MLPs: how the IRS subsidizes o...
As more M.L.P.’s come to resemble normal operating companies, the tax loophole looks more like a straightforward tax subsidy for fossil fuel production. From an environmental standpoint, this is exactly backward. We should be taxing carbon production, not subsidizing it.
As with real estate investment trusts, the I.R.S. has made matters worse by carving the original loophole, brick by brick, into an opening big enough to drive an oil tanker through.
In a series of private rulings over the last few years, the I.R.S. has been exceedingly accommodating toward what counts as an energy M.L.P. The end result is that more oil and natural gas companies, and companies loosely affiliated with the industry, can legally skirt the general requirement that publicly traded entities must pay the corporate tax.
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