Canadian government announces guidance on "normal growth" for income trusts
2006年12月19日 - 8:51AM
PRニュース・ワイアー (英語)
CALGARY, Dec. 18 /PRNewswire-FirstCall/ -- Canetic Resources Trust
("Canetic" or the "Trust" or "We") (CNE.UN-TSX; CNE-NYSE) wishes to
inform unitholders that following the close of markets on Friday,
December 15, 2006 the Canadian Department of Finance provided
further guidance on what will constitute "normal growth" in respect
of the proposed tax measures announced on October 31, 2006
regarding income and royalty trusts and the taxation of trust
distributions that are expected to become applicable to the Trust
on January 1, 2011. BACKGROUND On Tuesday, October 31, 2006,
Canada's Minister of Finance announced the Federal Government's
intention to impose a new tax on distributions from publicly traded
income and royalty trusts. For existing income trusts such as
Canetic, the government has proposed a four-year transition or
"grace" period. As a result, existing income and royalty trusts
that were publicly traded as of October 31, 2006, will not be
subject to the new measures until January 1, 2011. The measures
proposed on October 31, 2006 include the application of a 31.5
percent tax on the distributable cash of income and royalty trusts
to be paid by the trust prior to making distributions to
unitholders. The following table outlines in general terms the
potential impact of the proposed tax measures relative to the
current level of taxation applicable to unitholders of income and
royalty trusts. Simplified Comparison of Investor Tax Rates in 2011
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Current System Proposed System of Taxation for of Taxation for
Income and Royalty Income and Royalty Unitholder type Trust
Unitholders Trust Unitholders
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Taxable Canadian(x) 46% 45.5% Canadian tax-exempt 0% 31.5% Taxable
U.S. investor(xx) 15% 41.5%
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(x) All rates in the table are as of 2011, include both entity- and
investor-level tax (as applicable) and reflect already-announced
rate reductions and the additional .5% corporate rate reduction.
Rates for "taxable Canadian" assume that top personal income tax
rates apply and that provincial governments increase their dividend
tax credit for dividends of large corporations. (xx) Canadian taxes
only. U.S. tax will in most cases also apply.
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ANNOUNCED GUIDELINES FOR "NORMAL GROWTH" OF INCOME AND ROYALTY
TRUST DURING GRACE PERIOD In conjunction with its announcement of
the new tax measures to be applied to income and royalty trusts,
the Federal Government also announced that while it had no
intention of limiting income and royalty trusts from "normal
growth" during the four-year grace period, it would take steps to
rescind the grace period and immediately apply the new tax measures
against any income or royalty trust it considered to have
undertaken "undue growth or expansion" subsequent to October 31,
2006. The announcement by the Department of Finance following the
close of markets on Friday, December 15, 2006, seeks to clarify the
Federal Government's position as to what will constitute "normal
growth" for income and royalty trusts during the four-year grace
period. The announcement provided guidelines outlining the position
of the Federal Government and Department of Finance with respect to
acceptable levels of growth for income and royalty trusts during
the period of November 1, 2006 through to December 31, 2010. In its
announcement the Department of Finance indicated that it will
honour the four-year grace period and will not apply the proposed
tax measures to any existing income or royalty trust prior to
January 1, 2011 so long as such income or royalty trust does not
grow its equity capital through the issuance of new equity in
excess of certain guidelines. The guidelines on new equity issuance
put forth by the Department of Finance are generally referred to as
"safe harbour" amounts and are set out as a percentage of the
trust's market capitalization, as measured in terms of the value of
the trusts issued and outstanding publicly-traded equity units as
of October 31, 2006 (the "Market Capitalization Basis").
Determination of the Market Capitalization Basis for this purpose
will not include the value of debt outstanding as of October 31,
2006, (whether or not that debt is convertible to equity or was
itself publicly traded), options or other interests that were
convertible into equity units of the trust. The general guidelines
of the Department of Finance with respect to the issuance of new
equity are outlined below: - Growth of an income or royalty trust
for this purpose shall be measured by the issuance of new equity
which cannot exceed the greater of $50 million per year or the
"safe harbour" amounts of 40 percent, 20 percent, 20 percent, and
20 percent of the trust's Market Capitalization Basis in each of
2007 (inclusive of the period between November 1, 2006 to December
31, 2007), 2008, 2009 and 2010, respectively. - The annual safe
harbour amounts are cumulative and can be carried forward if not
used in a particular year. However, the growth of an income or
royalty trust may not exceed the cumulative sum of the safe harbour
amounts available to it in any given year or the combined safe
harbour total of 100 percent at the end of the four-year grace
period. - Issuance of new equity of an income or royalty trust for
these purposes includes the issuance, subsequent to October 31,
2006, of new units and new debt that is convertible into units; if
attempts are made to develop other such substitutes for equity,
those may be included as well. - Replacing debt that was
outstanding as of October 31, 2006 with new equity, whether through
a debenture conversion or otherwise, will not be considered as
issuance of new equity under the safe harbour amounts. New,
non-convertible debt can also be issued, subsequent to October 31,
2006, without affecting the safe harbour; however, the replacement
of that new debt with equity will be counted as growth and issuance
of new equity under the safe harbour amounts. - An issuance of
equity by an income or royalty trust will not be considered growth
or issuance of new equity under the safe harbour to the extent that
such issuance is made to satisfy the exercise by another person or
partnership of a right in place on October 31, 2006 to exchange an
interest in a partnership, or a share of a corporation, into that
new equity. - The merger of two or more existing income or royalty
trusts each of which traded on October 31, 2006, or a
reorganization of an income or royalty trust, will not be
considered growth or issuance of new equity under the safe harbour
to the extent that there is no net addition to equity as a result
of the merger or reorganization. In addition to the provision of
the above guidelines on acceptable growth for income and royalty
trusts during the four-year grace period, the Department of Finance
also outlined its intention to examine existing legislation and
take all necessary steps to ensure that any potential conversion of
an income or royalty trust back to a corporation be allowed to take
place without any tax consequences to unitholders upon the
conversion. As one of the largest royalty trusts in Canada, with an
estimated Market Capitalization Basis for these purposes of
approximately $4.5 billion on October 31, 2006, Canetic believes
that it remains well positioned in respect of the announced
guidelines to continue to implement its existing strategy to
acquire, consolidate and exploit maturing crude oil and natural gas
assets both in Canada and international markets. Canetic remains
opposed to the Federal Government's proposed tax measures and
continues to be an active member of the Canadian Association of
Income Funds (CAIF) and the Coalition of Canadian Energy Trusts
(CCET). Canetic will continue to monitor further developments and
activities with respect to the Federal Government's proposed new
tax measures and intends to continue to keep investors informed of
any material developments that have the potential to affect
unitholders of the Trust. Canetic will continue to review all
actions and alternatives available to the Trust to position it
appropriately in the best interests of our unitholders in the
context of changes in the economic and political environment in
which it operates. For further information regarding the Federal
Government's proposed tax measures please visit Canetic's website
at http://www.canetictrust.com/ and follow the link entitled
"Canadian Government Proposal for Taxation of Income Trusts".
ADVISORY Forward-Looking Statements Certain information in this
news release constitutes forward-looking statements under
applicable securities law. Any statements that are contained in
this news release that are not statements of historical fact may be
forward-looking statements. Forward-looking statements are often
identified by terms such as "may", "should", "anticipate",
"expects" and similar expressions. Forward-looking statements in
this news release include, but are not limited to, statements with
respect to the substance and timing for adoption of the Federal
Government's tax proposals, including the new safe harbour
provisions, and Canetic's intended response to the tax proposals.
These forward-looking statements necessarily involve known and
unknown risks, including, without limitation, risks associated with
changes in the tax proposals or safe harbour, or the failure of the
Federal Government to adopt such legislation as a consequence,
actual results may differ materially from those anticipated in the
forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive. Additional information
on these and other factors that could affect Canetic's operations
or financial results are included in Canetic's reports on file with
Canadian and U.S. securities regulatory authorities and may be
accessed through the SEDAR website (http://www.sedar.com/), the
SEC's website (http://www.sec.gov/), Canetic's website
(http://www.canetictrust.com/) or by contacting Canetic.
Furthermore, the forward-looking statements contained in this news
release are made as of the date of this news release, and Canetic
does not undertake any obligation to update publicly or to revise
any of the included forward-looking statements, whether as a result
of new information, future events or otherwise, except as expressly
required by securities law. All references are to Canadian dollars
unless otherwise indicated. Additional Information Additional
information regarding the Trust and its business operations,
including the Trust's annual information form for the period ended
December 31, 2005, is available on the Trust's SEDAR company
profile at http://www.sedar.com/, the SEC's website at
http://www.sec.gov/ or Canetic's website at
http://www.canetictrust.com/. DATASOURCE: Canetic Resources Trust
CONTACT: Investor Relations, Canetic Resources Trust, (403)
539-6300, (877) 539-6300, http://www.canetictrust.com/
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