Canadian development expenses to flow-through shareholder	(12.62) Where a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian development expenses, the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purposes of subsection (12.7), to the person in respect of the share the amount, if any, by which the part of those expenses that was incurred on or before the effective date of the renunciation (which part is in this subsection referred to as the ``specified expenses'') exceeds the total of
	(a) the assistance that the corporation has received, is entitled to receive, or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian development activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in paragraph (b) or (b.1)),
	(b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,
	(12) Subsection 66(12.62) of the Act is amended by adding the following after paragraph (b):
	(b.1) all specified expenses that are described in paragraph (e) of the definition ``Canadian development expense'' in subsection 66.2(5) or that are described in paragraph (f) of that definition because of the reference in the latter paragraph to paragraph (e), and
	(13) Paragraph 66(12.62)(d) of the Act is replaced by the following:
	(d) exceeding the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced in respect of the share under this subsection or subsection (12.6) or (12.601) on or before the day on which the renunciation is made, or
	(14) The portion of subsection 66(12.63) of the Act before paragraph (a) is replaced by the following:
Effect of renunciation	(12.63) Subject to subsections (12.691) to (12.702), where under subsection (12.62) a corporation renounces an amount to a person,
	(15) Subsections 66(12.64) and (12.65) of the Act are repealed.
	(16) Paragraph 66(12.66)(a) of the Act is replaced by the following:
	(a) a corporation that issues a flow-through share to a person under an agreement incurs, in a particular calendar year, Canadian exploration expenses or Canadian development expenses,
	(a.1) the agreement was made in the preceding calendar year,
	(17) Paragraph 66(12.66)(b) of the Act is replaced by the following:
	(b) the expenses
	(i) are 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),
	(ii) would be described in paragraph (h) of the definition ``Canadian exploration expense'' in subsection 66.1(6) if the words ``paragraphs (a), (b), (c), (d), (f) and (g)'' were read as ``paragraphs (a), (d) and (f)'', or
	(iii) would be described in paragraph (f) of the definition ``Canadian development expense'' in subsection 66.2(5) if the words ``any of paragraphs (a) to (e)'' were read as ``paragraph (a) or (b)'',
	(18) Paragraphs 66(12.66)(c), (d) and (e) of the Act are replaced by the following:
	(c) before the end of that preceding year the person paid the consideration in money for the share to be issued,
	(d) the corporation and the person deal with each other at arm's length throughout the particular year, and
	(e) in January, February or March of the particular 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 that preceding year,
	(19) Paragraph 66(12.67)(a) of the Act is replaced by the following:
	(a) not to have renounced under any of subsections (12.6), (12.601) and (12.62) 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;
	(20) The portion of paragraph 66(12.671)(c) of the Act before subparagraph (i) is replaced by the following:
	(c) with the partnership if any part of the amount renounced would, but for subsection (12.7001), be included, because of paragraph (h) of the definition ``Canadian exploration expense'' in subsection 66.1(6), in the Canadian exploration expense of
	(21) Subsection 66(12.69) of the Act is replaced by the following:
Filing re partners	(12.69) Where, in a fiscal period of a partnership, an expense is incurred by the partnership as a consequence of a renunciation of an amount under subsection (12.6), (12.601) or (12.62), the partnership shall, before the end of the third month that begins after the end of the period, file with the Minister a prescribed form identifying the share of the expense attributable to each member of the partnership at the end of the period.
Consequences of failure to file	(12.6901) Where a partnership fails to file a prescribed form as required under subsection (12.69) in respect of an expense, except for the purpose of subsection (12.69) the partnership is deemed not to have incurred the expense.
	(22) The portion of subsection 66(12.691) of the Act before paragraph (a) is replaced by the following:
Filing re assistance	(12.691) Where a partnership receives or becomes entitled to receive assistance as an agent for its members or former members at a particular time in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph (12.61)(b) or (12.63)(b), would be incurred by a corporation, the following rules apply:
	(23) Subsections 66(12.7) to (12.73) of the Act are replaced by the following:
Filing re renunciation	(12.7) Where a corporation renounces an amount in respect of Canadian exploration expenses or Canadian development expenses under subsection (12.6), (12.601) or (12.62), the corporation shall file a prescribed form in respect of the renunciation with the Minister before the end of the first month after the month in which the renunciation is made.
Consequences of failure to file	(12.7001) Where a corporation fails to file a prescribed form as required under subsection (12.7) in respect of a renunciation of an amount, subsections (12.61) and (12.63) do not apply in respect of the amount.
Filing re assistance	(12.701) Where a corporation receives or becomes entitled to receive assistance as an agent in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph (12.61)(b) or (12.63)(b), would be incurred by the corporation, the corporation shall, before the end of the first month after the particular month in which it first becomes known to the corporation that a person that holds a flow-through share of the corporation is entitled to a share of any part of the assistance, file with the Minister a prescribed form identifying the share of the assistance to which each of those persons is entitled at the end of the particular month.
Consequences of failure to file	(12.702) Where a corporation fails to file a prescribed form as required under subsection (12.701) in respect of assistance, except for the purpose of subsection (12.701) the Canadian exploration expense or Canadian development expense to which the assistance relates is deemed not to have been incurred by the corporation.
Restriction on renunciation	(12.71) A corporation may renounce an amount under subsection (12.6), (12.601) or (12.62) in respect of Canadian exploration expenses or Canadian development expenses incurred by it only to the extent that, but for the renunciation, it would be entitled to a deduction in respect of the expenses in computing its income.
Reductions in renunciations	(12.73) Where an amount that a corporation purports to renounce to a person under subsection (12.6), (12.601) or (12.62) exceeds the amount that it can renounce to the person under that subsection,
	(a) the corporation shall file a statement with the Minister in prescribed form where
	(i) the Minister sends a notice in writing to the corporation demanding the statement, or
	(ii) the excess arose as a consequence of a renunciation purported to be made in a calendar year under subsection (12.6) or (12.601) because of the application of subsection (12.66) and, at the end of the year, the corporation knew or ought to have known of all or part of the excess;
	(b) where subparagraph (a)(i) applies, the statement shall be filed not later than 30 days after the Minister sends a notice in writing to the corporation demanding the statement;
	(c) where subparagraph (a)(ii) applies, the statement shall be filed before March of the calendar year following the calendar year in which the purported renunciation was made;
	(d) except for the purpose of Part XII.6, any amount that is purported to have been so renounced to any person is deemed, after the statement is filed with the Minister, to have always been reduced by the portion of the excess identified in the statement in respect of that purported renunciation; and
	(e) where a corporation fails in the statement to apply the excess fully to reduce one or more purported renunciations, the Minister may at any time reduce the total amount purported to be renounced by the corporation to one or more persons by the amount of the unapplied excess in which case, except for the purpose of Part XII.6, the amount purported to have been so renounced to a person is deemed, after that time, always to have been reduced by the portion of the unapplied excess allocated by the Minister in respect of that person.
	(24) The portion of subsection 66(12.741) of the Act before paragraph (a) is replaced by the following:
Late renunciation	(12.741) Where a corporation purports to renounce an amount under subsection (12.6), (12.601) or (12.62) after the period in which the corporation was entitled to renounce the amount, the amount is deemed, except for the purposes of this subsection and subsections (12.7) and (12.75), to have been renounced at the end of the period if
	(25) Subparagraph 66(12.75)(a)(ii) of the Act is replaced by the following:
	(ii) 1/4 of 1% of the maximum amount in respect of the Canadian exploration expenses and Canadian development expenses renounced or attributed or to be renounced or attributed as set out in the document;
	(26) Paragraphs (a) and (b) of the definition ``flow-through share'' in subsection 66(15) of the Act are replaced by the following:
	(a) to incur, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share is to be issued, and
	(b) to renounce, before March of the first calendar year that begins after that period, in prescribed form to the person in respect of the share, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share,
	(27) The definition ``foreign exploration and development expenses'' in subsection 66(15) of the Act is amended by adding the following after paragraph (e):
	but does not include
	(f) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class,
	(g) an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,
	(h) an expenditure (other than a drilling expense) incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates, or
	(i) an expenditure incurred at any time relating to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir;
	(28) The definition ``principal-business corporation'' in subsection 66(15) of the Act is amended by striking out the word ``and'' at the end of paragraph (f.1) and by adding the following after paragraph (g):
	(h) the generation of energy using property described in Class 43.1 of Schedule II to the Income Tax Regulations, and
	(i) the development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project would be the capital cost of property described in Class 43.1 of Schedule II to the Income Tax Regulations,
	(29) Subsection 66(16) of the Act is replaced by the following:
Partnerships	(16) For the purposes of subsections (12.6) to (12.73), the definitions ``assistance'' and ``flow-through share'' in subsection (15) and subsections (18), (19) and 66.3(3) and (4), a partnership is deemed to be a person and its taxation year is deemed to be its fiscal period.
	(30) Subsection 66(18) of the Act is replaced by the following:
Members of partnerships	(18) For the purposes of this section, subsection 21(2), sections 59.1 and 66.1 to 66.7, paragraph (d) of the definition ``investment expense'' in subsection 110.6(1) and the descriptions of C and D in subsection 211.91(1), where a person's share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is included in respect of the person under paragraph (d) of the definition ``foreign exploration and development expenses'' in subsection (15), paragraph (h) of the definition ``Canadian exploration expense'' in subsection 66.1(6), paragraph (f) of the definition ``Canadian development expense'' in subsection 66.2(5) or paragraph (b) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5), the portion of the outlay or expense so included is deemed, except for the purposes of applying the definitions ``foreign exploration and development expenses'', ``Canadian exploration expense'', ``Canadian development expense'' and ``Canadian oil and gas property expense'' in respect of the person, to be made or incurred by the person at the end of that fiscal period.
	(31) Subsection 66(19) of the Act is replaced by the following:
Renunciation by corporate partner, etc.	(19) A corporation is not entitled to renounce under subsection (12.6), (12.601) or (12.62) to a person a specified amount in respect of the corporation where the corporation would not be entitled to so renounce the specified amount if
	(a) 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
	(b) the expression ``on the effective date of the renunciation'' in each of paragraphs (12.61)(a) and (12.63)(a) were read as ``at the earliest time that any part of such expense was incurred by the corporation''.
Specified amount	(20) For the purpose of subsection (19), a specified amount in respect of a corporation is an amount that represents
	(a) 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; or
	(b) all or part of an amount renounced to the corporation under subsection (12.6), (12.601) or (12.62).
	(32) Subsection (1) applies to renunciations made
	(a) after 2006, in respect of a payment or loan received by a joint exploration corporation before March 6, 1996;
	(b) after 2006, in respect of a payment or loan received by a joint exploration corporation after March 5, 1996 under an agreement in writing made
	(i) by the corporation before March 6, 1996, or
	(ii) by another corporation before March 6, 1996, where
	(A) the other corporation controlled the corporation at the time the agreement was made, or
	(B) the other corporation undertook, at the time the agreement was made, to form the corporation; and
	(c) after March 5, 1996, in any other case.
	(33) Subsections (2) and (11) apply to expenses incurred after February 1996.
	(34) Subsection (3) applies to costs incurred after March 5, 1996, other than costs incurred under an agreement in writing made before March 6, 1996.
	(35) Subsections (4), (8), (10), (13), (14) and (19) to (22), subsections 66(12.7) to (12.71) of the Act, as enacted by subsection (23), and subsections (24) to (26) and (31) apply to renunciations made after 1998.