Government of Canada releases 2026 Spring Economic Update: Canada Strong for All

The federal government released its Spring 2026 Economic Update on April 28, 2026 (Spring Update). From a tax perspective, the Spring Update does not introduce any new policy initiatives, but it provides important confirmation, expanded detail, and next-step legislative direction on a number of previously announced tax measures. The principal tax items addressed in the Spring Update are summarized below.

Employee ownership trusts – capital gains exemption made permanent

The Spring Update confirms that the $10 million capital gains exemption for qualifying dispositions of shares to an Employee Ownership Trust (EOT) will be made permanent. Previously, the exemption applied only to qualifying dispositions completed between 2024 and the end of 2026.

The EOT framework itself remains unchanged, including:

• the requirement for a qualifying business transfer,
• applicable control and ownership thresholds,
• vendor activity and continuity conditions, and
• the ten-year disqualifying event regime that can result in the recapture of the exempted gain.

By removing the sunset, the measure provides significantly greater certainty for succession planning and transaction timing and allows EOT transactions to be structured and completed over longer time horizons without being driven by an expiring incentive.

Extension of the CCUS investment tax credit to enhanced oil recovery projects

The Spring Update confirms the federal government’s commitment to extend the carbon capture, utilization, and storage (CCUS) investment tax credit to projects involving enhanced oil recovery (EOR), following the November 2025 Canada-Alberta memorandum of understanding.

Key points confirmed or clarified in the Spring Update include:

• Eligible capture, transportation, storage, and use equipment in qualified CCUS projects that store carbon dioxide through EOR will be eligible for the credit.
• CCUS credits for EOR-related expenditures will generally be available at reduced rates compared to other CCUS projects.
• Eligibility will depend on whether captured carbon is permanently stored, subject to safeguards and tracking requirements.
• Recapture mechanisms may apply where projected eligible use materially exceeds actual eligible use.
• The Spring Update confirms interaction of EOR treatment with other clean economy regimes, including CCUS coordination with clean hydrogen and clean electricity incentives.

These changes broaden CCUS eligibility while maintaining a focus on emissions integrity and permanent carbon storage.

Accelerated capital cost allowance for low-carbon LNG facilities

The Spring Update provides additional detail with respect to the previously announced reinstatement of accelerated capital cost allowance (CCA) for eligible liquefied natural gas (LNG) equipment and related buildings, subject to low carbon emissions thresholds.

Highlights include:

• Eligibility depends on certification that the expected emissions intensity of on-site liquefaction activities does not exceed prescribed limits.
• Certification will be based on a one-time third-party engineering assessment submitted to the Minister of Energy and Natural Resources.
• Enhanced CCA rates apply to specified liquefaction equipment (including compressors, storage tanks, and ancillary equipment) and to certain LNG-related buildings.
• Additional restrictions apply as to eligible income against which accelerated CCA may be claimed.

The measure reinforces the government’s emissions performance focus in capital-intensive LNG investments while preserving accelerated depreciation for qualifying low-carbon projects.

Confirmation of intention to proceed with previously announced tax legislation

The Spring Update reaffirms the federal government’s intention to proceed with a broad range of previously announced legislative and regulatory tax proposals, including:

• the second package of hybrid mismatch rules (see our summary here);
• measures aimed at preventing tax deferral through tiered corporate structures, including certain Part IV tax planning strategies;
• refinements and technical amendments to the Global Minimum Tax Act (Pillar Two);
• immediate expensing rules for certain manufacturing and processing buildings;
• clarifications to eligible activities under the Canadian exploration expense regime; and
• various other technical amendments to the Income Tax Act, Income Tax Regulations, GST/HST, and related regimes.

While largely reflecting legislative follow through rather than new policy direction, these measures may affect the structuring, timing, and administration of cross-border transactions and corporate group reorganizations.

Clean economy investment tax credits

The Spring Update confirms continued implementation of clean economy investment tax credits, including credits related to clean hydrogen production and coordination with CCUS incentives. These credits remain targeted to specific qualifying activities and projects, rather than operating as measures of general application.

Advance income tax rulings – priority treatment

The Spring Update announces that the Canada Revenue Agency will prioritize advance income tax ruling requests related to:

• large-scale “nation-building” projects,
• housing and infrastructure projects of national importance, and
• clean economy investments that may qualify for clean economy investment tax credits.

Further details on qualification and administration are expected.

No broad tax changes

The Spring Update does not introduce changes to federal corporate income tax rates, capital gains inclusion rates, or the overall structure of Canada’s income tax system. With limited, targeted exceptions, the Update reflects legislative follow‑through on previously announced measures rather than new tax policy direction.