ARX:

Canadian Tax Information

ARC Dividend Programs

Elimination of the Dividend Reinvestment Plan ("DRIP") and Stock Dividend Program ("SDP") was effective for the March 2017 dividend payable on April 17, 2017 to shareholders of record on March 31, 2017. The ex-dividend date was March 29, 2017. Shareholders that were enrolled in either program will automatically receive dividend payments in the form of cash.

Prior to elimination of the DRIP and SDP, shareholders were able to receive dividend payments in cash or reinvest their cash dividends into additional common shares of ARC pursuant to the DRIP.  Alternatively, shareholders could elect to receive common shares of ARC in lieu of cash dividends pursuant to the SDP.

Shareholders are advised to consult their tax advisors regarding questions relating to the tax treatment of ARC Resources dividends and the computation of the adjusted cost base of their investment.

Canadian Resident Individual Shareholders

The following outlines the general tax considerations that are expected to apply for a Canadian resident individual shareholder who holds their shares of ARC as capital property.

This summary is of a general nature only and is not intended to be nor should it be construed to be tax advice to any particular shareholder.  Shareholders are encouraged to consult their own tax advisors regarding the tax consequences to them of receiving cash or stock dividends.

Cash Dividends
  • The amount of any cash dividends will be included in computing income in the taxation year in which the cash dividend is received.
  • ARC Resources anticipates that its dividends will be “eligible dividends” and, as a result, subject to the enhanced dividend tax credit which is typically applied to dividends from most Canadian public companies.
  • The actual taxable amount of dividends will be communicated to shareholders on a T5 – Statement of Investment Income (“T5 slip”) on or before the last day of February following the year in which the dividends were paid.  Registered shareholders who receive the dividend from the transfer agent, Computershare Trust Company of Canada (“Computershare”) will receive a T5 slip directly from Computershare.  Beneficial owners will receive a T5 slip from their broker, investment dealer, financial institution, or other nominee as applicable.
  • Canadian resident individual shareholders who hold their ARC Resources common shares in a Registered Retirement Savings Plan (“RRSP”), Registered Pension Plan (“RPP”), Registered Retirement Income Fund (“RRIF”), Registered Education Savings Plan (“RESP”), Deferred Profit Sharing Plan (“DPSP”), Tax Free Savings Account (“TFSA”) or any other such registered plans need not report any income related to cash dividends on their income tax return.
Dividend Reinvestment Plan - Eliminated
  • All of the tax items noted under “Cash Dividends” also apply to Canadian resident individual shareholders who participate in the DRIP.  
  • The cash dividend is subsequently reinvested under the DRIP resulting in the shareholders acquiring new ARC Resources shares.  The cost of the new shares acquired under the DRIP is equal to the amount of the dividend.  The cost of the new shares acquired under the DRIP will generally be averaged with the adjusted cost base of all other ARC Resources shares held at that time (other than those held in a registered plan noted under “Cash Dividends”) for the purposes of determining the adjusted cost base of each share to the Canadian resident individual shareholder.
Stock Dividend Program - Eliminated
  • The amount of a stock dividend included in computing the income of a Canadian resident individual shareholder is equal to the amount that ARC Resources adds to its stated capital in respect of the shares that are issued in satisfaction of the dividend.  As ARC Resources intends to add only a nominal amount to its stated capital, the amount of the dividend included in computing the income of a Canadian resident individual shareholder is expected to be nominal.
  • The cost of the new shares acquired under the SDP is equal to the amount of the stock dividend.  The cost of the new shares acquired under the SDP will generally be averaged with the adjusted cost base of all other ARC Resources shares held at that time (other than those held in a registered plan noted under “Cash Dividends”) for the purposes of determining the adjusted cost base of each share to the Canadian resident individual shareholder.  Since the cost of the new shares acquired under the SDP is expected to be nominal, the receipt of shares as stock dividends may increase a capital gain (or decrease a capital loss) realized on a subsequent disposition of ARC Resources shares.
  • In general, the Canadian tax consequences associated with the SDP could be described as tax deferred, as a tax event occurs when the shares are sold rather than when the dividend is received.

Historical Tax Data For ARC Energy Trust Cash Distributions

Year Return on Capital (CDN$) Per Cent Income CDN$ (Taxable) Per Cent Total Cash Distributions (CDN$)
2010 0.1800 15 1.0200 85 1.20
2009 0.0384 3 1.2416 97 1.28
2008 0.0534 2 2.6166 98 2.67
2007 0.0720 3 2.3280 97 2.40
2006 0.0520 2 2.5480 98 2.60
2005 0.0388 2 1.9012 98 1.94
2004 0.1080 6 1.6920 94 1.80
2003 0.2670 15 1.5130 85 1.78
2002 0.5056 32 1.0744 68 1.58
2001 0.7712 32 1.6388 68 2.41
2000 1.0230 55 0.8370 45 1.86
1999 0.9900 79 0.2600 21 1.25
1998 1.0800 90 0.1200 10 1.20
1997 1.0890 78 0.3110 22 1.40
1996 0.8100 100 - - 0.81

US Tax Information

ARC Dividend Programs

Elimination of the Dividend Reinvestment Plan ("DRIP") and Stock Dividend Program ("SDP") was effective for the March 2017 dividend payable on April 17, 2017 to shareholders of record on March 31, 2017. The ex-dividend date was March 29, 2017. Shareholders that were enrolled in either program will automatically receive dividend payments in the form of cash.

Prior to elimination of the DRIP and SDP, shareholders were able to receive dividend payments in cash or reinvest their cash dividends into additional common shares of ARC pursuant to the DRIP.  Alternatively, shareholders could elect to receive common shares of ARC in lieu of cash dividends pursuant to the SDP.

Shareholders are advised to consult their tax advisors regarding questions relating to the tax treatment of ARC Resources dividends and the computation of the adjusted cost base of their investment.

US Individual Shareholders

The following outlines the general tax considerations that are expected to apply for a US individual shareholder.

This summary is of a general nature only and is not intended to be nor should it be construed to be tax advice to any particular shareholder.  Shareholders are encouraged to consult their own tax advisors regarding the tax consequences to them of receiving cash or stock dividends.

Cash Dividends
  • The amount of any cash dividends will be included in computing income in the taxation year in which the cash dividend is received.  ARC Resources does not anticipate any portion of the dividend to be a non-taxable return of capital.  
  • ARC Resources anticipates that its dividends paid to US individual investors will be considered “qualified dividends” from a qualified foreign corporation, eligible for the reduced US federal tax rate applicable to long-term capital gains (being either 0%, 15% or 20%, depending on tax bracket of each shareholder) provided the US individual shareholder satisfies the required holding period.   Effective January 1, 2017, the tax rate on “qualified dividends” will apply for taxpayers with taxable income in excess of $470,700 for joint filers and $418,400 for single filers. These thresholds are indexed annually for inflation. Since January 1, 2013, there is an additional 3.8% tax applicable to the net investment income of US individual investors whose adjusted gross income for US tax income purposes is in excess of $250,000 for joint filers and $200,000 for single filers.
  • US shareholders who are non-residents of Canada and hold their common shares of ARC Resources in a taxable US account will to be subject to Canadian withholding tax. The withholding tax rate is 25%; however, the Canada – US Income Tax Treaty generally reduces the withholding rate on dividends to 15%.  In order to be entitled for the reduced withholding tax, a US individual shareholder must provide Form NR301 – “Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer” or the equivalent information to the transfer agent, Computershare Trust Company of Canada (“Computershare”) if they are a registered shareholder or to their broker, investment dealer, financial institution, or other nominee as applicable if they are a beneficial shareholder.
  • The Canadian withholding tax should be creditable, subject to numerous limitations, for US income tax purposes in the year in which the withholding taxes are withheld.
  • Canadian withholding tax should not apply to dividends with respect to US shareholders that hold their common shares of ARC Resources in a registered tax-deferred investment account such as an IRA or 401K.
  • US shareholders who are registered shareholders should receive an NR4 – Statement of Amounts Paid or Credited to Non-Residents of Canada (“NR4 slip”) on or before the end of March following the year in which dividends are paid from the transfer agent, Computershare Trust Company of Canada (“Computershare”).  The NR4 slip will outline the amount of dividends paid in the calendar year and the amount of Canadian tax withheld. These amounts will be in Canadian dollars and will need to be converted to US dollars at the appropriate exchange rate.
  • US shareholders who are beneficial shareholders and hold their shares through a broker, investment dealer, financial institution, or other nominee that is resident in Canada should receive an NR4 slip on or before the end of March following the year in which dividends are paid from the respective intermediary.  The NR4 slip will outline the amount of dividends paid in the calendar year and the amount of Canadian tax withheld. These amounts will be in Canadian dollars and will need to be converted to US dollars at the appropriate exchange rate.
  • US shareholders who are beneficial shareholders and hold their shares through a broker, investment dealer, financial institution, or other nominee that is not resident in Canada (e.g. a US-based brokerage) should receive a Form 1099-DIV Dividends and Distributions (“Form 1099-DIV”) from the respective intermediary.  The Form 1099-DIV will outline the amount of the dividends paid in the calendar year and the amount of foreign taxes paid.  The amounts will be in US dollars and will not need to be converted. 
Dividend Reinvestment Plan - Eliminated
  • US citizens and US residents are not eligible to participate in the DRIP.
Stock Dividend Program - Eliminated
  • The amount of the stock dividend for Canadian withholding tax purposes differs from the amount of the stock dividend received for US tax purposes.
  • For Canadian tax purposes, the amount of a stock dividend is equal to the amount that ARC Resources adds to its stated capital in respect of the shares that are issued in satisfaction of the dividend.  As ARC Resources intends to add only a nominal amount to its stated capital, the amount of the dividend is expected to be nominal.  As a result,  Canadian withholding tax is not applicable to the stock dividend and no NR4 slip will be issued.
  • For US tax purposes, the amount of the stock dividend is generally taxable in the year received for US shareholders who do not hold their investment through a registered tax-deferred investment account such as an IRA or 401K.  As ARC Resources does not anticipate any portion of the dividend to be a non-taxable return of capital, the amount of the dividend included in computing income will be determined by the value of the shares received in satisfaction of the dividend.  The US tax basis of the shares received should equal the value of the dividend including in computing income.
  • ARC Resources anticipates that any stock dividends paid to U.S. individual investors will be considered “qualified dividends”, eligible for the reduced tax rate applicable to long-term capital gains (see additional details regarding tax rates noted under “Cash Dividends”).

Summary

Record Date Distribution Payment Date Dist. Paid CDN$ Exchange Rate Dist. Paid US$ Taxable Qualified Dividend US$ Non-Taxable Return of Capital US$
31/12/2009 15/01/2010 $0.10 0.9721 $0.097210 $0.073685 $0.023525
29/01/2010 15/02/2010 $0.10 0.9542 $0.095420 $0.072328 $0.023092
26/02/2010 15/03/2010 $0.10 0.9788 $0.097880 $0.074193 $0.023687
31/03/2010 15/04/2010 $0.10 0.9986 $0.099860 $0.075694 $0.024166
30/04/2010 17/05/2010 $0.10 0.9611 $0.096110 $0.072851 $0.023259
31/05/2010 15/06/2010 $0.10 0.9720 $0.097200 $0.073678 $0.023522
30/06/2010 15/07/2010 $0.10 0.9613 $0.096130 $0.072867 $0.023263
30/07/2010 16/08/2010 $0.10 0.9586 $0.095860 $0.072662 $0.023198
31/08/2010 15/09/2010 $0.10 0.9726 $0.097260 $0.073723 $0.023537
30/09/2010 15/10/2010 $0.10 0.9893 $0.098930 $0.074989 $0.023941
29/10/2010 15/11/2010 $0.10 0.9935 $0.099350 $0.075307 $0.024043
30/11/2010 15/12/2010 $0.10 0.9965 $0.099650 $0.075535 $0.024115
Total Per Unit - $1.20 - $1.170860 $0.887512 $0.283348

Other Foreign Tax Information

ARC Dividend Programs

Elimination of the Dividend Reinvestment Plan ("DRIP") and Stock Dividend Program ("SDP") was effective for the March 2017 dividend payable on April 17, 2017 to shareholders of record on March 31, 2017. The ex-dividend date was March 29, 2017. Shareholders that were enrolled in either program will automatically receive dividend payments in the form of cash.

Prior to elimination of the DRIP and SDP, shareholders were able to receive dividend payments in cash or reinvest their cash dividends into additional common shares of ARC pursuant to the DRIP.  Alternatively, shareholders could elect to receive common shares of ARC in lieu of cash dividends pursuant to the SDP.

Shareholders are advised to consult their tax advisors regarding questions relating to the tax treatment of ARC Resources dividends and the computation of the adjusted cost base of their investment.

Other Foreign Individual Shareholders

The following outlines the general tax considerations that are expected to apply for individual shareholders who are not residents of Canada and are neither citizens nor residents of the US. This summary is of a general nature only and is not intended to be nor should it be construed to be tax advice to any particular shareholder.  Shareholders are encouraged to consult their own tax advisors regarding the tax consequences to them of receiving cash or stock dividends.

Cash Dividends
  • Cash dividends paid to non-residents of Canada are subject to Canadian withholding tax. The withholding tax rate is 25%; however, this rate may be reduced if the recipient is resident in a country with   which Canada has a tax treaty and provided the recipient is eligible for benefits under that tax treaty. 
  • In order to be entitled for a reduced withholding tax, a non-resident individual of Canada must provide Form NR301 – “Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer” or the equivalent information to the transfer agent, Computershare Trust Company of Canada (“Computershare”) if they are registered shareholder or to their broker, investment dealer, financial institution, or other nominee as applicable if they are a beneficial shareholder.
  • Non-resident shareholders who are registered shareholders should receive an NR4 – Statement of Amounts Paid or Credited to Non-Residents of Canada (“NR4 slip”) on or before the end of March following the year in which dividends are paid from the transfer agent, Computershare Trust Company of Canada (“Computershare”).  The NR4 slip will outline the amount of dividends paid in the calendar year and the amount of Canadian tax withheld. These amounts will be in Canadian dollars.
  • Non-resident shareholders who are beneficial shareholders and hold their shares through a broker, investment dealer, financial institution, or other nominee that is resident in Canada should receive an NR4 slip on or before the end of March following the year in which dividends are paid from the respective intermediary.  The NR4 slip will outline the amount of dividends paid in the calendar year and the amount of Canadian tax withheld. These amounts will be in Canadian dollars.
  • Non-resident shareholders are encouraged to consult their own tax advisors regarding the appropriate treatment of dividends based on their own facts and circumstances.
Dividend Reinvestment Plan - Eliminated
  • All of the tax items noted under “Cash Dividends” also apply to foreign individual shareholders who participate in the DRIP.
Stock Dividend Program - Eliminated
  • The amount of the stock dividend for Canadian withholding tax purposes may differ from the amount of the stock dividend received for foreign tax purposes.  
  • For Canadian tax purposes, the amount of a stock dividend is equal to the amount that ARC Resources adds to its stated capital in respect of the shares that are issued in satisfaction of the dividend.  As ARC Resources intends to add only a nominal amount to its stated capital, the amount of the dividend is expected to be nominal.  As a result, Canadian withholding tax is not applicable to the stock dividend and no NR4 slip will be issued.  
  • Non-resident shareholders are encouraged to consult their own tax advisors regarding the appropriate treatment of dividends based on their own facts and circumstances.