Renewable energy and energy conservation

Section 1219 of the Income Tax Regulations defines "Canadian renewable and conservation expense" (CRCE) for the purposes of subsection 66.1(6) of the Income Tax Act. A CRCE is included in calculating your Canadian Exploration Expense and is eligible to be renounced under a flow-through share agreement.

CRCE includes certain intangible costs such as feasibility studies and pre-construction development expenses associated with renewable energy and energy efficiency projects for which at least 50 per cent of the cost of depreciable assets relates to equipment eligible for Class 43.1 or Class 43.2 capital cost allowance (CCA) treatment.

A variety of renewable energy production assets are included in Class 43.1 and 43.2, including:

• co-generation and specified waste-fuelled electrical and heat generation systems;
• wind turbines;
• electrical generating equipment that uses only geothermal energy;
• small hydroelectric facilities;
• stationary fuel cells;
• photovoltaics and "active" solar equipment used to heat a liquid or gas;
• equipment powered by certain waste fuels (e.g. wood waste, municipal waste, biogas from a sewage treatment facility);
• equipment that recovers biogas from a landfill; and
• equipment used to convert biomass into bio-oil.

The Class 43.1/43.2 Secretariat within Natural Resources Canada (NRCan) is the Technical Authority for Class 43.1 and Class 43.2 and has the authority to provide advice and guidance and provide technical opinions to business and institutional organizations interested in taking advantage of the incentive for capital projects.

More information is available on the NRCan web page entitled ‘Tax Savings for Industry’.