In the past, CIRI was able to use careful tax planning to minimize taxation of shareholder dividends, meaning most distributions to shareholders were tax-free. CIRI used up its tax loss carryovers and shareholder distributions became taxable in 2001. Because CIRI began paying corporate income taxes in 2002, the net effect was double taxation. This means CIRI pays tax on its profits, while shareholders pay taxes on their dividends paid from the remaining profits.

The CIRI Board and management examined many creative ideas with the goal of being able to once again make tax-advantaged distributions to shareholders. As previously reported to shareholders, in addition to requesting a private letter ruling from the Internal Revenue Service (IRS) confirming the tax treatment to be afforded the proposed Elders’ Settlement Trust, CIRI also requested that the IRS confirm the tax treatment to be afforded to a proposed shareholder distribution trust. At the time, it appeared that implementation of a settlement trust for the purpose of paying shareholder distributions might be a more tax-efficient way of delivering payments to shareholders than paying corporate dividends.

In the past, CIRI was able to use careful tax planning to minimize taxation of shareholder dividends, meaning most distributions to shareholders were tax-free. CIRI used up its tax loss carryovers and shareholder distributions became taxable in 2001. Because CIRI began paying corporate income taxes in 2002, the net effect was double taxation. This means CIRI pays tax on its profits, while shareholders pay taxes on their dividends paid from the remaining profits.

The CIRI Board and management examined many creative ideas with the goal of being able to once again make tax-advantaged distributions to shareholders. As previously reported to shareholders, in addition to requesting a private letter ruling from the Internal Revenue Service (IRS) confirming the tax treatment to be afforded the proposed Elders’ Settlement Trust, CIRI also requested that the IRS confirm the tax treatment to be afforded to a proposed shareholder distribution trust. At the time, it appeared that implementation of a settlement trust for the purpose of paying shareholder distributions might be a more tax-efficient way of delivering payments to shareholders than paying corporate dividends.