C-269 (45-1) - An Act to amend the Income Tax Act (heat recovery tax credit)
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 acquired after December 31, 2025
- Defines 'qualifying heat recovery equipment' as new equipment used to capture industrial process heat and convert it to energy, for exclusive use in Canada
- Requires a prescribed form to be filed by the corporation's tax filing deadline to claim the credit
- Introduces a recapture rule: if the equipment is sold, exported, or converted to another use within five years, the full credit amount must be repaid
- Includes partnership rules so that corporate members of partnerships can claim their proportional share of the credit
- 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 operating at a loss) cannot benefit from it directly
- 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 bill excludes equipment whose 'primary function' is energy generation, which may create ambiguity about dual-purpose systems and require CRA interpretation
- The capital cost eligible for the credit is reduced by any non-government assistance received, meaning businesses receiving other subsidies or grants will have a smaller credit base
- Tax shelter investments are explicitly excluded from the credit, preventing the use of this credit in certain structured financial arrangements
- The credit applies starting in the 2025 taxation year, meaning equipment purchased from January 1, 2025 onward could qualify, even though the bill was introduced in March 2026
Who's Affected
- Taxable Canadian corporations that operate industrial facilities producing waste heat
- Manufacturers and industrial businesses (e.g., steel, cement, chemical, oil and gas sectors)
- Equipment suppliers and manufacturers of heat recovery technology
- Partnerships with corporate members investing in heat recovery systems
- Tax professionals and accountants advising industrial clients
Vibes
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Gotchas
- The credit is non-refundable, so companies with little or no tax payable (e.g., those operating at a loss) cannot benefit from it directly
- 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 bill excludes equipment whose 'primary function' is energy generation, which may create ambiguity about dual-purpose systems and require CRA interpretation
- The capital cost eligible for the credit is reduced by any non-government assistance received, meaning businesses receiving other subsidies or grants will have a smaller credit base
- Tax shelter investments are explicitly excluded from the credit, preventing the use of this credit in certain structured financial arrangements
- The credit applies starting in the 2025 taxation year, meaning equipment purchased from January 1, 2025 onward could qualify, even though the bill was introduced in March 2026
Summary
Bill C-269 amends the Income Tax Act to introduce a new '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 exclusively 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 in industrial operations. By reducing the after-tax cost of this equipment, the credit is designed to make it more financially attractive for companies to adopt heat recovery systems. 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 also includes rules for partnerships, corporate mergers, and situations where the equipment is later sold, exported, or repurposed.
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Vibes
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