Schedule 31 – Investment Tax Credit (Corporations)

A CCPC is considered to be a qualifying corporation if the taxable income in its preceding year, i.e. the amount on line 390 in Part 2A of Schedule 31, does not exceed its qualifying income limit. If the corporation is associated with one or more corporations, the aggregate of all taxable income of each associated corporation for the latest taxation year that ended in the preceding calendar year, i.e. the total in column 4A of Schedule 49, Agreement Among Associated Canadian‑Controlled Private Corporations to Allocate the Expenditure Limit (Jump Code: 49) must not exceed the corporation’s qualifying income limit.

The qualifying income limit is calculated based on the following formula:

$500,000 X [($40,000,000 - A) / $40,000,000]

Where “A” is $0 if the answer in a) or b) below is equal to or less than $10 million;

a) if the corporation is not associated with any other corporation:
the amount of its taxable capital employed in Canada for its preceding taxation year according to the Schedule 23 section in Schedule 9 WORKCHART, Related and Associated Corporations Workchart (Jump Code: 9 WORKCHART) of the filing corporation; or

b) if the corporation is associated to other corporations in a particular year:
the total of each associated corporation’s taxable capital employed in Canada for its last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, i.e. the amount in the Schedule 23 section in Schedule 9 Workchart of the filing corporation and all of the associated corporations.

In any other case, the lesser of $40 million and the answer in a) or b) exceeding $10 million.

The credits attributed to the investment amount in each class of Section 4 of Schedule 31 are transferred to the Summary of Investment Tax Credits Carryovers (Jump Code: 31S). If the class doesn’t already exist, the classes will be set up in the order in which they are entered in Part 4 of Schedule 31 and will be automatically created in the Summary of Investment Tax Credits Carryovers. If the class already exists in the summary, the credit attributed to this class will be added to the existing credit. This order is very important since it will determine how the ITC claims will be applied.

Since it is more advantageous to first deduct the ITC from classes with the lowest CCA rate, the order of the Summary of Investment Tax Credits Carryovers must be established accordingly, i.e. from the lowest to the highest rate.

If prior year ITCs originated in different years, the program will ignore the above-mentioned order and claim the oldest ITCs first.

If it doesn’t already exist, it’s important to create only one class in which all totals should be reported.

When current or capital SR&ED expenditures appear in Part 8 of Schedule 31, a Class "99" will be created in the Summary of Investment Tax Credits Carryovers which will allow for a follow-up of the ITC carry-overs resulting from the SR&ED expenditures.

If it doesn’t already exist, it’s important to create only one Class “99” in which all totals should be reported.

Contributions paid to agricultural organizations for SR&ED - Part 8 line 350 (Part 3 line 103)

Farm producers must complete Schedule 31 to receive their share of investment tax credits (ITC) for contributions made to agricultural organizations. However, they are not required to complete Form T661. It is up to agricultural organizations to file Form T661 for their members no later than six months after the end of their taxation year.

Contributions made to agricultural organizations that were used in the year to finance SR&ED activities and that qualify for ITC purposes, as well as assistance related to these contributions, must be entered on the appropriate lines in Part 8, “Qualified SR&ED expenditures.” Once entered, the net amount of these contributions is updated to line 103 of Part 3, “Corporations in the farming industry.” In addition, the program assumes that this amount also qualifies for provincial tax credits (Alberta (AT1-Schedule 9 and AT1 Schedule 29), British Columbia (Schedule 425) and Ontario (Schedules 508 and 566)). However, the amount of contributions that is transferred to Schedules 425, 508 and 566 is the amount before any reduction for assistance related to the contributions. Therefore, if assistance related to the contributions has to be taken into account in these schedules, make the appropriate changes in the schedules. Furthermore, note that in Form T661 (Jump Code: 661), the program cannot correctly determine the portion of the provincial government assistance that does not relate to contributions made to agricultural organizations. Overrides may be required on lines 429 and 513 of Schedule T661, because these lines should not take into account the portion of the assistance related to contributions made to agricultural organizations.

For more information, consult the CRA Web page, Third-Party Payments Policy.

When an expenditure for the apprenticeship job creation appears in Part 19 of Schedule 31, a Class “97” is created in the Summary of Investment Tax Credits Carryovers which will allow for a follow-up of the ITC carry-overs resulting from the apprenticeship job creation expenditures.

If it doesn’t already exist, it’s important to create only one Class “97” in which all totals should be reported.

Eligible taxpayers will be entitled to a non-refundable tax credit equal to 25% of the eligible expenditures, to a maximum credit of $10,000 per child care space created.

Eligible expenditures will include the cost of depreciable property (furniture, appliances, computer equipment, playground structure, etc.) and the amount of specified start-up costs (architect’s fees, initial licensing fees, building permit costs, etc.). The eligible expenditures have to be incurred solely for the purpose of creating new child care spaces at a licensed child care facility.

When a depreciable expenditure for child care space creation appears in Schedule 31, Investment Tax Credit - Corporations (Jump Code: 31), a custom class “XXt” is created in Schedule 31S, Summary of Investment Tax Credits Carryovers (Jump Code: 31S), for each CCA class number in Part 22 of Schedule 31. The custom classes “XXt” are created to follow-up on the ITC carryovers resulting from the depreciable child care place creation expenditures and to assist in tracking the ITC relating to child care spaces separately from the ITC for other eligible investments.

The ITC claimed in the immediate prior taxation year from classes XX and XXt will be carried forward to Schedule 8 WORKCHART, Capital Cost Allowance (CCA) Workchart as a negative adjustment for the corresponding CCA class. For example, a class 1 ITC of $3,000 and a class 1t ITC of $2,000 claimed in the taxation year will be added together for the purpose of Schedule 8 and $5,000 will be deducted from class 1 UCC as a negative adjustment on line 205, UCC (prior year), in next year’s Schedule 8.

When non-depreciable expenditures for child care space creation appear in Schedule 31, a class 96 is created in Schedule 31S to follow-up on the ITC carryovers resulting from the other child care place creation expenditures.

If it does not already exist, it is important to create only one class 96 or class XXt in which all totals should be carried over.

Elimination of the investment tax credit for child care spaces

The investment tax credit for child care spaces for expenditures incurred after March 21, 2017, has been eliminated. However, the credit remains available for eligible expenditures incurred before 2020, inasmuch as these expenditures have been incurred pursuant to a written agreement entered into before March 22, 2017. When the corporation has eligible expenditures for child care spaces and its taxation year ends after March 21, 2017, the program prompts you, via a diagnostic, to verify if adjustments are required.