Recovery Tax – Overview and Summary

The amount of a taxpayer’s eligible expenditure qualifying as Qualified Carbon Capture Expenditures (QCCE) or Qualified Carbon Transportation Expenditures (QCTE) depends on the projected eligible use percentage for each project period beginning on or after the time of the expenditure.

In straightforward cases—such as when expenditures are incurred before commercial operations begin and 100% eligible use is projected—the full amount qualifies as QCCE or QCTE.

Recovery Tax – Summary Table

Trigger Event	Description	Taxpayer Impact	Recovery Tax Type
1. Pre-Commercial Change in Project Plan	Project plan revised before commercial operations begin, resulting in a lower projected eligible use percentage.	Repay the difference in CCUS development credits claimed vs. revised projection.	Recovery of excess development tax credit.
2. Actual Use >5% Below Projection (Development Credit)	At the end of a project period, the actual eligible use is more than 5% lower than the projected eligible use.	Pay the difference between the CCUS development credit originally claimed and what should’ve been claimed based on actual use.	Development Credits Recovery Amount
3. Actual Use >5% Below Projection (Refurbishment Credit)	Same as above, but relates to refurbishment expenditures after commercial operations begin.	Pay back excess refurbishment credits based on lower actual eligible use.	Refurbishment Credits Recovery Amount
4. Actual Eligible Use Drops Below 10%	If actual eligible use drops below 10% in any calendar year, all future project periods are deemed to have 0% use.	100% of all CCUS ITCs may be repayable.	Full Recovery Tax on both development and refurbishment credits.
5. Disposition or Export of Property	Property linked to CCUS credits is sold or exported.	Triggers partial or full recapture of ITCs claimed on that property.	Recovery under Part XII.7 (specific rules apply).

Relief Rules Summary

Situation	Conditions	Effect
Extraordinary Circumstances	Event outside taxpayer’s control (e.g. natural disaster, regulation change); taxpayer applies in writing by due date.	No Recovery Tax payable if event affects all or most of the project period.
Project Shutdown	Project is inactive for all or most of a project period.	Inoperative period excluded from actual use calculation, possibly avoiding tax.