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Status and purpose

• Bill C-269 was at first reading on March 12, 2026. It would amend the Income Tax Act to create a heat recovery tax credit.
• The bill applies to the 2025 and subsequent taxation years, although qualifying equipment must be acquired after December 31, 2025.

Credit and eligibility

• A taxable Canadian corporation could deduct 30% of the capital cost of qualifying equipment from its income tax otherwise payable. The credit is non-refundable.
• The equipment must be used all or substantially all to recover heat produced by industrial processes and convert it to generate energy. Equipment whose primary function is generating energy does not qualify.
• The equipment must be intended for use exclusively in Canada and must not previously have been used, or acquired for use or lease, in Canada. It must not have been exported, sold or leased by the corporation before the end of the acquisition year.
• The corporation must file a prescribed form with prescribed information by its tax filing deadline.

Adjustments and restrictions

• The capital cost used to calculate the credit is reduced by relevant non-government assistance received, receivable or reasonably expected. Assistance later repaid or no longer expected is added back to the cost.
• Taxable Canadian corporations that are partnership members can receive a reasonable share of a partnership’s credit. A limited partner’s allocation cannot exceed its at-risk amount. Special rules also address assistance and tiered partnerships.
• The credit is unavailable for equipment or related interests that are tax shelter investments under the specified provision of the Act.
• If credited equipment acquired in any of the preceding five calendar years is converted to a non-heat-recovery use, exported or disposed of, the deducted credit is added back to the taxpayer’s tax payable.

Changes to existing law

• The bill adds the new credit to existing income, depreciable-property, partnership, amalgamation and corporate wind-up rules. These changes address how the credit is treated elsewhere in the tax system, including adjustments to property costs and partnership interests.
• The provided text does not state an estimated cost for the credit.