QUESTION
From discussions with Mr. C. Dubé, Provincial & International Relations, the question is as follows:
Is it the Department's position that the credit on mining taxes refundable for losses pursuant to the relevant provisions of the Quebec Mining Duties Act (the "refundable credit") is not assistance for purposes of reducing a taxpayer's cumulative Canadian exploration expense (CCEE) under the Income Tax Act (the "Act")?
ANSWER
Yes. It is our view that the refundable credit does not constitute assistance in respect of Canadian exploration expenses and therefore would not reduce the taxpayer's CCEE. The reason is that, in our view, the credit is too remote from Canadian exploration expenses to be in respect thereof. Instead, we consider the refundable credit to be assistance in respect of an outlay, i.e., the mining tax exigible under the Quebec Mining Duties Act.
As a result of a recent amendment to subparagraph 12(1)(x)(iv) of the Act adding thereto a reference to an "outlay", refundable credits received after 1990 would have to be included in income.
New subsection 12(2.2) of the Act however permits the taxpayer to elect within specified time periods to net the mining tax with the refundable credit in determining the amount of the paragraph 12(1)(x) income inclusion. This election would normally result in no amount having to be included in income.
One of the requirements of subsection 12(2.2) is that the mining tax be incurred in the year that the refundable credit is received, in any of the 3 preceding years or the year immediately following
21(1)(b)
. /J. Chan
January 22, 1992
ISSUE SHEET
Refundable Mining Tax Credits John Chan
5-920208
This question was asked by Special Audits Division and Current Amendments and was answered by our memoranda dated December 4, 1990 (file # 7-4196) and December 6, 1990 (file # 7-910535), respectively. Our positions are supported by legal opinions and informal discussions with the Department of Finance.
The amendment to subparagraph 12(1)(x)(iv) adding thereto the reference to an "outlay" is applicable with respect to amounts received after 1990 and new subsection 12(2.2) is applicable to taxation years ending after 1990.
/January 22, 1992