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Kinder Morgan Energy Partners Message Board

  • jrad52 jrad52 Mar 3, 2013 1:47 PM Flag

    New JCT report on MLP tax cost to US

    I've read several articles recently about an updated Joint Committee on Taxation report that increased its estimate of the "tax expenditure" (reduced taxes) relating to MLPs. Last year's report estimated the annual cost of MLPs to the US Treasury at $ 300 million. I read now that the updated estimate has increased to $ 1.7 billion annually.

    Has anyone seen the actual report? Most of the JCT reports don't explain their methodology, but I'd like to see the report anyway. But I haven't been able to find it.

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    • Never mind, I found it. The estimated cost (lost taxes) due to MLPs rose from $ 200 - $ 300 million per year in last year's JCT report to $ 1.2 to $ 1.4 billion in this year's report. There is no explanation for the increase but the general explanation of the estimates says the new report reflects changes in tax rates, so a portion of the increase is presumably due to the higher tax rates and new Medicare tax on high income individuals. It doesn't look like that was a major cause of the jump because the report shows the 2013 cost to be just slightly higher than the 2012 cost. I've seen guesses on Yahoo boards that the increase is due to more MLPs going public. I'm sure that had an impact, but it wouldn't cause a 5-fold or 6-fold increase. For instance, a large portion of KMP's income is taxed to KMI; this is true with any MLP with a corporate sponsor, such as CVI taking a small part of CVRR public in January. Also, alst year's estimate could simply be wrong, and they corrected it this year - they talk (generally, nothing specific to MLPs) about corrections to prior years' methodologies in the report.

      Just something else to worry about.