Waste biomass generation tapped for tax credit

CRE awaits spinoffs of new provincial spending

Quebec and Ontario unveil investment incentives
Monday, March 27, 2023

There are few promises of new provincial spending that will flow directly to the commercial real estate sector in the 2023-24 Quebec and Ontario budgets, which were released last week. However, both governments have announced investment incentive programs that could have spinoff implications for land deals and/or producers of technologies and products that the industry uses. As well, there are some allocations for skills development, technical and administrative services, and continued funding is committed to subsidize some low-income renters who obtain housing in the private sector.

Quebec has expanded the parameters of its pre-existing tax holiday on large investments of at least $100 million. As of budget day, March 21, 2023, the maximum rebate on capital investment has increased for projects located outside Montreal and Quebec City and the program has been extended an extra five years, giving candidates until Dec. 31, 2029 to qualify.

Approved investors can receive tax exemptions on the combo of the completed project’s revenue and the employer’s contributions to Quebec’s Health Services Fund equivalent to 15, 20 or 25 per cent of the eligible capital costs of the project, to a maximum of $1 billion prorated over 10 years. Previously, five categories of economic activity were designated for the tax holiday — manufacturing; wholesale trade; warehousing; data processing; and development of digital platforms — but that has now been broadened to include: information and cultural industries; professional, scientific and technical services; arts, entertainment and recreation; agriculture and forestry; and extraction of critical and strategic resources.

The budget document calls this a move to “accelerate the expansion of activity sectors with growth potential” and identifies investments that improve productivity, have a multiplier effect in the broader economy or support the net-zero energy transition as particular priorities. It also promises a simplified application process, which, along with a shorter timeline for rebate payout (10 versus the previous 15 years), is expected to “make the measure more attractive to businesses”.

Some of newly designated investment categories appear to overlap with commercial real estate’s business interests, but it is one of 23 sectors explicitly excluded from benefitting. Others on that list — such as motion picture/video industries; broadcast and content providers; accommodations and food services; and spectator sports — would likewise seem to be logical investors in the arts, entertainment and recreation or information and cultural areas.

Even so, real estate industry insiders speculate the new program criteria could help get obsolete industrial lands cleaned up and back into productive use and/or prompt more interest in remote communities and those that have suffered an erosion of their once mainstay industries. The latter encompasses 26 specified territories of “low economic vitality” where a 25 per cent investment rebate is on offer, while urban centres outside Greater Montreal and Quebec City are in the zone where a 20 per cent incentive applies.

“There is a desire to do clean tech,” says Luciano D’Iorio, Quebec regional president for the commercial brokerage, CDNGLOBAL. “In the eastern part of Montreal, the Chamber of Commerce is active in trying to promote clean tech for those areas that were traditionally heavy industrial with refineries and petrochemical industries, and there is also a push for logistics space and companies. However, this (the incentive) could have more effect outside the Montreal area.”

Also of potential interest to Quebec’s real estate and development industry, the 2023-24 budget allocates $11 million over three years to support implementation of building information modelling (BIM) and $88 million over six years for various elements of the recently adopted vision for architecture and land-use planning, Politique nationale d’architecture et d’aménagement du territoire (PNAAT). The latter envelope of expenditures includes funds to help municipalities with land-use planning exercises and to establish a new coordinating body for architecture.

“Establishing a governance structure will promote the creation of a genuine culture of architectural quality in Québec. The main mandate of this governance structure will be to mobilize and obtain the support of stakeholders with respect to high-quality architecture,” the budget document states. “It will also need to gather data on architecture projects and monitor the integration and development of architectural quality in the government’s practices and actions. In addition, it will need to support research and innovation in architecture and promote Québec architecture.”

The Ontario government has allocated $780 million over three years to underwrite its newly unveiled tax credit for investment in manufacturing facilities and/or equipment. As proposed, it will take the form of a 10 per cent refundable corporate income tax credit, to a maximum of $20 million per year, on qualifying costs of acquiring, constructing or renovating buildings and/or purchasing machinery or equipment used in manufacturing or processing.

Canadian-controlled private corporations with a fixed place of business in Ontario would be eligible. The tax credit would be available on investments made as of budget day, March 23, 2023.

“This tax incentive would help local manufacturers invest and expand, creating good‐paying jobs and helping rebuild the economy,” the budget document states. “The government would undertake a review of the credit every three years. The review would evaluate the credit for effectiveness, compliance burden and administrative costs.”

Meanwhile, a larger review of Ontario’s tax system is promised.

“The tax review will build on the government’s track record of supporting business, seniors and working families. It will prioritize competitiveness and long‐term growth in the province, as well as the fairness and effectiveness of tax relief and supports,” the budget document advises. “The review will also focus on modernized administration tools that strengthen Ontario’s growth and prosperity and complement Ontario’s ongoing efforts to reduce red tape.”

Looking beyond Ontario’s taxing purview, the budget document urges the federal government to adjust the harmonized sales tax (HST)/goods and services tax (GST) to provide relief on the development costs of new housing.

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