Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Amount to be included in income

• 66.2 (1) There shall be included in computing the amount referred to in paragraph 59(3.2)(c) in respect of a taxpayer for a taxation year the amount, if any, by which the total of

  • (a) all amounts referred to in the descriptions of E to O in the definition cumulative Canadian development expense in subsection 66.2(5) that are deducted in computing the taxpayer’s cumulative Canadian development expense at the end of the year, and

  • (b) the amount that is designated by the taxpayer for the year under subsection 66(14.2)

  exceeds the total of

  • (c) all amounts referred to in the descriptions of A to .1 in the definition cumulative Canadian development expense in subsection 66.2(5) that are included in computing the taxpayer’s cumulative Canadian development expense at the end of the year, and

  • (d) the total determined under subparagraph 66.7(12.1)(b)(i) in respect of the taxpayer for the year.

• Marginal note:Deduction for cumulative Canadian development expenses

  (2) A taxpayer may deduct, in computing the taxpayer’s income for a taxation year, such amount as the taxpayer may claim not exceeding the total of

  • (a) the lesser of

    • (i) the total of

      • (A) the taxpayer’s cumulative Canadian development expense at the end of the year, and

      • (B) the amount, if any, by which

        • (I) the total determined under subparagraph 66.7(12.1)(b)(i) in respect of the taxpayer for the year

        exceeds

        • (II) the amount that would, but for paragraph 66.2(1)(d), be determined under subsection 66.2(1) in respect of the taxpayer for the year, and

    • (ii) the amount, if any, by which the amount determined under subparagraph 66.4(2)(a)(ii) exceeds the amount determined under subparagraph 66.4(2)(a)(i),

  • (b) the lesser of

    • (i) the amount, if any, by which the amount determined under subparagraph 66.2(2)(a)(i) exceeds the amount determined under subparagraph 66.2(2)(a)(ii), and

    • (ii) the amount, if any, by which the total of all amounts each of which is

      • (A) an amount included in the taxpayer’s income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to — or, for civil law, any right in or to — a share, acquired by the taxpayer under circumstances described in paragraph (g) of the definition Canadian development expense in subsection (5) or paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), or

      • (B) an amount included by virtue of paragraph 12(1)(e) in computing the taxpayer’s income for the year to the extent that it relates to inventory described in clause 66.2(2)(b)(ii)(A)

      exceeds

      • (C) the total of all amounts deducted as a reserve by virtue of paragraph 20(1)(n) in computing the taxpayer’s income for the year to the extent that the reserve relates to inventory described in clause 66.2(2)(b)(ii)(A),

  • (c) 30% of the amount, if any, by which the amount determined under subparagraph 66.2(2)(b)(i) exceeds the amount determined under subparagraph 66.2(2)(b)(ii), and

  • (d) the amount determined by the formula

    A(B − C)

    where

    A

    is

    • (i) for taxation years that end before 2024, 15%,

    • (ii) for taxation years that begin before 2024 and end after 2023, the amount determined by the formula

      0.15(I/J) + 0.075(K/J)

      where

      I

      is the total of all accelerated Canadian development expenses incurred by the taxpayer before 2024 and in the taxation year,

      J

      is the total of all accelerated Canadian development expenses incurred by the taxpayer in the taxation year, and

      K

      is the total of all accelerated Canadian development expenses incurred by the taxpayer after 2023 and in the taxation year, and

    • (iii) for taxation years that begin after 2023, 7.5%,

    B

    is the total of all accelerated Canadian development expenses incurred by the taxpayer in the taxation year, and

    C

    is the amount determined by the formula

    (D − E) − (F − G − H)

    where

    D

    is the total of the amounts determined for E to O in the definition cumulative Canadian development expense in subsection (5) at the end of the taxation year,

    E

    is the total of the amounts determined for E to O in the definition cumulative Canadian development expense in subsection (5) at the beginning of the taxation year,

    F

    is the total of the amounts determined for A to D.1 in the definition cumulative Canadian development expense in subsection (5) at the end of the taxation year,

    G

    is the total of the amounts determined for A to D.1 in the definition cumulative Canadian development expense in subsection (5) at the end of the preceding taxation year, and

    H

    is the amount determined for B.

• Marginal note:Definitions

  (5) In this section,

  accelerated Canadian development expense

  accelerated Canadian development expense, of a taxpayer, means any cost or expense incurred by the taxpayer during a taxation year if the cost or expense

  • (a) qualifies as a Canadian development expense at the time it is incurred, other than

    • (i) an expense in respect of which the taxpayer is a successor, within the meaning of subsection 66.7(4), and

    • (ii) a cost in respect of a Canadian resource property acquired by the taxpayer, or a partnership in which the taxpayer is a member, from a person or partnership with which the taxpayer does not deal at arm’s length,

  • (b) is incurred after November 20, 2018 and before 2028, other than expenses deemed to have been incurred on December 31, 2027 because of subsection 66(12.66), and

  • (c) if the Canadian development expense is deemed to be a Canadian development expense incurred by the taxpayer because of paragraph 66(12.63)(a), is an amount renounced under an agreement entered into after November 20, 2018; (frais d’aménagement au Canada accélérés)

  Canadian development expense

  Canadian development expense of a taxpayer means any cost or expense incurred after May 6, 1974 that is

  • (a) any expense incurred by the taxpayer in

    • (i) drilling or converting a well in Canada for the disposal of waste liquids from an oil or gas well,

    • (ii) drilling or completing an oil or gas well in Canada, building a temporary access road to the well or preparing a site in respect of the well, to the extent that the expense was not a Canadian exploration expense of the taxpayer in the taxation year in which it was incurred,

    • (iii) drilling or converting a well in Canada for the injection of water, gas or any other substance to assist in the recovery of petroleum or natural gas from another well,

    • (iv) drilling for water or gas in Canada for injection into a petroleum or natural gas formation, or

    • (v) drilling or converting a well in Canada for the purposes of monitoring fluid levels, pressure changes or other phenomena in an accumulation of petroleum or natural gas,

  • (b) any expense incurred by the taxpayer in drilling or recompleting an oil or gas well in Canada after the commencement of production from the well,

  • (c) any expense incurred by the taxpayer before November 17, 1978 for the purpose of bringing a mineral resource in Canada into production and incurred prior to the commencement of production from the resource in reasonable commercial quantities, including

    • (i) clearing, removing overburden and stripping, and

    • (ii) sinking a mine shaft, constructing an adit or other underground entry,

  • (c.1) any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer for the purpose of bringing a new mine in a mineral resource in Canada that is a bituminous sands deposit or an oil shale deposit into production and incurred before the new mine comes into production in reasonable commercial quantities, including an expense for clearing the land, removing overburden and stripping, or building an entry ramp,

  • (c.2) any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer after March 20, 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities and incurred before the new mine comes into production in such quantities, including an expense for clearing, removing overburden, stripping, sinking a mine shaft, constructing an adit or other underground entry or drilling a well for the extraction of lithium from brines,

  • (d) any expense (other than an amount included in the capital cost of depreciable property) incurred by the taxpayer after 1987

    • (i) in sinking or excavating a mine shaft, main haulage way or similar underground work designed for continuing use, for a mine in a mineral resource in Canada built or excavated after the mine came into production,

    • (ii) in extending any such shaft, haulage way or work referred to in subparagraph (i), or

    • (iii) in drilling or completing a well for the extraction of lithium from brines in Canada after the mine came into production,

  • (e) the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (b), (e) or (f) of the definition Canadian resource property in subsection 66(15), or any right to or interest in — or for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership),

  • (f) subject to section 66.8, the taxpayer’s share of any expense referred to in any of paragraphs (a) to (e) incurred by a partnership in a fiscal period thereof at the end of which the taxpayer was a member of the partnership, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is 6 months after the taxpayer’s taxation year in which that period ends, or

  • (g) any cost or expense referred to in any of paragraphs (a) to (e) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,

  but for greater certainty, shall not include

  • (h) any consideration given by the taxpayer for any share or any interest in or right to — or, for civil law, any right in or to — a share, except as provided by paragraph (g),

  • (i) any expense described in paragraph (g) incurred by any other taxpayer to the extent that the expense was,

    • (i) by virtue of that paragraph, a Canadian development expense of that other taxpayer,

    • (ii) by virtue of paragraph (i) of the definition Canadian exploration expense in subsection 66.1(6), a Canadian exploration expense of that other taxpayer, or

    • (iii) by virtue of paragraph (c) of the definition Canadian oil and gas property expense in subsection 66.4(5), a Canadian oil and gas property expense of that other taxpayer,

  • (i.1) an expense that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after 1987,

  • (j) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class, or

  • (k) the taxpayer’s share of any consideration, expense, cost or expenditure referred to in any of paragraphs (h) to (j) given or incurred by a partnership,

  but any assistance that a taxpayer has received or is entitled to receive after May 25, 1976 in respect of or related to the taxpayer’s Canadian development expense shall not reduce the amount of any of the expenses described in any of paragraphs (a) to (g); (frais d’aménagement au Canada)

  cumulative Canadian development expense

  cumulative Canadian development expense of a taxpayer at any time in a taxation year means the amount determined by the formula

  (A+B+C+D+D.1) - (E+F+G+H+I+J+K+L+M+M.1+N+O)

  where

  A

  is the total of all Canadian development expenses made or incurred by the taxpayer before that time,

  B

  is the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(c) for taxation years ending before that time,

  C

  is the total of all amounts referred to in the description of F or G that are established by the taxpayer to have become bad debts before that time,

  D

  is such part, if any, of the amount determined for M as has been repaid before that time by the taxpayer pursuant to a legal obligation to repay all or any part of that amount,

  D.1

  is the total of all specified amounts, determined under paragraph 66.7(12.1)(b) in respect of the taxpayer for taxation years ending before that time,

  E

  is the total of all amounts deducted in computing the taxpayer’s income for a taxation year ending before that time in respect of the taxpayer’s cumulative Canadian development expense,

  F

  is the total of all amounts each of which is an amount in respect of property described in paragraph (b), (e) or (f) of the definition Canadian resource property in subsection 66(15) or property disposed of after March 21, 2011 which was described in any of those paragraphs and the cost of which when acquired by the taxpayer was included in the Canadian development expense of the taxpayer, or any right to or interest in — or, for civil law, any right in or to — such a property, other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as “the particular property”) disposed of by the taxpayer before that time equal to the amount, if any, by which

  • (a) the amount, if any, by which the proceeds of disposition in respect of the particular property that became receivable by the taxpayer after May 6, 1974 and before that time exceed any outlays or expenses that were made or incurred by the taxpayer after May 6, 1974 and before that time for the purpose of making the disposition and that were not otherwise deductible for the purposes of this Part

  exceeds

  • (b) the amount, if any, by which

    • (i) the total of all amounts that would be determined under paragraph 66.7(4)(a), immediately before the time (in this paragraph referred to as the “relevant time”) when such proceeds of disposition became receivable, in respect of the taxpayer and an original owner of the particular property (or of any other property acquired by the taxpayer with the particular property in circumstances in which subsection 66.7(4) applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time) if

      • (A) amounts that became receivable at or after the relevant time were not taken into account,

      • (B) each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable before the relevant time were made before the relevant time,

      • (C) paragraph 66.7(4)(a) were read without reference to “30% of”, and

      • (D) no reduction under subsection 80(8) at or after the relevant time were taken into account

    exceeds the total of

    • (ii) all amounts that would be determined under paragraph 66.7(4)(a) at the relevant time in respect of the taxpayer and an original owner of the particular property (or of that other property) if

      • (A) amounts that became receivable after the relevant time were not taken into account,

      • (B) each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable at or before the relevant time were made before the relevant time,

      • (C) paragraph 66.7(4)(a) were read without reference to “30% of”,

      • (D) amounts described in subparagraph 66.7(4)(a)(iii) that became receivable at the relevant time were not taken into account, and

      • (E) no reduction under subsection 80(8) at or after the relevant time were taken into account, and

    • (iii) such portion of the amount otherwise determined under this paragraph as was otherwise applied to reduce the amount otherwise determined under this description,

  G

  is the total of all amounts that became receivable by the taxpayer before that time that are to be included in the amount determined under this description by virtue of paragraph 66(12.1)(b) or 66(12.3)(a),

  H

  is the total of all amounts each of which is an amount included by the taxpayer as an expense under paragraph (a) of the definition Canadian development expense in this subsection in computing the taxpayer’s Canadian development expense for a previous taxation year that has become a Canadian exploration expense of the taxpayer by virtue of subparagraph (c)(ii) of the definition Canadian exploration expense in subsection 66.1(6),

  I

  is the total of all amounts each of which is an amount that before that time has become a Canadian exploration expense of the taxpayer by virtue of subsection 66.1(9),

  J

  is the total of all amounts each of which is an amount received before that time on account of any amount referred to in the description of C

  K

  is the total of all amounts paid to the taxpayer after May 6, 1974 and before May 25, 1976

  • (a) under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, or

  • (b) pursuant to any agreement, entered into between the taxpayer and Her Majesty in right of Canada under the Northern Mineral Grants Program or the Development Program of the Department of Indian Affairs and Northern Development,

  to the extent that the amounts have been expended by the taxpayer as or on account of Canadian development expense incurred by the taxpayer,

  L

  is the amount by which the total of all amounts determined under subsection 66.4(1) in respect of a taxation year of the taxpayer ending at or before that time exceeds the total of all amounts each of which is the least of

  • (a) the amount that would be determined under paragraph 66.7(4)(a), at a time (hereafter in this description referred to only as the “particular time”) that is the end of the latest taxation year of the taxpayer ending at or before that time, in respect of the taxpayer as successor in respect of a disposition (in this description referred to as the “original disposition”) of Canadian resource property by a person who is an original owner of the property because of the original disposition, if

    • (i) that paragraph were read without reference to “30% of”,

    • (ii) where the taxpayer has disposed of all or part of the property in circumstances in which subsection 66.7(4) applied, that subsection continued to apply to the taxpayer in respect of the original disposition as if subsequent successors were the same person as the taxpayer, and

    • (iii) each designation made under subparagraph 66.7(4)(a)(iii) in respect of an amount that became receivable before the particular time were made before the particular time,

  • (b) the amount, if any, by which the total of all amounts each of which became receivable at or before the particular time and before 1993 by the taxpayer and is included in computing the amount determined under subparagraph 66.7(5)(a)(ii) in respect of the original disposition exceeds the amount, if any, by which

    • (i) where the taxpayer disposed of all or part of the property before the particular time in circumstances in which subsection 66.7(5) applied, the amount that would be determined at the particular time under subparagraph 66.7(5)(a)(i) in respect of the original disposition if that subparagraph continued to apply to the taxpayer in respect of the original disposition as if subsequent successors were the same person as the taxpayer, and

    • (ii) in any other case, the amount determined at the particular time under subparagraph 66.7(5)(a)(i) in respect of the original disposition

    exceeds

    • (iii) the amount that would be determined at the particular time under subparagraph 66.7(5)(a)(ii) in respect of the original disposition if that subparagraph were read without reference to the words “or the successor”, wherever they appear therein, and if amounts that became receivable after 1992 were not taken into account, and

  • (c) where

    • (i) after the original disposition and at or before the particular time, the taxpayer disposed of all or part of the property in circumstances in which subsection 66.7(4) applied, otherwise than by way of an amalgamation or merger or solely because of the application of paragraph 66.7(10)(c), and

    • (ii) the winding-up of the taxpayer began at or before that time or the taxpayer’s disposition referred to in subparagraph (i) (other than a disposition under an agreement in writing entered into before December 22, 1992) occurred after December 21, 1992,

    nil

  M

  is the total amount of assistance that the taxpayer has received or is entitled to receive in respect of any Canadian development expense (including an expense that has become a Canadian exploration expense of the taxpayer by virtue of subsection 66.1(9)) incurred after 1980 or that can reasonably be related to Canadian development activities after 1980,

  M.1

  is the total of all amounts by which the cumulative Canadian development expense of the taxpayer is required because of subsection 80(8) to be reduced at or before that time,

  N

  is the total of all amounts that are required to be deducted before that time under subsection 66(14.2) in computing the taxpayer’s cumulative Canadian development expense, and

  O

  is the total of all amounts that are required to be deducted before that time under paragraph 66.7(12)(c) in computing the taxpayer’s cumulative Canadian development expense. (frais cumulatifs d’aménagement au Canada)

• Marginal note:Application of ss. 66(15), 66.1(6) and 66.4(5)

  (5.1) The definitions in subsections 66(15), 66.1(6) and 66.4(5) apply to this section.

• Marginal note:Share of partner

  (6) Except as provided in subsection 66.2(7), where a taxpayer is a member of a partnership, the taxpayer’s share of any amount that would be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection 66.2(5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection (5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition, whichever is applicable, in respect of the taxpayer for the taxation year of the taxpayer in which the partnership’s taxation year ends.

• Marginal note:Exception

  (7) Where a non-resident person is a member of a partnership that is deemed under paragraph 115(4)(b) to have disposed of any Canadian resource property, the person’s share of any amount that would be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection 66.2(5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition in respect of the partnership for a taxation year of the partnership if section 96 were read without reference to paragraph 96(1)(d) shall, for the purposes of this Act, be deemed to be an amount referred to in the description of in the definition cumulative Canadian development expense in subsection (5), in paragraph (a) of the description of F in that definition or in the description of G or M in that definition, whichever is applicable, in respect of the person for the taxation year of the person that is deemed under paragraph 115(4)(a) to have ended.

• Marginal note:Presumption

  (8) Where pursuant to the terms of an arrangement in writing entered into before December 12, 1979 a taxpayer acquired a property described in paragraph (a) of the definition Canadian oil and gas property expense in subsection 66.4(5), for the purposes of this Act, the cost of acquisition shall be deemed to be a Canadian development expense incurred at the time the taxpayer acquired the property.