Regulation 1219 - Canadian Renewable and Conservation Expense

In the course of a general response to a question as to whether expenses incurred in respect of a ground-source heat pump system would qualify as "Canadian renewable and conservation expense" ("CRCE"), CRA stated:

We direct your attention to the Technical Guide to Canadian Renewable and Conservation Expenses (CRCE) …In particular, Appendix II contains project development activities that are typically eligible as CRCE…[f]or example… :

• Undertaking pre-feasibility studies;
• Obtaining and analyzing the regional soil and ground-water data;
• Determining the technology and capacity of the overall system;
• Identifying the options for horizontal ground collector or vertical wells;
• Negotiating and obtaining access to the site or building for testing and assessment;
• Undertaking feasibility studies;
• Undertaking the collection and preliminary analysis of the site data, such as, soil thermal response, ground water characteristics and soil profile; and
• Commissioning and start-up activities.

Would a particular application in a "waste heat to power project" qualify as "Canadian renewable and conservation expense" in Reg. 1219 if this project does not proceed beyond the feasibility study stage? CRA stated:

[T]he fact that the development of a particular project is subsequently abandoned due to factors that were not foreseen at the time that the initial stages of the project development were undertaken will not necessarily preclude such expenditures from being treated as CRCE. In such circumstances, it will be necessary to establish that at the time the expenditures were incurred it was reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in the proposed project would be the capital cost of any property that is described in Class 43.1 and Class 43.2.

The corporate "Vendor" disposes of the "Property" (including land options agreements, permits, engineering data and technical and environmental reports) acquired in the development phase of a proposed wind turbine farm. Before discussing the consequences of sale, CRA stated:

CRCE may include the costs of certain pre-feasibility studies, feasibility studies, environmental assessment expenses and the expenses for negotiating power purchase agreements. In particular, paragraph 1219(1)(c) includes the costs of negotiating a site access agreement with landowners, obtaining approval to use the site from various regulatory authorities and obtaining permits (e.g., environmental, building and drilling permits) for the project from various regulatory authorities.