CRA indicates that those claiming full clean economy credits should take “reasonable steps” to ensure compliance by their subcontractors with the union labour-rate requirements

Where a clean economy incentive claimant has claimed its tax credit at the “regular tax credit rate” (i.e., 10% higher than the (unenhanced) “reduced tax credit rate”) but is unable to substantiate having met the “Compensation Requirement” (respecting meeting (union-rate) prevailing wages) for covered workers employed by a third-party contractor, would CRA seek to apply the gross negligence penalty under s. 127.46(9)?

CRA indicated that the mere fact that a claimant is not able to demonstrate that covered workers employed by others met the Compensation Requirement would not, by itself, support the imposition of the penalty. However, to access the regular tax credit rate, a claimant who uses a contractor must be able to show that it took reasonable steps to ensure compliance with the Compensation Requirement. If no reasonable steps were taken, the claimant, by claiming at the regular rate, would run the risk of a determination that it, in circumstances amounting to gross negligence, failed to meet the prevailing-wage requirement.

Neal Armstrong. Summary of 2 December 2025 CTF Roundtable, Q.10 under s. 127.46(9).