On February 19, 2015, the Department of Finance released a proposal to allow accelerated CCA treatment for certain property acquired for use in facilities that liquefy natural gas to supply international markets, domestic markets or to store in periods of low demand and then regasify it in periods of high demand.
Equipment and structures used for natural gas liquefaction are generally included in Class 47 (8 per cent declining balance). The accelerated CCA will increase the rate to 30 per cent (on a declining balance basis) where the property is used in Canada in connection with natural gas liquefaction. Although the additional allowance represents a significant increase, it is not as generous as the original allowance provided to oil sands producers.
The additional allowance will be allowed to be claimed against income of the taxpayer attributable to the liquefaction of natural gas at the facility. This includes income from selling natural gas that was liquefied by the taxpayer if the taxpayer owned the natural gas when it entered the facility, selling by-products from the liquefaction process and providing liquefaction services in respect of natural gas owned by a third party. Where a taxpayer is engaged in an integrated activity there are special rules for determining the amount of income attributable to the liquefaction activities. These attribution rules differ from those introduced by British Columbia in the Liquefied Natural Gas Income Tax Act.
Property eligible for the accelerated CCA treatment includes property acquired after February 19, 2015 and before 2025 where the property is part of the facility that liquefies the natural gas, including controls, cooling equipment, compressors, pumps, storage tanks, and ancillary equipment, pipelines used exclusively to transport liquefied natural gas from the facility, and related structures. Equipment used exclusively for regasification, natural gas pipelines and electrical generation equipment will not be eligible for the additional CCA. Non-residential buildings at a facility that liquefies natural gas are currently eligible for a CCA rate of 6 per cent (on a declining balance basis). An additional 4 per cent allowance will bring the CCA rate for these buildings to 10 per cent.
The half-year and available for use rules will apply to any property acquired in these circumstances.