In 2021, the federal government introduced a series of refundable investment tax credits (the “ITCs”) to accelerate the transition to a low-carbon economy, stimulate economic growth, and support innovation.  The Spring Economic Update 2026 confirms the growing importance of these measures. In particular, it announces that the Canada Revenue Agency (the “CRA”) will give increased priority to requests for advance rulings regarding eligible clean energy projects. In this regard, the CRA plans to increase its capacity to process these applications by more than 4.5 times by July 2026.  In this context, two measures are of particular note: the Clean Technology ITC and the Clean Electricity ITC.  1. The Clean Technology ITC The Clean Technology ITC generally applies to certain capital investments in equipment and systems that contribute to the production of clean energy, the improvement of energy efficiency, and the reduction of greenhouse gas emissions, provided that such assets are acquired and used in Canada in accordance with the applicable criteria.  This refundable credit can reach up to 30% of the capital cost of eligible property. It thus serves as a significant financial lever, helping to strengthen liquidity and improve project profitability, particularly during the early years.  In practice, the analysis required to apply for this credit focuses primarily on the following elements:  the entity’s eligibility (including its status as a taxable Canadian corporation);  the property’s qualification (eligible category, function, and use);  the timeline (dates of acquisition, installation, and commissioning);  the impact of labour requirements, which may influence the applicable rate;  interaction with other tax credits.  The application period covers property acquired and that becomes available for use between March 28, 2023, and December 31, 2034.  2. The Clean Electricity ITC  The Clean Electricity ITC is another measure that is gaining importance. It is of particular interest in structures where the investor (or certain investors) is tax-exempt or belongs to categories of entities for which several clean economy ITCs have historically been less accessible.  Indeed, this credit is designed to be accessible to a broader range of entities, including notably (according to the proposed definitions) certain eligible trusts, designated provincial or territorial Crown corporations, corporations principally owned by municipalities, as well as entities affiliated with Aboriginal governments.  At this stage, the government has published legislative proposals accompanied by explanatory notes, and the CRA has recently consolidated the relevant information on this subject on its website. Notably, it appears that:  the credit would provide a base rate of 15% of the capital cost of eligible clean electricity-related property;  eligibility would apply to property used primarily to generate, store, or transmit electricity, subject to technical and environmental criteria;  the rate could be reduced in the event of non-compliance with certain labour requirements;  the proposed application period would cover investments made from April 2024 and that becomes available for use on or before December 31, 2034.  3. Structuring: Corporation or Limited Partnership  Beyond the technical eligibility of the property, the legal structure chosen for a project will have a decisive impact on the ability to claim ITCs and pass on their economic value to investors.  In some cases, a taxable corporation is simpler to administer and more easily meets the eligibility criteria. Conversely, a limited partnership (“LP”), while useful for certain financing objectives, presents several disadvantages in the context of ITCs:  3.1 Constraints Related to Investors’ Tax Status  Certain tax credits—particularly the Clean Technology ITC, often considered one of the most advantageous—are naturally better suited for taxable investors. When an LP has non-taxable members, converting the tax benefit into economic value may be less optimal, depending on how the credit is allocated and used.  3.2 Allocation of Credits and Limits for Limited Partners  The rules governing credits within a partnership generally require that the allocation to each partner be reasonable, taking into account, in particular, their capital investment and contribution. Furthermore, for a limited partner, the share of the credit may be limited by “at-risk” rules, which cap certain tax benefits based on actual economic exposure. In practice, this can reduce the amount of credit available and limit allocation flexibility.  3.3 Increased Complexity of Monitoring and Compliance  An LP generally entails heavier administrative obligations: calculating at-risk amounts, tracking allocations, documenting contributions and distributions, and ensuring consistency between the partnership agreement, financing agreements, and tax positions. This complexity can become a significant issue in the event of a tax audit.  Conclusion  Federal ITCs represent a major financial incentive for clean energy projects. However, their application depends on technical, tax, and structuring criteria that must be rigorously analysed and documented.  Furthermore, the legislative framework governing these credits is constantly evolving (implementing regulations, administrative guidelines, and technical requirements), making a case-by-case analysis essential to confirm eligibility and optimize a project’s structure.  We invite you to contact our tax team. We would be happy to assist you in successfully bringing your project to completion.  Key Takeaways A Major Administrative Acceleration by July 2026  The CRA is making clean energy a priority: its capacity to process advance tax ruling requests will increase by more than 4.5 times by July 2026. For proponents, now is the time to act to secure early tax certainty.  Two Powerful Financial Levers with Distinct Criteria  Clean Technology: A major refundable credit of up to 30% of capital costs, primarily targeting taxable Canadian corporations.  Clean Electricity: A refundable credit of up to 15% of capital costs structured to include entities that were historically restricted, such as Crown corporations, municipalities, and Indigenous organizations. Legal Structuring Can Make or Break Your ITCs  Choosing the right legal vehicle is just as critical as technical asset eligibility. While popular for financing, LPs introduce significant complexity due to "at-risk" rules, the involvement of non-taxable partners, and a heavy compliance burden during tax audits.

The federal budget presented on November 4, 2025 (the “Budget”), proposes a significant change to the Critical Mineral Exploration Tax Credit (CMETC). As a reminder, the CMETC is equal to 30% of “specified mineral exploration expenses”1 incurred in Canada that a company has renounced to flow-through share investors. Critical minerals currently eligible for the CMETC The critical minerals currently eligible for the CMETC are nickel, cobalt, graphite, copper, rare earth elements, vanadium, tellurium, gallium, scandium, titanium, magnesium, zinc, platinum group metals, uranium and lithium (including lithium from brine deposits). Critical minerals added to the list The Budget proposes to expand the definition of “critical mineral” to include the following additional critical minerals: bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin and tungsten.  Impact of this measure on mining exploration expenses The measure will make the 30% CMETC apply to exploration expenses relating to these new types of critical minerals that a mining exploration company would renounce to flow-through share investors. The measure will cover exploration expenses renounced under flow-through share agreements entered into after Budget Day and on or before March 31, 2027. The Budget also confirms the renewal of the Mineral Exploration Tax Credit until March 31, 2027 (METC). Please feel free to contact our professionals for more information Canadian exploration expenses incurred by a company after April 7, 2022, as part of mineral exploration activities conducted from or above the surface of the earth targeting mainly critical minerals.

The PUT is a crucial component of provincial finances and has a significant impact on the operating costs of the many companies providing essential services. The PUT was introduced in Quebec in fiscal 2004–2005 to replace the municipal property tax on specific infrastructure used by companies in certain key sectors. Such infrastructure includes telecommunications network facilities, gas distribution systems, and energy production, transmission and distribution systems. The latest Quebec budget provides for gradual changes, including an increase in applicable rates over the next decade. The rate applicable to electricity production, for example, will rise from 0.7% in 2027 to 1.5% by 2035. However, this increase does not apply to transmission and distribution operations. The rate applicable to telecommunications will also rise from 0.7% to 1.5%. Lastly, the rate that applies to gas distribution will rise from 0.75% to 1.5% by 2035 on the first 750 million dollars in revenue. The portion of revenue exceeding that amount will be subject to a 1.5% rate as of 2027. As part of the changes introduced in the latest budget, the PUT exemption has been expanded to include certain municipal or public bodies performing government functions in Canada, as well as the corporations owned by such entities. A PUT exemption will also be granted on a pro rata basis to entities operating jointly with other non-eligible entities, based on the distribution of voting rights or income and loss shares. An anti-avoidance rule has been established to ensure that such distribution remains reasonable and in keeping with the spirit of the law. These adjustments apply as of calendar year 2025, with declaratory provisions covering the aforementioned exemptions. Through such provisions, companies having met the criteria set out for previous years should be able to claim back the PUT. To do so, they will have to submit their application by June 30, 2026, or the deadline by which they are required to file their tax returns. While it is true that this measure aims to ensure that the PUT reflects the changing infrastructure needs of public utility companies and to optimize their tax contribution, the impact it will have on stakeholders in the targeted sectors will be considerable, and they will have to adjust operations to cope with future increases. Read our first bulletin on the 2025 provincial budget titled “Provincial Budget 2025: New Refundable Tax Credit for Research, Innovation and Commercialization (CRIC)” Read our second bulletin on the 2025 provincial budget titled “Provincial Budget 2025: Major Changes to the Tax Credit for the Development of E-Business (TCEB)”

In this bulletin, we will be discussing the TCEB as part of our series on the 2025 Quebec budget and corporate taxation. This particular tax credit aims to boost innovation and competitiveness in the digital marketplace by providing strategic tax assistance to businesses specializing in information and communication technologies. It was introduced to spur the growth of Quebec’s technology sectors through tax incentives granted to companies developing or integrating e-business solutions.  Before the 2025 Quebec budget reform, the TCEB comprised a 24% refundable tax credit, coupled with a 6% non-refundable tax credit. In 2024, the government began adjusting TCEB rates as part of the updated economic priorities, gradually reducing the refundable credit to 20% by 2028 and increasing the non-refundable credit to 10%. New adjustments were announced in the 2025 provincial budget to ensure that the incentives align more closely with the changing technological landscape, in particular by shifting the focus to the integration of recent emerging technologies, such as artificial intelligence (AI) and data processing and hosting. The new rules provide that only activities that incorporate artificial intelligence functionalities in a significant way will be eligible for the TCEB going forward. In addition, data processing and hosting services (NAICS 51821) have been added to the list of eligible activities, which shows the increasingly important role they play in today’s technological landscape. However, activities aimed at maintaining or upgrading information systems and technological infrastructure have been removed from the list, refocusing the program on cutting-edge technologies. Businesses engaged in inter-company outsourcing, mainly with subsidiaries of foreign companies, are particularly affected by the changes, in that credit rates will be reduced by half if the proportion of such outsourcing reaches 50% or more. The idea is to encourage those businesses to contribute more directly to the local economy and technological innovation in Quebec. The changes will apply to tax years beginning after December 31, 2025, but companies have the option of electing to apply them to tax years beginning after the budget presentation, provided the election is made before the end of the ninth month following the deadline by which they are required to file their tax returns. Read our first bulletin on the 2025 provincial budget titled “Provincial Budget 2025: New Refundable Tax Credit for Research, Innovation and Commercialization (CRIC)”