The MLPA has had a sizeable impact on federal and state tax policy toward MLPs since its origin in 1983. These include:
- 2015-2017: Worked successfully for important changes in the large partnership audit provisions enacted as part of the Bipartisan Budget Act of 2015. Obtained as part of an end-of-2015 omnibus tax and spending bill a technical correction clarifying that when an audit of a publicly traded partnership results in an adjustment and the MLP opts for the alternative of paying the added tax itself, the MLP may take its partners’ suspended passive losses under section 469(k) into account in calculating the imputed underpayment. During 2016 advocated for additional needed technical corrections, which were included in a technical corrections bill at the end of the 114th Congress. Is currently working for reintroduction and enactment of technical corrections in the 115th Congress.
- 2007-2012: Worked with Congressional staff to obtain a number of changes in the language of “carried interest” legislation in the 109th – 112th Congresses to ensure that traditional PTPs were not harmed by efforts to change taxation of investment fund managers (legislation has not yet been enacted but is still under consideration).
- 2008: Persuaded Congress to expand the qualifying income definition to include transportation and storage of ethanol, biodiesel, and other alternative fuels.
- 2004: Achieved enactment of a provision to make PTPs a qualifying income source for mutual funds under the regulated investment company rules of the tax code.
- 1993: Obtained repeal of a discriminatory provision treating all PTP income allocated to a tax-exempt organization, regardless of its nature, as unrelated business taxable income. PTPs are now treated like other partnerships, i.e., income will not be treated as UBI if it falls within one of the exceptions such as interest and dividends.
- 1991-1993: Monitored development of, and successfully influenced, 1993 Congressional legislation to regulate partnership roll-up transactions to exclude transactions involving only PTPs and to make the rules for covered transactions practicable.
- 1988: Obtained favorable clarification of the 1987 provisions in the 1988 technical corrections bill.
- 1987: Secured the continued existence of publicly traded partnerships. In 1987, when Congressional tax writers were set to tax all PTPs as corporations, the then Coalition of Publicly Traded Partnerships won a compromise which preserved permanent partnership taxation for PTPs earning specific types of income (passive investment income or income from natural resources and real estate activities), and won a 10-year grandfather period for existing PTPs not meeting the new standards. In 1997 the grandfather period was extended permanently for nonqualifying PTPs willing to pay a small excise tax.
- 1984: Modified partnership provisions in the Deficit Reduction Act of 1984 that would have adversely affected PTP operations.
- 1983-1986: Before the 1987 legislation, blocked efforts to include the taxation of MLPs as corporations in the Deficit Reduction Act of 1984 and the Tax Reform Act of 1986, and played an instrumental role in removing taxation of partnerships with more than 35 partners as corporations from the Treasury Department’s 1984 tax reform proposal.
Federal Tax Regulation
- 2015-2017: Successfully advocated for numerous changes in proposed IRS regulations defining the activities related to minerals and natural resources that generate qualifying income under section 7704(d)(1)(E). The final regulations, issued in January 2017, were a substantial improvement over the regulations proposed in 2015. Discussions regarding qualifying income issues continue.
- 2009-2015: Favorably influenced provisions dealing with PTPs in the regulations on allocating tax items to partners who enter, leave, or change their interest in a partnership during a tax year.
- 2008-2010: Worked with the IRS to obtain procedures for administrative relief with regard to filing returns after a technical termination.
- 2003-2005: Favorably influenced provisions dealing with PTPs in the regulations on withholding for foreign partners under section 1446.
- 1990-1994: Persuaded the IRS to permit the use of curative allocations in its regulations dealing with property contributed by a partner under section 704(c).
- 1988-1992: Obtained favorable clarification of the 1987 provisions from the Treasury Department.
- 1988-1992: Persuaded the IRS to provide a safe harbor based on SIC codes for determining whether a proposed business activity under the transition rule for the 1987 legislation that provided grandfathered PTPs with the certainty needed to plan future business activities.
- 2007-2008: Persuaded the Federal Energy Regulatory Commission (FERC) to include PTPs in proxy groups used for setting pipeline rates, and to count the full amount of partnership distributions in their discounted cash flow formula rather than capping them at the level of earnings.
- 2005: Successfully advocated a change in FERC policy regarding the income tax allowance. The policy allows PTPs and other pass-through entities to include such an allowance in their ratemaking as long as their partners are subject to income tax.
State Legislation and Regulation
- Ongoing, 1990-present: Obtained exclusion of publicly traded partnerships from several states’ requirements for withholding on partnership distributions to nonresidents, and from model withholding legislation promulgated by the Multistate Tax Commission. Work on obtaining exclusions and defending them from threatened legislative or regulatory changes occurs every year.
- 2008: Obtained an exemption for publicly traded partnerships from the Illinois Department of Revenue’s combined unitary reporting requirements.