CRA finds that NRCan preliminary approval of a CCUS project in Year 2 can backdate qualification of a project expenditure for Class 57(a) property acquired in Year 1

In 2026. a taxable Canadian corporation (Aco) takes ownership and delivery of, and pays for, equipment described in Class 57(a) at the premises of its proposed (carbon capture) CCUS project. However, the equipment will be stored at the premises until Natural Resources Canada (NRCan) issues an initial project evaluation, which will not occur until 2027.

After noting that, unlike other clean economy investment tax credits, there is no requirement that the property acquired be available for use before the CCUS tax credit can be claimed, CRA indicated that the expenses incurred in 2026 could be considered to have been incurred “in respect of” a qualified CCUS project of ACo once ACo's project became a qualified CCUS project upon receipt of the initial project evaluation from NRCan in 2027.

Accordingly, such expenditure would be qualified carbon capture expenditures for the 2026 taxation year, i.e., once initial project evaluation occurred in 2027, the 2026 expenditure would qualify and could be claimed for 2026 (and this was so even though the special backdating timing rule in s. 127.44(9)(h) was not available.)

Neal Armstrong. Summary of 21 July 2025 External T.I. 2024-1039761E5 under s. 127.44(4).