Income Tax Regulations — 1219
1219 (1) Subject to subsections (2) to (4), for the purpose of subsection 66.1(6) of the Act, Canadian renewable and conservation expense means an expense incurred by a taxpayer, and payable to a person or partnership with whom the taxpayer is dealing at arm’s length, in respect of the development of a project for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in the project would be the capital cost of any property that is included in Class 43.1 or 43.2 in Schedule II, or that would be so included if this Part were read without reference to this section, and includes such an expense incurred by the taxpayer (a) for the purpose of making a service connection to the project for the transmission of electricity to a purchaser of the electricity, to the extent that the expense so incurred was not incurred to acquire property of the taxpayer; (b) for the construction of a temporary access road to the project site; (c) for a right of access to the project site before the earliest time at which a property described in Class 43.1 or 43.2 in Schedule II is used in the project for the purpose of earning income; (d) for clearing land to the extent necessary to complete the project; (e) for process engineering for the project, including (i) collection and analysis of site data, (ii) calculation of energy, mass, water, or air balances, (iii) simulation and analysis of the performance and cost of process design options, and (iv) selection of the optimum process design; (f) for the drilling or completion of a well for the project, other than (i) a well that is, or can reasonably be expected to be, used for the installation of underground piping that is included in paragraph (d) of Class 43.1 or paragraph (b) of Class 43.2 in Schedule II, or (ii) a well referred to in paragraph (h); (g) for a test wind turbine that is part of a wind farm project of the taxpayer; or (h) if at least 50% of the depreciable property to be used in the project, determined by reference to its capital cost, is described in subparagraph (d)(vii) of Class 43.1, (i) for the drilling of a well, or (ii) solely for the purpose of determining the extent and quality of a geothermal resource. (2) A Canadian renewable and conservation expense does not include any expense that (a) is described in paragraphs 20(1)(c), (d), (e) or (e.1) of the Act; or (b) is incurred by a taxpayer directly or indirectly and is (i) for the acquisition of, or the use of or the right to use, land, except as provided by paragraph (1)(b), (c) or (d), (ii) for grading or levelling land or for landscaping, except as provided by paragraph (1)(b), (iii) payable to a non-resident person or a partnership other than a Canadian partnership (other than an expense described in paragraph (1)(g)), (iv) included in the capital cost of property that, but for this section, would be depreciable property (other than property that would be included in Class 14.1 of Schedule II), except as provided by paragraph (1)(b), (d), (e), (f), (g) or (h), (v) included in the capital cost of property that, but for this section, would be property included in Class 14.1 of Schedule II, except as provided by any of paragraphs (1)(a) to (e) or subparagraph (h)(ii), (vi) included in the cost of inventory of the taxpayer, (vii) an expenditure on or in respect of scientific research and experimental development, (viii) a Canadian development expense or a Canadian oil and gas property expense, (ix) incurred, for a project, in respect of any time at or after the earliest time at which a property described in Class 43.1 or 43.2 in Schedule II was used in the project for the purpose of earning income, (x) incurred in respect of the administration or management of a business of the taxpayer, or (xi) a cost attributable to the period of the construction, renovation or alteration of depreciable property, other than property described in Class 43.1 or 43.2 in Schedule II, that relate