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GST New Housing Rebate. Projects that introduce new housing units as part of the sensitive rehabilitation or restoration of a historic building are not eligible for the GST New Housing Rebate. The program stipulates that 90 percent of the non-structural fabric of the existing building must be removed and that major new additions must fundamentally change the character of the existing property. This directive discourages renovators who follow heritage conservation standards.

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The Income Tax Act. The lack of a codified definition of expansible rehabilitation in the Act makes it difficult to determine if rehabilitation work is considered repair and maintenance (currently deductible for tax purposes) or an expenditure which must be capitalized and depreciated for tax purposes over future years under the capital cost allowance system. This distinction is important. A restoration expenditure, after tax, can jump by 60 percent if Revenue Canada disallows the cost as a deductible repair and requires the cost to be capitalized. The uncertainty generated makes it difficult to develop a balance sheet and obtain financing for a project.