Frequently Asked Tax Questions for Spectra Energy Corp (“Spectra Energy”) Stockholders



This Tax Q&A does not address tax consequences that may vary with, or are contingent on, individual circumstances. You should consult your own tax advisors concerning the tax consequences of the merger and the ownership of Enbridge common shares in the context of your particular circumstances. This Q&A only addresses U.S. and Canadian federal income taxes but does not address other taxes or income taxes arising in non-federal jurisdictions.

For this Q&A the responses have been excerpted, in part, from the F-4 Proxy Statement/Prospectus filed with the U.S. Securities & Exchange Commission in connection with this matter. For more detail and a complete version of the F-4 Proxy Statement please click here.

For purposes of this Q&A, the term “U.S. holder” generally means a beneficial owner of Spectra Energy common stock or of Enbridge common shares after the merger that is, for United States federal income tax purposes, an individual who is a citizen or resident of the United States; a corporation created or organized in the United States; an estate the income of which is subject to United States federal income tax regardless of its source; or a trust (a) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person for United States federal income tax purposes.

1. What are the federal income tax consequences of this transaction?

The tax consequences of this transaction depend on the tax laws of the country in which the stockholder is resident for tax purposes, as well as their particular circumstances.  Spectra Energy stockholders should consult their own tax advisors to confirm the tax consequences of the transaction.

2. I am a U.S holder, is the merger a taxable transaction to me for U.S. federal income tax purposes?

It is intended that, for United States federal income tax purposes, the merger will qualify as a “reorganization” as set out in the Internal Revenue Code (“the Code”).  Assuming the merger qualifies for the intended tax treatment, a U.S. holder receiving Enbridge common shares in exchange for Spectra Energy  common stock pursuant to the merger will not recognize any gain or loss, except for any gain or loss that may result from the receipt by such U.S. holder of cash in lieu of fractional Enbridge common shares.

A U.S. holder of Spectra Energy common stock who receives cash in lieu of a fractional Enbridge common share pursuant to the merger generally will be treated as having received such fractional share in the merger and then as having received cash in redemption of such fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and the portion of the U.S. holder’s aggregate tax basis in the Spectra Energy common stock surrendered which is allocable to the fractional share.

3. Will there be Canadian withholding tax on the dividends paid to U.S. holders by Enbridge? What is the Canadian withholding tax rate?

Dividends paid or credited, or deemed to be paid or credited, on Enbridge common shares to a Non-Canadian resident stockholder generally will be subject to Canadian withholding tax at a rate of 25% of the gross amount of the dividend, unless the rate is reduced under the provisions of an applicable income tax convention between Canada and the Non-Canadian resident stockholder’s jurisdiction of residence. The rate of withholding tax under the Canada-United States Income Tax Convention (1980), as amended (which we refer to as the “Treaty”) applicable to a Non-Canadian resident Holder who is a resident of the United States for the purposes of the Treaty, is the beneficial owner of the dividend and is entitled to all of the benefits under the Treaty, generally will be 15%. Enbridge will be required to withhold the required amount of withholding tax from the dividend, and to remit it to the Canada Revenue Agency (“CRA”) for the account of the Non-Canadian resident stockholder.

U.S. holders that are charitable organizations or arrangements to administer or provide pension, retirement or employee benefits and which are entitled to benefits under the Treaty may be eligible for an exemption from Canadian tax with respect to Enbridge’s dividends.

4. What is the U.S. federal tax consequence for U.S. holders with respect to the Canadian withholding taxes?

U.S. holders may be eligible to claim a credit or deduction against U.S. taxes with respect to Canadian non-resident withholding tax.  As each U.S. holder’s circumstance is different, each U.S. holder should consult their own tax advisors to confirm how the law applies to them.

5. Are Enbridge dividends “qualifying dividends” for the purposes of U.S. federal income tax laws?

Under the U.S. federal income tax laws, and subject to the passive foreign investment company, which we refer to as “PFIC,” if you are a U.S. holder, the gross amount of any dividend Enbridge pays out of its current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) is subject to U.S. federal income taxation. If you are a noncorporate U.S. holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains, provided that you hold the Enbridge common shares for more than 60 days during the 121 day period beginning 60 days before the ex-dividend date and meet other holding period requirements. Dividends Enbridge pays with respect to Enbridge common shares generally will be qualified dividend income.

The remaining Q&A relate specifically to Canadian resident Spectra Energy stockholders. Canadian stockholders are urged to consult their own tax advisors as soon as possible and take the appropriate actions without delay.

For this Q&A the responses have been excerpted, in part, from the F-4 Proxy Statement/Prospectus filed with the U.S. Securities & Exchange Commission in connection with this matter. For more detail and a complete version of the F-4 Proxy Statement please click here.

For the purposes of this Q&A, the term “Canadian Spectra Energy stockholder” refers to each holder of Spectra Energy common stock who is (i) a resident of Canada for the purposes of the income Tax Act (Canada) )the “Canadian Tax Act”) or (ii) a partnership, at least one partner of which is a resident of Canada for the purposes of the Canadian Tax Act.

6. I am a Canadian Spectra Energy stockholder, is the merger a taxable transaction to me for Canadian federal income tax purposes?

In the absence of making an income tax election as described below, yes, a Canadian Spectra Energy stockholder who disposes of Spectra Energy common stock for Enbridge common shares as outlined in the merger agreement will generally realize a capital gain (or capital loss) equal to the amount by which the fair market value (“FMV”) of the Enbridge common shares received (and any cash received in lieu of a fractional Enbridge common share) exceeds (or is less than) the adjusted cost base (“ACB”) of the Canadian Spectra Energy stockholder’s Spectra Energy common stock, determined immediately before the disposition and any reasonable costs of disposition.

However, a Canadian Spectra Energy stockholder can decide to defer all or part the capital gain (as defined in the Canadian Tax Act) by accepting the “Canadian Exchange Offer” as set out in the merger agreement. A Canadian Spectra Energy stockholder who accepts the Canadian Exchange Offer, and disposes of Spectra Energy common stock as consideration for Enbridge common shares per the “Canadian Share Purchase Agreement”, delivers the Spectra Energy shares to the exchange agent, and files a valid “Tax Election” under Section 85 of the Canadian Tax Act jointly with Enbridge, may defer wholly or in part, the recognition of any capital gain that might otherwise arise on the disposition, subject to the rules and restrictions in the Canadian Tax Act.

Canadian Spectra Energy stockholders should consult their own tax advisors without delay to help determine the best course of action for their particular circumstances.

7. I hold Spectra Energy common stock in a registered tax-deferred account. Should I file the Tax Election?

Since the only effect of the Tax Election under these circumstances is to defer the gain, if any, for Canadian income tax purposes there should be no need to file an election for your Spectra Energy common shares held in registered tax-deferred accounts, such as registered retirement savings plans, registered income funds, registered retirement income funds, registered education savings plans and tax-free savings accounts. However as each stockholder’s circumstance is different, we urge Canadian Spectra Energy stockholders to seek the advice from their own tax advisors as it relates to this matter.

8. What must I do in order to take advantage of the capital gain deferral for Canadian income tax purposes?

If Spectra Energy Canadian stockholders choose to take advantage of the capital gain deferral; the following three steps are necessary:

  1. Accept the Canadian Exchange Offer as set out in the merger agreement prior to the Closing Date.
  2. Deliver your “Spectra Energy Share Certificates” to the “Exchange Agent”, CST Trust Company, in accordance with the instructions in the transmittal letter.
  3. File a valid Tax Election under Section 85 of the Canadian Tax Act to elect with Enbridge to defer all or part of the capital gain. The Tax Election must have been properly completed, signed and sent to Enbridge within 60 days after the Closing Date. You will receive a copy of the executed Tax Election form once Enbridge has filed it with the Canada Revenue Agency (“CRA”) and provincial tax authorities and a copy will be mailed to you for your records. Please note, the deadline for filing the Tax Election was extended from April 28, 2017 (60 days after the Closing Date) to the end of the business day on May 29, 2017

It is recommended that all Canadian Spectra Energy stockholders who wish to defer all or a portion of a capital gain arising on this transaction for Canadian tax purposes give their immediate attention to this matter. Stockholders should seek the advice of their own tax advisors as to the tax consequences applicable to them.

The above-noted steps are also set out in the F-4 Proxy Statement/Prospectus.

9. How do I know how many Spectra Energy shares I own?

You can confirm the number of shares you own with your broker and or refer to your investment statement.

If you are unsure or do not have a current investment statement contact the Spectra Energy transfer agent, Broadridge Financial Solutions, Inc., at 1-855-277-3287 in order to obtain the number of shares you own.

10. How will I know that Enbridge has accepted the Enbridge Canadian Share Purchase Agreement?

A counter-signed copy of the Enbridge Canadian Share Purchase Agreement will be mailed to you, via first class priority mail, before the Closing Date.

11. Where do I deliver my Spectra Energy Share Certificates?

All Spectra Energy common stock share certificates registered in your name should be submitted to the Exchange Agent, CST Trust Company at the address noted below, in accordance with the instructions provided in, and on the terms and conditions of, the letter of transmittal to be used in connection with the merger. The transmittal letter will be sent to you after the Closing Date.

CST Trust Company
Attn: Corporate Actions
B1 Level, 320 Bay Street, Toronto, Ontario, Canada M5H 4A6

NOTE: Please consult your broker or other financial adviser if you do not currently hold your Spectra Energy common stock in physical certificated form. You may need to take additional steps to obtain physical Spectra Energy common stock share certificates to participate in the Canadian Exchange Offer. You should initiate this process early in order to meet the time limits imposed by the Canadian Exchange Offer.

Your broker or other financial adviser may need to contact Enbridge’s transfer agent at the following address:

CST Trust Company
Attn: Corporate Actions
320 Bay Street, Toronto, Ontario, Canada M5H 4A6
1-800-387-0825

12. How do I complete the Tax Election and where do I send it?

The Section 85 Election Assistant https://tax.ca/EnbridgeElection will be accessible the first business day following the Closing Date in order to facilitate the completion of the Tax Election. Stockholders are strongly encouraged to use the Section 85 Election Assistant rather than completing a paper copy.

If you have questions about using the Section 85 Election Assistant you can contact the Helpline. The Helpline will be open through the end of the business day on May 29, 2017. Once the Helpline is activated, you will be able to leave a voicemail with your name and number and you will receive a call back within 48 hours. The Helpline number is 1-844-638-0201. Do not leave any personal or tax sensitive information.

Once the Section 85 Election Assistant is activated, follow the instructions and print the form. Once printed, ensure you print your social insurance number (in the case of a stockholder that is an individual) on the printed copy. This is important as the web-tool will not allow you to key in your social insurance number. Once complete, sign and date the Tax Election and send one copy to the following address within 60 days of the Closing Date:

Enbridge Inc.
200, 425 1st Street S.W.
Calgary, Alberta, Canada T2P 3L8
Attention: Manager, Income Tax Compliance
Canadian Tax Election

NOTE: Enbridge has extended the Section 85 election deadline. All information necessary to complete the Section 85 election must be received by Enbridge on or before end-of-business on May 29, 2017. The Election Assistant and the Helpline are no longer available as the deadline has passed.

You are also referred to Information Circular 76-19R3 and Interpretation Bulletin IT-291R3 (archived) issued by the CRA for further information with respect to the Tax Election. The comments provided within this Q&A are intended to provide general assistance only. The tax law in this area is complex and contains numerous technical requirements. We advise you to consult your own tax advisors.

13. What is the deadline for delivering the Tax Election to Enbridge?

NOTE: Deadline extended to May 29, 2017. 

The Tax Election must be completed and sent to Enbridge within 60 days after the Closing Date. It cannot be completed prior to the Closing Date as certain information that is necessary in order to complete the Tax Election such as the FMV of the property being disposed of (Spectra Energy common stock) will not be known until that time.

Enbridge has agreed to sign and forward to the CRA and applicable provincial or territorial taxation authorities all properly completed Tax Elections that are received within 60 days of the Closing Date on or before the date that is 90 days after the Closing Date.

14. I completed, signed and sent the Canadian Share Purchase Agreement to Enbridge within the time limits; however I have changed my mind, and I will not file the Tax Election. What are the Canadian tax implications for me?

If you do not file the Tax Election jointly with Enbridge the transaction will be a taxable transaction for you. Canadian Spectra Energy stockholders will generally realize a capital gain (or capital loss) equal to the amount by which the FMV of the Enbridge common shares received (and any cash received in lieu of a fractional Enbridge common share) exceeds (or is less than) the ACB of the Spectra Energy common stock, determined immediately before the disposition and any reasonable costs of disposition.

15. I am a Canadian Spectra Energy stockholder and I did not accept the Canadian Exchange Offer by entering into the Canadian Share Purchase Agreement within the time limits. However, I did complete and send the Tax Election to Enbridge. What are the Canadian tax implications for me?

The transaction will be a taxable transaction for you and a tax deferral is not available because the Canadian Share Purchase Agreement for the exchange of Spectra Energy shares for Enbridge common shares (and any cash received in lieu of a fractional Enbridge common share) was not entered into with Enbridge prior to the Closing Date.

16. I completed, signed and sent the Canadian Share Purchase Agreement to Enbridge within the time limits; however I did not file the Tax Election with Enbridge prior to May 29th, 2017. What are the Canadian tax implications for me?

If you do not file the Tax Election jointly with Enbridge by the deadline the transaction will be a taxable transaction for you. Canadian Spectra Energy stockholders will generally realize a capital gain (or capital loss) equal to the amount by which the FMV of the Enbridge common shares received (and any cash received in lieu of a fractional Enbridge common share) exceeds (or is less than) the ACB of the Spectra Energy common stock, determined immediately before the disposition and any reasonable costs of disposition.

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