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CRA Income Tax Update
As anticipated in Superior's previous disclosure, Superior received on April 2, 2013 from the CRA Notices of Reassessment for Superior's 2009 and 2010 taxation years reflecting the CRA's intent to challenge the tax consequences of Superior's corporate conversion transaction (Conversion) which occurred on December 31, 2008. The CRA's position is based on the acquisition of control rules, in addition to the general anti-avoidance rules in the Income Tax Act (Canada). The table below summarizes Superior's estimated tax liabilities and payment requirements associated with the received and anticipated Notices of Reassessment.
---------------------------------------------------------------------------- Taxes Payable 50% of the Taxes Taxation Year (1)(2) Payable (1)(2) Payment Dates---------------------------------------------------------------------------- 2009/2010 $13.0 $6.5 Paid in April 2013 2011 $10.0 (3) $5.0 Q2 2013 2012 $10.0 (3) $5.0 Q3 2013 2013 $20.0 (3) $10.0 Q3 2014---------------------------------------------------------------------------- Total $53.0 $26.5--------------------------------------------------------------------------------------------------------------------------------------------------------(1) In millions of dollars(2) Includes estimated interest and penalties.(3) Estimated based on Superior's previously filed tax returns and the midpoint of Superior's 2013 outlook.
Superior has 90 days from the initial Notice of Reassessment to prepare and file a Notice of Objection which would be reviewed by the CRA's appeals division. Superior anticipates filing a Notice of Objection in the next 30 days. After 90 days if the CRA has not responded or settled the Notice of Objection with Superior, then an application can be made to the Tax Court of Canada. Superior anticipates that if the application proceeds in the Tax Court of Canada a decision could be rendered by the end of fiscal 2014. If a decision of the Tax Court of Canada were to be appealed, the appeal process could reasonably be expected to take an additional 2 years. If Superior receives a positive decision then any taxes, interest and penalties paid to the CRA will be refunded plus interest and if Superior is unsuccessful then any remaining taxes payable plus interest and penalties will have to be remitted.
Superior remains confident in the appropriateness of its tax filing position and the expected tax consequences of the Conversion and intends to vigorously defend such position and intends to file its future tax returns on a basis consistent with its view of the outcome of the Conversion.
Superior's 2013 financial outlook includes the impact of the reassessment although the interim tax payments made by Superior will be recorded to the balance sheet and will not impact either adjusted operating cash flow or net earnings.
Based on the midpoint of Superior's current 2013 financial outlook of adjusted operating cash flow per share of $1.70, if the tax pools from the Conversion were not available to Superior, the impact would be an increase to cash income taxes of approximately $0.15 per share for 2013. As previously stated, Superior intends to file its future income tax returns on a basis consistent with its view of the outcome of the Conversion.
