Clean Technology Investment Tax Credit – Geothermal Energy: Eligibility and Benefits

Are you interested in investing in clean technology and renewable energy sources? The Canadian government has introduced a new tax credit that may be of interest to you.

In the 2022 Fall Economic Statement, the government proposed the Clean Tech ITC, a refundable tax credit of 30% for eligible property acquired and available for use after March 27, 2023. And now, the budget proposes to expand the eligibility of the Clean Tech ITC to include geothermal energy systems that meet specific criteria.

Geothermal energy is a renewable energy source that harnesses the heat from within the Earth to generate electricity and heat. It is a sustainable and clean form of energy that has the potential to significantly reduce greenhouse gas emissions. Geothermal energy systems typically involve the use of equipment such as piping, pumps, heat exchangers, steam separators, and electrical generating equipment. These types of equipment may now be eligible for the Clean Tech ITC if they meet the requirements.

To qualify for the Clean Tech ITC, the geothermal energy systems must be eligible for Class 43.1 of Schedule II of the Income Tax Regulations, and they must not have been used for any purpose before their acquisition. Class 43.1 includes equipment used primarily for the purpose of generating electricity and/or heat solely from geothermal energy, as described in subparagraph (d)(vii). However, equipment used for geothermal energy projects that co-produce oil, gas, or other fossil fuels would not be eligible for the tax credit.

One of the significant benefits of the Clean Tech ITC for geothermal energy projects is the 30% refundable tax credit. This means that businesses can claim a credit of up to 30% of the eligible expenses incurred for acquiring and installing geothermal energy systems. The tax credit can help reduce the upfront costs of investing in clean technology and make geothermal energy projects more financially viable for businesses. The credit is also refundable, which means that even if a business does not have enough tax liability to offset the credit fully, they can still receive a refund for the remaining credit amount.

It’s also worth noting that the budget proposes to modify the phase-out schedule of the Clean Tech ITC. Instead of starting the phase-out in 2032, the credit rate would remain at 30% until 2032 and then gradually decrease by 5% each year until it is fully phased out in 2037. This change provides businesses with a longer period to benefit from the full tax credit rate and plan their investments accordingly.

In addition to the Clean Tech ITC, businesses may also be eligible for other investment tax credits, such as the Hydrogen ITC, the CCUS ITC, the Clean Electricity ITC, and the Clean Tech Manufacturing ITC, among others. However, businesses can only claim one of these tax credits for a particular property, but multiple tax credits may be available for different types of eligible property within the same project. It’s essential to consult with a tax professional or accountant to understand the specific requirements and benefits of each tax credit and how they may apply to your geothermal energy project.

In conclusion, the Clean Technology Investment Tax Credit (CTITC) for geothermal energy is a valuable incentive that promotes the adoption of clean and renewable energy technologies. Geothermal energy is a reliable and sustainable source of power that has the potential to significantly reduce greenhouse gas emissions and mitigate the impacts of climate change.

The CTITC for geothermal energy provides financial benefits to investors, businesses, and individuals who invest in geothermal energy projects, making it an effective tool to encourage private sector investment in this clean energy sector. By offering tax credits, the CTITC helps to offset the high upfront costs associated with developing geothermal energy projects, including drilling and infrastructure installation.

Furthermore, the CTITC for geothermal energy promotes job creation, economic growth, and technological innovation in the clean energy industry. Geothermal energy projects require skilled labor and expertise in various fields, such as engineering, construction, and operations, which can stimulate local economies and create employment opportunities.

Moreover, geothermal energy is a baseload power source, meaning it can provide a consistent and reliable supply of electricity throughout the year, reducing dependence on fossil fuels and enhancing grid stability. Geothermal energy also has a small footprint and emits minimal greenhouse gas emissions, making it an environmentally friendly option for addressing the challenges of climate change.

In summary, the CTITC for geothermal energy is a beneficial incentive that supports the development and deployment of clean and renewable geothermal energy projects. It encourages private sector investment, promotes job creation and economic growth, and contributes to the transition towards a more sustainable and low-carbon energy future.


The IDM Team

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