DER for Manufacturing

How Bill C-59 and the Clean Technology Investment Tax Credit Impact Manufacturing

In an era where sustainability and environmental responsibility increasingly become focal points for industries worldwide, Canada’s Bill C-59 introduces significant changes directly impacting the manufacturing sector. This blog will explore how Bill C-59 affects manufacturers and dive into the specifics of the Clean Technology Investment Tax Credit, highlighting its potential benefits for the industry.

Bill C-59’s Impact on Manufacturing

1. Carbon Capture, Utilization, and Storage (CCUS) Equipment

One of the standout provisions of Bill C-59 is the introduction of a refundable investment tax credit for eligible carbon capture, utilization, and storage equipment. This incentive encourages manufacturers to adopt technologies that reduce carbon emissions, aligning their operations with global sustainability goals.

2. Clean Technology Equipment

Bill C-59 also provides a refundable investment tax credit for businesses investing in clean technology equipment, such as battery storage. This initiative aims to promote the integration of environmentally friendly technologies into manufacturing processes, driving the industry towards greener practices.

3. Labour Requirements

Manufacturers must meet specific labor requirements to qualify for the new tax credits. This ensures that the push towards clean technology supports fair labour practices, balancing technological advancements with social responsibility.

4. Zero-Emission Technology

The bill extends the three-year phase-out period and expands the eligible activities for reduced tax rates on zero-emission technology manufacturers. This extension gives manufacturers more time to benefit from lower taxes while developing and producing green technologies.

5. Hybrid Mismatch Rules

Bill C-59 implements rules consistent with OECD and G20 recommendations to address cross-border tax avoidance structures. This impacts manufacturers with international operations, ensuring fair tax practices and reducing opportunities for tax avoidance.

6. Intergenerational Business Transfers

The bill ensures that only genuine intergenerational business transfers are excluded from the anti-surplus stripping rule, affecting family-owned manufacturing businesses planning for succession and maintaining business integrity across generations.

7. Dividend Received Deduction

The bill denies the dividend deduction for dividends received by Canadian financial institutions on certain shares. This change may impact manufacturers with significant investments in financial institutions, altering their financial strategies.

8. Climate Action Incentive Payments

Bill C-59 increases the rural supplement for Climate Action Incentive payments from 10% to 20%, benefiting manufacturers in rural areas with additional financial incentives to support sustainable practices.

9. Digital Services Tax Act

A new 3% tax on digital services revenue for businesses meeting specific thresholds is introduced. While primarily targeting digital services, this tax may also impact manufacturers with substantial digital service revenues.

The Clean Technology Investment Tax Credit: A Closer Look

Financial Incentives for Green Investments

The Clean Technology Investment Tax Credit is a central feature of Bill C-59. It provides a refundable tax credit for investments in eligible clean technology equipment. This significantly reduces the overall cost for manufacturers to adopt and integrate environmentally friendly technologies into their operations. Note that the tax credit amount is 30% of the eligible capital cost, and the start date is March 28, 2023. The credit only applies to new equipment, not refurbished or previously used.

Promotes Sustainability

The tax credit promotes more sustainable manufacturing practices by incentivizing investments in renewable energy systems, energy storage solutions, and other clean technologies. This aligns manufacturers with growing consumer and regulatory demands for environmentally responsible production.

Compliance with Labour Requirements

Manufacturers must meet specific labour requirements to qualify for the tax credit. This ensures that investments in clean technology also uphold fair labour practices, promoting social responsibility alongside environmental sustainability.

Long-Term Cost Savings

Investing in clean technology can lead to substantial long-term cost savings. Improved energy efficiency and reduced operational costs enhance manufacturers’ overall competitiveness, making sustainability a profitable venture.

Enhanced Market Position

Adopting clean technologies can significantly improve a manufacturer’s market position. Manufacturers can differentiate themselves in a competitive market by meeting increasing consumer and regulatory demands for sustainable and environmentally friendly products.

Bill C-59 introduces several measures that impact the manufacturing sector, primarily through financial incentives and regulatory changes to promote sustainability, fair practices, and financial responsibility. The Clean Technology Investment Tax Credit, in particular, offers significant benefits for manufacturers, providing financial support for adopting green technologies, promoting sustainability, and ensuring compliance with fair labour practices. As the manufacturing industry navigates these changes, embracing the opportunities presented by Bill C-59 will be crucial for achieving long-term success and sustainability.

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