Chamber
commons
Stage
1st Reading
Introduced
Mar 12, 2026
Progress
This bill creates a 30% non-refundable tax credit for Canadian businesses that buy equipment to recover and convert industrial waste heat into energy.
Key Changes
- Creates a new 30% non-refundable tax credit (section 127.431) for qualifying heat recovery equipment purchased after December 31, 2025
- Defines 'qualifying heat recovery equipment' as new equipment used primarily to capture industrial process heat and convert it into energy, intended exclusively for use in Canada
- Requires businesses to file a prescribed form by their tax filing deadline to claim the credit
- Includes a recapture rule: if the equipment is sold, exported, or converted to another use within five years, the full credit amount must be added back to taxes owed
- Allows partnerships to pass the credit through to their corporate members, proportional to each member's share
- Reduces the eligible capital cost by any non-government assistance received, to prevent double-dipping on subsidies
Gotchas
- The credit is non-refundable, so companies with little or no tax payable (e.g., those with losses) would receive little or no benefit from it
- A full recapture of the credit is triggered if the equipment is sold, exported, or repurposed within five years, which could create a significant tax liability for businesses that change operations
- The credit cannot be used for equipment whose primary function is energy generation — it must primarily recover and convert waste heat, which may require careful classification of equipment
- Tax shelter investments are explicitly excluded from the credit, preventing use of the credit in certain tax avoidance structures
- The capital cost eligible for the credit is reduced by any non-government assistance received, meaning businesses receiving other subsidies for the same equipment will have a smaller credit base
- The bill applies retroactively to the 2025 taxation year, even though it was introduced in March 2026, meaning eligible equipment purchased in 2025 could qualify
Who's Affected
- Taxable Canadian corporations that operate industrial facilities producing waste heat
- Manufacturers and industrial businesses looking to invest in energy efficiency equipment
- Partnerships with corporate members investing in heat recovery technology
- Equipment suppliers and manufacturers of heat recovery systems
- Limited partners in partnerships investing in qualifying equipment (subject to at-risk amount limits)
Vibes
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Gotchas
- The credit is non-refundable, so companies with little or no tax payable (e.g., those with losses) would receive little or no benefit from it
- A full recapture of the credit is triggered if the equipment is sold, exported, or repurposed within five years, which could create a significant tax liability for businesses that change operations
- The credit cannot be used for equipment whose primary function is energy generation — it must primarily recover and convert waste heat, which may require careful classification of equipment
- Tax shelter investments are explicitly excluded from the credit, preventing use of the credit in certain tax avoidance structures
- The capital cost eligible for the credit is reduced by any non-government assistance received, meaning businesses receiving other subsidies for the same equipment will have a smaller credit base
- The bill applies retroactively to the 2025 taxation year, even though it was introduced in March 2026, meaning eligible equipment purchased in 2025 could qualify
Summary
Bill C-269 adds a new section to the Income Tax Act called the 'heat recovery tax credit.' It allows taxable Canadian corporations to deduct 30% of the cost of qualifying heat recovery equipment from their taxes. This equipment must be used to capture heat produced by industrial processes and convert it into usable energy. The equipment must be new, intended for use only in Canada, and acquired after December 31, 2025. The bill is aimed at encouraging businesses to invest in energy efficiency technology that reuses heat that would otherwise be wasted during industrial operations. By reducing the tax burden on companies that make these investments, the bill seeks to promote cleaner energy practices in Canadian industry without requiring a direct government subsidy. The credit is non-refundable, meaning it can reduce a company's tax bill to zero but will not result in a cash payment from the government if the credit exceeds taxes owed. The bill was introduced as a private member's bill by Mr. McLean in March 2026.
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Vibes
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