Accelerated Investment Incentive claims denied by the CRA

Budget 2021 proposed measures to encourage Canadian Controlled Private Companies to purchase certain capital property by offering accelerated tax depreciation. In more cases, the impact will be to triple the amount of expense that can be claimed in the first year relating to these types of purchasers. For certain machinery and equipment used in manufacturing, full expensing is allowed. These measures for purchases made between April 19, 2021 and December 31, 2023, up to a maximum of $1.5M/year among an associated group of companies. If the full $1.5M is not used in a year, the difference does NOT carry forward. It should be noted that this does not represent a pure tax savings to eligible companies, but rather a deferral of tax to future years.

Unfortunately, as of the date of this blog, the legislation to support the announcement has not been introduced or passed. We have recently learned that the CRA has been denying these CCA claims on the grounds that it will not allow the proposed deductions due to the lack of legislation to support them. If and when the federal government introduces and passes this legislation, it should be possible to amend your corporate tax returns to take advantage of these deductions.