CCUS (Carbon Capture, Utilization, and Storage) Investment Tax Credit (ITC)

Canada's CCUS (Carbon Capture, Utilization, and Storage) Investment Tax Credit (ITC) was introduced as part of the federal government's efforts to incentivize the development of CCUS projects across the country. This initiative was first announced in the 2022 Canadian Federal Budget and further detailed in Bill C-59, which was presented to the House of Commons for its first reading on November 30, 2023.\n\nKey aspects of the CCUS ITC include:\n\nRefundable Tax Credit: The ITC is a refundable tax credit based on a percentage of eligible expenses for qualified CCUS projects in Canada. It applies retroactively to expenses incurred from January 1, 2022.\n\nVariable Rates: The ITC rate varies depending on the type of CCUS project:\n\n60% for equipment used in direct air capture.\n50% for equipment used in other CCUS projects.\n5% for equipment used in the transportation, storage, and use of captured CO2.\nDuration and Phase-Out: The ITC is available for eligible expenses incurred through the 2030 tax year. From 2031 to 2040, the rates will be halved.\n\nLabour Requirements: Bill C-59 introduces labour requirements, including wage and apprenticeship training conditions. If these are not met, the ITC rate will be reduced by 10%.\n\nBroader Economic Measures: In addition to the ITC, Bill C-59 implements various measures relating to the Income Tax Act and Regulations. These include limiting the deductibility of net interest and financing expenses, implementing hybrid mismatch rules, supporting the exploration and development of lithium, and introducing a 2% tax on net value equity repurchases by certain entities.\n\nThe CCUS ITC, as part of Bill C-59, represents a significant step in supporting Canada's green energy sector and carbon capture initiatives, aligning with broader economic and environmental policies.