On February 21, 2019, the Federal Energy Regulatory Commission (FERC) issued Trailblazer Pipeline Company LLC (“Trailblazer”), FERC’s first order addressing how FERC applies its Revised Income Tax Allowance Policy Statement, as further revised on rehearing (collectively “Revised Policy Statement”), to a pipeline organized as a pass-through partnership that is not a master limited partnership (“MLP”) in a Natural Gas Act (“NGA”) section 4 rate case proceeding. FERC issued the Revised Policy Statement in response to the U.S. Court of Appeals for the D.C. Circuit’s (“D.C. Circuit”) decision in United Airlines, Inc. v. FERC (“United Airlines”), which found that FERC could not permit a specific MLP pipeline to recover an income tax allowance in its rates without further explaining why this did not result in the MLP’s investors “double recovering” their income tax costs, based on a concern that the investors’ pre-tax return on equity (“ROE”) also provided such compensation when calculated using the discounted cash flow (“DCF”) methodology. United Airlines did not consider other types of pass-through entities, such as non-publicly traded partnerships, or alternative methodologies to calculate ROE and the Revised Policy Statement did not address them directly. (more…)
On December 20, 2017, the United States Congress passed legislation known as the Tax Cuts and Jobs Act (the Tax Act), the first comprehensive reform of the U.S. tax code since 1986. The legislation is expected to be signed by President Trump and enacted into law. The changes will be effective for taxable years beginning after December 31, 2017, unless otherwise noted below.
The following summary analyzes certain aspects of the Tax Act likely to affect the energy industry, particularly publicly traded partnerships or master limited partnerships (MLPs).
For a complete list of Sidley resources summarizing the major changes to the U.S. tax code generally and with respect to particular industries and subject matters, as well as links to register for upcoming Sidley webinars on tax reform, please click here to access our Tax Reform Developments and Insights webpage.