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(a) a corporation that issues a flow-through
share to a person under an agreement
incurs, within 60 days after the end of a
calendar year, Canadian exploration
expenses or Canadian development
expenses,
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(b) the expenses are expenses described in
paragraph (a), (d) or (f) of the definition
``Canadian exploration expense'' in
subsection 66.1(6) or paragraph (a) or (b) of
the definition ``Canadian development
expense'' in subsection 66.2(5),
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(c) before the end of the year, the agreement
was entered into between the corporation
and the person and the person paid the
consideration for the share in money,
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(d) the corporation and the person deal with
each other at arm's length throughout the 60
days, and
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(e) within 90 days after the end of the year,
the corporation renounces an amount in
respect of the expenses to the person in
respect of the share in accordance with
subsection (12.6) or (12.601) and the
effective date of the renunciation is the last
day of the year,
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the corporation shall for the purpose of
subsection (12.6) or (12.601) be deemed to
have incurred the expenses on the effective
date of the renunciation.
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*ep
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(11) Subsection 66(12.67) of the Act is
replaced by the following:
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| Restrictions
on
renunciation
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(12.67) A corporation shall be deemed
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(a) not to have renounced under any of
subsections (12.6), (12.601), (12.62) and
(12.64) any expenses that are deemed to
have been incurred by it because of a
renunciation under this section by another
corporation that is not related to it;
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(b) not to have renounced under
subsection (12.601) to a trust, corporation
or partnership any Canadian development
expenses (other than expenses renounced to
another corporation that renounces under
subsection (12.6) any Canadian exploration
expense deemed to have been incurred by it
because of the renunciation under
subsection (12.601)) if, in respect of the
renunciation under subsection (12.601), it
has a prohibited relationship with the trust,
corporation or partnership;
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(c) not to have renounced under
subsection (12.601) any Canadian
development expenses deemed to have
been incurred by it because of a
renunciation under subsection (12.62); and
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(d) not to have renounced under
subsection (12.6) to a particular trust,
corporation or partnership any Canadian
exploration expenses (other than expenses
ultimately renounced by another
corporation under subsection (12.6) to an
individual (other than a trust) or to a trust,
corporation or partnership with which that
other corporation does not have, in respect
of that ultimate renunciation, a prohibited
relationship) deemed to be incurred by it
because of a renunciation under
subsection (12.601) if, in respect of the
renunciation under subsection (12.6), it has
a prohibited relationship with the particular
trust, corporation or partnership.
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| Prohibited
relationship
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(12.671) For the purposes of
subsection (12.67), where a trust, corporation
(in paragraph (b) referred to as the
``shareholder corporation'') or partnership, as
the case may be, gave consideration under a
particular agreement for the issue of a
flow-through share of a particular
corporation, the particular corporation has, in
respect of a renunciation under subsection
(12.6) or (12.601) in respect of the share, a
prohibited relationship
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(a) with the trust if, at any time after the
particular agreement was entered into and
before the share is issued to the trust, the
particular corporation or any corporation
related to the particular corporation is
beneficially interested in the trust;
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(b) with the shareholder corporation if,
immediately before the particular
agreement was entered into, the
shareholder corporation was related to the
particular corporation; or
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(c) with the partnership if any part of the
amount renounced would, but for
subsection (12.7), be included, because of
paragraph (h) of the definition ``Canadian
exploration expense'' in
subsection 66.1(6), in the Canadian
exploration expense of
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(i) the particular corporation, or
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(ii) any other corporation that, at any time
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(A) after the particular agreement was
entered into, and
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(B) before that part of the amount
renounced would, but for this
paragraph, be incurred,
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would, if flow-through shares issued by
the particular corporation under
agreements entered into at the same time
as or after the time the particular
agreement was entered into were
disregarded, be related to the particular
corporation.
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(12) Subsection 66(12.69) of the Act is
replaced by the following:
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| Filing re
partners
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(12.69) Where, in a fiscal period of a
partnership, an expense is or, but for this
subsection, would be incurred by the
partnership as a consequence of a renunciation
of an amount under subsection (12.6),
(12.601), (12.62) or (12.64), the partnership
shall, on or before the last day of the third
month following the end of that period, file
with the Minister a prescribed form indicating
the share of the expense attributable to each
member of the partnership at the end of the
period and, where the prescribed form is not so
filed, the partnership shall be deemed not to
have incurred the expense.
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(13) Subsection 66(12.7) of the Act is
replaced by the following:
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| Filing
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(12.7) Where a corporation renounces an
amount in respect of Canadian exploration
expenses, Canadian development expenses or
Canadian oil and gas property expenses under
subsection (12.6), (12.601), (12.62) or
(12.64), the corporation shall file a prescribed
form in respect of the renunciation with the
Minister before the end of the first month
following the month in which the renunciation
is made and, where the prescribed form is not
so filed, subsections (12.61), (12.63) and
(12.65) do not apply in respect of the amount
so renounced.
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(14) Subsections 66(12.71) to (12.73) of
the Act are replaced by the following:
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| Restriction on
renunciation
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(12.71) A corporation may renounce an
amount under subsection (12.6), (12.601),
(12.62) or (12.64) in respect of Canadian
exploration expenses, Canadian development
expenses or Canadian oil and gas property
expenses incurred by it only to the extent that,
but for the renunciation, it would be entitled to
claim a deduction in respect of the expenses in
computing its income for the purposes of this
Part.
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| Application of
sections 231
to 231.3
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(12.72) Without restricting the generality of
sections 231 to 231.3, where a corporation
renounces an amount under subsection (12.6),
(12.601), (12.62) or (12.64), sections 231 to
231.3 apply, with such modifications as the
circumstances require, for the purpose of
permitting the Minister to verify or ascertain
the Canadian exploration expenses, Canadian
development expenses or Canadian oil and
gas property expenses of the corporation in
respect of which the amount is renounced, the
amounts renounced in respect of those
expenses, any information in respect of those
expenses or the amounts renounced and the
amount of, or information relating to, any
assistance in respect of those expenses.
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| Adjustment in
renunciation
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(12.73) Where the total of all amounts that
a corporation purports to renounce to persons
under subsection (12.6), (12.601), (12.62) or
(12.64) in respect of expenses incurred by it in
any period ending on the effective date of the
purported renunciation exceeds the total
amount of those expenses in respect of which
it may renounce amounts under that
subsection, it shall
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(a) reduce the amount so renounced to one
or more persons to effect a reduction in the
total of the amounts so purported to be
renounced by the amount of the excess, and
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(b) file a statement with the Minister
indicating the adjustments made in the
renunciations,
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and if the corporation does not so reduce the
amounts and file that statement with the
Minister within 30 days after notice in writing
by the Minister is forwarded to the corporation
that such a reduction is or will be required for
the purposes of any assessment of tax under
this Part, the Minister may, for the purposes of
this section, reduce the amounts purported to
be renounced by the corporation to one or
more persons to effect a reduction in the total
of the amounts so purported to be renounced
by the amount of the excess, and in any such
case, notwithstanding subsections (12.61),
(12.63) and (12.65), the amount renounced to
each of the persons shall be deemed to be the
amount as reduced by the corporation or the
Minister, as the case may be.
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(15) Section 66 of the Act is amended by
adding the following after
subsection (12.74):
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| Late
renunciation
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(12.741) Where a corporation purports to
renounce an amount under subsection (12.6),
(12.601), (12.62) or (12.64) after the period
during which the corporation would otherwise
be entitled to renounce the amount, the
amount shall, except for the purposes of this
subsection and subsections (12.7) and (12.75),
be deemed to have been renounced at the end
of the period if
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(a) the corporation purports to renounce the
amount
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(i) on or before the day that is 90 days
after the end of that period, or
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(ii) after the day that is 90 days after the
end of that period where, in the opinion
of the Minister, the circumstances are
such that it would be just and equitable
that the amount be renounced; and
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(b) the corporation pays to the Receiver
General a penalty in respect of the
renunciation not more than 90 days after the
renunciation.
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(16) The portion of subsection 66(12.75)
of the Act before paragraph (a) is replaced
by the following:
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| Penalty
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(12.75) For the purposes of
subsections (12.74) and (12.741), the penalty
in respect of the late filing of a document
referred to in subsection (12.68), (12.69),
(12.691), (12.7) or (12.701) or in respect of a
renunciation referred to in
subsection (12.741) is the lesser of $15,000
and
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(17) Subsection 66(12.75) of the Act is
amended by striking out the word ``and'' at
the end of paragraph (a), by adding the
word ``and'' at the end of paragraph (b) and
by adding the following after
paragraph (b):
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(c) where the penalty is in respect of a
renunciation referred to in
subsection (12.74), the greater of
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(ii) 1/4 of 1% of the amount of the
renunciation.
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(18) Paragraph (b) of the definition
``flow-through share'' in subsection 66(15)
of the Act is replaced by the following:
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(b) to renounce, before March of the first
calendar year beginning after that period,
in prescribed form to the person in
respect of the share, an amount in respect
of the Canadian exploration expenses,
Canadian development expenses or
Canadian oil and gas property expenses
so incurred by it not exceeding the
consideration received by the
corporation for the share,
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(19) Subsection 66(19) of the Act is
replaced by the following:
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| Renunciation
by member of
partnership,
etc.
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(19) Notwithstanding subsections (12.6),
(12.601), (12.62) and (12.64), where at any
time a corporation
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(a) would, but for this subsection, be
entitled to renounce under
subsection (12.6), (12.601), (12.62) or
(12.64) to another person
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(i) all or part of the corporation's share of
an outlay or expense made or incurred by
a partnership of which the corporation is
a member or former member at that time,
or
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(ii) all or part of an amount renounced to
the corporation under subsection (12.6),
(12.601), (12.62) or (12.64), and
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(b) would not be entitled to so renounce the
amount described in subparagraph (a)(i)
or (ii) to the other person if
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(i) the expression ``end of that fiscal
period'' in subsection (18) were read as
``time the outlay or expense was made or
incurred by the partnership'', and
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(ii) the expression ``on the effective date
of the renunciation'' in each of
paragraphs (12.61)(a), (12.63)(a) and
(12.65)(a) were read as ``at the earliest
time that any part of such expense was
incurred by the corporation'',
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the corporation is not entitled to renounce that
amount under subsection (12.6), (12.601),
(12.62) or (12.64), as the case may be, at that
time to the other person.
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(20) Subsections (1) and (2) apply to
taxation years that end after December 2,
1992.
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(21) Subsections (3), (6) and (8) apply to
expenses incurred after February 1986.
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(22) Subsections (4), (5), (7), (9), (11)
and (12) apply to expenses incurred after
December 2, 1992.
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(23) Subsection (10) applies to expenses
incurred after 1992.
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(24) Subsection (13) and
subsections 66(12.71) and (12.73) of the
Act, as enacted by subsection (14), apply to
renunciations made after December 2,
1992.
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(25) Subsection 66(12.72) of the Act, as
enacted by subsection (14), applies after
December 2, 1992.
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(26) Subsections (15) to (17) apply to
renunciations purported to be made after
February 1993.
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(27) Subsection (18) applies to shares
issued pursuant to an agreement entered
into after February 1986.
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(28) Subsection (19) applies to
renunciations of outlays or expenses made
or incurred after December 2, 1992.
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6. (1) Subsection 66.1(2) of the Act is
replaced by the following:
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| Deduction for
principal-busi
ness
corporation
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(2) In computing the income of a
principal-business corporation for a taxation
year, there may be deducted any amount that
the corporation claims not exceeding the
lesser of
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(i) the amount, if any, by which its
cumulative Canadian exploration
expense at the end of the year exceeds the
amount, if any, designated by it for the
year under subsection 66(14.1), and
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(ii) the amount, if any, by which
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(A) the total determined under
subparagraph 66.7(12.1)(a)(i) in
respect of the corporation for the year
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(B) the amount that would be
determined under subsection (1) in
respect of the corporation for the year,
if that subsection were read without
reference to paragraph (c) thereof, and
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(b) the amount, if any, by which
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(i) the amount that would be its income
for the year if no deduction (other than a
prescribed deduction) were allowed
under this subsection or section 65
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(ii) the total of all amounts each of which
is an amount deducted by the corporation
under section 112 or 113 in computing its
taxable income for the year.
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(2) The description of F in the definition
``cumulative Canadian exploration
expense'' in subsection 66.1(6) of the Act is
replaced by the following:
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F is the total of all amounts deducted or
required to be deducted in computing
the taxpayer's income for a taxation
year ending before that time in respect
of the taxpayer's cumulative Canadian
exploration expense,
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(3) Paragraph (c) of the definition
``restricted expense'' in subsection 66.1(6)
of the Act is replaced by the following:
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(c) that was renounced by the taxpayer
under subsection 66(10.2), (12.601) or
(12.62),
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(4) Subsections (1) and (2) apply to
taxation years that end after December 2,
1992.
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(5) Subsection (3) applies to expenses
incurred after December 2, 1992.
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7. (1) Clause 66.3(4)(a)(ii)(B) of the Act is
replaced by the following:
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(B) 50% of the total of the expenses
that were renounced by the
corporation under subsection
66(12.6), (12.601), (12.62) or (12.64)
in respect of the share; and
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