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Dividends are good. Not paying taxes on them is better. Getting them outside an RRSP and still not paying any taxes on them? Best.

You might have thought that impossible. But a growing batch of Alberta energy companies think they've found a way to perform this feat for their shareholders. Over the past couple of years, they've replaced their traditional dividend-reinvestment plans, or DRIPs, with what they call stock dividend programs. With these SDPs, the companies say, dividends received in the form of shares don't count as income under Canada's Tax Act.

Instead, the dividend shares come with a cost basis of nearly zero, meaning shareholders only pay tax if and when they sell the shares. When they do, they pay tax at capital-gains rates, not as if it were ordinary income.

So, technically, the dividends are tax-deferred, rather than tax-free. But wealthy investors will tell you there's plenty of money to be made in postponing taxes for as long as you can.

Husky Energy introduced an SDP to its shareholders in February, 2011; Bonavista and Enerplus followed in May of last year. PetroBakken got shareholder approval for its plan in December.

Expect more companies to follow, says AltaCorp Capital managing director Dirk Lever. "Discussions with a number of management teams indicate this … is being quickly adopted."

Alas, it seems the phenomenon may be limited to Alberta-domiciled dividend-payers, thanks to a quirk in the province's law.

First, understand that a company's "stated capital" for its common shares (sometimes called "par value") is often a tiny amount, like one cent, and bears no relation to the market value.

As Enerplus explained in its prospectus to shareholders, the Alberta Business Corporations Act allows a company's board of directors to add any amount (up to the fair market value of the shares issued) to the stated capital of shares issued in payment of a stock dividend. That added amount is what's included in the shareholder's taxable income.

As it happens, that discretion also allows the board to add very little at all to the shares — and to the shareholder's taxable income.

"It is anticipated," Enerplus said last May, "that the Board of Directors will add only a nominal amount to the stated capital of the common shares when [they] are issued as payment of a stock dividend. Therefore, it is expected … the amount of such stock dividend for the purposes of computing a Canadian [shareholder's] income under the Tax Act will be nominal. As a result, it is expected that Canadian [shareholders] will have no material amounts to include in computing their income for the purposes of the Tax Act as a result of receiving a stock dividend."

Well played, sirs, well played.

The key question, however, is what the Canada Revenue Agency thinks of all this, considering there doesn't seem to be much substantive economic difference between a DRIP – in which shareholders get tagged with normal dividend taxes – and an SDP, aside from all that deferred tax revenue.

Enerplus, as appropriate, warns shareholders in its proxy that "there is no assurance that the Canada Revenue Agency or other applicable taxation authorities will not disagree with or challenge [our] description of the tax treatment to a [shareholder] who receives stock dividends pursuant to the Stock Dividend Program."

Asked vie e-mail whether the company sought CRA's guidance, Enerplus chief financial officer Robert Waters said: "Both our Canadian and U.S. lawyers were comfortable we were in compliance with tax legislation and there was no reason to seek CRA 'approval.'"

Husky Energy, whose shareholders would have filed tax returns in April, 2012, under this plan, says it is unaware of any challenges by the CRA.

For its part, Canada Revenue Agency spokesman Philippe Brideau said: "We have not recently reviewed a plan similar to the ones you describe. A corporation considering such a plan could obtain certainty as to its tax treatment by requesting an advance income tax ruling from the CRA."

If the arrangement passes muster? Perhaps other provinces without similar language in their corporations acts will rush to change their laws so Alberta companies don't have all the fun. That would spread SDPs across Canada — and for many investors, make dividend taxes a thing of the past. Or, really, the distant future, which is just as good.

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