Yesterday, the Government of Canada released Budget 2024: Fairness for Every Generation, which proposed investments in clean technology, AI, modernization of SR&ED, intellectual property, and workforce development. NorthBridge has compiled a summary of key points outlined as part of the Budget.

A Review of the Scientific Research and Experimental Development Tax Incentive

Consultations for the modernization of the SR&ED closed on April 15, with a second phase of consultations to be launched soon, which will focus on technical reforms and expanding access to the enhanced rates of 35% for public Canadian companies. Beginning in 2025, $600 million will be provided over four years to enhance the SR&ED program by improving supports for small- and medium-sized businesses, with $150 million to be provided per year on an ongoing basis.

Continued Support for Research and Innovation

Since 2016, over $16 billion has been invested to support scientific discoveries and develop research talent. This has included support for critical emerging sectors, supported by the $2-billion Global Innovation Clusters, and ongoing funding for innovation in key industries through programs including the $3.5 billion Sustainable Canadian Agricultural Partnership, which will end in 2028.  

In support of innovation, businesses will be able to write off costs related to patents, data network infrastructure equipment, computers, and other data processing equipment as of April 16, 2024, until January 1, 2027.

Alongside Talent for Innovation Canada, the Government of Canada intends to develop a pilot initiative to build a strong R&D workforce in Canda, with the aim of attracting and training talent in key sectors including bio-manufacturing, clean technology, electric vehicle manufacturing, and microelectronics.

Amendments will be made to the Red Tape Reduction Act to broaden the use of regulatory sandboxes, with the intent of boosting innovation through temporary rules for testing of products, services, and new regulatory approaches.

Support for Artificial Intelligence

With over $2 billion invested in Canada’s AI sector since the establishment of the Pan-Canadian Artificial Intelligence Strategy was released in 2017, a further $2.4 billion in investments have been proposed as part of Budget 2024. This includes:

  • $2 billion to launch an AI Compute Access Fund and Canadian AI Sovereign Compute Strategy to increase Canadian compute capacity.
  • $200 million to accelerate AI adoption in key sectors and assist AI startups in bringing new technologies to market.
  • $100 million for the National Research Council’s AI Assist Program to support Canadian SMEs in building and deploying AI solutions.
  • $50 million to support workers in sectors impacted by AI.

In addition to these investments, funding will go towards enhancement of AI safety and security by establishing the AI Safety Institute of Canada, enforcing the proposed Artificial Intelligence and Data Act, and advancing the Global Partnership on Artificial Intelligence.

Strengthening Intellectual Property

Consultations for the creation of a patent box regime in Canada closed on April 15. Additional commitments made to strengthen IP for businesses include $14.5 million over two years for ISED’s Innovation Asset Collective to assist small- and medium-sized businesses in IP creation and retention, and ongoing support for programs including Canada’s Global Innovation Clusters.

Clean Energy Investment Tax Credits

Over the next 11 years, $90.9 million will go towards the Canada Revenue Agency to administer the clean energy tax credits, which include credits for carbon capture, utilization, and storage; clean technology, clean hydrogen, clean technology manufacturing; and clean electricity. A further $21.4 million will go towards the Department of Finance Canada to implement and legislate the credits, while $7.4 million will go towards Natural Resources Canada over the next five years to provide technical advice related to the credits.

A new 10% tax credit has been introduced for electric vehicle assembly, battery production, and cathode active material production. The credit will apply to property acquired on or after January 1, 2024, and will be available until 2034. Further details on the credit will be announced in the 2024 Fall Economic Statement.

The Clean Electricity investment tax credit will be available for property that is acquired on or after April 16, 2024, at a rate of 15%. An anticipated $32.2 billion will be delivered through the credit over the next ten years.

Net-Zero Economy and Sustainability

Additional proposals listed in Budget 2024 which aim to build a net-zero economy include the following:

  • Further funding for low-carbon projects, technologies, businesses, and supply chains will be provided through the Canada Growth Fund, which has invested $1.34 billion in clean technology solutions since its inception in 2023.
  • An ongoing $3.8 billion towards the Critical Minerals Strategy.
  • $9 million to the Privy Council Office’s Clean Growth Office.
  • Up to $500 million per year from Clean Fuel Regulations compliance payment revenues to support biofuels production.
  • $3 billion to support the construction of two new CANDU reactors, $50 million to support Bruce Power’s large nuclear expansion, and over $1.2 billion to support the construction of small modular reactors. An additional $3.1 billion will go towards Atomic Energy of Canada Limited to support Canadian Nuclear Laboratories’ nuclear science research.
  • Sustainable Investment Guidelines are currently under development to regulate credible climate investment.
  • To support small- and medium-sized businesses, fuel charge proceeds will be returned through a refundable tax credit, with an estimated $2.5 billion expected to be delivered to 600,000 businesses.
  • The Clean Growth Hub, which provides information and advice on federal funding for clean technology projects, will receive $6.1 million over the next two years to support over 1000 companies each year.

Investing in Start-Ups and Economic Growth

To further support economic growth, changes have been made to the Capital and Dividend Policy Framework for Financial Crown Corporations to increase the focus on output-based metrics and ensure that financial Crown corporations are following best practices.

Beginning in 2026, $200 million will be provided to support entrepreneurs in accessing venture capital.

$158.5 million will be provided over the next two years to Canada’s Regional Development Agencies for the Regional Economic Growth through Innovation Program, which provides access to funding for scaling up, technology adoption, productivity improvements, and market development. 

Strengthening the Workforce

In addition to the ~$3-billion annual investments in Canada’s Labour Market Development Agreements and Workforce Development Agreements, $60 million will be provided over the next five years for Futurepreneur Canada, to empower young entrepreneurs. Additional proposals include modernization of the Employment Equity Act and a $263.5-million extension of support for seasonal workers.

Learn More

Announcements will continue to be made throughout 2024 on the status of consultations for SR&ED and the patent box regime, and legislature for programs including the Clean Electricity and EV tax credits. Contact one of our experts to stay updated on these new developments as they are released, and learn how you can leverage these opportunities for your business.