The 25% resource allowance a valuable incentive

"Careful tax planning and proper attention to the regulations can result in an optimum deduction ""of the 25% federal resource allowance. Introduced in the Income Tax Act in1976, in part to compensate for the disallowance of provincial mining taxes and royalties. the 25% ""resource allowance"" is a permitted deduction in computing taxable income from mining and petroleum. However, the rules relating to the deduction are complex, and the importance of the deduction which can readily exceed 25% of net income- is frequently underestimated. This month, Tax Notes discusses the basic rules of calculating the resource allowance, and suggests some tax planning aspects which may warrant consideration.May 6, 1974 - "" .. . our provinces have adjusted royalties, mining taxes and other arrangements to derive what they perceive to be a fair share for the benefit of their people. However, a provincial resource is also a national resource... I am proposing that revenues derived by provincial governments in respect of production from a… mineral resource should no longer be.\ deductible in computing the income of the operator. .. I am proposing that. .. there be an extra abatement from federal income tax in respect of taxable production income.. .fifteen points in the case of mineral profits. .. "" - The Honourable John N. Turner, Minister of Finance. June 23, 1975-"" '"" to meet, at least in part, the request for some form of deductibility in the tax system for provincial resource levies... to offer more incentive to those who explore and develop in Canada. .. I am now proposing, the extra fifteen point abatement of federal taxes would be withdrawn... at the same time, I am introducing a new resource allowance, which would be an extra deduction from income equal to 250/0 of production income.. ."" - The Honourable John N. Turner, Minister of Finance."