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Burger King and the Benefits of a MLP

Oil and gas companies are able to take advantage of a great tax break by restructuring themselves to form a Master Limited Partnership (MLP), potentially reducing their tax bill to zero. It works by counting each partner’s profit as the individual’s income, meaning that the MLP becomes exempt from paying corporate tax.

In 2011 Tennessee Gas Pipeline, structured as a normal corporation, paid more than $100 million in taxes; last year it was bought by Kinder Morgan and restructured as a MLP. As a result of the new MLP format, in August it paid no corporate tax.

Pipelineoilandgas.com explains that the “incentives are not ‘Loop Holes’, they were placed in the Tax Code by Congress to make participation in oil and gas ventures one of the best tax advantaged investments.”

Related article: A Fresh Opportunity in Refining Stocks

John Buckley, a tax professor at Georgetown University Law Center and author of the tax code, admitted that they never envisioned “how popular the tax break would become.”

Congress is considering extending the tax break to be available for renewable energy companies as well.

Back in the 1980’s even non-energy companies such as Burger King tried to set themselves up as MLP’s, however congress quickly restricted the tax exception to energy companies.

Maybe if Burger King bought an oil pipeline it could form a MLP.

By. James Burgess of Oilprice.com


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