Budget 2025 Implementation Act, No. 2

Summary#

Bill C-31 is a large budget implementation bill that changes tax rules, reporting and enforcement, creates a new defence procurement agency, updates air passenger complaint handling, and bans non‑compete clauses in federally regulated workplaces. It also expands clean hydrogen tax credits, modernizes crypto‑asset reporting, and raises federal housing finance backstops.

Key changes include:

• Tax: Temporary 100% write‑off for new manufacturing or processing buildings (phasing down after 2029) and new anti‑avoidance rules for trusts, related companies, and tax‑debt transfers. The Canada Carbon Rebate will not be paid on tax returns filed after Oct 30, 2026.
• Benefits and filing: The CRA may automatically file returns for some low‑income individuals to deliver benefits if they have not filed.
• Crypto reporting: New mandatory reporting by crypto‑asset service providers to the CRA (aligned with OECD standards), plus updates to financial account reporting for e‑money and central bank digital currencies.
• Clean energy: Expands the Clean Hydrogen Investment Tax Credit to include hydrogen made from methane pyrolysis, with detailed conditions, caps, and recapture rules.
• CRA audit powers: Broader information‑gathering powers, new “notice of non‑compliance,” stop‑the‑clock rules, and penalties for failing to comply with court‑ordered information requests.
• Global minimum tax: Implements the “undertaxed profits rule” (UTPR) so certain Canadian entities in large multinational groups pay a top‑up tax where group profits are taxed below the agreed minimum abroad.
• Defence and procurement: Creates the Defence Investment Agency and updates the Defence Production Act (renamed) to include national security, new financing tools (loans, guarantees, equity), default competitive procurement with defined exceptions, and security‑based bidder exclusions.
• Air passenger complaints: Moves complaint resolution from the Canadian Transportation Agency to the Minister of Transport and allows third‑party resolution of backlogs and future complaints. Sets timelines, publication, and higher penalties (up to $1,000,000).
• Workplaces: Bans non‑compete clauses and certain other employment restrictions in federally regulated sectors (with narrow exceptions).
• Housing finance: Raises CMHC’s mortgage‑backed securities guarantee cap to $1 trillion and the insured loans limit to $500 billion.
• Northern lands: Allows national‑interest orders for certain Nunavut lands to cancel or pause mineral rights, with compensation set by the Minister of Northern Affairs.

What it means for you#

• Workers (federally regulated)

  • Most non‑compete clauses will be void once the law starts. Employers cannot retaliate if you refuse to sign one. Exceptions exist for sellers joining the buyer, CEOs and a small set of top executives. Existing clauses become void one year after the start date.

• Low‑income individuals

  • The CRA may file a simple tax return on your behalf to trigger benefits if you meet set conditions and have not filed. You can opt out or correct data. Canada Carbon Rebate will not be paid if your return (or adjustment) is filed after Oct 30, 2026.

• Manufacturers

  • New buildings used mainly for manufacturing/processing in Canada can be immediately expensed (100% deduction) for a limited time, then phased down. If you change use within 10 years (e.g., switch more than 10% of space to non‑manufacturing), a recapture may apply.

• Clean hydrogen developers

  • Hydrogen from methane pyrolysis becomes eligible for the Clean Hydrogen ITC, subject to strict rules on carbon intensity, power sourcing, end‑uses (e.g., at least 90% hydrogen use for economic purposes in some cases), caps on eligible pyrolysis reactor costs, reporting, and recapture if the project underperforms.

• Crypto‑asset service providers and platforms

  • Must collect self‑certifications, identify controlling persons, and report customer transactions (exchanges and certain large retail payments) to the CRA; keep records; and meet due‑diligence timelines. Customers may need to provide taxpayer ID numbers on request (penalty if not provided).

• Large multinational groups (about €750M+ global revenue)

  • Canadian entities may owe a top‑up tax under the UTPR if other group entities’ profits are taxed below the agreed minimum and not otherwise topped up.

• Air passengers

  • Complaints go to the Minister (not the CTA), with mediation and a decision targeted within 90 days and publication of key outcomes. Backlogs may be handled by designated third parties. Carriers must pay ordered compensation or refunds within 30 days. Penalties for violations can reach $1,000,000.

• Defence, security, and suppliers

  • A new Defence Investment Agency will centralize and speed up procurement and enable new financial supports. Competitive tendering is the default, but defined exceptions (e.g., urgent needs, sensitive tech, sole source, interoperability) allow direct awards. Bidders may be excluded for security risks.

• Financial institutions and investors

  • Banks, insurers, and trust/loan companies must replace bearer‑form documents with registered form (no new bearer instruments). Registered plan “qualified investment” rules are streamlined and harmonized; some categories are clarified.

• Bankruptcy professionals and the public

  • The Superintendent of Bankruptcy can seek court orders against unlicensed persons posing as trustees or doing misleading insolvency solicitations. New offences and higher fines apply.

• Mineral rights holders in Nunavut

  • The Governor in Council may order cancellations or pauses for mineral rights in the national interest, and can restrict transfers or new applications. The Minister of Northern Affairs decides if compensation is paid and how much.

• Homebuyers and lenders (indirect)

  • Higher CMHC guarantee and insured‑loan ceilings support liquidity in the mortgage market. This is not direct aid to buyers but helps keep mortgage funding available.

Expenses#

No publicly available information.

• Tax measures (immediate expensing; expanded hydrogen credit; anti‑avoidance) will affect federal revenues. No clear public estimate is provided here.
• Defence: Up to $1 billion can be paid from the Consolidated Revenue Fund at any time for defence production/procurement uses (revolving, with offsets and parliamentary oversight). The Minister also gets new authority to make loans, guarantees, grants, and equity investments (some require Finance approval).
• Housing finance: Raising CMHC caps increases federal exposure, not immediate spending.
• CRA and Transport Canada: New administration, audit, and complaint‑resolution systems will raise operating costs; no figures are provided.
• Businesses (especially crypto platforms and large multinationals) face new compliance costs.

Proponents' View#

• The bill appears intended to improve fairness and efficiency in the tax system by closing avoidance routes (trust‑to‑trust transfers, dividend refund timing, tax‑debt transfers) and modernizing audit tools.
• Automatic returns and benefit delivery could increase uptake of benefits among low‑income people who do not file.
• Immediate expensing for manufacturing buildings could spur investment and productivity.
• Expanding the Clean Hydrogen ITC and clarifying conditions could accelerate low‑carbon hydrogen, including emerging technologies (pyrolysis), while setting strict performance and reporting rules.
• Crypto‑asset and updated financial account reporting align Canada with OECD standards, improving tax transparency and discouraging evasion.
• The Global Minimum Tax UTPR helps ensure large multinationals pay at least the agreed minimum tax regardless of where profits are booked.
• A new Defence Investment Agency, clearer procurement rules, and new financial tools could speed delivery, support domestic capability, protect sensitive supply chains, and reflect economic security needs.
• Moving air passenger complaints to the Minister and using third parties could reduce backlogs and resolve claims faster, with clearer timelines and higher penalties.
• Banning non‑competes in federally regulated sectors may improve job mobility and wages while keeping narrow exceptions.

Opponents' View#

• The CRA’s expanded audit powers (new notices, penalties, and “stop‑the‑clock” rules) may raise concerns about proportionality, privacy, and due process for taxpayers.
• Crypto‑asset reporting and due‑diligence duties add significant compliance burdens and could raise user privacy concerns.
• Temporary immediate expensing and expanded clean hydrogen credits could reduce revenues without guaranteed returns; complex rules may be difficult to navigate and enforce.
• Supporting hydrogen from methane pyrolysis could be seen as extending fossil‑based pathways; strict end‑use and carbon‑intensity rules may still be questioned for climate integrity.
• The Defence Investment Agency’s broad powers (including non‑competitive awards, loans/guarantees, and bidder exclusion) may raise transparency, competition, and fiscal‑risk concerns.
• Transferring air passenger complaints from an independent tribunal to the Minister and third parties may raise questions about independence and consistency, despite timelines.
• The Nunavut land‑order powers are broad; compensation is set by the Minister of Northern Affairs, which may raise predictability and investment‑certainty concerns for mineral rights holders.
• Changing pesticide review to a risk‑triggered re‑evaluation (instead of automatic every 15 years) could be viewed as weakening routine safety reassessments.