CRA indicates that a CCUS credit cannot be claimed at the regular rate while a wage shortfall has not yet been corrected, and that such shortfall does not taint future years

Commencing in 2025, Canco started engaging in the construction and installation work for a Canadian carbon capture project that was a qualifying CCUS project. A portion of its installation expenses for 2025 included an amount paid to a contractor who it later learned had three employees who were covered workers but who had not been compensated in accordance with the prevailing wage requirement, i.e., each worked 100 days in 2025 at less than the prevailing wage rate, resulting in a total shortfall for the three workers of $2,600. Canco has not received any cooperation of the contractor in remedying that shortfall.

CRA indicated that if, at the time of making the CCUS tax credit claim for its 2025 taxation year, Canco knew that it had not satisfied the labour requirement, then it should not elect under s. 127.46(2) even though it was seeking to remedy the shortfall – and if it did, it might be subject to the gross negligence penalty under s. 127.46(9). Canco would have until June 30, 2027 to have the shortfall paid and still be able to then claim the CCUS tax credit for that year.

If Canco only discovered that it did not meet the compensation requirement after it had elected and claimed the CCUS tax credit in its 2025 return, then the additional tax under s. 127.46(6) would be computed as $22 per day for the 300 work days involved, for a total of $6,600.

Regarding the reasonable steps referred to in the attestation requirement under s. 127.46(3)(b)(ii), CRA indicated that Canco could, for example, have obtained the appropriate covenants from the contractor, including that the contractor would meet the prevailing wage requirements, permit regular monitoring of compliance with the labour requirements, provide appropriate updates at reasonable project intervals, and provide written compliance declarations.

CRA further indicated that, as Canco would meet the labour requirements for 2026 and 2027, Canco could elect under s. 127.46(2) in making its claims for the CCUS tax credit for its 2026 and 2027 taxation years, notwithstanding a failure for its 2025 taxation year.

Neal Armstrong. Summaries of 28 April 2026 External T.I. 2025-1081341E5 under s. 127.46(3) and s. 127.46(6).