AT1 Schedule 15, Alberta Resource Related Deduction

The calculation of Earned Depletion Base for Alberta purposes follows the same rules as the federal calculation. Corporations are reminded that no additions are permitted after December 31, 1989 to the Earned Depletion Base. To the extent that a corporation has a balance at the end of the preceding taxation year in its Earned Depletion Base, it is permitted to claim a deduction in the current taxation year subject to the existing rules.

As there are no additions permitted to this pool, only transfers received on amalgamation (pursuant to subsection 87(1.2) of the federal Act), transfers received on the wind-up of a subsidiary (pursuant to subsection 88(1.5) of the federal Act), or transfers received other than on amalgamation or wind-up of a subsidiary are permitted to be added to the earned depletion base. If the transferred expenses were regular expenses in the hands of the amalgamating company or the subsidiary being wound up then they should be recorded as regular expenses in the successor’s hands. In all other cases, the transferred earned depletion base is subject to the successor rules and should be entered in the successor expenses column.

Amounts transferred on the sale of resource property to a successor corporation must be deducted from the earned depletion base (regular expense column or successor expense column, as applicable).

The claim for the year (regular or successor expenses) is equal to the lessor of 25% of resource profits (as determined in accordance with the regulations to the federal Act) and the earned depletion base as of the end of the year before making any earned depletion claim.

Note: The amounts that are claimed on lines 007 and 019 must be included in the amount that is reported on line 022 of Schedule 12.

A corporation may deduct a mining exploration depletion allowance, the calculation of which follows the federal rules. No additions are permitted to be made to the mining exploration depletion base after December 31, 1989, except for transfers received by amalgamation, wind-up of a subsidiary or otherwise.

Transfers on the disposal of resource property to successor corporations should be deducted from the pool before calculating the amount available for the current year claim.

Note: The amount that is claimed on line 031 must be included in the amount that is reported on line 022 of Schedule 12.

Canadian exploration expenses (CEE) are generally intangible costs incurred to determine the existence, nature or location of an oil or gas reservoir not known previously to exist. The determination of the amounts to be included, deducted or claimed in the year follows the federal rules. CEE incurred during the current year are added to the opening pool balance as well as:

• reclassified Canadian development expenses;
• transfers on amalgamation or wind-up of a subsidiary;
• transfers other than on amalgamation or wind-up of a subsidiary;
• Canadian renewable and conservation expenses; and
• all other additions (e.g. repayments of government assistance, bad debts in respect of a sale or recovery of CEE, etc.)

Amounts that must be deducted from the pool include:

• government assistance and grants;
• amounts transferred on disposition of resource property to a successor corporation;
• current and previous year Canadian exploration expenses renounced in the year pursuant to a flow-through share agreement;
• expenses renounced under look-back rule; and
• other deductions or transfers (e.g. investment tax credits claimed in the immediately preceding year, amounts received from the sale of seismic data, etc.)

CEE is accounted for in two pools: one for regular expenses and one for successor expenses. The additions and deductions noted above must be recorded in the appropriate pool to determine the amount upon which the current year’s claims for the regular and successor CEE are based.

The maximum deduction allowed for the regular expense pool is the amount available. For the successor expense pool, the maximum deduction allowed is the lesser of: the amount available in the successor expense column, and; the income attributable to the disposition of successored properties together with the production income from those properties.

A principal business corporation is a corporation whose principal business is mining, oil and gas production, and related activities. A principal business corporation may only claim CEE up to the amount of its taxable income; it cannot create a loss. This limitation does not apply to non-principal business corporations.

Note: The amounts that are claimed on lines 061 and 081 must be carried forward to line 026 on Schedule 12. If the "amount available" in the regular expenses column is negative, include this amount in income at line 040 ("other" area) on Schedule 12 and enter "0" on lines 061 and 063.

Canadian development expenses (CDE) are generally intangible costs incurred in bringing known reservoirs into production. The determination of the amounts to be included, deducted or claimed in the year follows the federal rules. Additions to the cumulative CDE pool include:

• current year CDE;
• transfers on amalgamation or wind-up of a subsidiary;
• transfers other than on amalgamation or wind-up of a subsidiary; and
• other additions (e.g. bad debts in respect of a sale or recovery of CDE)

Amounts to be deducted from the CDE pool include:

• reclassified Canadian exploration expenses;
• government assistance and grants;
• receivable on disposition of underground oil and gas storage rights or mining property;
• credit balance in the cumulative Canadian oil and gas property expense pool;
• amounts transferred on the disposition of resource property to a successor;
• current and previous year Canadian development expenses renounced in the year pursuant to a flow-through share agreement;
• expenses renounced under look-back rule; and
• other deductions or transfers (e.g. amounts receivable as a recovery of costs included in CDE)

Similar to the cumulative CEE pool, CDE is accounted for in two pools: one for regular expenses and one for successor expenses. The additions and deductions noted above must be recorded in the appropriate pool to determine the amount upon which the current year's claims for the regular and successor CDE are based.

The maximum deduction for CDE is:

• 30% of the amount available in the regular expenses column; and
• the lesser of 30% of the amount available in the successor expenses column and the income attributed to the production income from the successored properties.

Note: If the amounts at lines 113 and 139 are positive, the current year’s CDE claims shown on lines 115 and 141 are added together and carried forward to line 028 on Schedule 12.
A negative amount at line 139 is carried forward to line 107 of Area D – cumulative CDE. If an election pursuant to subparagraph 66.7(4)(a)(iii) of the federal Act has been filed by the corporation then a negative amount at line 139 is entered at line 167 of Area E (Cumulative Canadian Oil and Gas Property Expense).
If line 113 is negative, the negative amount must be included in income on line 040 of Schedule 12.

Canadian oil and gas property expenses (COGPE) are generally the costs of acquisition of oil and gas properties. The determination of the amounts to be included, deducted or claimed in the year follows the federal rules. Additions to the COGPE pool include:

• current year COGPE;
• amounts transferred on the amalgamation or wind-up of a subsidiary;
• amounts transferred other than on the amalgamation or wind-up of a subsidiary; and
• other additions (e.g. bad debts in respect of a sale or recovery of COGPE)

Amounts to be deducted from the COGPE pool include:

• amounts received or receivable on the disposition of Canadian oil and gas properties;
• government assistance and grants;
• amounts transferred on the disposition of resource properties to a successor; and
• other deductions or transfers (e.g. amounts recovered in respect of bad debts from a sale or recovery of COGPE)

The additions and deductions noted above must be recorded in one of the two pool components - regular expenses or successor expenses.

The maximum deduction for COGPE is:

• 10% of the amount available in the "regular expenses" column; and
• the lesser of 10% of the amount available in the "successor expenses" column and the income attributed to the production income from successored properties.

Note: If the "amount available" in both the "regular expenses" column and the "successor expenses" column are positive, then the amounts at lines 169 and 189 are totaled and carried forward to line 032 on Schedule 12.
If the "amount available" in the "successor expenses" column is negative, this amount must be entered at line 167 of Area E. If, however, the corporation has filed an election pursuant to subparagraph 66.7(4)(a)(iii) of the federal Act, a negative amount available must be carried forward to line 133 of Area D (CDE – "successor expenses" column).
If the COGPE "amount available" in the "regular expenses" column is negative, the corporation must enter the amount at line 105 in AREA D of Schedule 15.

Foreign exploration and development expenses are those that are not in respect of a country. If they are in respect of a country, complete Area G or H.

Foreign exploration and development expenses (FEDE) are generally those costs incurred in conducting resource exploration and development activities outside of Canada. The determination of the amounts to be included, deducted or claimed in the year follows the federal rules.

Area F corresponds to federal Schedule 12, Part 7.

Additions to the cumulative FEDE pool include:

• current year FEDE;
• amounts transferred on amalgamation or wind-up of a subsidiary; and
• amounts transferred other than on amalgamation or wind-up of a subsidiary

Any transfers of foreign resource property must be deducted from the cumulative FEDE pool. These additions and deductions must be recorded in one of the two pool components - regular expenses or successor expenses.

The maximum deduction for regular expenses FEDE is the lesser of:

• the amount available in the FEDE "regular expenses" column; and
• the greater of the foreign source resource income and 10% of the amount available in the FEDE "regular expenses" column

The maximum deduction for "successor expenses" FEDE is the lesser of the amount available in the "successor expenses" column and the foreign source resource income attributable to successored properties.

Note: The current year FEDE claim at lines 209 and 221 should be added together and carried forward to line 030 on Schedule 12.
If the "amount available" in either the "regular expenses" column or "successor expenses" column for FEDE is negative, the negative amount must be included in income at line 040 of Schedule 12.

Specified foreign exploration and development expenses are those that are in respect of a specific country and have been incurred before 2001. If they are in respect of two or more countries, determine a reasonable allocation to each country and maintain a consistent allocation in the following years.

Area G corresponds to federal Schedule 12, Part 8.

The determination of the amounts to be included, deducted or claimed in the year follows the federal rules.

The current year claim as per 66(4), line J, and 66.7(2), line S, should be carried forward to line 030 of Alberta Schedule 12.

Foreign resource expenses are those that are in respect of a specific country and that have been incurred in a taxation year beginning in 2001 or after. If there are two or more countries, determine a reasonable allocation to each country and maintain a consistent allocation in the following years.

Area H corresponds to federal Schedule 12, Part 9.

The determination of the amounts to be included, deducted or claimed in the year follows the federal rules.

The current year claim as per subsection 66.21(4), line JJ, and subsection 66.7(2.3), line SS, should be carried forward to line 030 of Alberta Schedule 12.