Regulation 1219

Subsection 1219(1)

Administrative Policy

19 August 2015 External T.I. 2015-0587981E5 - Renunciation of CRCE

Natural Resources Canada listing of project development activities

In the course of a general response to a question as to whether expenses incurred in respect of a ground-source heat pump system would qualify as "Canadian renewable and conservation expense" ("CRCE"), CRA stated:

We direct your attention to the Technical Guide to Canadian Renewable and Conservation Expenses (CRCE) …In particular, Appendix II contains project development activities that are typically eligible as CRCE…[f]or example… :

  • Undertaking pre-feasibility studies;
  • Obtaining and analyzing the regional soil and ground-water data;
  • Determining the technology and capacity of the overall system;
  • Identifying the options for horizontal ground collector or vertical wells;
  • Negotiating and obtaining access to the site or building for testing and assessment;
  • Undertaking feasibility studies;
  • Undertaking the collection and preliminary analysis of the site data, such as, soil thermal response, ground water characteristics and soil profile; and
  • Commissioning and start-up activities.

29 December 2014 External T.I. 2014-0547911E5 - FTS renunciations

abandonment after feasibility study

Would a particular application in a "waste heat to power project" qualify as "Canadian renewable and conservation expense" in Reg. 1219 if this project does not proceed beyond the feasibility study stage? CRA stated:

[T]he fact that the development of a particular project is subsequently abandoned due to factors that were not foreseen at the time that the initial stages of the project development were undertaken will not necessarily preclude such expenditures from being treated as CRCE. In such circumstances, it will be necessary to establish that at the time the expenditures were incurred it was reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in the proposed project would be the capital cost of any property that is described in Class 43.1 and Class 43.2.

12 January 2015 External T.I. 2014-0555071E5 - POD subject to earn-out

wind turbine development project

The corporate "Vendor" disposes of the "Property" (including land options agreements, permits, engineering data and technical and environmental reports) acquired in the development phase of a proposed wind turbine farm. Before discussing the consequences of sale, CRA stated:

CRCE may include the costs of certain pre-feasibility studies, feasibility studies, environmental assessment expenses and the expenses for negotiating power purchase agreements. In particular, paragraph 1219(1)(c) includes the costs of negotiating a site access agreement with landowners, obtaining approval to use the site from various regulatory authorities and obtaining permits (e.g., environmental, building and drilling permits) for the project from various regulatory authorities.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g) proceeds of goodwill on sale of wind turbine development project 193
Tax Topics - Income Tax Act - Section 14 - Subsection 14(5) - Cumulative Eligible Capital proceeds of goodwill on sale of wind turbine development project 225
Tax Topics - Income Tax Act - Section 66.1 - Subsection 66.1(6) - cumulative Canadian exploration expense - Element G proceeds of wind turbine development project 141

Paragraph 1219(1)(h)

Administrative Policy

17 July 2018 External T.I. 2018-0747311E5 - Geothermal Energy Project

completing an exploratory geothermal well ultimately used in production generates Class 43.1 costs, not CRCE

In response to a request as to the tax treatment of various expenses incurred as part of a typical geothermal project, CRA first noted that during the exploration phase “subsurface exploration of the geothermal resource may be effected through the drilling of smaller diameter “exploratory wells” (sometimes called “core holes” or “slim wells”) to determine the extent and quality of the geothermal resource,” and that “Following a successful exploration program, the Project may proceed with the drilling and completion of larger diameter production and re-injection wells and flow testing of the geothermal resource,” and after indicating that various types of testing expenditures would qualify as CRCE, CRA stated:

The cost of drilling geothermal wells (either an exploratory well or a production well) would also be CRCE, based on the assumption that at least 50% of the capital cost of the depreciable property to be used in the Project would be the capital cost of any property that is described in subparagraph (d)(vii) of Class 43.1, provided the other requirements in section 1219 of the Regulations are also met.

The cost of completing an exploratory well whose sole purpose is to determine the extent and quality of a geothermal resource could also qualify as CRCE. However, the cost of completing either (i) a production well or (ii) an exploratory well that is used for production (including small-scale heat or electricity production) will not qualify as CRCE but rather may form part of the cost of depreciable property and may be eligible for an inclusion in Class 43.2 of the Regulations.

Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 43.1 - Paragraph (d) - Subparagraph (d)(vii) inclusion of cost of completing geothermal exploratory wells in fact used in production 90
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 14 if renegotiation, further permit fees may generate Class 14 property 113

Subsection 1219(3)

Administrative Policy

11 August 2015 External T.I. 2015-0592441E5 F - Test wind turbines

change to GPS coordinates does not affect 2013-0490631E5

A change to the GPS coordinates for the wind installation described in 2013-0490631E5 did not affect that interpretation.

21 February 2013 External T.I. 2012-0473301E5 F - Test Wind Turbines

favourable opinion on test wind turbine project

Opinion of CRA that for the purposes of Reg. 1219(1)(g), each of the subject “Test Wind Turbines” will be a test wind turbine as defined in Reg. 1219(3), from the time, if it were not for Reg. 1219, that it would be included in Class 43.1 by the effect of s. (d)(v) or in Class 43.2 by the effect of s. (b) is based on an opinion of the Department of Natural Resources Canada (“NRCan”) that:

  • At least 50% of the capital cost of depreciable property that will be used in the Wind Project would be that of property that is included in Class 43.1 or 43.2 of Schedule II or that would be included in the absence of subsection 1219(1).
  • Each of the Test Wind Turbines will be a fixed installation consisting of a wind energy conversion system which, if it were not for section 1219, would be included in Class 43.1 of Schedule II by the effect of subparagraph (d)(v) or in Class 43.2 of that Schedule by the effect of paragraph (b).
  • The Wind Power Project will not share, with any other project, a point of interconnection to an electric power transmission or distribution grid.
  • The purpose of the construction of each of the XXXXXXXXXX Test Wind Turbines is to verify the level of electrical energy produced from the wind by each of them where they are located.
  • No other Test Wind Turbine will be within 1,500 meters of each of the Test Wind Turbines.
  • No other wind energy conversion system will be installed within 1,500 meters of the Test Wind Turbines until the level of electrical energy produced from the wind has been tested for at least 120 calendar days.
  • The electrical energy generated from the wind by the XXXXXXXXXX Wind Test Turbines of the Wind Project will not exceed 20% of the nameplate capacity, according to the nameplates, of the Wind Project.

4 September 2013 External T.I. 2013-0490631E5 F - Éoliennes d'Essai 

opinion on test wind turbines installed on wind farm

Two models of wind turbines are proposed to be installed on a new wind farm by a limited partnership, with land use rights obtained under option contracts with land owners. The application was respecting test wind turbines to be installed in relation to the first phase of the project. CRA provides an opinion that each of the test wind turbines will be a Test Wind Turbine, as defined in Reg. 1219(3), from the time that, but for Reg. 1219, it would be included in Class 43.1 by the effect of s. (d)(v) or in Class 43.2 by the effect of s. (b).

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