What the CTM ITC Can Fund: Eligible Property, Costs and Rates
The Clean Technology Manufacturing (CTM) Investment Tax Credit (ITC) is a federal refundable credit designed to accelerate capital investment in the clean technology supply chain across Canada. It supports manufacturing and processing activities for clean technologies and the extraction and processing of critical minerals. This article explains exactly what the CTM ITC can fund: eligible property categories, ineligible costs, funding amounts and rates, documentation requirements, practical examples, and how claims and stacking work.
Definition in brief (featured snippet-ready): The CTM ITC is a refundable investment tax credit for eligible capital property acquired on or after January 1, 2024 and available for use by December 31, 2034. The base rate is 30% from 2024 to 2031, phasing down to 20% in 2032, 10% in 2033, and 5% in 2034.
Program Funding Overview
The CTM ITC provides refundable support on qualifying capital investments used in:
Clean technology manufacturing and processing in Canada; and
Critical mineral extraction and processing activities in Canada.
The program is administered by the Canada Revenue Agency (CRA). Businesses claim the credit through the corporate income tax return (T2), supported by program-specific schedules and documentation. The credit applies to eligible property that is acquired and becomes available for use within the program window:
Property acquired on or after January 1, 2024
Property becomes available for use by December 31, 2034
The CTM ITC complements other clean economy ITCs and provincial incentives, but has distinct eligible property rules and a defined rate schedule. Because it is refundable, organizations may receive the credit even if their tax payable is reduced to zero, subject to CRA verification and any recapture rules.
Funding Amounts & Rates
The CTM ITC rate applies to the capital cost of eligible property used all or substantially all (generally 90% or more) in qualifying activities. Rates are set by calendar year when the property becomes available for use:
30% for property available for use from 2024 through 2031
20% for property available for use in 2032
10% for property available for use in 2033
5% for property available for use in 2034
Key points about how the funding is calculated:
The credit is calculated on the eligible capital cost of qualifying property. Government assistance or non-repayable contributions that relate to the property generally reduce the cost base used to calculate the CTM ITC.
The credit is refundable, meaning it can be paid out even if the corporation has insufficient tax payable, subject to CRA assessment.
The year of the credit depends on the “available for use” date under tax rules, which may differ from delivery or invoice dates.
If property becomes available for use across multiple phases, each asset’s specific in-service date determines the applicable rate.
Eligible Expenses
The CTM ITC focuses on capital property used to manufacture or process clean technology components or to extract and process critical minerals in Canada. Eligible property typically includes new machinery and equipment that is:
Situated in Canada
Depreciable capital property
Used all or substantially all (generally at least 90%) in eligible activities
Acquired and available for use within the program window
Examples of eligible property for clean technology manufacturing and processing:
Manufacturing machinery and processing equipment used to produce clean technology components such as:
Solar photovoltaic (PV) cells, wafers, and panels; module assembly equipment; stringers, laminators, and test stations
Wind turbine components including towers, blades, nacelles, hubs, and related subassemblies
Energy storage components and systems, including battery cells, modules, packs, battery management systems, and related manufacturing lines
Power electronics and inverters used in renewable energy systems
Components for small modular reactors and other nuclear-related clean energy applications, where manufacturing qualifies under program guidance
Heat pump, geothermal, and other clean heating/cooling technology components, where specifically covered by CTM rules
Equipment used to produce battery materials and advanced materials, for example:
Cathode active materials (e.g., nickel, manganese, cobalt chemistries)
Anode materials (e.g., graphite, silicon-enhanced materials)
Electrolytes, separators, and other battery supply chain inputs
Production-line machinery for clean technology subcomponents and subassemblies (e.g., winding and coating equipment, calendering lines, slitting machines, tab welding stations)
Quality testing and inline inspection systems integral to the manufacturing process (e.g., X-ray inspection stations for cells/modules, end-of-line electrical testers)
Material handling equipment that is integral to the manufacturing line (e.g., automated conveyors, robotics, pick-and-place systems) when used almost exclusively for eligible production
Process control systems, software-integrated controllers, and instrumentation when they are integral to and form part of eligible manufacturing equipment acquisitions
Examples of eligible property for critical mineral extraction and processing:
Extraction equipment used primarily for critical minerals used in clean technologies (e.g., lithium, cobalt, nickel, graphite, rare earth elements, copper)
Mineral processing equipment used to concentrate, refine, or otherwise process critical minerals into materials used in clean technology supply chains (e.g., flotation cells, autoclaves, leaching reactors, calcination/roasting units, refining tanks)
Comminution, crushing and grinding circuits directly used in critical mineral processing lines dedicated to clean tech supply chains
Hydrometallurgical and pyrometallurgical processing equipment tailored to qualifying critical minerals
Solvent extraction, ion exchange, and crystallization systems used substantially in eligible critical mineral processing
Environmental control and emissions abatement systems that are integral to the eligible extraction or processing equipment and required for its operation
Important notes on eligibility conditions:
New property: CTM ITC is intended for new eligible property. Used property is typically not eligible; edge cases should be validated against CRA rules before claiming.
Location: Property must be located in Canada and primarily used in eligible Canadian activities.
Use test: Property must be used all or substantially all (generally 90%+) in qualifying manufacturing/processing or critical mineral activities. Mixed-use assets must be carefully tracked and may need proration or may be ineligible if the threshold is not met.
Availability for use: The applicable rate depends on when the asset is available for use under tax rules, not necessarily purchase order or delivery dates.
Integral systems: Components that are integral to eligible machinery (e.g., controllers, safety interlocks, embedded sensors) may be included as part of the eligible acquisition.
Ineligible Expenses
While many types of equipment can qualify, certain costs are typically ineligible for the CTM ITC:
Land, buildings, and general-purpose structures (e.g., warehouses, offices, foundations) not qualifying as machinery or equipment
Office equipment, IT hardware not integral to the production line, and general administrative systems
Vehicles for general transportation or logistics (forklifts or AGVs may qualify only if integral to and used almost exclusively in the production line; general-use fleets are typically excluded)
Tools and supplies that are not capitalized as depreciable property
Repairs and maintenance costs, spare parts not included in the original capital acquisition, and routine consumables
Property used primarily (less than the “all or substantially all” threshold) in non-eligible activities
Used property and property previously used in Canada (unless specifically permitted; typically excluded for CTM ITC)
Leased property that is not accounted for as the purchaser’s depreciable capital property for tax purposes
Training, commissioning services, and engineering services that are not capitalized into the cost of eligible property
Interest and financing charges that are not part of the capital cost for tax purposes
When in doubt, classify assets by function, location, and usage. If the property supports a mix of eligible and non-eligible operations, robust usage records are essential.
Expense Documentation Requirements
To support a CTM ITC claim, maintain a complete audit-ready package for each asset or asset group:
Purchase documentation: executed contracts, purchase orders, invoices, shipping documents
Capitalization records: fixed asset register entries, capital cost allocation, CCA class assignment, and “available for use” dates
Technical evidence: equipment specifications, datasheets, engineering drawings, line layouts, and commissioning reports that show the property’s function in the clean tech manufacturing or critical minerals process
Usage support: production logs, throughput reports, shift schedules, and evidence demonstrating “all or substantially all” (generally 90%+) eligible use
Integration documentation: proof that controls, instrumentation, and auxiliary equipment are integral to eligible machinery
Cost adjustments: records of any government assistance, non-repayable contributions, or cost-sharing that reduce the capital cost base
Partnership allocations: partnership information and T5013 slips if the activity is conducted through a partnership
Corporate filing support: workpapers reconciling Schedule 76 calculations to Schedule 31 claim amounts on the T2
Good record-keeping reduces review time and supports compliance if CRA requests additional information or performs an audit.
Examples of Funded Projects
The following examples illustrate how the CTM ITC may apply. These are simplified scenarios; individual outcomes depend on facts and CRA rules.
Example 1: Solar module manufacturing line
Assets: Stringers, tabbers, laminators, EL testers, module frames line, automated conveyors, integrated quality inspection
Capital cost: $10,000,000
Available for use: June 2026
Rate: 30%
Potential refundable CTM ITC: $3,000,000
Notes: A provincial non-repayable grant of $1,000,000 reduces the eligible capital cost base to $9,000,000, yielding a $2,700,000 CTM ITC.
Example 2: Battery cathode active materials plant expansion
Assets: Mixing systems, coating/calendering lines, solvent recovery, drying ovens, in-line metrology, process control systems
Capital cost: $50,000,000
Available for use: October 2032
Rate: 20%
Potential refundable CTM ITC: $10,000,000
Notes: Auxiliary building addition and offices are not eligible; only the manufacturing machinery and integral systems qualify.
Example 3: Graphite processing for anode materials
Assets: Crushing and grinding circuits, flotation cells, purification units, thermal treatment furnaces, dust collection integral to the line
Capital cost: $15,000,000
Available for use: March 2025
Rate: 30%
Potential refundable CTM ITC: $4,500,000
Notes: Mobile equipment used throughout the site is excluded unless almost exclusively dedicated to the eligible process line.
Example 4: Wind tower manufacturing automation
Assets: Robotic welding cells, rolling and forming machines, NDT inspection stations, line material handling integral to production
Capital cost: $22,000,000
Available for use: July 2033
Rate: 10%
Potential refundable CTM ITC: $2,200,000
Notes: General warehouse racking and IT servers for HR/finance do not qualify.
Funding Disbursement & Claiming Process
The CTM ITC is claimed via the corporate T2 return for the taxation year in which the property becomes available for use. Key steps include:
Calculate the CTM ITC on Schedule 76, identifying each eligible property acquisition and the applicable rate
Report the claim on Schedule 31 (Investment Tax Credit), typically using the appropriate line (often line 170 for current-year credits) to bring the amount onto the T2
Include supporting workpapers and retain documentation; CRA may request details or conduct audit and compliance activities
Partnerships generally compute the CTM ITC at the partnership level and allocate to members via the T5013; corporate partners then claim on their T2 with the allocated amount
Due date: the claim is tied to the T2 filing deadlines; late-filed investment tax credit claims may be accepted up to one year after the T2 due date, subject to CRA rules
Disbursement timing depends on CRA assessment of the return and any review requests. Because the CTM ITC is refundable, approved amounts can be paid out even in loss years.
Recapture note: If eligible property is disposed of, exported, or its use changes such that it no longer meets the “all or substantially all” test within the applicable recapture period, some or all of the CTM ITC may be repayable. Maintain asset-level tracking, document any changes in use, and consult CRA guidance before transfers or reconfigurations.
Stacking Rules
The CTM ITC can coexist with other federal or provincial incentives, subject to key principles:
Cost base reduction: Non-repayable assistance (e.g., grants, forgivable loans tied to the asset) generally reduces the capital cost used to calculate the CTM ITC.
No double claiming: The same dollar of cost cannot be used to claim multiple investment tax credits beyond what program rules allow.
Interaction with other clean economy ITCs: Ensure the asset is not simultaneously claimed under another federal ITC that covers the same property unless the rules explicitly permit it.
Disclosure: All assistance and other credits must be disclosed and reflected in the tax computations.
These stacking rules do not eliminate the benefit of combining programs; they align the credit with the net eligible cost.
Real-World Budgeting Tips
Plan in-service dates: Small schedule shifts can move assets across the 2024–2034 rate curve. Earlier in-service dates may secure higher rates.
Separate eligible from ineligible scope: Break out project budgets to isolate machinery and equipment from buildings and general infrastructure to avoid diluting the claim.
Design for dedicated use: The “all or substantially all” test is central. Layout and operating plans that keep equipment dedicated to eligible manufacturing/processing simplify compliance.
Capture integral systems: Ensure controls, inspection stations, and safety systems that are part of the production line are included in the eligible asset cost when appropriate.
Track assistance early: Record all government assistance and incentives to correctly adjust the capital cost base before calculating the CTM ITC.
Maintain a documentation checklist: Standardize invoices, commissioning reports, and usage logs across projects to streamline future filings and audits.
Consider modular commissioning: If practical, commissioning in phases may allow different assets to meet in-service dates aligned to higher rates while maintaining operational readiness.
Conclusion
The Clean Technology Manufacturing (CTM) Investment Tax Credit funds capital investments in Canada’s clean technology supply chains and critical mineral extraction and processing. Eligible property includes manufacturing and processing machinery, integral systems, and specialized equipment used almost exclusively in qualifying activities, with refundable rates of 30% to 5% depending on the year the asset becomes available for use between 2024 and 2034. Careful scoping, documentation, and timing help organizations maximize eligible property and comply with CRA rules. Before finalizing claims, verify your facts against the official program guidance and maintain audit-ready records to support eligibility, calculations, and any stacking with other incentives.
