IRS Puts Damper On Newer Types Of Energy Partnerships
WASHINGTON/NEW YORK, April 8 (Reuters) - 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 business was affected by the IRS action.
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