IRS May Prohibit MLPs For Chemicals

Proposed Internal Revenue Service rules may stem the tide of chemical master limited partnerships (MLPs) and nullify existing ones. MLPs do not pay income taxes. Instead, investors who hold MLPs’ “common units” pay taxes on earnings from the MLPs at their own personal tax rates. MLPs were once the domain of natural resource extraction industries such as oil and gas. But the IRS has allowed olefin producers to form MLPs in recent years. The new rules may roll that back. Some MLPs, such as Westlake Chemical’s, would have to revert back to a conventional corporate structure within 10 years. Axiall recently announced that it was seeking an MLP structure for its chlor-alkali operations.