Investing in Green Vehicles for Businesses

Budget 2019 proposes to provide a temporary enhanced first year CCA rate of 100 percent in respect of eligible zero emission vehicles. Two new CCA classes will be created.  Class 54 will include zero-emission vehicles that would otherwise be included in Class 10 or 10.1, which presently include most motor vehicles.  Class 55 will include zero emission vehicles that would otherwise be included in Class 16, which presently includes heavy freight tractor units and taxicabs. In the case of Class 54, there will be a limit of $55,000 (plus sales taxes) on the amount of CCA deductible in respect of each zero-emission passenger vehicle. This new $55,000 limit will be reviewed annually.
 
Only new vehicles will qualify, and they must be fully electric, a plug-in hybrid with a battery capacity of at least 15 kWh or fully powered by hydrogen.  Vehicles in respect of which assistance is paid under the new federal purchase incentive (see Section E. Other Tax and Business Measures) will be ineligible.
 
To parallel the income tax proposals, Budget 2019 proposes to increase the amount of GST/HST that businesses can recover in respect of zero-emission passenger vehicles.
 
This measure will apply to eligible assets acquired on or after Budget Day and that become available for use before 2028.  The 100% rate will apply from March 19, 2019 to the end of 2023.  For acquisitions in calendar 2024 and 2025, the first year enhanced allowance will decline to 75%, with a further decline to 55% for 2026 and 2027.  
 
Any undepreciated capital cost remaining after the year of acquisition will be eligible for CCA of 30% (Class 54, the same as Class 10 and 10.1) or 40% (Class 55, the same as Class 16).  CCA must be pro rated for short taxation years.  When a Class 55 vehicle is disposed of, the proceeds which reduce the undepreciated capital cost pool will be pro rated based on the total cost compared to the $55,000 depreciable limit.  An election to forego these special rules, and place these vehicles in Class 10, 10.1 or 16, will be available.