The Association received information at the end of April regarding a tax reform proposal being considered within the Administration that would threaten PTPs and a number of other passthrough entities as well. We have learned from reliable sources that Treasury Department staff are working on a tax reform proposal that reportedly would include corporate taxation of any pass-through entity with gross receipts of $50 million or more. This would of course, affect all MLPs, and would also sweep in a large number of non-traded partnerships, joint ventures, and other entities. The $50 million threshold was foreshadowed in testimony by former Deputy Assistant Secretary for Tax Policy Michael Graetz in March, in which Graetz told the Senate Finance Committee:

We like to think of these noncorporate business taxpayers as small businesses, but that is only part of the story. Most passthrough entities are small businesses; they comprise more than 90 percent of all business entities. But the 0.2 percent of partnerships that had revenues greater than $50 million accounted for nearly 60 percent of all partnership income that year.

This is all we know at the moment. The Administration has not released its tax reform plan yet, and details may change before it does. We believe that if this proposal is released in its current form, the fact that it sweeps so broadly will ensure widespread opposition from business groups and in Congress, particularly in the Republican-controlled house. In fact, Ways and Means Committee Chairman Dave Camp (R-MI) has said that he was “not inclined to consider” such a proposal, while Ways and Means Member Eric Paulsen termed it “dead on arrival.”

We believe that given the political divisions in Washington, it is highly unlikely that any major tax reform proposal will be approved by Congress before the 2012 election. In fact, the latest word is that the corporate tax proposal has been sent from Treasury to the White House, but because the Administration is now in re-election mode, it will not see the light of day until after 2012.