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4. Processing Allowance
Most OMT taxpayers can deduct a processing allowance under
the third method for calculating OMT profit.1 Id. sec.
3(3)(c)(i) and (ii) (as amended in 1975); Ont. Rev. Regs. 126/75,
sec. 4 (1975). During the years in issue, the processing
allowance was calculated at a rate prescribed by the regulations
or determined by the mine assessor. MTA, R.S.O., ch. 269, sec.
3(7)(c)(ii). The processing allowance was a percentage of the
cost of assets used to process a mined product (asset cost basis)
or a percentage of profits from mining and processing activities
(combined profits). Ont. Rev. Regs. 126/75, sec. 5 (1975). An
OMT taxpayer which used the asset cost basis method multiplied
the original cost of assets by a percentage which varied based on
which processing assets the mine operator owned (e.g.,
concentrator, smelter, refinery, and semi-fabricating plant) and
where those assets were located (e.g., in Northern Ontario). Id.
The minimum processing allowance was 15 percent of combined
profits. Id. sec. 5(5). The maximum processing allowance was 65
percent of the OMT taxpayer's combined profits. Id.
Most mine operators claimed the 65 percent amount. The
processing allowance was zero if an operator had no taxable
1The processing allowance is not available to mining
companies that do not process mined material, e.g., gypsum, salt,
etc. These are very insignificant in numbers and dollars in
Ontario.
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Last modified: May 25, 2011