The U.S. Treasury Department is looking into the increased use of the master limited partnership as a business structure, hours after Kinder Morgan turned its back on the MLP.
"We at Treasury are looking into the effects of these transactions on future tax revenues," says a department spokesperson. "Instances where the tax base may be eroded serve as a reminder of why we need Congress to enact business tax reform that broadens the tax base and lowers tax rates."
Kinder Morgan's move represents a turning point for the rise of MLPs, which are publicly traded but pay no corporate income tax.
Back in early April, the IRS said it had temporarily stopped issuing private letter rulings that companies often seek to get the agency's blessing when setting up new MLPs. An IRS spokesman says that the pause remains in place, so that the agency can review MLP qualifications.