A new report shows Texas Senator John Cornyn added a provision into the last-minute revised, final tax bill reportedly intended to benefit Texas lawmakers, like Ted Cruz and the company behind the Keystone Pipeline project.
According to the International Business Times (IBT), Cornyn added an amendment to the bill to ensure the use of master limited partnerships (MLPs) receive what’s known as a “pass through” tax break in the final version of the GOP tax bill – a way to rely on different, often lower, tax levels.
According to analysts, MLPs are publicly traded partnerships, which already are not required to pay corporate taxes, and they say this amendment would ensure they get an additional 20 percent tax break – the same rate reportedly offered to corporations under the new tax plan.
MLPs are further said to be frequently used by companies involved in the extraction of natural resources, like oil and gas, as well as by investors in those companies.
According to IBT, several members of Congress could make a lot of money from Cornyn’s proposed tax break as a result of their investment in MLPs, because the break technically allows them to keep more money in their pocket, which would otherwise be taxed.
Junior Texas Senator Ted Cruz and House Member Pete Sessions, both Texas lawmakers, are also on this list.
TransCanada, the company behind the Keystone Pipeline, is also on the list of MLPs who reportedly stand to benefit from Cornyn’s proposed tax break, and there are said to be some entities who take issue with giving companies already receiving a pass on taxes even more money.
“These MLP financial vehicles already operate at a tremendous tax advantage over other publicly-traded businesses, because they are the only public companies that are allowed to escape paying corporate income tax,” USC law professor Edward Kleinbard wrote in an article for Washington, D.C.-based political news site The Hill.
For their part, according to reports, a number of MLPs claim their business model relies on tax breaks and incentives, such as the one Cornyn is proposing.
“If the Internal Revenue Service (IRS) were to treat us as a corporation for federal income tax purposes, or if we were to become subject to material amounts of entity-level taxation for state tax purposes, then our cash available for distribution to our unit-holders would be substantially reduced,” MLP Boardwalk Pipeline partners wrote in its annual report to the Securities and Exchange Commission (SEC).
Per tax laws, MLPs aren’t taxed directly, rather, their income gets taxed when it “passes through” to their owners, hence the name of the tax break.
Corporations are taxed as an entity under legal tax provision in addition to when the money they make goes to their shareholders, according to the Huffington Post.
After required revisions based on procedural issues ruled on by the Senate Parliamentarian and ultimate revised passaged in both chambers, the GOP tax bill is expected to reach the President’s desk before Christmas.