Spin It, Baby, Spin It (Gwen Moritz Editor's Note)

by Gwen Moritz  on Monday, Aug. 12, 2013 12:00 am  

The all-time champion in the category of making lemonade came from Windstream Corp. last month. The telecom, headquartered in Little Rock, announced that stockholders who had claimed Windstream’s vaunted $1-per-share dividend as taxable income in 2012 might be able to get a tax refund.

Suddenly, two-thirds (66.417 percent) of the payout to shareholders was non-taxable income. I haven’t heard a good explanation for why Windstream made this “change in the tax treatment” of the dividends, but I know this: When a company pays out part of its profit to shareholders as dividends, that income is taxable. If a shareholder receives money from the company that isn’t taxable, then it isn’t a dividend in the traditional sense of the word.

Sure enough, if one digs around on Windstream’s website, one finds this sentence in the “important tax information” about the revised tax treatment: “Non-dividend distributions are considered a return of capital and are generally not taxable; however, the recipient must adjust their cost basis to reflect the distribution.”

When is a dividend not a dividend? When you are getting back your own money rather than profit.

I don’t blame public companies, or anyone else, for accentuating the positive. Cutting through the spin keeps people like me employed year after year.

Gwen Moritz has been editor of Arkansas Business since Aug. 2, 1999. Email her at GMoritz@ABPG.com.



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