Investment Tax Credit (ITC) for Qualified Property

This section outlines the rules and conditions for claiming the Investment Tax Credit (ITC) specifically related to qualified property, with a focus on designated activities in the Atlantic region. The ITC is a mechanism through which corporations can earn credits to reduce their Part I tax liability.

Key Points

1. Qualified Property Eligibility
   • Corporations can earn ITCs on qualified property primarily acquired for designated activities in the Atlantic region.
2. Designated Activities
   • Designated activities include, among others:
     • Manufacturing or processing goods for sale or lease.
     • Logging.
     • Farming or fishing.
     • Storing grain.
     • Harvesting peat.
3. Class 53 Eligibility
   • Eligible machinery and equipment acquired after 2015 and before 2026 for use in Canada, mainly for manufacturing and processing goods for sale or lease, is included in class 53. These assets qualify for the ITC.
4. ITC Rate
   • The ITC rate for qualified property is 10%.
5. Rules for Corporations Leasing Qualified Properties
   • Specific rules apply to corporations engaged in leasing qualified properties, such as prescribed machinery, equipment, or energy generation and conservation property, to lessees involved in designated activities.
   • Different criteria are outlined for corporations with principal businesses in leasing, manufacturing, or selling/servicing property.
   • For corporations with a principal business of leasing property, lending money, or purchasing conditional sales contracts, accounts receivable, or other obligations:
     • Property acquired for leasing in the ordinary course of business in Canada is considered qualified property

1. • For corporations with a principal business of manufacturing property that is sold or leased:
     • Property is considered qualified only if the corporation both manufactures and leases it in the ordinary course of business in Canada.
   • For corporations with a principal business of selling or servicing property:
     • Property is considered qualified only if it is a type of property that the corporation sells or services, and it is leased in the ordinary course of business in Canada.

Practical Implications:

Understanding the eligibility criteria and specific rules for qualified property under designated activities is crucial for corporations aiming to maximize their ITC. Compliance with these rules ensures that the claimed credits align with the intended objectives of promoting specific economic activities.

References:

• The legislative basis for the ITC and related rules is provided in relevant subsections, possibly including Subsections 13(26) to 13(32) and 127(11.2).
• Additional guidelines and regulations may be referred to for specific details.

Example Scenario:

A manufacturing corporation in the Atlantic region acquires eligible machinery for the production of goods for sale or lease. By meeting the criteria outlined in this article, the corporation qualifies for an ITC at a rate of 10% on the cost of acquiring this qualified property. The ITC earned can then be applied to reduce the corporation's Part I tax liability.