SIFT Tax
Canadian Government's Tax on Income Trusts
On June 22, 2007, federal legislation was enacted implementing a new tax (the "SIFT Tax") on certain publicly traded income trusts and limited partnerships, referred to as "Specified Investment Flow-Through" ("SIFT") entities. For SIFTs in existence on October 31, 2006 (including Penn West), the SIFT Tax will become effective in 2011. Under the SIFT Tax, distributions of certain types of income will not be deductible for income tax purposes by SIFTs in 2011 and thereafter and any resultant trust level taxable income will be taxed at a rate that will be approximately equal to corporate income tax rates. The SIFT Tax rate is currently 29.5 percent in 2011 and 28.0 percent thereafter. For a full transcript of the government's plan, please click here.
Our Board of Directors and management are continuously monitoring the impact of taxes on our business strategies. Penn West has a series of prospects which could be developed in the future in various stages. These opportunities include light oil, heavy oil, oil sands and natural gas conventional, enhanced recovery and resource plays. Current business plans are to evaluate the production, reserves potential and economics of developing this suite of prospects over the next two to four years under various price scenarios. The outcome of these evaluations will determine Penn West's most appropriate future business model however there are no current plans to convert out of the trust model until at least 2011.
The Trust continues to review organizational structures and alternatives which might serve to reduce the impact of the SIFT Tax on Penn West and its Unitholders. The release of the November 28, 2008 rules on SIFT conversions to corporations clarifies certain taxation aspects of this analysis. While there can be no assurance that the negative effect of the SIFT Tax can be minimized or eliminated, Penn West and its tax advisors continue to work diligently on these issues. The Trust also encourages all Unitholders to contact the Canadian Prime Minister and/or the Canadian Finance Minister to express your opinion on the proposed tax measures. Canadian unitholders are also encouraged to contact their Members of Parliament.
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Latest News
- September 4, 2007 - Canada's Liberals get Trust Plan Election-ready
- June 22, 2007 - Canada's Senate passes 2007-08 Budget Bill
- June 12, 2007 - Canadian House passes Controversial Budget Bill
- February 28, 2007 - Energy Trusts says Finance Committee Report Gets it Right
- Taxing Income Trusts: Reconcilable or irreconcilable differences - Report of the Standing Committee on Finance February 2007
- February 13, 2007 - Liberals Propose New Income Trust Policy to Counter Conservative Mismanagement - click here to visit Liberal website for more info.
- January 17, 2007 - Coalition of Canadian Energy Trusts supports Finance Committee decision to review trust tax legislation
- December 21, 2006 - Canadian Government Releases Draft Legislative Proposals to Implement the Distribution Tax on Income Trusts and Partnerships
- December 20, 2006 - Energy Trust Coalition Releases Report on its Perspectives Regarding the Canadian Government's October 31, 2006 Announcement with Respect to Energy Trusts (click here for link to report)
- December 20, 2006 - Energy Trust Coalition News Conference (click here to listen to webcast)
- December 15, 2006 - Department of Finance Provides Guidance on "Normal Growth" for Income Trusts and Other Flow-Through Entities
- November 5, 2006 - Coalition of Energy Trusts Holds Media Conference
- Download Transcript (PDF)
- Coalition News Release (Nov 6, 2006) (PDF)
- Coalition Speaker Presentation (PDF)
- Coalition Backgrounder (PDF)
- Coalition Members (PDF)