British Columbia’s latest budget, introduced on Feb. 17, 2015, confirmed two measures intended to support B.C.’s mining industry, including an extension of the B.C. mining flow-through share tax credit. 

Flow-through shares are designed to help corporations in the mining, oil and gas, and renewable energy sectors finance their exploration and development activities. Junior resource corporations generally benefit the most from the use of flow-through shares since those corporations typically have the most difficulty financing their activities. 

A qualifying issuer corporation may transfer certain resource expenses to investors using the flow-through share mechanism. This allows an investor in flow-through shares to benefit from several tax incentives. For example, the investor may deduct qualifying resource expenses renounced by the issuing corporation in computing the investor’s income. As well, individual investors (excluding trusts) may be entitled to federal investment tax credits for resource expenses which qualify as flow-through mining expenditures. Further, some provinces, including British Columbia, provide supplementary provincial investment tax credits for qualifying resource expenses. 

British Columbia’s tax incentive for qualifying resource expenses is in the form of the B.C. mining flow-through share tax credit. That tax credit expires periodically. The existing tax credit only applies to expenditures that were incurred by the end of 2014. The B.C. government has been extending this tax credit periodically, and many corporations have come to depend on these extensions. 

B.C.’s Premier recently announced that the government would extend the B.C. mining flow-through share tax credit to the end of 2015, and this extension was just confirmed in the B.C. budget. The extension will help resource companies raise funds by allowing them to offer the additional B.C. tax credit to qualifying investors in 2015. Given the importance of the mining sector in British Columbia, this extension will be as welcome as it was expected. 

In its budget, the B.C. government also extended the new mine allowance through to Dec. 31, 2019. The new mine allowance allows an additional deduction for development costs in a new mine for purposes of calculating the B.C. mineral tax. In total, a 133% deduction of certain capital costs is permitted for new mines in determining the mineral tax. This special deduction helps support the development of new mines and major expansions.

Since mining companies are facing tough times, any measures which facilitate financing or reduce taxes will no doubt be welcome news to this sector.