IRS Delivers Significant Year-End MLP Qualifying Income PLRs

The Internal Revenue Service (IRS) has released four qualifying income private letter rulings (PLRs) for publicly traded partnerships (MLPs) regarding end-user sales, wholesale marketing, olefins activities, and real property rents since our third-quarter update. These four PLRs are summarized below. All told, the IRS released 18 MLP PLRs in 2012 more than double the record set in 2011. The most recent guidance is particularly helpful in the areas of olefins activities and end-user sales, both of which have been areas of uncertainty for MLPs in the past with respect to qualifying income.

The Internal Revenue Code generally treats an MLP as a corporation, rather than a partnership, for federal income tax purposes unless 90 percent or more of the MLP's gross income for every taxable year consists of "qualifying income." For this purpose, qualifying income includes certain real property rents and income derived from the exploration, development, mining, production,