31 Investment Tax Credit - Corporations - Canada.ca.

The capital cost of the qualified property (i.e., the Property) for purposes of computing the AITC is $7,500,000. This is because of paragraph 127(11.1)(b) , (footnote 32) which requires that the capital cost of the Property (i.e., $10,000,000) be determined without reference to subsections 13(7.1) or (7.4) and be reduced by the amount of government assistance that, at the time of the filing of the Taxpayer’s income tax return for its 2024 taxation year, the Taxpayer has received, is entitled to receive or can reasonably be expected to receive.

The definition of government assistance referenced above in the context of the Clean Tech ITC is the same one that is used for purposes of computing the AITC. By the time the Taxpayer files its income tax return for its 2024 taxation year, the Taxpayer can reasonably be expected to receive and is entitled to receive, the NS CITC, based on the hypothetical facts.

Consequently, the $10,000,000 capital cost of the Property will be reduced by the NS CITC of $2,500,000, but not for the AITC or the Clean Tech ITC, since those are specifically excluded from the definition of government assistance (discussed above).

Therefore, the AITC for the Taxpayer will be $750,000 (i.e., 10% x $7,500,000), based on the hypothetical facts.

The AITC can be taken as a deduction from the Taxpayer’s federal income tax payable in its 2024 taxation year. Because the Taxpayer is not a Canadian-controlled private corporation it will not meet the definition of a qualifying corporation, (footnote 33)   which means that the AITC is not refundable to the Taxpayer. If any portion of the $750,000 AITC is not used to reduce Taxpayer’s federal income tax payable in its 2024 taxation year, it may be carried-forward for up to 20 years, or carried back up to three years. (footnote 34)

III. Relevant Income Tax Implications for Taxpayer in its December 31, 2025 taxation year

A. Deduction from income – CCA

The preamble to the definition of UCC in subsection 13(21) states that the UCC to a taxpayer of depreciable property of a prescribed class is computed “at any time”.

The capital cost of the Property (i.e., Element A of the UCC definition) will be adjusted by:

- the amount of the Clean Tech ITC deemed to have been deducted for Taxpayer’s December 31, 2024 taxation year, pursuant to paragraph 13(7.1)(e); (footnote 35)

- the amount of the AITC deducted for Taxpayer’s December 31, 2024 taxation year, pursuant to paragraph 13(7.1)(e); and

- the amount of the NS CITC that Taxpayer has received or is entitled to receive, pursuant to paragraph 13(7.1)(f). (footnote 36)

In its 2025 taxation year, Taxpayer will not take a CCA deduction for Class 43.2, rather it will have a $3,000,000 income inclusion pursuant to subsection 13(1), as a result of the recapture of the previously deducted CCA, computed as follows:

Adjusted capital cost of the Property (Element A of UCC) $4,500,000

(i.e., $10M - $2.25M - $2.5M - $0.75M)

Less: previously deducted CCA (Element E of UCC) $7,500,000

Subtotal – Class 43.2 -$3,000,000

Recapture of previously deducted CCA - income inclusion $3,000,000

The $3,000,000 of recaptured CCA will be added to UCC - Class 43.2, pursuant to Element B of the definition of UCC in subsection 13(21) in the Taxpayer’s 2026 taxation year, which will offset the negative balance, resetting the Taxpayer’s UCC for Class 43.2 to nil.

Note that this $3 million recapture could have been avoided if the Taxpayer chose to deduct $4.5 million of CCA in computing its income for the 2024 taxation year, instead of the maximum amount of CCA of $7.5 million.

B. NS CITC

The Taxpayer has not acquired any qualified property that has become available for use in its December 31, 2025 taxation year, based on the hypothetical facts.

C. Clean Tech ITC

The Taxpayer has not acquired any clean technology property that has become available for use in its December 31, 2025 taxation year, based on the hypothetical facts.

D. AITC

The Taxpayer has not acquired any qualified property that has become available for use in its December 31, 2025 taxation year, based on the hypothetical facts.

IV. Summary of the tax deductions and tax credits available to the Taxpayer for each taxation year in respect of its acquisition of the Property

	Capital Cost of Property Acquired	Clean Tech ITC [refundable]	NS CITC [refundable]	AITC [non- refundable]	CCA deduction / (recapture)
December 31, 2024	$10,000,000	$2,250,000	$2,500,000	$750,000	$7,500,000
December 31, 2025	-				(3,000,000)
Total		$2,250,000	$2,500,000	$750,000	$4,500,000

Note, the above dates are not indicative of cash inflows or outflows. The dates when the Taxpayer will realize the above tax incentives will depend on when the Taxpayer files its income tax returns for the above-noted taxation years, and when they are assessed by the CRA.

Yours truly,

Kimberley Wharram
Manager, Resources Section
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

Appendix A: Nova Scotia Capital Investment Tax Credit

There are several conditions that must be satisfied by the Taxpayer before it is issued a tax-credit certificate under subsection 49A(6) of the NS ITA. The tax-credit certificate is required for the Taxpayer to claim the NS CITC. These conditions are summarized here:

(a) The Taxpayer must meet the definition of an eligible corporation in section 4 of the NS CITC Regulations, which has four conditions described in paragraphs (a) to (c). In general, the corporation must be incorporated under a provincial or federal incorporating statute, be a taxable Canadian corporation, have a permanent establishment in Nova Scotia and not have as its principal activity one of the 10 listed classes of industries under NAICS Canada, for example construction and oil and gas extraction, among others.

The Taxpayer is an eligible corporation based on the hypothetical facts.

(b) The qualified property must be acquired as part of an approved project in section 3 of the NS CITC Regulations. An approved project is one that satisfies three conditions described in paragraphs (a) to (c). The first condition requires the Taxpayer to incur a minimum total expenditures for qualified property for a project over given periods of time. For example, $5 million within a 24 month period and $15 million within a 60 month period. The second condition requires that at least 50% of the revenue from the project is not from government sources. The third condition is that the project is, in the opinion of the Minister of Finance and Treasury Board of the Province (“NS Minister”), consistent with the Nova Scotia’s priority of achieving sustained economic development and growth through investments in significant capital projects such as new technologies or expansions that result in gains in innovation, productivity or competitiveness as well as increased international trade.

The hypothetical facts state that the Taxpayer’s project is an approved project.

(c) The Taxpayer must apply for and be issued an eligibility certificate before it can apply for the tax-credit certificate. (footnote 37)  

The hypothetical facts state that an eligibility certificate will have been issued to the Taxpayer in respect of its approved project by December 31, 2024.

(d) The Property must be a qualified property, as defined in subsection 49A(1) of the NS ITA, which states:

“qualified property”, in respect of an eligible corporation, means property acquired by the eligible corporation after December 31, 2014, and before January 1, 2030, to be used in [Nova Scotia] (footnote 38) , that (i) is qualified property as defined in subsection 127(9) of the Federal Act, or (ii) meets the criteria, set out in the [NS CITC Regulations], to be qualified property.

In order to receive the NS CITC, the qualified property must become available for use in the taxation year that the tax credit is being applied for. (footnote 39)

The hypothetical facts state that the Property will be acquired and available for use in Nova Scotia in 2024, and as noted below in Appendix C, it will meet the definition of qualified property in subsection 127(9) of the Act.

For more information on the NS CITC, specifically on the two-step application process, click the links: Nova Scotia Department of Finance - Capital Investment Tax Credit and Nova Scotia capital investment tax credit - Canada.ca.

Appendix B: Clean Technology Investment Tax Credit

Clean technology property is defined in subsection 127.45(1) of the Act. To qualify, the property must meet all the applicable conditions in paragraphs (a) to (d), which are summarized here.

(a) The property must be situated in Canada and intended for use exclusively in Canada.

The hypothetical facts state that the Property will be situated in and used in the Taxpayer’s business in Halifax, Nova Scotia, Canada.

(b) The property must not have been used or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer.

  The hypothetical facts state that the Property is new.

(c) Not relevant here because it deals with leased property.

(d) The property must fall into one of seven types of properties listed. The relevant one is: (i) equipment used to generate electricity from solar, wind and water energy that is described in subparagraph (d)(ii), (iii.1), (v), (vi) or (xiv) of Class 43.1 in Schedule II to the Regulations.

The hypothetical facts state that the Property is equipment used to generate electricity from solar energy as described in Class 43.1(d)(vi).

Appendix C: Atlantic Investment Tax Credit

Qualified property is defined in subsection 127(9) of the Act. To qualify, the property must meet all the applicable conditions, which are summarized here.

Firstly, the property must be new and be one of (a) a prescribed building, (b) prescribed machinery and equipment or (b.1) prescribed energy generation and conservation property. Prescribed energy generation and conservation property is defined in subsection 4600(3) of the Regulations, and includes property that is included in CCA Class 43.2 and CCA Class 43.1, by virtue of paragraph (d). The Property qualifies as prescribed energy generation and conservation property, based on the hypothetical facts because the Property acquired by the Taxpayer is new and will be included in Class 43.2.

Secondly, the property must meet one of the three purpose tests, which are described in paragraphs (c), (c.1) and (d).

Paragraph (c) is for property that is to be used by the taxpayer in Canada primarily for the purpose of: (i) manufacturing or processing goods for sale or lease, (ii) farming or fishing, (iii) logging, (iv) storing grain or (v) harvesting peat. The Property qualifies under the purpose test in paragraph (c), based on the hypothetical facts, which state that the Property will be used in Halifax, Nova Scotia, Canada, be an integral and essential part of the Taxpayer’s manufacturing of goods for sale, (footnote 40) and it will not sell the electricity it generates with the Property. (footnote 41)

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 The NS CITC is administered by the Canada Revenue Agency (CRA) and the Taxation and Federal Fiscal Relations Division of the Nova Scotia Department of Finance and Treasury Board. For more information, see CITC_Guidelines.pdf (novascotia.ca).

2 The accelerated investment incentive/full expensing for clean energy equipment was announced as part of the Minister of Finance’s 2018 Fall Economic Statement on November 21, 2018. For more information, see Accelerated investment incentive - Canada.ca.

3 For more details on the meaning of “available for use”, see paragraphs 1.32 and 1.34 of Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance – Canada.ca, but note that the third bullet point in paragraph 1.34 does not apply for purposes of the Clean Tech ITC, the AITC and the NS CITC.

4 Non-government assistance is defined in subsection 127(9) of the Act.

5 Government assistance is defined in subsection 127(9) of the Act.

6 Generally speaking, a corporation’s filing due-date for a taxation year is on or before 6 months after the end of the year (see definition of filing due-date in subsection 248(1), and paragraph 150(1)(a)).

7 The specified energy property rules are in subsections 1100(24) to (29) of the Regulations.

8 The relevant “available for use” rules are in subsections 13(26) and 13(27) of the Act.

9 This is because the Taxpayer acquired the property before 2025. If the Property was acquired in 2025, it would be included in Class 43.1, under subparagraph (d)(vi) (30% rate). Note that current Class 43.2 will not be available for properties acquired after December 31, 2024.

10 The first-year enhanced CCA deduction is gradually being phased-out starting in 2024 and will no longer be in effect for properties that become available for use after 2027. Note that the rate of the first-year enhanced CCA deduction depends on the date when the particular property is available for use.

11 The definition of AIIP in subsection 1104(4) of the Regulations refers to property of a taxpayer that meets two conditions described in paragraphs (a) and (b). Paragraph (a) requires that the property is acquired by the taxpayer after November 20, 2018 and becomes available for use before 2028; and paragraph (b) applies in one of two circumstances outlined in subparagraphs (b)(i) and (b)(ii). Because the facts state that the property will be new when acquired by the Taxpayer, and thus no CCA or terminal loss was claimed in respect of the Property before it is acquired, the condition in subparagraph (b)(i) is met and therefore the condition in subparagraph (b)(ii) is not relevant.

12 Pursuant to paragraph 20(1)(a) of the Act.

13 Pursuant to Regulation 1100(2), Element A, subparagraph (c)(ii).

14 Pursuant to Regulation 1100(1)(a)(xxix.2).

15 Defined in subsection 49A(1) of the NS ITA and discussed in Appendix A.

16 Ibid.

17 In subsection 49A(1) of the NS ITA, government assistance is defined by reference to the definition in subsection 127(9) of the Act and it also excludes the NS CITC. The definition of government assistance in subsection 127(9) of the Act excludes the AITC and the Clean Tech ITC, among others.

18 Subsection 49A(4) of the NS ITA.

19 Subsection 49A(2) of the NS ITA.

20 Subsection 49A(3) of the NS ITA and subsection 164(2) of the Act.

21 Subsection 127.45(4) deems a taxpayer not to acquire clean technology property before it is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)(c) and 13(28)(d). Note that this deeming rule is for the purpose of section 127.45 (i.e., the Clean Tech ITC) only.

22 Pursuant to subsection 127.45(3).

23 Note that there are other special adjustments to the capital cost of clean technology property listed in subsection 127.45(5) for purposes of computing the Clean Tech ITC, including a reduction for non-government assistance, however, none are applicable based on the facts of the hypothetical scenario.

24 The deduction under subsection 127(5) of the Act includes a taxpayer’s investment tax credit at the end of the year in respect of property acquired before the end of the year. The AITC is included in the definition of investment tax credit in subsection 127(9), under paragraph (a).

25 Pursuant to subsection 49A(2) of the NS ITA.

26 The specified percentage is 30% as defined in paragraph (b) of the definition in subsection 127.45(1).

27 Subsection 127.45(2).

28 See paragraph 127(9)(a) of the definition of investment tax credit. For more information, see Atlantic investment tax credit - Canada.ca.

29 Ten per cent (10%) is the specified percentage relevant for qualified property used primarily in Nova Scotia, which is defined in clause (a)(iii)(D) of the definition of that term in subsection 127(9).

30 Subsection 127(11.2) deems a taxpayer not to acquire qualified property before it is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)(c) and 13(28)(d). Note that this deeming rule is for the purpose of the AITC, as well as other tax credits included in subsection 127(5) that are not relevant to this hypothetical scenario.

31 This deadline is pursuant to paragraph (m) of the definition of investment tax credit in subsection 127(9).

32 Note that there are other special adjustments to the capital cost of qualified property in subsection 127(11.1) for purposes of computing the AITC, however, none are applicable based on the facts of the hypothetical scenario.

33 Qualifying corporation is defined in subsection 127.1(2) of the Act.

34 See paragraph (c) of the definition of investment tax credit in subsection 127(9) as well as subsection 127(9.01).

35 Subsection 127.45(6) states that for purposes of subsection 13(7.1), the amount deemed under subsection 127.45(2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer’s Part I tax otherwise payable for the year.

36 Pursuant to Paragraph 17 of IT-273R2 Government Assistance – General Comments the CRA has stated that: A tax credit or deduction from tax is considered to be received (…) at the earliest of when it is applied: to reduce a taxpayer's tax instalment payable, and to create or increase a tax refund or to reduce tax liability for a taxation year.

37 The eligibility certificate is issued under section 5 of the NS CITC Regulations. The application requirements are listed under subsection 5(2) of the NS CITC Regulations.

38 “Use” in Nova Scotia means “use primarily” in Nova Scotia (i.e., more than 50% of the time). See CITC_Guidelines.pdf (novascotia.ca)

39 See page 2 of CITC_Guidelines.pdf (novascotia.ca) and pursuant to subsection 8(1), paragraph 9(1)(b) and subsection 2(1) of the NS CITC Regulations. Subsection 2(1) of the NS CITC Regulations states: “available for use” means available for use as determined under either of the following: subsection 13(27) of the [Act], without reference to paragraph (c); subsection 13(28) of the [Act], without reference to paragraph (d).

40 The phrase “manufacturing or processing” has been considered by the courts several times. See for example Repsol Canada Ltd. et al v. The Queen, 2015 DTC 1070 (Tax Court of Canada), (aff’d by FCA in 2017 DTC 5113). For more information on the CRA’s interpretation of “manufacturing or processing” in general, see Income Tax Folio S4-F15-C1, Manufacturing and Processing - Canada.ca

41 Paragraph 127(11)(a) excludes the producing or processing of electricity for sale from the term “manufacturing or processing” for purposes of the AITC by referencing paragraph 125.1(3)(h).

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