Schedule 12, Resource-Related Deductions

No additions to the earned depletion base or to the mining exploration depletion base can be made after 1989. If a corporation still has an existing balance, it can claim a deduction at any time under existing rules.

See Also

Schedule 51, Calculation of Adjusted Resource Profits, Resource Loss, and Resource Allowance

Canadian exploration expenses (CEE), as defined in subsection 66.1(6) ITA, are expenses incurred for the exploration and the development of oil and gas properties and mineral resource properties. CEEs are 100% deductible in the year in which they are incurred. Unused balances can be carried forward indefinitely or transferred to flow-through share investors.

The relevant amounts are then updated to custom Form N.B.V., Resources Properties Net Book Value (NBV) Reconciliation.

Canadian development expenses (CDE), as defined in subsection 66.2(5) ITA, are expenses which relate to the development of petroleum substances or minerals. The cumulative Canadian development expenses (CCDE) balance can be deducted at 30% (the deduction will be prorated based on the number of days for short taxation years). Unclaimed balances can be carried forward indefinitely or transferred to flow-through share investors (excluding the cost of any Canadian mineral property).

The relevant amounts are then updated to custom Form N.B.V., Resources Properties Net Book Value (NBV) Reconciliation.

Accelerated Canadian development expenses (ACDE), as defined in subsection 66.2(5) ITA, includes all expenses for the current taxation year incurred after November 20, 2018, and before 2028, for which the corporation is not a successor corporation, and which is not a Canadian resource property acquired from a person (or partnership) with which the corporation does not deal at arm's length. ACDE, minus excess amounts to deduct from the amount to include to the Canadian cumulative development expenses (CCDE) pool are eligible for an additional deduction of:

• 15% for taxation years ending before 2024

• 7.5% for taxation years beginning after 2023, and

• When the taxation year straddles January 1, 2024, the average rate that corresponds to the total of:

• The rate obtained by multiplying 15% by the ACDE incurred before 2024 divided by the total ACDE incurred, and

• The rate obtained by multiplying 7.5% by the ACDE incurred after 2023 divided by the total ACDE incurred

To calculate the applicable average rate, enter the ACDE amount on the custom line ACDE incurred before 2024 to calculate the average rate for a taxation year straddling January 1, 2024, located under line 346.

Canadian oil and gas property expenses (COGPE), as defined in subsection 66.4(5) ITA, include the acquisition cost of Canadian resource property that is an oil and gas property. This includes the cost of land, exploration rights, licenses, permits, leases, well, and royalty interests in an oil and gas property in Canada. COGPE can be deducted at a 10% declining rate (subject to proration for short taxation years). Unclaimed balances can be carried forward indefinitely.

The relevant amounts are then updated to custom Form N.B.V., Resources Properties Net Book Value (NBV) Reconciliation.

Accelerated Canadian oil and gas property expenses (ACOGPE), as defined in subsection 66.4(5) ITA, includes all expenses for the current taxation year incurred after November 20, 2018, and before 2028, for which the corporation is not a successor corporation, and is a not related to a Canadian resource property acquired from a person (or partnership) with which the corporation does not deal at arm's length. ACOGPE, minus the excess of the amount to deduct from the amount to include to the cumulative Canadian oil and gas property expense (CCOGPE) pool are eligible for an additional deduction of:

• 5% for taxation years ending before 2024

• 2.5% for taxation years beginning after 2023

• When the taxation year straddles January 1, 2024, the average rate that corresponds to the total of:

• The rate obtained by multiplying 5% by the ACOGPE incurred before 2024 divided by the total ACOGPE incurred

• The rate obtained by multiplying 2.5% by the ACOGPE incurred after 2023 divided by the total ACOPGE incurred

To calculate the applicable average rate, enter the ACOGPE amount on the custom line ACOGPE incurred before 2024 to calculate the average rate for a taxation year straddling January 1, 2024 located under line 446.

Part 7, Foreign exploration and development expenses

Before 2001, foreign exploration and development expenses (FEDE) incurred by a Canadian corporation were accumulated in one global “pool.” If a balance still exists, the corporation may claim a deduction equal to the greater of the following amounts: foreign resource income or 10% (the deduction will be prorated based on the number of days for short taxation years).

Part 8, Specified foreign exploration and development expenses

This part targets foreign exploration and development expenses that were incurred before 2001 but relate to a specific country.

Part 9, Cumulative foreign resource expenses

Canadian corporations that incur exploration and development expenses abroad can claim a deduction for Foreign Resource Expenses (FRE) on a country-by-country basis for income tax purposes. The basic FRE deduction for each country is between 10% and 30% (the deduction will be prorated based on the number of days for short taxation years) of the cumulative FRE balance for that country.

The relevant amounts entered in these three parts are then updated to custom Form N.B.V., Resources Properties Net Book Value (NBV) Reconciliation.