Refundable investment tax credit (CCPC)

Investment tax credits are earned on qualified properties and expenditures such as SR&ED, according to the CRA’s Schedule 31. Not every credit is refundable: for SR&ED, the CRA notes that corporations and unincorporated businesses may earn a non-refundable credit and that some CCPCs may also earn a refundable one. It can matter in a purchase where the target has claimed credits; see whether SR&ED credits survive a change of control.

How the Act describes it

Under section 127.1(1), a taxpayer (other than a person exempt from tax under section 149) that files a prescribed form with its return, or with a prescribed form amending that return, is deemed to have paid, on its balance-due day and on account of its Part I tax, an amount equal to the lesser of its refundable investment tax credit for the year and the amount it designates on the form. A qualifying corporation is a CCPC whose taxable income for the preceding year, together with that of its associated corporations, does not exceed its qualifying income limit.

What to check or ask

• Which credits were claimed on Schedule 31
• Whether it was a qualifying corporation each year, counting associated corporations
• Whether any credit was carried forward, transferred or recaptured