{"id":32102,"date":"2025-04-22T08:21:00","date_gmt":"2025-04-22T12:21:00","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=32102"},"modified":"2025-04-28T16:02:55","modified_gmt":"2025-04-28T20:02:55","slug":"tips-to-maximize-clean-economy-investment-tax-credits","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/esg-and-carbon-finance\/tips-to-maximize-clean-economy-investment-tax-credits\/","title":{"rendered":"Tips to maximize Clean Economy Investment Tax Credits"},"content":{"rendered":"\n

After years of Canadian industry groups pressing successive federal governments for new economy refundable tax credits \u2013 which have driven renewable energy growth across the United States \u2013  Canada finally has a functional tax credit system that assists companies with a variety of projects. However, to take full advantage of the Canadian Clean Economy Investment Tax Credits (\u201cITC<\/strong>\u201d) for most ITCs, and to avoid a 10% credit rate reduction, project owners must meet specific labour requirements.<\/p>\n\n\n\n

To maximize entitlement to these incentives, it is essential for project owners to engage in strategic negotiations and carefully consider ITC implications when drafting a new agreement or modifying a standard form agreement. Doing so ensures a clear delineation of obligations and responsibilities, while also effectively allocating risks.<\/p>\n\n\n\n

What are the Clean Economy Investment Tax Credits?<\/h2>\n\n\n\n

Currently, there are four refundable ITCs: Carbon Capture, Utilization, and Storage (\u201cCCUS<\/strong>\u201d), Clean Technology (\u201cCT<\/strong>\u201d), Clean Hydrogen (\u201cCH<\/strong>\u201d), and Clean Technology Manufacturing (\u201cCTM<\/strong>\u201d). Because these credits are refundable, project owners may receive cash refunds from the government before the project begins to generate income.<\/p>\n\n\n\n

For previous articles written on this topic, see Hydrogen: Hollywood fiction, tax facts, and what\u2019s in it for producers<\/a>, Canada\u2019s clean energy future: Clean hydrogen tax credit recent developments<\/a>, and Miller Thomson Discusses Hot Topics in Energy and Energy Transition: A ESG and Carbon Finance Panel<\/a>.<\/strong><\/p>\n\n\n\n

What are the labour requirements?<\/h2>\n\n\n\n

To qualify for the maximum ITC credit rate for the CCUS ITC, CT ITC, and CH ITC, both the prevailing wage requirements and apprenticeship requirements must be met. These labour requirements do not apply to the CTM ITC.<\/p>\n\n\n\n

Prevailing wage requirements<\/h3>\n\n\n\n

To meet the prevailing wage requirement, \u201ccovered workers\u201d must be paid in accordance with an \u201celigible collective agreement,\u201d or at a wage and benefit level that closely aligns with the agreement most applicable to the worker’s experience, tasks, and location.<\/p>\n\n\n\n

A \u201ccovered worker\u201d is defined as an individual engaged in the preparation or installation of clean energy property at a designated work site, primarily performing manual or physical tasks. Workers in administrative, clerical, or executive roles do not qualify as covered workers.<\/p>\n\n\n\n

Importantly, a \u201ccovered worker\u201d can be employed by the project owner or by a third party such as a contractor, subcontractor, or other service provider<\/strong>. As a result, wages and benefits paid to employees of the project owner, as well as those of contractors and subcontractors, are all relevant for eligibility and compliance purposes.<\/p>\n\n\n\n

Apprenticeship requirements<\/h3>\n\n\n\n

To meet the apprenticeship requirements, the project owner must make reasonable efforts to ensure that apprentices registered in a Red Seal<\/a> trade work at least 10% of the total hours worked by Red Seal trade workers at a designated work site during the year. This requirement applies to all Red Seal trade workers on the site, not just those employed by the project owner.<\/p>\n\n\n\n

Checklist of matters to consider<\/h3>\n\n\n\n

To fully maximize entitlement to the CCUS, CH, or CT ITC, parties involved with the construction of a clean energy project should consider the following matters:<\/p>\n\n\n\n