Premise: these unit trusts do not pay corporate income tax and the Canadian gov't reckons it loses US$500m/yr+ on missed revenue.
Scenario A:
I know that there have been discrepancies between how the dividend is split between return of capital and capital gain in the US and Canada. I know that at least one trust would like to have the same dividend paid in Canada to have a higher ROC than the dividend paid in the US, making the NYSE unit investor hold a less attractive stock.
Scenario B:
The other option is tax treatment. If Canada taxation withholds foreign dividends at source at 25% and the IRS only requires 15% and the only dividend the US investor is receiving is Canadian trust income, then there is no refund for dividend overpayment. In essence the US investor overpays the dividend. As far as I know, there is no mechanism (even though there is a tax treaty) for a US investor to collect an overpayment of dividend income tax to Canadian authorities.
So, on paper, the dividend pays the same in all classes of stock but in reality US holders get a lower NET dividend.
Remember, these trusts are not paying corporate taxes (hence the high yield) so the Canadian authorities don't mind taxing Canadian holders 25% on their dividends and they don't want US holders to only pay 15%. The Canadian authorities and trust management would love to have the class of stock for US investors be subject to higher taxes to make the security less attractive thus helping the trusts keep below foreign ownership caps.
I don't think Scenario B could necessarily lead to a discount because a US investor would be taxed 25% whether the Canadian unit or US unit was held BUT in Scenario A a different classification of return to US units (ie 100% dividends vs Canadian unit holders getting, say 60% dividends) could, I think, impact NET dividends enough for them to trade at a discount. Therefore, if they could, US investors would want to hold the Canadian units over the US ones, and US units would trade at a lower price AND have a lower NET yield.
I don't know what they will do, but be assured, they want to do something.
PenGrowth's AGM had votes of 95% to create two classes of stock:
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