CALGARY, ALBERTA–(Marketwired – June 22, 2016) – Baytex Energy Corp. (“Baytex”) (TSX:BTE)(NYSE:BTE) announces that certain of its indirect subsidiary entities have received reassessments from the Canada Revenue Agency (the “CRA”) that deny non-capital loss deductions relevant to the calculation of income taxes for the years 2011 through 2015. These reassessments follow the previously disclosed letter from the CRA, received by Baytex in November 2014, proposing to issue such reassessments.
Baytex remains confident that the tax filings of the affected entities are correct and will vigorously defend their tax filing position. The reassessments do not require Baytex to pay any amounts in order to participate in the appeals process.
Baytex will file a notice of objection for each notice of reassessment received. These notices of objection will be reviewed by the Appeals Division of the CRA, a process that we estimate could take up to 2 years. If the Appeals Division upholds the notices of reassessment, Baytex has the right to appeal to the Tax Court of Canada; a process that we estimate could take a further 2 years. Should we be unsuccessful at the Tax Court of Canada, additional appeals are available; a process that we estimate could take another 2 years and potentially longer.
By way of background, Baytex acquired several privately held commercial trusts in 2010 with accumulated non-capital losses of $591 million (the “Losses”). The Losses were subsequently used to reduce the taxable income of those trusts by $591 million. The reassessments disallow the deduction of the Losses under the general anti-avoidance rule of the Income Tax Act (Canada). If the deduction of Losses continues to be disallowed, Baytex estimates that it ultimately would owe approximately $120 million for taxes and an additional amount for late payment interest (currently estimated at $14 million).