Last week, we reported that the federal government was considering a proposal to provide a significant tax break to proposed LNG plants in British Columbia.
The Prime Minister has now confirmed, in a speech today in Surrey, that the government intends to amend the Income Tax Act regulations to provide for accelerated depreciation for LNG facilities.
The announced rates are 30% depreciation for equipment used in natural gas liquefaction (including controls, cooling equipment, compressors, pumps, storage tanks, and ancillary equipment, pipelines used exclusively to transport liquefied natural gas from the facility, and related structures), and 10% for buildings at a facility that liquefies natural gas.
Depreciation at the accelerated rates would only be deductible against income attributable to natural gas liquefied at the facility, and not against other income of the taxpayer. Conventional depreciation rules (such as the half-year rule and depreciation on a declining-balance basis) would apply.
Depreciation at the accelerated rates would apply to equipment purchased after February 29, 2015 and before 2025. Equipment purchased before February 19, 2015 would not be eligible.
For further information, see the Prime Minister's Office's backgrounder and the Department of Finance's draft regulations.
The Department of Finance is seeking comments on the draft regulations until March 27.
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