Background

Some states have enacted statutes stating that a when a nonresident partner sells units in an MLP with operations in the state, the state is entitled to tax the nonresident on a portion of the gain. The most recent of these was Montana, where the MLPA worked to change a law proposed by the state Department of Revenue so that would not be unduly burdensome for MLPs and investors. The resulting Montana statute calculates the tax owed as the section 751 recapture income reported on the unitholder’s K-1 multiplied by the PTP’s apportionment factor for Montana.

Following our successful effort in Montana, the MLPA began working to amend the existing statute in Idaho. Early in 2011 we succeed in obtaining the enactment of language similar to the Montana provision. The language is effective as of January 1, 2011.

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