CRA confirms that a lessee will not be able to claim a clean technology ITC under a lease-to-own arrangement, and that this arrangement could trigger recapture of any lessor ITC

Would the lessor or the lessee under a lease-to-own arrangement in respect of clean technology property be eligible to claim the clean technology investment tax credit (CT ITC) under s. 127.45?

CRA noted that the CT ITC was dependent inter alia on the taxpayer having “acquired” the clean technology property in the year, and referred to its position in Folio S3-F4-C1 generally stating that a taxpayer will be considered to acquire depreciable property at the earlier of obtaining title to the property or acquiring all the incidents of ownership, such as possession, use, and risk. Furthermore, a property that was used by the lessee under a lease arrangement before it was acquired by it could not satisfy the requirement in para. (b) of the “clean technology property” definition that the property must not have been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer.

Turning to the lessor, CRA noted that where the taxpayer, having acquired a clean technology property, then leases it to another person, the conditions in para. (c) of the “clean technology property” definition (respecting, generally, the leasing being in the ordinary course of a described principal business and to a qualifying taxpayer or partnership) would need to be satisfied. Furthermore, if the lessee acquires the property less than 10 years after its acquisition by the lessor under a lease-to-own arrangement, the CT ITC claimed by the lessor generally would be subject to recapture under s. 127.45(11).

Neal Armstrong. Summary of 15 December 2025 External T.I. 2024-1043191E5 under s. 127.45(1) - clean technology property.