Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Is a ground source heat pump for use in heating a greenhouse included in Class 43.1?
Position: Yes, under proposed amendments to Class 43.1.
Reasons: Proposed amendments to Class 43.1 will include active solar heating equipment for use in a greenhouse operation.
2003-005103
XXXXXXXXXX Marc Edelson, LL.B.
(613) 957-2123
February 23, 2004
Dear XXXXXXXXXX:
Re: Ground Source Heat Pump Systems for Greenhouse Operations
We are writing in reply to your letter of November 28, 2003 wherein you asked us to confirm that certain equipment would be included in Class 43.1 of Schedule II to the Regulations to the Income Tax Act (Canada).
Your question is whether a ground source heat pump that is used to heat a greenhouse is equipment that is used in an industrial process for the purposes of certain provisions in the Class 43.1.
It also appears that your questions relate to proposed amendments to the description of property included in Class 43.1. The proposed amendments would extend the properties included in that Class to certain properties used primarily to generate heat energy for use in a taxpayer's greenhouse operation (February 18, 2003 Federal Budget, Supplementary Information, 2003 Budget Plan - Annex 9).
Your request appears to relate to a proposed transaction or a completed transaction. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R5 ("IC-70-6R5") dated May 17, 2002. However, if the situation relates to a completed transaction a request for the Canada Revenue Agency's views must be made to your local tax services office. We can, however, provide the following general comments.
The term "industrial process" generally means an operation in which goods are manufactured or processed . We do not consider greenhouse space heating, or space heating in general, to be an industrial process (see our Document 2002-0180955, dated January 24, 2003). Also, at pages 11 and 12 of Section 1 of the Technical Guide to Canadian Renewable and Conservation Expenses, published by the Department of Natural Resources (November, 1994), they state:
"Active solar systems used to heat a gas or liquid not directly connected with an industrial process, such as building services (e.g. heating, ventilation or domestic hot water) ... are ineligible."
The February 18, 2003 federal budget contained proposals to expand the types of properties included in Class 43.1 of Schedule II to the Regulations. In Supplementary Information released with the budget, the following was stated:
"The budget also proposes changes to extend eligibility for Class 43.1 to certain equipment used primarily to generate heat energy for use in a taxpayer's greenhouse operation. Qualifying equipment will include active solar heating equipment ..."
The federal budget proposal also stated that the amendments will be effective for property acquired after February 18, 2003.
Certain ground source heat pumps which use the ground as the solar energy collector qualify as active solar heating systems. However, without knowing more about the nature of the equipment and systems you own we are unable to confirm to you whether your equipment would, in fact, be active solar heating equipment. As well, to date no amendments respecting the proposals have been promulgated and made law so that we are unable to comment on the eligibility of any particular equipment for inclusion in Class 43.1.
Our comments are provided in accordance with the practice outlined in paragraph 22 of IC-70-6R5.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch
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