Trump Tax Cut Proposal Shines Light On MLPs

April 27, 2017

New York/Houston (Reuters) – The Trump administration's proposal to slash tax rates on so-called pass-through businesses would deliver a windfall to investors in master limited partnerships and could offer a much-needed lift to this niche segment of the energy market.

The tax plan outline released on Wednesday by U.S. President Donald Trump would sharply slash business taxes and discount the rate on overseas corporate profits brought back into the United States.

The proposed changes include a cut to the top tax rate on pass-through businesses to 15% from the current rate of up to 36.9%. Pass-throughs get that name because taxes are not paid by the business itself but pass through to their owners' individual taxes, at that rate.

MLPs Would Benefit

The change would largely benefit owners of private businesses, but U.S. stock market investors holding shares of master limited partnerships, or MLPs, would receive the same treatment. MLPs build the pipelines and storage tanks, and are a common corporate structure in the oil and gas infrastructure sector.

"If the average rate [for MLP investors] is in the 30s, reducing it to 15% would be tremendously attractive," Robert Willens, president of tax and accounting advisory firm Robert Willens LLC, said on Wednesday.

He said if the cuts come through, they would make MLPs "the most attractive investment from a tax point of view."

Mike Bresson, a tax partner with the law firm Baker Botts in Houston said Trump's proposed change would enhance an already-superior tax structure enjoyed by MLPs.


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