7 Recommendations:
1. Expand the definition in the Income Tax Act to make the Clean Investment Tax Credits and all 31 minerals on Canada’s Critical Minerals List eligible for financing under the Flow-Through Share (“FTS”) tax regime with a priority placed on helium.
2. Renew the Mineral Exploration Tax Credit for 5 years beyond the current expiry date of March 2024, and extend the Critical Mineral Exploration Tax Credit by 2 years, from 2027, thereby aligning the periods for the two incentives.
3. Provide authority to the Minister of Natural Resources to allow for an extension of expenditure timelines associated with FTS in the event of an unforeseen situation (e.g. wildfires) that may create unintended tax consequences for companies and individuals.
4. Postpone implementation of the proposed changes to the Alternative Minimum Tax (“AMT”) to be effective January 1, 2025 to allow for continued consultation and refinement in order to avoid foreseeable and potentially catastrophic impacts on the resource and charity sectors.
5. Modify the proposed changes to the AMT in Budget 2023 to reduce or eliminate the unintended negative economic impact on the successful Mineral Exploration Tax Credits by:
a) Removing the Donation Tax Credits from the AMT calculation
b) Retaining the 0% inclusion rate for capital gains on donations of publicly listed securities in the calculation of AMT
c) While preserving the regular capital gains treatment for FTS based on a deemed nil adjusted cost base, for the purpose of AMT only, the capital gain calculation should be based on the subscription price paid for the FTS and not nil.
6. Clarify the language in proposed subsection 245 (4.1) of the ITA surrounding the GAAR to ensure tax incentives supporting high risk investment in the FTS regime are not inadvertently eliminated resulting in negative economic impacts on the exploration sector by adding a postamble stating: “but does not include a transaction or series entered into for the purpose of issuing a flow-through share for which an information return has been filed with the Minister under subsection 66(12.68).”
7. Amend the ITA Regulation s.6201.1(5)(c) definition of ‘excluded obligation’ to increase resource issuer tax compliance. These provisions should apply to all FTS offerings.
a) Issuers’ obligations under the standard FTS tax indemnities contained in subscription agreements should include interest charged by the CRA to FTS subscribers.
b) The indemnity obligation should be a first charge against the assets of the issuer in priority to banks but always subordinate to government claims.
Download 