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IRS lifts ‘pause’ on rulings for energy partnerships

HOUSTON (Reuters) – The Internal Revenue Service has lifted its temporary “pause” on rulings about what businesses qualify for tax-free inclusion in energy master limited partnerships (MLPs), after about a year of study that held up some transactions.

The suspension of the so-called private letter rulings was part a review by the IRS and the U.S. Department of Treasury, driven in part by how widely and often the partnerships were being used in an evolving industry.

MLPs have soared in popularity with energy companies in recent years. The partnerships pay no taxes, offering companies a means to lower their cost of capital. Investors also like them for the fat dividends they pay. There are about 130 publicly traded partnerships, mostly related to energy and pipelines or other infrastructure.

“We know taxpayers have been patiently waiting for private letter rulings before proceeding with their transactions,” the IRS said in a statement late on Friday. “During the pause, we have spent significant time studying the issues and have worked with engineers in (Large Business and International) to develop workable standards to guide our ruling practice.”

The pause snared companies’ plans to form MLPs with their assets. In one example, U.S. exploration and production company SandRidge Energy Inc said last April that its letter asking the IRS whether its water disposal business would qualify as tax-free for inclusion in an MLP was snared in the pause.

The ruling process resumed on Friday, and the IRS will issue proposed regulations in the near futures, it said.

The National Association of Publicly Traded Partnerships said on Friday that its members are “very pleased that the long wait for rulings to resume is over.”

Tax payers ask the IRS for private letter rulings to see how tax laws apply to them.

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