Investment Tax Credit (ITC)

Line 652 pertains to the Investment Tax Credit (ITC), a credit that corporations can claim to reduce Part I tax. The ITC may be fully or partially refundable in some cases. Schedule 31, Investment Tax Credit – Corporations, is used to calculate this credit.

Key Points:

1. Calculation Using Schedule 31:
   • Corporations calculate the ITC using Schedule 31, which involves applying a specified percentage to the cost of acquiring certain property (investments) or on specific expenditures.
   • The capital cost of the property or expenditure must be reduced by any government or non-government assistance received or expected.
2. Available-for-Use Rule:
   • The corporation is only considered to have acquired a property or made capital expenditures for earning an ITC when the property becomes available for use.
3. Qualifying Investments and Expenditures:
   • The ITC can be earned on the following:
     • A. The cost of acquiring qualified property.
     • A.1. The cost of acquiring qualified resource property (only carry-forward amounts are allowed).
     • B. SR&ED qualified expenditure pool.
     • C. Pre-production mining expenditures (only carry-forward amounts are allowed).
     • D. Apprenticeship expenditures.
     • E. Eligible child care spaces (only carry-forward amounts are allowed).
4. Definitions of Qualifying Investments and Expenditures:
   • Definitions are provided for qualified property, qualified resource property, qualified expenditures, and SR&ED qualified expenditure pool.
5. Expiration of Certain Credits:
   • Qualified resource property credits expired on December 31, 2015, with transitional measures expiring on December 31, 2016.
   • Pre-production mining expenditure credits expired on December 31, 2015, with transitional measures also expiring.

1. Carry-Forward Provisions:
   • Unused credits that have not expired can be carried forward for up to 20 tax years following the tax year in which the investment was made.
2. Repealed Definition:
   • The definition of eligible child care spaces expenditure was repealed, and claims for this credit expired on March 31, 2017, with transitional measures expiring on December 31, 2019.

References:

• Subsections 13(26) to 13(32) and 127(11.2) provide the legislative basis for the ITC.
• Definitions of qualified property, qualified resource property, qualified expenditures, and SR&ED qualified expenditure pool are outlined in subsection 127(9) and subsection 248(1).
• Relevant regulations and schedules, such as Schedule 31, provide detailed instructions.

Example Scenario:

Suppose Corporation Y incurred qualified expenditures in scientific research and experimental development (SR&ED). Using Schedule 31, Corporation Y calculates the ITC based on the specified percentage for SR&ED qualified expenditure pool, considering any applicable reductions for government assistance. The resulting ITC is then entered on Line 652 to reduce the Part I tax liability.