27 April 1999 External T.I. 9906235 - BC MINING EXPLORATION TAX CREDITS; CEE

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: BC mining exploration tax credits; CEE

Position: determination depends on particular facts

Reasons: question of fact; interpretation of "excluded expense" in 25.1(1) of BC Income Tax Act

XXXXXXXXXX 	990623
		Denise Dalphy
(613) 957-9231
Attention: XXXXXXXXXX 	

April 27, 1999

Re: B.C. Mining Exploration Tax Credits (“BC METC”)

This is in reply to your letter of March 5, 1999, which was forwarded to us by the Government of British Columbia. You have inquired about mining exploration tax credits provided for under section 25.1 of the B.C. Income Tax Act (the B.C. Act”), and in particular the definition of “excluded expense” therein.

In order to address your questions properly, we would need the exact details pertaining to each expense. Although we understand that the expenses pertain to identifying and/or proving reserves, since no information was provided with respect to the precise nature of the expenditures, we can only advise that each expense must meet the definition of “qualified mining exploration expense” in the B.C. Act.

If you wish to obtain confirmation as to the income tax consequences of proposed expenditures which are seriously being contemplated, you should submit a written request for an advance income tax ruling in accordance with Information Circular 70-6R3 ("IC 70-6R3") dated December 30, 1996 and issued by Revenue Canada. If the expenditures have already been made and you require assistance in determining the tax status of the expenditures, you should contact the local Taxation Services Office. Nevertheless, we can provide you with the following general comments.

Paragraph (b) of subsection 25.1(1) of the B.C. Act defines an “excluded expense” as, inter alia:

“an expense that may reasonably be considered to be related to a mine that has come into production in reasonable commercial quantities or to a potential or actual extension of such a mine,”

Whether an expense relates to a particular mine that has come into production in reasonable commercial quantities or relates to a potential or actual extension of such a mine are questions of fact to be determined on the basis of all relevant information. The wording in the B.C. Act is virtually identical to the wording in paragraph (f)(vi) of the definition of “Canadian exploration expense” (“CEE”) in 66.1(6) of the federal Income Tax Act (the “federal Act”). As such, where subparagraph (f)(vi) of the definition of CEE in the federal Act does not apply to preclude a particular expense from CEE treatment, that expense would not be an “excluded expense” within the meaning of paragraph (b) of that definition in the B.C. Act. However, this determination alone will not resolve the issue of whether mining exploration tax credits will be available in respect of a particular expense.

The foregoing comments represent our general views with respect to the subject matter. As indicated in paragraph 22 of Information Circular 70-6R3, the above comments do not constitute an advance income tax ruling and accordingly are not binding on the Department. Our practice is to make this disclaimer in all instances in which we provide an opinion.

Yours truly,

for Director
Resources, Partnerships and Trusts Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch