July 15 - Deadline to File T2s to Receive Carbon Tax Rebate

Evelyn Jacks

Approximately 600,000 incorporated small to medium sized businesses with 499 or fewer employees will be receiving $2.5 billion in Carbon Tax Rebates for the years 2019 to 2024 soon, BUT they must have filed their 2023 T2 tax returns by July 15. There are other important criteria:

Location of Business.   SMEs who have paid the carbon tax in Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador are eligible.  These are provinces in which the carbon pricing system includes a federal “backstop” because they don’t have their own system in place.

The tax credit for an eligible corporation in a given fuel charge year would be calculated separately for each province where the corporation had employees during the calendar year in which the fuel charge year begins.

How the Refundable Tax Credit is Calculated.  The credit will be determined by multiplying the number of employees of the corporation in the province for that calendar year by the payment rate set by the Minister of Finance for the province for the corresponding fuel charge year.

The CFIB has estimated this to be an average rebate of $2500 per business, but it could be more, as shown in a chart they have developed, below.

According to the budget, the tax credit will be available for future fuel charge years, including 2024-25, in a similar manner. That is, a payment rate would be specified for each applicable province with a payment made to an eligible corporation that has filed a tax return for a taxation year ending in the calendar year in which the fuel charge year begins.  However, the CFIB also notes that the government has announced the rebate will be reduced from 9% to 5% in 2024.

Strings Attached: The rebate funds can be used by businesses for a variety of purposes, including investing in energy-efficient equipment, implementing renewable energy projects, conducting energy audits and efficiency upgrades, or offsetting the costs of carbon pricing compliance, in order to choose the most cost-effective and impactful ways to reduce their carbon footprint.

Reporting and Compliance: Participating businesses must report on their carbon emissions and demonstrate compliance with program requirements to qualify for the rebate. This may involve submitting regular emissions reports, implementing emissions reduction measures, or undergoing audits or inspections to verify compliance.

When Will the Money Arrive?  The budget notes that ”. . .the refunds will be returned directly to eligible corporations through direct payments from the Canada Revenue Agency (CRA), separatelyfrom CRA tax refunds.”  Few other details are available at the time of writing.

The Bottom Line.  Incorporated SMEs which are behind in their T2 filings for 2023 should endeavor to catch up by July 15.  Unincorporate business owners who will file T1 returns by June 15 will want to ask their accountants about these rebates to be sure they are eligible for them.