SMALL BUSINESS AIR QUALITY IMPROVEMENT TAX CREDIT: Could Your Business Benefit?

Posted on March 4th, 2022 in Domestic Tax

close up of air vents on an industry building

The December 14, 2021, Economic and Fiscal Update proposed a temporary refundable small businesses air quality improvement tax credit of 25% on eligible air quality improvement expenses incurred by small businesses to make ventilation and air filtration systems safer and healthier.

The credit will be available for qualifying expenditures between September 1, 2021, and December 31, 2022, related to the purchase or upgrade of mechanical heating, ventilation and air conditioning (HVAC) systems, and the purchase of standalone devices designed to filter air using high-efficiency particulate air (HEPA) filters, up to a maximum of $10,000 per location. There is also a $50,000 maximum claim to be shared among all affiliated entities. The $10,000 and $50,000 limits apply to expenditures over all years (since the beginning of the program) rather than to each particular taxation year.

Eligible entity

The credit is available to qualifying corporations, partnerships, and individuals other than trusts. A qualifying corporation is a Canadian-controlled private corporation (CCPC) that has (in combination with associated corporations) less than $15 million in taxable capital employed in Canada.

Qualifying expenditures

To qualify, expenditures must be made for a qualifying location in Canada used by the entity in its ordinary commercial activities.

Claiming the credit

Expenses incurred September 1 – December 31, 2021, are claimed in the entity’s first tax year that ends on or after January 1, 2022, while expenses incurred January 1 – December 31, 2022, are claimed in the tax year in which the expenditure was incurred.

The credits are taxable in the taxation year in which they are claimed.

ACTION ITEM: Please maintain and provide us with any receipts for amounts expended that may benefit from this tax credit.

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Article originally published in: Tax Tips & Traps 2022 First Quarter – Issue 137