Tax and Revenue Administration Alberta Corporate Tax Act Special Notice Vol. 5 No. 23

Vol. 5 No. 23 / November 2007

ALBERTA CORPORATE TAX ACT SPECIAL NOTICE: Income Tax Treatment of Payments under the Climate Change and Emissions Management Act and Regulations

NOTE: This special notice is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this special notice and governing legislation, the legislation takes precedence.

Industry has various options to meet the emissions intensity reduction obligations under the Climate Change and Emissions Act's Specified Gas Emitters Regulation . First, facilities can make operational improvements that reduce emissions as required. For those facilities unable to meet their intensity reduction targets through these improvements, the following compliance options are also available:

• payment of $15 per tonne of excess carbon dioxide equivalent (“Ordinary Payments”) into the Climate Change and Emissions Management Fund (the “Fund”);
  
  
• purchase “Emissions Performance Credits” from facilities that reduced their emissions intensity below required targets; or
  
  
• purchase “Emissions Offsets”, being carbon dioxide equivalent reductions generated from Alberta-based projects not subject to reduction obligations under the Specified Gas Emitters Regulation.

Ordinary payments, payments for Emission Performance Credits, and payments for Emissions Offsets are considered expenses to earn income and will be deductible for income tax purposes for Alberta.

Fines may be imposed if a facility fails to meet emission intensity obligations under the Specified Gas Emitters Regulation using the options provided for in the regulation. These fines will not be deductible for income tax purposes for Alberta.