Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Definitions

• 127.46 (1) The following definitions apply in this section.

  apprenticeship requirements

  apprenticeship requirements means the requirements set out in subsection (5). (exigences à l’égard d’apprentis)

  benefits

  benefits means vacation, pension, health and welfare benefits required to be provided by employers to or for employees under an eligible collective agreement. (avantages sociaux)

  covered worker

  covered worker means an individual (other than a trust)

  • (a) who is engaged in the preparation or installation of specified property at a designated work site as an employee of an incentive claimant or of another person or partnership;

  • (b) whose work or duties in respect of the designated work site are primarily manual or physical in nature; and

  • (c) who is not

    • (i) an administrative, clerical or executive employee, or

    • (ii) a business visitor to Canada as described in section 187 of the Immigration and Refugee Protection Regulations. (travailleur visé)

  designated work site

  designated work site in a taxation year of an incentive claimant means a work site where specified property of an incentive claimant is located during the year and includes the site of a CCUS project (as defined in section 127.44) or of a clean hydrogen project (as defined in section 127.48) of the incentive claimant. (chantier désigné)

  eligible collective agreement

  eligible collective agreement means

  • (a) in Quebec,

    • (i) a collective agreement negotiated in accordance with applicable provincial law, or

    • (ii) a prescribed agreement; and

  • (b) in any other case,

    • (i) the most recent multi-employer collective bargaining agreement negotiated with a trade union that is an affiliate of Canada’s Building Trades Unions for a given trade in a region or province,

    • (ii) a project labour agreement established with a trade union in accordance with applicable provincial law that covers the work associated with the investments eligible for specified tax credits and that provides for wages and benefits for covered workers in a given trade that are at least equal to the regular wages (without taking into account overtime) and benefits provided for covered workers in an agreement described in subparagraph (i), or

    • (iii) a prescribed agreement. (convention collective admissible) 

  incentive claimant

  incentive claimant means a person that, or a partnership at least one member of which, plans to claim or has claimed a specified tax credit for a taxation year. (demandeur d’incitatif)

  installation taxation year

  installation taxation year, in respect of a specified tax credit, means a taxation year during which preparation or installation of specified property occurs. (année d’imposition de l’installation)

  prevailing wage requirements

  prevailing wage requirements means the requirements set out in subsection (3). (exigences relatives au salaire prévalant)

  Red Seal trade

  Red Seal trade means, for a province using the Red Seal Program for a particular trade, the relevant Red Seal trade managed by the Canadian Council of Directors of Apprenticeship and, in any other case, an equivalent provincially registered trade. (métier désigné Sceau rouge)

  Red Seal worker

  Red Seal worker means a covered worker whose duties are, or are equivalent to, those duties normally performed by workers in a Red Seal trade. (travailleur Sceau rouge)

  reduced tax credit rate

  reduced tax credit rate means the regular tax credit rate minus 10 percentage points. (taux du crédit d’impôt réduit)

  regular tax credit rate

  regular tax credit rate means the specified percentage (as defined in subsections 127.44(1), 127.45(1) and 127.48(1), as the case may be). (taux du crédit d’impôt régulier)

  specified property

  specified property means property all or a portion of the cost of which qualifies for a specified tax credit. (bien déterminé)

  specified tax credit

  specified tax credit means the CCUS tax credit under subsection 127.44(1), the clean technology investment tax credit under subsection 127.45(1) and the clean hydrogen tax credit under subsection 127.48(1). (crédit d’impôt déterminé)

• Marginal note:Reduced or regular rate

  (2) Despite sections 127.44, 127.45 and 127.48, the applicable rate for each specified tax credit of an incentive claimant is the reduced tax credit rate unless the incentive claimant elects in prescribed form and manner to meet the prevailing wage requirements under subsection (3) and the apprenticeship requirements under subsection (5) for each installation taxation year in respect of the specified tax credit.

• Marginal note:Prevailing wage requirements

  (3) For the purposes of this section, the prevailing wage requirements for an incentive claimant for an installation taxation year are

  • (a) if prescribed circumstances exist, prescribed conditions; and

  • (b) in any other case, the following conditions:

    • (i) each covered worker at a designated work site of an incentive claimant must be compensated for their work on the preparation or installation of specified property

      • (A) in accordance with the terms of an eligible collective agreement that applies to the worker, or

      • (B) in an amount that is at least equal to the amount of the regular wages (without taking into account overtime) and benefits as specified in the eligible collective agreement that most closely aligns with the covered worker’s experience level, tasks and location, calculated on a per-hour or similar basis;

    • (ii) the incentive claimant attests, in prescribed form and manner, that it has met the prevailing wage requirement in subparagraph (i) for its own employees who are covered workers, if any, and that it has taken reasonable steps to ensure that any covered workers employed by any other person or partnership at the designated work site are compensated in accordance with subparagraph (i); and

    • (iii) it has communicated, either in a poster or notice, in a manner readily visible to and accessible by covered workers at the designated work site or by electronic means, a notice confirming that the work site is a work site subject to prevailing wage requirements in relation to covered workers, including a plain language explanation of what that means for workers and information regarding how to report failures to pay prevailing wages to the Minister.

• Marginal note:Indexation of prevailing wages

  (4) Where an eligible collective agreement that is used to calculate the prevailing wage requirement under subparagraph (3)(b)(i) is expired, then the amounts of wages and benefits stipulated in the agreement shall be adjusted by the average Consumer Price Index in the manner set out in section 117.1 for each calendar year that begins after the expiration of the eligible collective agreement.

• Marginal note:Apprenticeship requirements

  (5) For the purposes of this section, the apprenticeship requirements for an incentive claimant for an installation taxation year are that

  • (a) subject to paragraph (b), the incentive claimant makes reasonable efforts to ensure that apprentices registered in a Red Seal trade work at least 10% of the total hours that are worked during the year by Red Seal workers at a designated work site of the incentive claimant on the preparation or installation of specified property;

  • (b) if an applicable law or collective agreement that specifies a maximum ratio of apprentices to journeypersons, or otherwise restricts the number of apprentices employed at a designated work site, prevents the condition in paragraph (a) from being met, the incentive claimant makes reasonable efforts to ensure that the highest possible percentage of the total labour hours, performed during the year by Red Seal workers on the preparation or installation of specified property, is performed by apprentices registered in a Red Seal trade while respecting the applicable labour law or collective agreement; and

  • (c) the incentive claimant attests in prescribed form and manner that it has met the apprenticeship requirements in paragraph (a) or (b) in respect of covered workers at the designated work site.

• Marginal note:Addition to tax — wage requirement

  (6) Unless subsection (9) applies, if an incentive claimant claims a specified tax credit at a regular tax credit rate in a taxation year but does not meet the prevailing wage requirements in respect of a covered worker for one or more days in an installation taxation year in respect of that specified tax credit, there shall be added to the tax payable under this Part for the installation taxation year by the incentive claimant an amount equal to $20 for each day in the installation taxation year on which the covered worker was not paid the prevailing wage.

• Marginal note:Addition to tax — apprenticeship requirement

  (7) Unless subsection (9) applies, if an incentive claimant claims a specified tax credit at a regular tax credit rate in a taxation year in respect of a designated work site, but less than 10% of the total hours that are worked during an installation taxation year in respect of that specified tax credit at the designated work site on the preparation or installation of specified property are worked by apprentices registered in a Red Seal trade, there shall be added to the tax payable under this Part for the installation taxation year by the incentive claimant the amount determined by the formula

  $50 × (A − B)

  where

  A

  is the total number of hours of labour required to be performed by apprentices registered in a Red Seal trade for the installation taxation year at the designated work site of the incentive claimant as described in paragraph (5)(a) or (b), as applicable, in each case read without reference to the words “the incentive claimant makes reasonable efforts to ensure that”; and

  B

  is the total number of actual hours of labour performed by apprentices registered in a Red Seal trade for the installation taxation year at the designated work site of the incentive claimant on the preparation or installation of specified property plus any other hours of labour for which the incentive claimant has met the apprenticeship requirements in paragraph (5)(a) or (b), as applicable.

• Marginal note:Indexation

  (8) The dollar amounts in subsections (6) and (7) shall be adjusted for inflation in each calendar year commencing after 2023 in the manner set out in section 117.1.

• Marginal note:Gross negligence

  (9) If an incentive claimant has claimed a specified tax credit at the regular tax credit rate in a taxation year (referred to in this subsection as the “claim year”) but has failed to meet the prevailing wage requirements or the apprenticeship requirements for an installation taxation year in respect of that specified tax credit and the Minister determines that the incentive claimant knowingly or in circumstances amounting to gross negligence failed to meet those requirements, then

  • (a) the incentive claimant is not entitled to the regular tax credit rate, and is entitled to not more than the reduced tax credit rate, for the specified tax credit; and

  • (b) the incentive claimant is liable to a penalty for the claim year equal to the amount determined by the formula

    50% × (A − B)

    where

    A

    is the amount of the specified tax credit claimed by the incentive claimant at the regular tax credit rate for the claim year, and

    B

    is the amount that the incentive claimant would have been entitled to claim as a specified tax credit at the reduced tax credit rate for the claim year.

• Marginal note:CCUS refurbishment credit

  (10) Subsection (9) does not apply in respect of a CCUS refurbishment tax credit.

• Marginal note:Corrective measures — prevailing wage requirement

  (11) Unless subsection (9) applies, if an incentive claimant receives a notification from the Minister specifying that the incentive claimant did not meet the prevailing wage requirements for a designated work site for a taxation year, the incentive claimant may within one year after receipt of the notification, or such longer period as is acceptable to the Minister, cause each covered worker to be paid the top-up amount determined under subsection (12).

• Marginal note:Top-up amount

  (12) For each covered worker in respect of an incentive claimant, the top-up amount referred to in subsection (11) for a taxation year shall equal or exceed the amount determined by the formula

  A − B + C

  where

  A

  is the amount that the covered worker would have received or benefited from, in respect of the worker’s employment at the designated work site during the taxation year, had the covered worker been paid in accordance with the prevailing wage requirements in paragraph (3)(a) or subparagraph (3)(b)(i), as applicable;

  B

  is the amount that the worker actually received or benefited from, in respect of the worker’s employment at the designated work site during the taxation year; and

  C

  is interest on the difference between the description of A and the description of B, calculated from the beginning of the taxation year to the time of payment at the prescribed rate specified in paragraph 4301(a) of the Income Tax Regulations.

• Marginal note:Top-up payment not made

  (13) For any covered worker in respect of whom a top-up amount is not paid under subsection (11), the incentive claimant shall pay to the Receiver General, as a penalty under this Act, 120% of the amount determined by the formula in subsection (12).

• Marginal note:Tax treatment of top-up amount

  (14) A top-up amount that is paid to a covered worker

  • (a) is deemed to be

    • (i) salary and wages of the worker for the year in which it is received, and

    • (ii) deductible in computing income by the payor for the year in which it is paid; and

  • (b) does not qualify for any specified tax credit.

• Marginal note:Exception

  (15) This section does not apply to a specified tax credit claimed for the acquisition of off-road zero emission vehicles or to the acquisition and installation of low carbon heat equipment.

• Marginal note:Deemed reasonable efforts

  (16) For the purposes of this section, an incentive claimant is deemed to have satisfied the requirement in paragraph (5)(a) or (b), as the case may be, in respect of hours of labour at a designated work site for an installation taxation year if the following conditions are met:

  • (a) at least every four months, the incentive claimant

    • (i) posts a bona fide job advertisement, seeking sufficient apprentices to perform those hours of labour in respect of the designated work site, that

      • (A) includes a commitment to facilitate participation of apprentices in a Red Seal trade program and a statement that the job opportunity is open to both existing employees and new hires, and

      • (B) is open and readily accessible on the Job Bank website of the Government of Canada and at least two other websites either

        • (I) on a continuous basis throughout the year, or

        • (II) for at least 30 days from the time of posting,

    • (ii) communicates with a trade union (which, if the designated work site is in Quebec, is a trade union recognized under applicable provincial law and, if the designated work site is outside of Quebec, is an affiliate of Canada’s Building Trades Unions) and at least one secondary school or post-secondary educational institution for the purpose of facilitating the hiring of the apprentice positions described in the job advertisement, and

    • (iii) receives from the trade union confirmation in writing that the trade union has provided as many apprentices as reasonably possible for work at the designated work site during the installation year, unless the trade union fails to respond within five business days of a request;

  • (b) the incentive claimant reviews and duly considers all applications received in response to the advertisement for apprenticeship opportunities that are offered directly by the incentive claimant and takes reasonable steps to ensure that other applications are reviewed and duly considered; and

  • (c) the incentive claimant attests in prescribed form and manner that it has complied with paragraphs (a) and (b).

• Marginal note:Partnerships

  (17) If subsection (6), (7), (9) or (13) applies to an incentive claimant that is a partnership

  • (a) any member of the partnership may elect to pay the amount of the relevant tax or penalty liability on behalf of the partnership;

  • (b) if no election has been made under paragraph (a), the portion of the relevant tax or penalty liability that can reasonably be considered to be each member’s share thereof is payable by each member; and

  • (c) each member of the partnership is jointly and severally, or for civil law, solidarily, liable for any portion of the amount of the relevant tax or penalty liability that is not paid in accordance with paragraph (a) or allocated to and payable by a member under paragraph (b).