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Tax Credit for Industrial Heat Recovery

An Act to amend the Income Tax Act (heat recovery tax credit)

Summary

  • Creates a new 30% non-refundable corporate income tax credit for the capital cost of qualifying industrial heat-recovery equipment acquired in the year, effective for 2025 and later tax years, claimable on a prescribed form by the filing due date.
  • Requires the equipment to be retained (not sold, leased, or exported) through year-end and imposes full recapture for five years if it is disposed of, exported, or converted to a non-heat-recovery use.
  • Adjusts the credit base by subtracting non-government assistance, and sets partnership rules for reasonable allocation, limited-partner at-risk limits, treatment of tiered partnerships, and anti–tax shelter provisions.
  • Integrates the new credit with existing Income Tax Act mechanics (e.g., reorganizations/continuations, partnership allocations, and adjusted taxable income calculations) to align with other clean investment credits.

Builder Assessment

Vote Yes

This bill materially supports private-sector investment in industrial energy efficiency, improving productivity, competitiveness, and energy resilience, with positive spillovers for prosperity. Risks remain around tax complexity, potential stacking with other assistance, and limited accessibility for firms without taxable income in the year of investment.

  • Positives: broad cross-sector applicability; lower energy costs and emissions; recapture and at-risk rules protect taxpayers while encouraging durable adoption; effective tool for industrial resilience and safety through reduced energy strain.
  • Concerns: added tax-code complexity and compliance steps; potential double-dipping because government assistance is not explicitly netted from the credit base; non-refundable with no clear carryforward limits uptake by SMEs and early-stage projects.
  • Suggestions: explicitly net government assistance from the credit base and coordinate with other ITCs to prevent overlap; permit limited carryforward or elective group-level pooling or transfer to improve uptake without adding paperwork; publish a clear, simple definition of qualifying equipment and a one-window digital claim to speed deployment; set a transparent fiscal ceiling or mid-term review to ensure value for money while maintaining a streamlined process.

Question Period Cards

What is the five-year fiscal cost of this credit and the expected megawatt-hours of industrial energy recovered, and will the government table the productivity and export impacts underlying that estimate?

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As drafted the credit base is reduced only by non-government assistance, so how will the government prevent double-dipping with federal or provincial grants and other clean investment credits so taxpayers do not over-subsidize the same equipment?

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Why is the credit non-refundable with no explicit carryforward or transferability, and how will small and medium-sized manufacturers without current tax liability benefit in the year of purchase?

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Principles Analysis

✓

Canada should aim to be the world's most prosperous country.

Lowering energy costs for industry via heat recovery can improve margins, support growth, and enhance economy-wide prosperity.

✗

Promote economic freedom, ambition, and breaking from bureaucratic inertia (reduce red tape).

Adds a new, specialized tax credit with forms, eligibility checks, and recapture rules, increasing tax-code complexity rather than simplifying it.

✓

Drive national productivity and global competitiveness.

Industrial waste-heat recovery lowers operating costs and improves energy efficiency, boosting productivity and competitiveness across multiple sectors.

—

Grow exports of Canadian products and resources.

Export gains are indirect; while lower costs can improve export competitiveness, the bill does not directly target exports or trade barriers.

✓

Encourage investment, innovation, and resource development.

A 30% credit directly incentivizes capital investment in advanced energy-efficiency equipment and adoption of innovative heat-to-power systems.

—

Deliver better public services at lower cost (government efficiency).

Implements support via the tax system instead of a new grant program, but still increases administrative workload and fiscal cost without service impacts.

✓

Reform taxes to incentivize work, risk-taking, and innovation.

Uses the tax code to reward capital risk-taking and adoption of efficiency technologies, though it remains a targeted credit rather than broad-based reform.

✓

Focus on large-scale prosperity, not incrementalism.

Waste-heat recovery applies across heavy industry and can unlock large, system-wide energy savings and resilience if widely adopted.

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Email [email protected]

C-269

PartyMember of Parliament
StatusOutside the Order of Precedence
Last updatedN/A
TopicsClimate and Environment, Economics, Technology and Innovation, Labor and Employment
Parliament45