For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
Sept. 22 — The IRS isn't likely to change its proposed master limited partnership rules' 10-year sunset provision for entities that no longer have 90 percent of their income from qualifying sources, Timothy Fenn, a partner at Latham & Watkins LLP, said.
“They seem to love the 10-year rule,” Fenn said Sept. 22 at a Bloomberg BNA and Mayer Brown LLP energy tax conference in Houston.
An Internal Revenue Service official said Sept. 18 he would “not be surprised” if the 10-year transition period were to be retained when the proposed regulations (REG-132634-14) are finalized. The IRS has said issuing final rules under tax code Section 7704(d)(1)(e) is a priority for the 2015-16 year (182 DTR G-9, 9/21/15).
“The IRS is looking at it that 10 years is a long time. Investors feel somewhat differently,” said Greg Matlock, the U.S. MLP leader at EY LLP.
The proposed rules scale back the income-generating activities that qualify for the tax-advantaged structure, especially those tied to chemical and timber processing. The IRS restricted the structure in 1987 and allowed a grandfathering provision for MLPs that had rulings from the IRS. Matlock said IRS officials have told him they have carefully considered the transition period.
The lack of a provision that would allow MLPs with private letter rulings to maintain their status is especially harmful to companies with rulings that haven't yet had an initial public offering, but have started to invest in facilities, Fenn said.
“It's ridiculous to think that investors in year eight would go give you money in an equity offering knowing you were only going to be around for two years,” he said. “That's not the way the world works. It's not 10 free years and then the world turns black the next day. There is an effect today and there will be a continued effect.”
MLPs that no longer qualify at the end of the transition period could go private or convert to a C corporation. MLPs should be conscious of converting their investors units to corporate shares, Matlock said.
To contact the reporter on this story: Laura Davison in Houston at email@example.com
To contact the editor responsible for this story: Brett Ferguson at firstname.lastname@example.org
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)