20 November 2025 External T.I. 2025-1078901E5 - CH ITC - Projects less than 20 years

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 NRCan able to confirm project plans where the expected operating duration of the project is less than 20 years (e.g., expected operating duration is 10 or 15 years)?

Position: no.

Reasons: One of the conditions that NRCan confirms in writing, pursuant to subparagraph (b)(i) of the definition “qualified clean hydrogen project” in subsection 127.48(1) of the Act, is that the expected carbon intensity of the project is determined in accordance with subsection 127.48(6). As set out in paragraph 127.48(6)(i) of the Act, the carbon intensity modelling guidance applies conclusively with respect to the calculation of carbon intensity (except as otherwise provided in section 127.48). The temporal boundary outlined in the guidance requires using cumulative data that represents the first 20 years of operation of the project in determining expected carbon intensity. Consequently, NRCan could not confirm in writing that the expected carbon intensity is determined in accordance with subsection 127.48(6) of the Act (i.e., confirm a project plan) if the expected operating duration of the project is less than 20 years.

XXXXXXXXXX									2025-107890

November 20, 2025

Dear XXXXXXXXXX:

Re: Confirming a clean hydrogen project as a qualified clean hydrogen project

This is in reply to your email of September 19, 2025, wherein you enquired about certain aspects of the clean hydrogen investment tax credit (the “CH ITC”). In particular, you asked about Natural Resources Canada’s (“NRCan”) ability to confirm whether a “clean hydrogen project” is a “qualified clean hydrogen project” where the project is expected to be operational for less than 20 years.

Issue

Is NRCan able to confirm project plans where the expected operating duration of the project is less than 20 years (e.g., expected operating duration is 10 or 15 years)?

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (footnote 1) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

The CH ITC is a refundable investment tax credit that applies in respect of the capital cost of eligible clean hydrogen property. To qualify as “eligible clean hydrogen property”, a property must, among other things, become available for use in respect of a “qualified clean hydrogen project”. A “qualified clean hydrogen project” is a clean hydrogen project where, among other things, NRCan has confirmed in writing that certain conditions have been met.

One of the conditions that NRCan confirms in writing, pursuant to subparagraph (b)(i) of the definition “qualified clean hydrogen project” in subsection 127.48(1) of the Act, is that the expected carbon intensity of the project is determined in accordance with subsection 127.48(6). Paragraph 127.48(6)(i) of the Act provides that the Clean Hydrogen Investment Tax Credit – Carbon Intensity Modelling Guidance Document (footnote 2) published by the Government of Canada at the time of filing the most recent related clean hydrogen project plan (the “Guidance Document”) applies conclusively with respect to the calculation of carbon intensity (except as otherwise provided in section 127.48).

Section 2.2.5.1 of the Guidance Document requires the use of cumulative data that represents the first 20 years of operation of the clean hydrogen project in determining expected carbon intensity. Therefore, a clean hydrogen project must be expected to operate for at least 20 years in order for the calculation of the expected carbon intensity of the project to be computed in accordance with the Guidance Document, as required by paragraph 127.48(6)(i). Consequently, NRCan could not confirm in writing that the expected carbon intensity is determined in accordance with subsection 127.48(6) of the Act (i.e., confirm a project plan) if the expected operating duration of the project is less than 20 years.

We trust these comments will be of assistance.

Yours truly,

Kimberley Wharram
Manager, Resources Section
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1. R.S.C. 1985, c. 1 (5th Supp.), as amended (the “Act”)

2. Available at: https://www.canada.ca/en/environment-climate-change/services/managing-pollution/fuel-life-cycle-assessment-model/clean-hydrogen-carbon-intensity-modelling-guidance.html