Linda Carlisle Quoted Regarding Treasury Proposed Regs on Mineral and Natural Resource PTP Qualifying Income

"Treasury Narrows PTP Qualifying Income for Olefins, Timber"
Tax Notes Today

Linda Carlisle was quoted regarding the Treasury Department's recently issued proposed regulations, which would narrow publicly traded partnership (PTP) qualifying income for activities in the mineral and natural resource industries. If the rules are made final in their current form, they provide a generous transition period during which partnerships that received qualifying income private letter rulings from the Internal Revenue Service (IRS) can continue to treat the income as qualifying even if would not qualify under the final rules. Carlisle does not believe the IRS would proactively revoke existing private letter rulings that appear to fall out of the line drawn by the proposed rules. "They are not trying to blindside anybody. Nothing is final," she said.

Under the proposed rule, steam-cracked olefins do not give rise to qualifying income, which apparently contradicts previous IRS guidance ruling that income from turning ethane and propane into olefins through a process involving a gas-fired cracking furnace is qualifying income. Carlisle took issue with the disparate treatment of olefins stemming from petroleum processing as opposed to natural gas processing and said the proposed rules went too far. "These regulations are an attempt to write the term 'processing' out of the statute and substitute for it a term such as 'separation' or 'filtering,'" she said.

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