Posted on 04/09/2014 10:31:03 AM PDT by thackney
The Internal Revenue Service has temporarily stopped issuing private letter rulings (PLRs) that energy companies sometimes request when setting up master limited partnerships for their tax benefits.
Lawyers specializing in the oil and gas sector have said the IRS wants to review the scope of assets that can qualify as tax-free for master limited partnerships (MLPs), which have lured hundreds of billions of dollars from investors seeking high yields.
"There has been a pause," IRS Commissioner John Koskinen told reporters on Tuesday at a congressional hearing. He did not say how long the delay would last.
"(The pause) is to try to make sure the letter rulings are all consistent and to try to see if there is a way to give broader guidance to the industry."
The IRS is undertaking the review "given the proliferation of publicly traded partnerships and changes in the industries in which they tend to operate," the agency said in a statement.
Failing the qualifying test and having a PLR request rejected means companies must pay taxes like corporations.
On Monday, in a sign that some transactions might be delayed, SandRidge Energy Inc said an MLP it had considered setting up for its water disposal...
The MLP world has grown dramatically over the past 10 years, surging from investments of just $2 billion in 1994 to $445 billion now. Last year the tax agency issued 28 private letter rulings and so far this year there have been only five, according to Wells Fargo.
Cash-generating pipeline companies have traditionally used the structure, but now a range of companies are setting up MLPs and their complexity is growing, analysts say.
Energy companies form the MLPs because they are not taxed at the federal level, lowering their cost of capital and allowing them to invest more in infrastructure.
(Excerpt) Read more at rigzone.com ...
Investment funds will seek the lower tax exposure, and won’t wait to see what happens, or buy a pig in a poke.
More incentive to organize offshore.
Translation: This is not working according to our clean energy environmental focus so we are going to put a halt to it till we figure out a way to tax or regulate to death.
They must have said they were going to use conservative accounting practices...
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