21 June 2024 External T.I. 2024-1009801E5 - BC Mining Exploration Tax Credit (METC)

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.

Principal Issues: Should the BC METC should be reported as income on an individual's federal income tax return?

Position: The BC METC should be deducted in computing the individual's cumulative Canadian exploration expense pool. If the individual has a negative cumulative Canadian exploration expense at the end of their taxation year, the individual will be required to report the negative balance as income on their federal income tax return for that taxation year.

Reasons: Element J of the definition "cumulative Canadian exploration expense" ("CCEE") in subsection 66.1(6) of the ITA requires the amount of any assistance, such as the BC METC, that the taxpayer has received or is entitled to receive in respect of Canadian exploration expenses ("CEE") to be deducted from the taxpayer’s CCEE pool. Consequently, the BC METC must be deducted from a taxpayer’s CCEE in accordance with this provision. If such deduction causes the taxpayer’s CCEE to become negative, the taxpayer will be required to include the negative balance in their income pursuant to subsections 66.1(1) and 59(3.2) of the ITA.

XXXXXXXXXX									2024-100980
										Olivier Bergeron

June 21, 2024

Re: BC Mining Exploration Tax Credit

Dear XXXXXXXXXX:

This is in reply to your letter dated February 28, 2024 wherein you requested our comments on whether or not an individual should report the British Columbia Mining Exploration Tax Credit (“BC METC”) as income on their federal income tax return.

In your letter you have stated that you believe that the BC METC should not be reported as income on an individual’s federal income tax return like various other credits available to individuals.

Our Comments:

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “ITA”) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

BC METC

The BC METC is a form of government assistance designed to help taxpayers with the cost of conducting grassroots exploration in British Columbia. It is available under section 25.1 of the BC Income Tax Act. An eligible taxpayer may generally claim a tax credit equal to 20% of the qualified mining exploration expenses incurred by the eligible taxpayer. Such tax credit is deemed to have been paid by the taxpayer on account of the taxpayer’s taxes payable under the BC Income Tax Act.

The definition of “qualified mining exploration expense” for purposes of the BC METC generally tracks the definition of Canadian exploration expense (“CEE”) in subsection 66.1(6) of the ITA and therefore the BC METC would generally be received in respect of an expense that is a CEE under the ITA.

CCEE under ITA

A taxpayer's "cumulative Canadian exploration expense" (“CCEE”) (as defined in subsection 66.1(6) of the ITA)) includes the taxpayer’s undeducted pool of CEE. A taxpayer is permitted a deduction under either subsection 66.1(2) or (3) with respect to positive CCEE. A negative CCEE is included in a taxpayer’s income under subsections 66.1(1) and 59(3.2).

Element J of the definition of CCEE reduces a taxpayer’s CCEE pool by the amount of any assistance the taxpayer has received or is entitled to received in respect of any CEE. “Assistance” is defined for this purpose in subsection 66(15) of the ITA to include any deduction from tax, rebate of tax or any other form of assistance or benefit.

BC METC and CCEE

The BC METC clearly meets this definition of assistance since the amount of the BC METC of a taxpayer is deemed to be a payment on account of the taxes payable by the taxpayer under the BC Income Tax Act. Therefore, where a taxpayer has received or is entitled to receive the BC METC in respect of any CEE, the taxpayer will be required to reduce their CCEE by the amount of that BC METC pursuant to Element J of the definition of CCEE in subsection 66.1(6) of the ITA.

BC METC Not Comparable to Personal Tax Credits

In our view, the BC METC is not comparable to the other credits referenced in your letter. This is because the income tax treatment of government assistance differs depending on the nature of the assistance and specific rules in the ITA. There is a specific provision of the ITA that requires the amount of any assistance, such as the BC METC, that the taxpayer has received or is entitled to receive in respect of CEE to be deducted from the taxpayer’s CCEE pool. As a result, the BC METC must be deducted from a taxpayer’s CCEE in accordance with the provisions of the ITA. If such deduction causes the taxpayer’s CCEE to become negative, the taxpayer will be required to include the negative balance in their income pursuant to subsections 66.1(1) and 59(3.2) of the ITA.

We trust the above comments will be of assistance.

Yours truly,

Kimberley Wharram
Section Manager, Resources Section
for Division Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch