Immediate Expensing of Capital Property

On June 23, 2022, Bill C-19 received royal assent enacting the changes to allow Canadian Controlled Private Corporations (CCPCs) to deduct 100% of capital outlays on eligible property acquired on or after April 19, 2021 for CCPCs. Eligible property includes any capital property subject to the capital cost allowance (CCA) rules except for the following CCA classes:

• Class 1 -6 – Various building types
• Class 14.1 – Intangibles/goodwill
• Class 17 – Roads, parking lots, sidewalks, storage areas or similar surface construction
• Class 47 – transmission or distribution equipment of electrical energy
• Class 49 – property that is a pipeline, including control/monitoring devices, valves and other equipment ancillary to the pipeline for transmission of petroleum
• Class 51 – property that is a pipeline, including control and monitoring devices, valves and other equipment ancillary to the pipeline, used for the distribution of natural gas

There is a $1.5M threshold for a corporation and its associated CCPCs per tax year. If allowable expenses exceed this limit in a tax year, the CCPC can elect which CCA asset class to apply the immediate deduction. Any remainder in excess of the limit is subject to regular CCA rules. Any unused portion of the annual $1.5M threshold is not carried forward for future tax years.

Property would be eligible for immediate expensing even if it has been used before, or acquired for use for any purpose before the acquisition by the taxpayer if the both the following conditions are met:

1. Neither the taxpayer nor a non-arm’s length person previously owned the property; and
2. The property has not been transferred to the taxpayer on a tax-deferred “rollover” basis

A CCPC that has already filed a tax return in which it had acquired property eligible for immediate expensing may file an amendment to increase the CCA deduction claimed in the tax year.

Property acquired by Canadian resident individuals or partnerhips where all members are individuals, after December 31, 2021 and becomes available for use before January 1, 2025 may be eligible for these rules. For partnerships, where not all members are individuals, the property must become available for use before January 1, 2024 to qualify. 

To determine if you qualify for the immediate expensing of certain assets, please contact us for more information.