Coalition proposes expanded equipment options for enhanced capital cost allowances

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                Tax incentives would encourage energy-efficient retrofits

    By Anja Karadeglija

    Special to Ontario Construction Report

    A new coalition, which includes members from the construction industry, is asking the federal government for tax reform that would create additional incentives for energy-efficient retrofits.

    Called the Building Energy Efficiency Coalition, its members include the Canadian Construction Association (CCA) and the Mechanical Contractors Association of Canada.

    “Specifically, we’re asking for a modest expansion in the equipment included in (Capital Cost Allowance) class 43.2,” said Canadian Federation of Apartment Associations president John Dickie, speaking on behalf of the coalition.

    The other coalition members are the Real Property Association of Canada, the Heating, Refrigeration and Air Conditioning Institute of Canada, the Thermal Insulation Association of Canada, the Association of Energy Engineers – Southern Ontario Chapter and the Energy Services Association of Canada.

    Including the equipment in class 43.2 means there would be greater tax incentives for owners considering making these changes.

    Some renewable energy efficiency equipment is already included under class 43.2; the coalition seeks to include additional uses of heat-recovery ventilators, which are currently allowed only if used in an industrial process, and active solar equipment, which is typically included in class 43.2, unless it’s used to heat water for swimming pools.   Additionally, if the cost of installing high-efficiency boilers or furnaces and the equipment that goes along with them exceeds a certain percentage, the entire retrofit cost should be included, the coalition argues.

    “With an older building… there are considerable costs to make the building suitable to receive, to make use of a high-efficiency boiler or furnace. And the addition of those costs, as well as the additional costs of going high-efficiency, means it doesn’t make financial sense,” Dockie explained. “Here’s an opportunity to incentivize them, to make it feasible for them to go to high efficiency.”

    The fourth item the coalition would like to see included is high-efficiency chillers; while the Canadian climate means they aren’t often used, installing them would save energy.

    The coalition argues that financial decision-makers aren’t investing enough in energy-efficient retrofits, partly because the financial incentives aren’t there; if the tax changes were put in place, accountants would be able to point out the tax advantages to their clients, Dickie said.

    “If, say the internal rate of return was 10 per cent without this change, it might become 15 per cent as a result of this change. It makes a significant difference in encouraging owners to make the changes which would qualify for this reform, if it’s adopted, of course,” he said.

    The changes would only apply to those who earn income from their buildings, like hotels and apartment owners, he added.

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