EXPLANATORY NOTE

These amendments to the Income Tax Act implement certain measures announced in the Economic and Fiscal Statement of December 2, 1992 and the Budget of April 26, 1993. Those measures are summarized below.

A. MEASURES FROM THE ECONOMIC AND FISCAL STATE MENT

(1) Unemployment Insurance Premium Relief for Additional Jobs: provides a refundable tax credit in respect of an increase in unemployment insurance premiums payable by certain employers in respect of 1993.

(2) Temporary Small Business Investment Tax Credit: provides a temporary 10 per cent non-refundable Small Business Investment Tax Credit for eligible machinery and equipment.

(3) Extension of the Small Business Financing Program: extends to the end of 1994 the program under which a small business in financial difficulty may refinance up to $500,000 of debt at low interest rates.

(4) Abolition of Penalty Tax: repeals the penalty tax on excess small business properties held by RRSPs and registered retirement income funds, from October 31, 1985.

(5) Labour-sponsored Venture Capital Corporations: adds preferred shares to the list of eligible investments for these corporations; facilitates the issuance of shares to RRSPs.

(6) Extension of the Home Buyers' Plan: extends by one year the program under which individuals may withdraw funds from RRSPs to finance the purchase of a home.

(7) Flow-through Shares: allows 100 per cent of the first $2 million of oil and gas development expenditures flowed through to shareholders to be deducted by them.

(8) Removal of Mandatory Deduction of Canadian Exploration Expenses: allows corporations carrying on a resource business to choose to deduct lower amounts of Canadian exploration expenses in order to utilize non-capital losses before they expire.

(9) Improvements to the Tax Credit for Scientific Research and Experimental Development: introduces a simpler method of calculating the credit, allows for partial credits, clarifies definitions and improves administration.

B. MEASURES FROM THE BUDGET

(10) Annual Investment Tax Credit Limit: repeals the annual investment tax credit limit for taxation years that begin after 1993.

(11) Investment Tax Credit for Scientific Research and Experimental Development: extends the 35% tax credit to Canadian-controlled private corporations with prior year taxable income under $400,000 and provides a phase-out of the $2 million expenditure limit.

(12) Instalment Payments of Income Tax: provides that individuals will generally have to make quarterly instalment payments of taxes if the difference between tax payable and amounts withheld at source is greater than $2,000 ($1,200 for residents of Quebec) in both the current and either of the two preceding years.

The Explanatory Notes issued by the Minister of Finance provide a detailed explanation of these amendments.