Federal draft moves to overhaul registered plan rules, REIT tests, credits
Proposed tax amendments would rewrite what counts as a qualified investment in registered plans, adjust REIT property tests, and add new rules for clean-energy credits and cross-border payments.
The legislative proposals relating to the Income Tax Act and the Income Tax Regulations include a large set of changes with varying effective dates. Many of the registered-plan investment measures are proposed to come into force on January 1, 2027. The hybrid mismatch measures are proposed to apply in respect of payments arising on or after July 1, 2026.
For Canadian financial planners, the most direct day-to-day impact is the planned overhaul of “qualified investment” definitions used across registered plans. The proposals would repeal several plan-specific “qualified investment” definitions, including those in the RRSP provisions (section 146), RESP provisions (section 146.1), RRIF provisions (section 146.3), and RDSP provisions (section 146.4), and would instead rely on an updated, centralized definition in subsection 207.01(1).
Under the proposed replacement definition in subsection 207.01(1), “qualified investment” for a trust governed by a registered plan would include categories such as money (subject to the conditions set out in the text), certain deposits, guaranteed investment certificates, and various debt and listed-security categories described in the proposal. It would also include specified annuity contracts issued by a licensed annuities provider, with detailed conditions that vary depending on whether the registered plan is an RDSP, RRIF, or RRSP. The definition also includes “a prescribed investment,” which is then built out in the proposed regulation changes.
Those regulation changes would replace Part XLIX with a new Part L, setting out prescribed qualified investments and prescribed prohibited property for registered plans. The proposed regulations describe prescribed qualified investments across debt instruments (section 5001), equity instruments (section 5002), trusts (section 5003), and other prescribed investments (section 5004). They also include transitional rules that matter for legacy holdings: a unit of a “small business investment trust” and an interest in a “small business investment limited partnership” are prescribed only if the holding was acquired before January 1, 2027, was a qualified investment when acquired, and would remain a qualified investment under the regulations as they read on December 31, 2026.
The proposal also revises how prohibited investments are identified for registered plans. The proposed regulations list prescribed prohibited property (section 5006), including, in specified circumstances, a share of a mortgage investment corporation tied to indebtedness of a connected person under the plan, and certain credit union or cooperative corporation debt or deposits where benefits or privileges are granted to connected persons, as described in the text.
Real estate investment trust rules would be adjusted through changes to the “qualified REIT property” definition and the REIT equity-value test. The revised “qualified REIT property” definition would include, among other items, real or immovable property that is capital property, eligible resale property, indebtedness of a Canadian corporation represented by a bankers’ acceptance, property described in paragraph (a) or subparagraph (c)(i) of the proposed “qualified investment” definition in subsection 207.01(1), and deposits with a credit union. The REIT definition would require that at each time in the taxation year, 75% or more of the trust’s equity value be represented by the total fair market value of those qualifying properties.
Beyond registered-plan eligibility, the proposals include credit changes relevant to corporate and institutional clients. The clean hydrogen investment tax credit rules would be expanded to include hydrogen produced from the pyrolysis of eligible hydrocarbons, with additional project-plan requirements, including an end-use plan for solid carbon produced during the first seven years of hydrogen production, and thresholds for expected hydrogen use and project consumption set out in the text. The carbon capture, utilization and storage investment tax credit rules would also be refined, including the definition of “designated jurisdiction,” and would allow the Minister of the Environment to designate specific geological formations in a jurisdiction or geographic area, in the circumstances described.
For non-profit organizations, the proposal would amend section 149 reporting. Subsection 149(12) would be revised to add a condition tied to total amounts received in a fiscal period exceeding $100,000. New subsection 149(13) would require a short-form information return for certain exempt persons, subject to exceptions in subsection 149(14), including where total amounts received do not exceed $10,000, where the person is not an organization, or where a return is required under subsection 149(12) for the same period.
These reporting changes are proposed to apply to fiscal periods that begin on or after January 1, 2027.
