Dividend – Return of Capital Tax Information

U.S. Internal Revenue Code §6045B Tax Reporting

Issuers of corporate stock must report corporate actions that affect stock basis, including but not limited to common stock distributions paid in excess of "earnings and profits", as defined by the U.S. Internal Revenue Code.

Additionally, nondividend distributions characterized as “return of capital” require Kodiak Gas Services, Inc. (“KGS”) to post on its website Form 8937 reflecting the impact on shareholders’ tax basis for each distribution made. By posting this information, KGS intends to satisfy the requirements of public disclosure pursuant to Treasury Regulation § 1.6045B-1(a)(3) and (b)(4). Whether any portion of a distribution is a return of capital depends on KGS’s estimate of earnings and profits for the full year.

The information contained herein is based on reasonable assumptions at the time of posting. These estimates are updated throughout the year and are typically finalized in December for the calendar year. KGS cannot assure that periodic updates to these estimates will provide an approximation of the final return of capital amounts at year-end.

2024 KGS DividendsForm 8937 – Dividends Paid in 2024 (Preliminary)

2023 KGS DividendsForm 8937 – Dividends Paid in 2023 

Frequently Asked Questions (FAQs)

WHAT IS EARNINGS & PROFITS?

Earnings & Profits (E&P) is an economic concept of a corporation’s ability to pay dividends without distributing any of the capital contributed by either its shareholders or its creditors. E&P is increased through earnings and decreased through losses and dividend payments to shareholders. The statutory provisions of Internal Revenue Code Section 312, and the related regulations, address the computation of E&P.

If the current year’s E&P are sufficient to cover all dividend payments made during the year, each payment is a taxable qualified dividend. If the year’s cash distributions exceed current and accumulated E&P, the portion of the payment not covered by E&P is generally a non-taxable return of capital which reduces a shareholders cost basis.

WHAT IS A RETURN OF CAPITAL?

A return of capital is a payment in excess of an entity’s current and accumulated E&P. It is generally a non-taxable distribution that reduces a shareholder’s cost basis of shares held. The amount of return of capital will be reported in Box 3 of 1099-DIV annually.

HOW IS RETURN OF CAPITAL TREATED FOR U.S. FEDERAL AND STATE INCOME TAX PURPOSES?

A return of capital payment is not taxable, but rather used to reduce the shareholder’s tax basis in KGS shares. Once the tax basis is exhausted, the return of capital portion of the distribution is treated as a capital gain. Generally, state law conforms to Federal law regarding the treatment of return of capital. Investors are strongly urged to consult with their own tax advisor as to their specific tax consequences.

DO I NEED TO FILE ANY ADDITIONAL DOCUMENTATION AS A RESULT OF THE RETURN OF CAPITAL?

No. However, the return of capital payment will reduce the shareholder’s tax basis. It is the responsibility of the shareholder, or their individual broker or agent, to maintain their tax basis.

HOW DO I CALCULATE THE CHANGE IN TAX BASIS RESULTING FROM THE RECEIPT OF RETURN OF CAPITAL?

KGS is required to make IRS Form 8937 publicly available for each distribution that affects shareholder basis within 45 days of the dividend payment date. This form will provide details on the expected changes in the tax basis of the shares. The final determination of the tax treatment of annual dividends vs. return of capital is reported to shareholders on Form 1099-DIV.

WHERE CAN I FIND FURTHER INFORMATION REGARDING THE INCOME TAX TREATMENT OF DIVIDENDS AND RETURN OF CAPITAL?

Please reference IRS Publication 550, Investment Income and Expenses.

DISCLAIMER: The information provided on Form 8937 and contained in the above investor information is for general purposes only, does not contain a complete analysis or description of all potential U.S. Federal, State, Local and Non-U.S. tax consequences and should not be considered legal or tax advice. Each investor is strongly urged to consult with their own tax advisor.

Forward-Looking Statement:

The Form 8937, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.  Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding estimated annual financial position.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. A list and description of risks, uncertainties and other factors can be found in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the SEC on March 25, 2024 and in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2024 and filed with the SEC on May 9, 2024.

Any forward-looking statement made by us is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future developments or otherwise.