28 July 1999 External T.I. 9912255 - CRCE

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Are there any incentives for investing in small energy projects?

Position: No.

Reasons: Provisions such as CRCE and Class 43.1 are to encourage investment but no specific assistance programs exist.

A. Seidel
Xxxxxxxxxx (613) 957-8974
991225

Attention: xxxxxxxxxx

July 28, 1999

Dear Sir:

Re: Energy Co-Generation System

This is in reply to your facsimile dated April 30, 1999 in which you requested assistance with respect to the acquisition or research and design of small energy transfer stations and whether there were any government programs or assistance that may be utilized with respect to the capitalization costs of participating in an energy co-generation system.

For non-tax, technical assistance in respect of the acquisition or research and design of small energy transfer stations and energy co-generation systems, the appropriate contact for any available information, literature or documentation is Natural Resources Canada. The person to contact at Natural Resources Canada is the Technology Manager, Mr. Michael Wiggin at:

CANMET Technology Center
Building 5A
Nepean, Ontario
K1A 1M1

On September 16, 1997, the Department of Finance released draft regulations in respect of "Canadian renewable and conservation expenses ("CRCE") and amendments to Class 43.1 of Schedule II of the Income Tax Regulations (the "Regulations") applicable to expenses incurred after December 5, 1996. Proposed subsections 1219(1) and (2) of the Regulations outline the requirements for an expense to qualify a,s a CRCE, Where an expense qualifies as a CRCE, it is a Canadian exploration expense ("CEE") by virtue of paragraph 66.1(6)(g.1) of the Income Tax Act (the "Act"). Provided the other requirements of subsection 66.1(2) of the Act are met, a taxpayer is entitled to deduct CEE in computing income for a taxation year.

Class 43.1 of the Regulations includes certain renewable energy and energy conservation equipment. The proposed amendments include the eligibility for certain used equipment to be included in Class 43.1. To the extent that property qualifies for inclusion in Class 43.1 of Schedule II of the Regulations, a taxpayer is entitled to deduct 30% of the undepreciated capital cost, as defined in subsection 13(21) of the Act, of Class 43.1 in computing income for the taxation year.

These comments are provided in accordance with the guidelines set out in paragraph 22 of IC 70-6R3 and are therefore not binding on Revenue Canada.

Yours truly,

for Director
Resources, Partnerships & Trusts Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

cc: Mr. M. Wiggin