Finavera qualifies for Canadian flow-through taxation
2007-05-18 00:33 MT - News Release
Mr. Jason Bak reports
OCEAN ENERGY QUALIFIES FOR CANADIAN 'FLOW-THROUGH' TAX BENEFITS
Finavera Renewables Inc. would like to acknowledge the government of Canada for extending flow-through tax credits to the ocean renewable energy sector. In its 2007 budget introduced March 19, the Canadian government made ocean energy eligible for the Canadian renewable and conservation expense and the accelerated capital cost allowance.
The new tax credits will significantly incentivize capital to move into the ocean energy sector. The flow-through tax credit (which is currently available for mineral exploration and qualifying renewable energy development and test projects) now encourages investment in ocean energy resource assessment as well as for certain capital expenditures on equipment that generates electricity from ocean energy, through the offering of tax incentives to investors.
Finavera Renewables chief executive officer Jason Bak said: "This tax initiative is critical for the development of the ocean energy industry, which has the potential to be a cornerstone in Canada's new energy economy. We would like to congratulate the Canadian government for having the foresight to extend this tax treatment to the rapidly developing ocean energy sector. I believe this support presents a market-driven solution that will contribute significantly to the commercialization of ocean energy technology. As a result, this will strengthen Canada's environmental and economic performance and help develop a world-leading ocean energy industry."
In a letter to the company, Natural Resources Minister, Gary Lunn, said: "On March 19, 2007, our government displayed its commitment to the environment and renewable energy by announcing the extension of the accelerated capital cost allowance and Canadian renewable and conservation expense (CRCE) to ocean energy and other renewables. As active proponents of this amendment, Finavera Renewables helped to successfully illustrate to government the utility of these market-driven tax incentives to support Canada technology and domestic industry."
Mr. Lunn concluded: "Through the implementation of these important tax incentives, the government of Canada is investing in technologies that contribute to reductions in greenhouse gas emissions, improved air quality, that promote the diversification of the energy supply and a competitive economy. We will support the ocean energy sector and its Canadian developers and technology leaders such as Finavera."
Canadian renewable and conservation expense (flow-through)
A flow-through share is available to mining, petroleum and certain types of renewable energy companies to facilitate financing their exploration and project development activities. Eligible companies issue these equity shares to new investors. Investors receive an equity interest in the company and income tax deductions associated with new expenditures incurred by the company on exploration and development. Flow-through shares are available to selected companies but are of greater benefit to non-tax-paying junior companies. These companies are often unable to use income tax deductions against their corporate income and are willing to forgo the deduction to new investors.
Accelerated capital cost allowance
A tax deduction for business-related capital property that provides for the depreciation of these assets. Businesses can deduct up to a fixed percentage of the depreciated cost each year. There are approximately 40 CCA classes described in the regulations to the Income Tax Act. The CCA rate applicable to each class is usually intended to reflect the economic life of the assets of that class. Where the CCA rate is clearly in excess of that required to reflect the economic useful life, it can be considered to be an accelerated CCA.
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