If a partnership realized a capital gain, any member of the partnership must include their taxable share of the gain in their income tax return. To calculate this share, the capital gain must be multiplied by the applicable inclusion rate.

For members who are corporations or trusts (other than a graduated rate estate or a qualified disability trust), the inclusion rate has increased from 50% to 66 2/3% for capital gains realized on or after June 25, 2024.

For members who are individuals, graduated rate estates or qualified disability trusts, the inclusion rate has increased from 50% to 66 2/3% for the portion of capital gains realized on or after June 25, 2024, that exceeds the $250,000 threshold. This threshold applies to capital gains realized by the partnership and allocated to the member after certain amounts have been deducted.

If a partnership sells a corporation's shares to an employee ownership trust, an individual (except a trust) who is a member of this partnership may, under certain conditions, be exempt from income tax for the first $10 million in capital gains realized on the transaction.

This measure applies to eligible sales of shares after December 31, 2023, but before January 1, 2027.

As a rule, if a qualified partnership incurred specified expenses to acquire specified property during a fiscal period but before January 1, 2025, a qualified corporation that is a member of this partnership can claim the tax credit for investment and innovation for these expenses for the taxation year in which the partnership's fiscal period ends. To calculate this tax credit, the specified expenses cannot exceed a cumulative limit of $100 million. Note that the rate of the tax credit for qualified corporations depends on the territory where the acquired property is primarily used.

To encourage Québec business investment and productivity, the tax credit for investment and innovation has been modified.

Longer eligibility period

The eligibility period for the tax credit for investment and innovation has been extended by five years. Property can therefore be considered specified property if it is acquired before January 1, 2030, and meets the other conditions.

Updated definition of “specified expenses”

A qualified corporation that is a member of a qualified partnership may be entitled to the tax credit for investment and innovation if the specified expenses incurred by the partnership to acquire a specified property have been paid when the credit is claimed.

More specifically, if a partnership incurs specified expenses during a fiscal period and pays them after the period, but no later than 18 months after the period ends, any corporation that is a member of this partnership and that is claiming the tax credit for investment and innovation must claim it for the taxation year in which the partnership's fiscal period when these expenses were incurred ends.Specified expenses incurred in a fiscal period and paid after the 18-month period are the partnership's specified expenses for the fiscal period in which they were paid.

The definition of “specified expenses” has been changed to allow a qualified corporation that is a member of a qualified partnership to also claim the credit for the taxation year in which the partnership's fiscal period when these expenses were incurred ends, even if these expenses were paid after the end of the fiscal period during which they were incurred, but no later than 18 months after the end of the period.

This change applies to specified expenses incurred by a partnership during a fiscal period ending after November 7, 2023.

Period taken into account for the calculation of the cumulative limit on specified expenses

The calculation of the $100 million cumulative limit for specified expenses takes into account not only the expenses incurred in a given fiscal period but also the expenses incurred in the 48 month period preceding this fiscal period.

For a fiscal period that begins after December 31, 2023, this period is 36 months.

Enhanced rates

The tax credit rates have increased from:

• 20% to 25% for specified property acquired for use mainly in a territory with low economic vitality;
• 15% to 20% for specified property acquired for use mainly in a territory with intermediate economic vitality;
• 10% to 15% for specified property acquired for use mainly in a territory with high economic vitality.

These new rates apply if qualified corporations incur specified expenses after December 31, 2023, or, unless otherwise specified, if they incurred such expenses after March 25, 2021, but before January 1, 2024, to acquire specified property after December 31, 2023.

The tax credit to foster the retention of experienced workers was abolished on March 12, 2024. For this reason, a qualified corporation that is a member of a qualified partnership may only claim the credit for employer contributions the partnership paid for its employees 60 or over and relating to the portion of their remuneration attributable to a date prior to March 13, 2024.

If a partnership incurred eligible digital conversion expenditures during a fiscal period, a qualified corporation that is a member of this partnership can, under certain conditions, claim the tax credit for the digital transformation of print media companies for the taxation year in which the partnership's fiscal period ends. The qualified corporation can claim the credit based on its percentage interest in the partnership.

Note that this credit has been extended for a year. To give entitlement, the eligible digital conversion expenditures must have been incurred before January 1, 2025, unless they were incurred to acquire a qualified property. In this case, the qualified property must have been acquired before January 1, 2024.

For more information, see the instructions for lines 440p to 440y, under code 105, of the Guide de la déclaration de revenus des sociétés (CO-17.G).

For new residential rental complexes included in class 1 for which construction began after April 15, 2024, but before January 1, 2031, and that are available for use before January 1, 2036, the capital cost allowance (CCA) rate can be 10% rather than 4%.

To be eligible for accelerated CCA, the residential complex must have been built expressly for rental purposes and must meet the following requirements:

• It has at least four private apartment units (i.e. each containing a private kitchen, bathroom and living area) or at least 10 private rooms or suites.
• At least 90% of residential units are held for long-term rental.

The CCA rate for property in classes 44, 46 and 50 is 25%, 30% and 55%, respectively. If it was acquired after April 15, 2024, and is available for use before January 1, 2027, this property may, under certain conditions, qualify for accelerated CCA at a rate of 100%.

Note that accelerated CCA is granted only for the first year a property is available for use.

A partnership that acquired, after December 3, 2018, property constituting manufacturing or processing equipment, clean energy generation equipment or computer equipment can, under certain conditions, claim additional CCA in the calculation of its net income. This additional CCA corresponds to 30% of the CCA amount claimed for the property for the previous fiscal period.

However, this additional deduction was abolished on January 1, 2024. Accordingly, only property that meets the requirements and was acquired no later than December 31, 2023, can give entitlement for the remainder of the period applicable to this property.

Due to a new tax measure, the following amounts must be deducted when calculating the adjusted cost base (ACB) of a partner's interest in a partnership:

• as of January 1, 2022, the partner's share of the federal carbon capture, utilization and storage (CCUS) investment tax credit;
• as of March 28, 2023, their share of the federal clean technology (CT) investment tax credit and the federal clean hydrogen investment tax credit;
• as of January 1, 2024, their share of the federal clean technology manufacturing (CTM) investment tax credit.

Certain amounts must be subtracted from a limited partner's at-risk amount to establish their share of the partnership's losses they can deduct from their taxable income.

The limited partnership loss (i.e. the share of the partnership's losses such a partner cannot deduct for a given year) can be deducted from the partner's taxable income for a subsequent year (hereinafter “given year”), up to the amount by which the partner's at-risk amount at the end of the partnership's fiscal period ending in the given year exceeds certain amounts.

Due to a new tax measure, amounts that did not need to be subtracted from a limited partner's at-risk amount now need to be to establish that partner's share of the partnership's losses and their limited partnership loss for a given fiscal period. These amounts are:

• as of January 1, 2022, the partner's share of the federal CCUS investment tax credit;
• as of March 28, 2023, their share of the federal CT investment tax credit and the federal clean hydrogen investment tax credit;
• as of January 1, 2024, their share of the federal CTM investment tax credit.