On November 4, 2025, the federal government tabled Budget 2025 — a document heavy on industrial strategy and investment incentives. For most of the country, the headline items were deficits and spending priorities. For Alberta manufacturers, agri-processors, and technology companies, the more relevant story was buried in the technical tax measures: a meaningful expansion of the Scientific Research and Experimental Development (SR&ED) program and a new immediate expensing rule for eligible manufacturing and processing buildings. Taken together, and layered on top of Alberta's own Innovation Employment Grant (IEG), the combined recovery opportunity is the most significant R&D and capital incentive stack available to Alberta businesses in years.
This piece unpacks each federal change, explains how it interacts with Alberta's provincial program, and identifies the year-end timing decisions your company should be working through before December 31.
What Budget 2025 changed in the SR&ED program
The SR&ED program has long offered Canadian-controlled private corporations (CCPCs) an enhanced refundable investment tax credit (ITC) of 35% on qualifying expenditures, up to an annual expenditure limit. For years, that limit sat at $3 million — meaning the maximum refundable cash a CCPC could recover on its R&D spend was $1.05 million per year.
Budget 2025 raises the expenditure limit directly from $3 million to $6 million, effective for taxation years beginning on or after December 16, 2024. The practical effect: a qualifying CCPC can now earn up to $2.1 million per year as a refundable cash credit on the first $6 million of eligible SR&ED expenditures.
The phase-out range based on prior-year taxable capital has also been widened — from the previous $10M–$50M range to a new $15M–$75M range — meaningfully extending full SR&ED eligibility to larger Alberta SMBs that had previously faced a partial phase-out.
Budget 2025 also proposes an elective pre-claim approval process targeting a 90-day technical review cycle (down from 180 days); this process was subsequently launched on April 1, 2026. For Alberta companies that have historically avoided SR&ED because of claim uncertainty, the shorter timeline changes the cost-benefit calculus.
The immediate expensing measure for M&P buildings
The second major change relevant to Alberta manufacturers is a new 100% first-year capital cost allowance (CCA) rate for eligible manufacturing and processing (M&P) buildings.
Under the measure, a business can immediately deduct the full cost of an eligible M&P building acquired on or after November 4, 2025, provided the building is first used for manufacturing or processing activities before 2030. To qualify as an eligible M&P building, at least 90% of the building's floor space must be used to manufacture or process goods for sale or lease.
For Alberta food processors, grain handling facilities, and industrial manufacturers considering a capital build or expansion, this is significant: a $10 million facility acquired and placed into service before 2030 generates a full $10 million CCA deduction in year one rather than being written off over decades. The cash-tax benefit at Alberta's combined federal-provincial rate (23% for general corporations; 11% for SBD-eligible CCPCs on the first $500k) is substantial and accelerates the payback period on the capital investment.
A phase-out applies for facilities first used in 2030–2031 (75% first-year rate) and 2032–2033 (55%). Nothing is available after 2033, which creates a clear planning horizon: buildings need to be operational before 2030 to capture the full deduction.
Alberta's IEG: the provincial layer that compounds the return
Alberta's Innovation Employment Grant is a refundable provincial tax credit that eligible corporations claim on AT1 Schedule 29 — filed with Alberta's own corporate return, the AT1, which is separate from the federal T2. The IEG is not available on the federal return; it exists entirely within the provincial system administered by Alberta Tax and Revenue Administration (TRA).
The IEG pays out at two rates:
- 8% on eligible R&D expenditures up to the corporation's base level (the average of the prior two years' qualifying spend).
- 20% on eligible R&D expenditures that exceed the base level — the incremental, above-baseline spending.
The IEG was made permanent in the 2025 provincial budget, removing the sunset-clause risk that had complicated multi-year R&D investment decisions. Expenditures must be both SR&ED-qualifying at the federal level and undertaken in Alberta; TRA verifies this against CRA's technical determination.
Stacking the two programs: what the combined recovery looks like
The power of the Alberta incentive environment comes from stacking the federal and provincial programs. They are not mutually exclusive; the IEG is calculated on expenditures that also qualify for federal SR&ED. Here is how a hypothetical Alberta CCPC's numbers could look for a tax year beginning in 2025.
Consider a hypothetical Alberta technology manufacturer with $4 million in qualifying SR&ED expenditures, of which $1.5 million exceeds its two-year base spending level.
Federal SR&ED (assuming full $6M limit availability): $4M × 35% refundable ITC = $1,400,000 refundable federal credit
Alberta IEG:
- $2.5M at base rate: $2.5M × 8% = $200,000
- $1.5M above base: $1.5M × 20% = $300,000
- Total IEG = $500,000 refundable provincial credit
Combined recovery: $1,900,000 on $4 million of R&D expenditure — an effective 47.5% recovery rate before accounting for the deduction against taxable income.
This is a hypothetical illustration. Actual recovery depends on expenditure eligibility, the corporation's specific base-spending calculation, and whether the taxable capital phase-out applies. Note also that the Alberta IEG has an annual eligible-expenditure cap of $4 million — expenditures above that cap do not attract the IEG credit, so the stacking benefit is most powerful for corporations whose qualifying spend falls within that limit. But the directional point is real: Alberta is one of the best jurisdictions in the country for stacking R&D incentives, and Budget 2025's SR&ED enhancements make it meaningfully more attractive.
Year-end timing decisions before December 31
With the federal budget now tabled and the Alberta IEG made permanent, the period between now and December 31 is a live planning window for Alberta businesses with active R&D programs or capital expansion plans. Several decisions have direct year-end implications.
SR&ED expenditure timing. For a CCPC with a December 31 year-end whose prior SR&ED spend has been modest, accelerating eligible R&D expenditures before December 31 builds the IEG base for future years and may push current-year claims above the base threshold — capturing the 20% IEG rate on the incremental portion. Moving a contract, hiring an eligible researcher, or purchasing eligible capital equipment before year-end can shift the recovery profile materially.
M&P building acquisition. If an Alberta manufacturer has been evaluating a facility purchase or construction project, the 100% first-year CCA measure applies to buildings acquired on or after November 4, 2025 and first used before 2030. A company with a December year-end that acquires and commences use of an eligible building before December 31, 2025 can claim the full deduction in the current year. Even a building acquired near year-end qualifies; the "first used" condition requires the building to be brought into M&P service, not that it operates for a full year.
CCA class review. The immediate expensing measure creates an incentive to revisit CCA class allocations and confirm that mixed-use facilities are correctly categorized. A building that qualifies as an M&P building (90% floor-space threshold) is treated differently than a general commercial building; the classification matters for the deduction claim.
AT1 coordination. Because the IEG is claimed on the AT1 (Schedule 29) and requires CRA technical verification of SR&ED eligibility, the sequence matters: the federal SR&ED claim should be prepared and filed first, and the AT1 Schedule 29 prepared in coordination with it. Alberta companies filing their first AT1 for a taxation year beginning after December 31, 2024 must e-file the AT1 — there is no paper option for those years, and a $1,000 penalty applies to corporations that fail to comply with the mandatory e-filing requirement.
Key takeaways
- Budget 2025 (tabled November 4, 2025) raises the SR&ED enhanced-credit expenditure limit from $3 million to $6 million, effective for taxation years beginning on or after December 16, 2024 — allowing qualifying CCPCs to recover up to $2.1 million annually as a refundable federal credit.
- A new 100% first-year CCA rate applies to eligible M&P buildings acquired on or after November 4, 2025 and first used for manufacturing or processing before 2030.
- Alberta's IEG — claimed on AT1 Schedule 29, not on the federal T2 — pays 8% on base-level R&D and 20% on incremental spend, and was made permanent in the 2025 provincial budget.
- Stacking the federal SR&ED credit with the Alberta IEG can produce combined recovery rates in the range of 40–50% on eligible R&D expenditures, depending on the corporation's specific circumstances.
- Year-end decisions on R&D spend timing, M&P building acquisition, and AT1 e-filing coordination should be on every Alberta manufacturer's, agri-processor's, and tech company's agenda before December 31, 2025.
Alberta has no provincial sales tax, no payroll health tax, and a competitive corporate rate structure. Add a well-stacked federal-provincial R&D incentive regime and the case for timing R&D and capital investment decisions deliberately — rather than treating them as incidental — becomes very clear.
RN Canada Accounting & Advisory helps Alberta manufacturers, agri-processors, and technology companies identify, prepare, and coordinate SR&ED and IEG claims. If you want to model the combined recovery for your 2025 taxation year before the December 31 window closes, reach out to our team.