This document
is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common units and also adds to and updates information contained in the accompanying base prospectus and the documents incorporated by
reference into this prospectus supplement and the accompanying base prospectus. The second part is the accompanying base prospectus, which provides more general information about the securities we may offer from time to time, some of which may not
apply to this offering of common units. Generally, when we use the term prospectus, we are referring to both parts combined. If the information varies between this prospectus supplement and the accompanying base prospectus, you should
rely on the information in this prospectus supplement.
In making an investment decision, prospective investors must rely on their own examination of us
and the terms of the offering, including the merits and risks involved. None of Westlake Chemical Partners LP, the underwriters or any of their respective representatives is making any representation to you regarding the legality of an investment in
our common units by you under applicable laws. You should consult with your own advisors as to legal, tax, business, financial and related aspects of an investment in our common units.
Any statement made in the base prospectus or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be
modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document that is also incorporated by reference into this prospectus modifies or supersedes that
statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Please read Where You Can Find More Information in this prospectus supplement.
The information in this prospectus supplement is not complete. You should review carefully all of the detailed information appearing in this prospectus
supplement, the accompanying base prospectus, any free writing prospectus and the documents we have incorporated by reference before making any investment decision.
DESCRIPTION OF DEBT SECURITIES
General
Westlake Chemical Partners LP
may issue senior and unsubordinated debt securities in one or more series, and WLKP Finance Corp. may be a
co-issuer
of one or more series of debt securities. WLKP Finance Corp. is 100% owned by Westlake
Chemical Partners LP, and has no assets or current operations and has been formed for the sole purpose of acting as
co-issuer
of debt securities, and therefore falls within the meaning of a minor
subsidiary under Rule
3-10(h)
of Regulation
S-X.
Its activities are limited to
co-issuing
debt securities and engaging in other
activities incidental thereto. Any debt securities
co-issued
by Westlake Chemical Partners LP and WLKP Finance Corp. will be issued jointly and severally. When used in this section Description of Debt
Securities, the terms we, us, our and issuers refer jointly to Westlake Chemical Partners LP and WLKP Finance Corp. if the latter is a
co-issuer
of the
series of debt securities and otherwise only to the former, and the terms WLKP and WLKP Finance refer strictly to Westlake Chemical Partners LP and WLKP Finance Corp., respectively.
If we offer debt securities, we will issue them in one or more series under an indenture among each issuer, any guarantors and a trustee (the
Trustee). A form of the indenture is filed as an exhibit to the registration statement of which this prospectus is a part. We have not restated the indenture in its entirety in this description. You should read the relevant indenture
because it, and not this description, controls your rights as holders of the debt securities. Capitalized terms used in the summary have the meanings specified in the indenture.
Specific Terms of Each Series of Debt Securities in the Prospectus Supplement
A prospectus supplement and a supplemental indenture or authorizing resolutions relating to any series of debt securities being offered will
include specific terms relating to the offering. These terms will include some or all of the following:
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whether WLKP Finance will be a
co-issuer;
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the guarantors of the debt securities, if any;
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the title of the debt securities;
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the total principal amount of the debt securities;
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the assets, if any, that are pledged as security for the payment of the debt securities;
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whether we will issue the debt securities in individual certificates to each holder in registered form, or in the form of temporary or permanent global securities held by a depository on behalf of holders;
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the prices at which we will issue the debt securities;
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the portion of the principal amount that will be payable if the maturity of the debt securities is accelerated;
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the currency or currency unit in which the debt securities will be payable, if not U.S. dollars;
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the dates on which the principal of the debt securities will be payable;
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the interest rate that the debt securities will bear and the interest payment dates for the debt securities;
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any conversion or exchange provisions;
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any optional redemption provisions;
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any sinking fund or other provisions that would obligate us to repurchase or redeem the debt securities;
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any changes to or additional events of default or covenants; and
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any other terms of the debt securities.
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7
We may offer and sell debt securities, including original issue discount debt securities, at a
substantial discount below their principal amount. The prospectus supplement will describe special U.S. federal income tax and any other considerations applicable to those securities. In addition, the prospectus supplement may describe certain
special U.S. federal income tax or other considerations applicable to any debt securities that are denominated in a currency other than U.S. dollars.
Possible Future Guarantors
We
contemplate that none of the subsidiaries of WLKP will guarantee the debt securities of any series. If at any time after the issuance of the debt securities of any series, however, a subsidiary of WLKP guarantees any of our debt, we will cause such
subsidiary to guarantee that series in accordance with the indenture by simultaneously executing and delivering a supplemental indenture.
Any guarantors of a series of debt securities would unconditionally guarantee to each holder and the Trustee, on a joint and several basis,
the full and prompt payment of the principal of, premium, if any, and interest on the debt securities of that series when and as the same became due and payable, whether at stated maturity, upon redemption or repurchase, by declaration of
acceleration or otherwise. If a series of debt securities is guaranteed, the related prospectus supplement will identify all of the guarantor subsidiaries. Also, such prospectus supplement will describe any limitation on the maximum amount of any
particular guarantee and the conditions under which guarantees may be released.
Any guarantees would be general, senior and
unsubordinated obligations of the guarantors.
Consolidation, Merger or Asset Sale
The indenture will, in general, allow us to consolidate or merge with or into another domestic entity. It will also allow each issuer to sell,
lease, transfer or otherwise dispose of all or substantially all of its assets to another domestic entity. If this happens, the remaining or acquiring entity must assume all of the issuers responsibilities and liabilities under the indenture
including the payment of all amounts due on the debt securities and performance of the issuers covenants in the indenture.
However,
the indenture will impose certain requirements with respect to any consolidation or merger with or into an entity, or any sale, lease, transfer or other disposition of all or substantially all of an issuers assets, including:
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the remaining or acquiring entity must be organized under the laws of the United States, any state or the District of Columbia;
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the remaining or acquiring entity must assume the issuers obligations under the indenture; and
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immediately after giving effect to the transaction, no Default or Event of Default (as defined under Events of Default and Remedies) may exist.
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The remaining or acquiring entity will be substituted for the issuer in the indenture with the same effect as if it had been an original party
to the indenture, and the issuer will be relieved from any further obligations under the indenture, except in the case of a lease of all or substantially all of its assets.
No Protection in the Event of a Change of Control
Unless otherwise set forth in the prospectus supplement, the debt securities will not contain any provisions that protect the holders of the
debt securities in the event of a change of control of us or in the event of a highly leveraged transaction, whether or not such transaction results in a change of control of us.
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Modification of Indenture
We may supplement or amend the indenture if the holders of a majority in aggregate principal amount of the outstanding debt securities of each
series affected by the supplement or amendment consent to it. Further, the holders of a majority in aggregate principal amount of the outstanding debt securities of any series may waive past defaults under the indenture and compliance by us with our
covenants with respect to the debt securities of that series only. However, without the consent of each outstanding debt security affected, no modification of the indenture or waiver may:
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reduce the principal of or extend the fixed maturity of any debt security;
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reduce any premium payable upon redemption or change any redemption date with respect to the redemption of the debt securities;
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reduce the rate of or extend the time for payment of interest on any debt security;
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waive a past Default or an Event of Default in the payment of principal of or premium, if any, or interest on the debt securities or in respect of an indenture provision that cannot be modified without the consent of
each affected holder;
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except as otherwise permitted under the indenture, release any security that may have been granted with respect to the debt securities;
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make any debt security payable in currency other than that stated in the debt securities;
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impair the right of any holder to receive any payment on its debt securities on or after the due date therefor or to institute suit for the enforcement of any such payment;
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waive any redemption payment with respect to any debt security (except as may be permitted in the case of a particular series of debt securities);
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except as otherwise permitted in the indenture, release any guarantor from its obligations under its guarantee or the indenture or change any guarantee in any manner adverse to the holders; or
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make any change in the preceding amendment, supplement and waiver provisions (except to increase any percentage set forth therein).
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We may supplement or amend the indenture without the consent of any holders of the debt securities in certain circumstances, including:
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to establish the form of terms of any series of debt securities;
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to cure any ambiguity, defect or inconsistency;
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to provide for uncertificated notes in addition to or in place of certificated notes;
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to provide for the assumption of an issuers obligations to holders of debt securities in the case of a merger or consolidation or disposition of all or substantially all of such issuers assets;
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to add or release guarantors pursuant to the terms of the indenture;
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to make any change that does not adversely affect the rights under the indenture of any holder of debt securities;
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to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended (the Trust Indenture Act);
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to evidence or provide for the acceptance of appointment under the indenture of a successor Trustee;
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to add any additional Events of Default (as defined below) with respect to any series of debt securities; or
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to secure the debt securities or any guarantees.
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9
Events of Default, Remedies and Notice
Event
of
Default
, when used in the indenture, will mean any of the following with respect to the debt
securities of any series:
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failure to pay when due the principal of or any premium on any debt security of that series;
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failure to pay, within 60 days of the due date, interest on any debt security of that series;
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failure to pay when due any sinking fund payment with respect to any debt securities of that series;
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failure on the part of an issuer to comply with the covenant described under Consolidation, Merger or Asset Sale;
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failure to perform any other covenant in the indenture that continues for 30 days after written notice is given to the issuers;
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certain events of bankruptcy, insolvency or reorganization of an issuer or any guarantor of that series;
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if the debt securities of that series are entitled to a guarantee, the guarantee ceases to be in full force and effect; or
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any other Event of Default provided under the terms of the debt securities of that series.
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An
Event of Default for a particular series of debt securities will not necessarily constitute an Event of Default for any other series of debt securities issued under the indenture. The Trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal, premium, if any, or interest) if it considers such withholding of notice to be in the best interests of the holders.
If an Event of Default for any series of debt securities occurs and continues, the Trustee or the holders of at least 25% in aggregate
principal amount of the debt securities of the series may declare the entire principal of, and accrued interest on, all the debt securities of that series to be due and payable immediately. If this happens, subject to certain conditions, the holders
of a majority in the aggregate principal amount of the debt securities of that series can rescind the declaration.
Other than its duties
in case of a default, a Trustee is not obligated to exercise any of its rights or powers under either indenture at the request, order or direction of any holders, unless the holders offer the Trustee reasonable security or indemnity. If they provide
this reasonable security or indemnification, the holders of a majority in aggregate principal amount of any series of debt securities may direct the time, method and place of conducting any proceeding or any remedy available to the Trustee, or
exercising any power conferred upon the Trustee, for that series of debt securities.
No Limit on Amount of Debt Securities
The indenture will not limit the amount of debt securities that we may issue, unless we indicate otherwise in a prospectus supplement. The
indenture will allow us to issue debt securities of any series up to the aggregate principal amount that we authorize.
Registration of Notes
We will issue debt securities of a series only in registered form, without coupons.
Minimum Denominations
Unless the
prospectus supplement states otherwise, the debt securities will be issued only in principal amounts of $1,000 each or integral multiples of $1,000.
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No Personal Liability
None of the past, present or future partners, incorporators, managers, members, directors, officers, employees, unitholders or stockholders of
either issuer, the general partner of WLKP or any guarantor, as such, will have any liability for the obligations of the issuers or any guarantor under the indenture or the debt securities or for any claim based on such obligations or their
creation. Each holder of debt securities by accepting a debt security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the debt securities. The waiver may not be effective under federal
securities laws, however, and it is the view of the SEC that such a waiver is against public policy.
Payment and Transfer
The Trustee will initially act as paying agent and registrar under the indenture. The issuers may change the paying agent or registrar without
prior notice to the holders of debt securities, and the issuers or any of their subsidiaries may act as paying agent or registrar.
If a
holder of debt securities has given wire transfer instructions to the issuers, the issuers will make all payments on the debt securities in accordance with those instructions. All other payments on any debt securities not in a global form will be
made at the corporate trust office of the Trustee, unless the issuers elect to make interest payments by check mailed to the holders at their addresses set forth in the debt security register.
The Trustee and any paying agent will repay to us upon request any funds held by them for payments on the debt securities that remain
unclaimed for two years after the date upon which that payment has become due. After payment to us, holders entitled to the money must look to us for payment as general creditors.
Exchange, Registration and Transfer
Debt
securities of any series will be exchangeable for other debt securities of the same series, the same total principal amount and the same terms but in different authorized denominations in accordance with the indenture. Holders may present debt
securities for exchange or registration of transfer at the office of the registrar. The registrar will effect the transfer or exchange when it is satisfied with the documents of title and identity of the person making the request. We will not charge
a service charge for any registration of transfer or exchange of the debt securities. We may, however, require the payment of any tax or other governmental charge payable for that registration.
We will not be required:
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to issue, register the transfer of, or exchange debt securities of a series either during a period of 15 days prior to the mailing of a notice of redemption of debt securities of that series; or
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to register the transfer of or exchange any debt security called for redemption, except the unredeemed portion of any debt security we are redeeming in part.
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Ranking
The debt securities will rank
equally in right of payment with all of our other senior and unsubordinated debt. The debt securities will be effectively subordinated, however, to all of our secured debt to the extent of the value of the collateral for that debt. We will disclose
the amount of our secured debt in the prospectus supplement.
Book Entry, Delivery and Form
The debt securities of a particular series may be issued in whole or in part in the form of one or more global certificates that will be
deposited with the Trustee as custodian for The Depository Trust Company, New York,
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New York (DTC) and registered in the name of DTCs nominee, Cede & Co. This means that we will not issue certificates to each holder. Instead, one or more global debt
securities will be issued to DTC, who will keep a computerized record of its participants (for example, your broker) whose clients have purchased the debt securities. The participant will then keep a record of its clients who purchased the debt
securities. Unless it is exchanged in whole or in part for a certificated debt security, a global debt security may not be transferred, except that DTC, its nominees and their successors may transfer a global debt security as a whole to one another.
Beneficial interests in global debt securities will be shown on, and transfers of beneficial interests in global debt securities will be
made only through, records maintained by DTC and its participants.
DTC has provided us the following information: DTC is a
limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the United States Federal Reserve System, a clearing corporation
within the meaning of the New York Uniform Commercial Code and a clearing agency registered under the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants (Direct
Participants) deposit with DTC. DTC also records the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through computerized records for Direct Participants accounts.
This eliminates the need to exchange certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations.
DTCs book-entry system is also used by other organizations such as securities brokers and dealers, banks and trust companies that work
through a Direct Participant. The rules that apply to DTC and its Direct Participants are on file with the SEC.
DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation (DTCC). DTCC, in turn, is owned by a number of its participants and by, among other institutions, the Financial Industry Regulatory Authority, Inc. The rules that apply
to DTC and its participants are on file with the SEC.
We will wire all payments on the global debt securities to DTCs nominee. We
and the Trustee will treat DTCs nominee as the owner of the global debt securities for all purposes. Accordingly, we, the Trustee and any paying agent will have no direct responsibility or liability to pay amounts due on the global debt
securities to owners of beneficial interests in the global debt securities
It is DTCs current practice, upon receipt of any payment
on the global debt securities, to credit Direct Participants accounts on the payment date according to their respective holdings of beneficial interests in the global debt securities as shown on DTCs records. In addition, it is
DTCs current practice to assign any consenting or voting rights to Direct Participants whose accounts are credited with debt securities on a record date, by using an omnibus proxy. Payments by Direct Participants to owners of beneficial
interests in the global debt securities, and voting by Direct Participants, will be governed by the customary practices between the Direct Participants and owners of beneficial interests, as is the case with debt securities held for the account of
customers registered in street name. However, payments will be the responsibility of the Direct Participants and not of DTC, the Trustee or us.
Debt securities represented by a global debt security will be exchangeable for certificated debt securities with the same terms in authorized
denominations only if:
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DTC notifies us that it is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under applicable law and in either event a successor depositary is not appointed by us within
90 days; or
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following an Event of Default, DTC notifies the Trustee of its decision to require that the debt securities of a series shall no longer be represented by a global debt security.
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Satisfaction and Discharge; Defeasance
The indenture will be discharged and will cease to be of further effect as to all outstanding debt securities of any series issued thereunder,
when:
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all outstanding debt securities of that series that have been authenticated (except lost, stolen or destroyed debt securities that have been replaced or paid and debt securities for whose payment money has theretofore
been deposited in trust and thereafter repaid to us) have been delivered to the Trustee for cancellation; or
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all outstanding debt securities of that series that have not been delivered to the Trustee for cancellation have become due and payable by reason of the giving of a notice of redemption or otherwise or will become due
and payable at their stated maturity within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee and in any case we have irrevocably deposited with the Trustee as trust funds in trust cash
sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness of such debt securities not delivered to the Trustee for cancellation, for principal, premium, if any, and accrued interest to the date
of such deposit (in the case of debt securities that have been due and payable) or the stated maturity or redemption date; and
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we have paid or caused to be paid all other sums payable by us under the indenture.
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The debt
securities of a particular series will be subject to legal or covenant defeasance to the extent, and upon the terms and conditions, set forth in the prospectus supplement.
Governing Law
The indenture and all of
the debt securities will be governed by the laws of the State of New York.
The Trustee
We will enter into the indenture with a Trustee that is qualified to act under the Trust Indenture Act, and with any other Trustees chosen by
us and appointed in a supplemental indenture for a particular series of debt securities. We will identify in the applicable prospectus supplement, the Trustee for each series of debt securities and will file an application with the SEC under the
Trust Indenture Act to qualify the Trustee.
Resignation or Removal of Trustee
If the Trustee has or acquires a conflicting interest within the meaning of the Trust Indenture Act, the Trustee must either eliminate its
conflicting interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and the indenture. Any resignation will require the appointment of a successor Trustee in accordance with the
terms and conditions of the indenture.
The Trustee may resign or be removed by us with respect to one or more series of debt securities
and a successor Trustee may be appointed to act with respect to any such series. The holders of a majority in aggregate principal amount of the debt securities of any series may remove the Trustee with respect to the debt securities of such series.
Limitations on Trustee if it is Our Creditor
The indenture will contain certain limitations on the right of the Trustee, in the event that it becomes a creditor of an issuer, to obtain
payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise.
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Annual Trustee Report to Holders of Debt Securities
The Trustee will submit an annual report to the holders of the debt securities regarding, among other things, the Trustees eligibility to
serve as such, the priority of the Trustees claims regarding certain advances made by it, and any action taken by the Trustee materially affecting the debt securities.
Certificates and Opinions to be Furnished to Trustee
The indenture will provide that, in addition to other certificates or opinions that may be specifically required by other provisions of the
indenture, every application by us for action by the Trustee shall be accompanied by a certificate of certain of our officers and an opinion of counsel (who may be our counsel) stating that, in the opinion of the signers, all conditions precedent to
such action have been complied with by us.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
This section summarizes the material U.S. federal income tax consequences that may be relevant to prospective unitholders and is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the Code), existing and proposed Treasury regulations thereunder (the Treasury Regulations), and current administrative rulings and court decisions, all of
which are subject to change. Changes in these authorities may cause the federal income tax consequences to a prospective unitholder to vary substantially from those described below, possibly on a retroactive basis. Unless the context otherwise
requires, references in this section to we or us are references to Westlake Chemical Partners LP and its subsidiaries.
Legal
conclusions contained in this section, unless otherwise noted, are the opinion of Vinson & Elkins L.L.P. and are based on the accuracy of representations made by us to them for this purpose. However, this section does not address local
taxes, state taxes,
non-U.S.
taxes, other taxes or all federal income tax matters that affect us or our unitholders such as the application of the alternative minimum tax that may be applicable to certain
unitholders. Furthermore, this section focuses on unitholders who are individual citizens or residents of the United States (for federal income tax purposes), who have the U.S. dollar as their functional currency, who use the calendar year as their
taxable year, who purchase units in this offering, who do not materially participate in the conduct of our business activities and who hold such units as capital assets (typically, property that is held for investment). This section has limited
applicability to corporations (including other entities treated as corporations for federal income tax purposes), partnerships (including other entities treated as partnerships for federal income tax purposes), estates, trusts,
non-resident
aliens or other unitholders subject to specialized tax treatment, such as
tax-exempt
entities,
non-U.S.
persons,
individual retirement accounts (IRAs), employee benefit plans, real estate investment trusts or mutual funds.
Accordingly,
we
encourage
each
prospective
unitholder
to
consult
the
unitholders
own
tax
advisor
in
analyzing
the
federal,
state,
local
and
non-U.S.
tax
consequences
particular
to
that
unitholder
resulting
from
ownership
or
disposition
of
units
and
potential
changes
in
applicable
tax
laws.
We have requested and obtained a
favorable private letter ruling from the IRS to the effect that the production, transportation, storage and marketing of ethylene and its
co-products
will constitute qualifying income within the
meaning of Section 7704 of the Code. However, no ruling has been or will be requested from the IRS regarding our treatment as a partnership for U.S. federal income tax purposes. Instead, we will rely on the opinions and advice of
Vinson & Elkins L.L.P. with respect to the matters described herein. An opinion of counsel represents only that counsels best legal judgment and does not bind the Internal Revenue Service (the IRS) or a court. Accordingly,
the opinions and statements made herein may not be sustained by a court if contested by the IRS. Any such contest of the matters described herein may materially and adversely impact the market for our units and the prices at which our units trade.
In addition, our costs of any contest with the IRS will be borne indirectly by our unitholders and our general partner because the costs will reduce our cash available for distribution. Furthermore, the tax consequences of an investment in us may be
significantly modified by future legislative or administrative changes or court decisions, which may be retroactively applied.
For the
reasons described below, Vinson & Elkins L.L.P. has not rendered an opinion with respect to the following federal income tax issues:
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the treatment of a unitholder whose units are the subject of a securities loan (e.g., a loan to a short seller to cover a short sale of units) (please read Tax Consequences of Unit OwnershipTreatment
of Securities Loans);
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whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations (please read Disposition of UnitsAllocations Between Transferors and
Transferees); and
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whether our method for taking into account Section 743 adjustments is sustainable in certain cases (please read Tax Consequences of Unit OwnershipSection 754 Election and
Uniformity of Units).
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Taxation of the Partnership
Partnership Status
We expect to be
treated as a partnership for U.S. federal income tax purposes and, therefore, subject to the discussion below under Administrative MattersInformation Returns and Audit Procedures, generally will not be liable for entity-level
federal income taxes. Instead, as described below, each of our unitholders will take into account its respective share of our items of income, gain, loss and deduction in computing its federal income tax liability as if the unitholder had earned
such income directly, even if we make no cash distributions to the unitholder. Distributions we make to a unitholder will not give rise to income or gain taxable to such unitholder, unless the amount of cash distributed exceeds the unitholders
adjusted tax basis in its units. Please read Tax Consequences of Unit OwnershipTreatment of Distributions and Disposition of Units).
Section 7704 of the Code provides that a publicly-traded partnership will be treated as a corporation for federal income tax purposes.
However, if 90% or more of a partnerships gross income for every taxable year it is publicly-traded consists of qualifying income, the partnership may continue to be treated as a partnership for federal income tax purposes (the
Qualifying Income Exception). Qualifying income includes, (i) income and gains derived from the processing, transportation, storage and marketing of any mineral or natural resource (such as crude oil, refined products and NGLs),
(ii) interest (other than from a financial business), (iii) dividends, (iv) gains from the sale of real property and (v) gains from the sale or other disposition of capital assets (or property described in Section 1231(b) of the Code) held
for the production of income that otherwise constitutes qualifying income. We estimate that less than 5.0% of our current gross income is not qualifying income; however, this estimate could change from time to time.
We have requested and obtained a favorable private letter ruling from the IRS to the effect that the production, transportation, storage and
marketing of ethylene and its
co-products
will constitute qualifying income within the meaning of Section 7704 of the Code. However, no ruling has been or will be requested from the IRS
regarding our treatment as a partnership for U.S. federal income tax purposes. Instead we have relied on the opinion of counsel that based upon the Code, existing Treasury Regulations, published revenue rulings and court decisions and
representations described below, Westlake Chemical Partners LP and our partnership and limited liability company subsidiaries will each be classified as a partnership or disregarded as an entity separate from its owner for federal income
tax purposes.
Vinson & Elkins L.L.P. is of the opinion that we and our partnership and limited liability company
subsidiaries will be disregarded as separate from us or treated as partnerships for federal income tax purposes. In rendering its opinion, Vinson & Elkins L.L.P. has relied on the factual representations made by us and our general partner,
including, without limitation:
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(a)
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Neither we nor any of our partnership or limited liability company subsidiaries has elected or will elect to be treated as a corporation for federal income tax purposes;
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(b)
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For each taxable year since and including the year of our initial public offering, more than 90% of our gross income has been and will be income of a character that Vinson & Elkins L.L.P. has opined is
qualifying income within the meaning of Section 7704(d) of the Code, including income earned pursuant to processes described in our private letter ruling; and
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(c)
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Each hedging transaction that we treat as resulting in qualifying income has been and will be appropriately identified as a hedging transaction pursuant to applicable Treasury Regulations, and has been and will be
associated with oil, natural gas or products thereof that are held or to be held by us in activities that Vinson & Elkins L.L.P. has opined or will opine result in qualifying income.
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We believe that these representations are true and will be true in the future.
If we fail to meet the Qualifying Income Exception, other than a failure that is determined by the IRS to be inadvertent and that is cured
within a reasonable time after discovery (in which case the IRS may also require us
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to make adjustments with respect to our unitholders or pay other amounts), we will be treated as transferring all of our assets, subject to all of our liabilities, to a newly formed corporation,
on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation and then as distributing that stock to our unitholders in liquidation. This deemed contribution and liquidation should not
result in the recognition of taxable income by our unitholders or us so long as the aggregate amount of our liabilities does not exceed the adjusted tax basis of our assets. Thereafter, we would be treated as an association taxable as a corporation
for federal income tax purposes.
The present federal income tax treatment of publicly traded partnerships, including us, or an investment
in our units may be modified by administrative or legislative action or judicial interpretation at any time. For example, from time to time, members of the U.S. Congress propose and consider substantive changes to the existing federal income tax
laws that affect publicly-traded partnerships. One such legislative proposal would have eliminated the Qualifying Income Exception upon which we rely for our treatment as a partnership for federal income tax purposes.
In addition, on January 24, 2017, final regulations regarding which activities give rise to qualifying income within the meaning of
Section 7704 of the Code (the Final Regulations) were published in the Federal Register. The Final Regulations, consistent with our private letter ruling, treat our income from the production, transportation, storage and marketing
of ethylene and its
co-products
constitutes as qualifying income. However, there can be no assurance that there would not be further changes to the Treasury Departments interpretation of the
qualifying income rules in a manner that could impact our ability to qualify as a partnership in the future.
It is possible that a change
in law could affect us and may be applied retroactively. Any such changes could negatively impact the value of an investment in our units. If for any reason we are taxable as a corporation in any taxable year, our items of income, gain, loss and
deduction would be taken into account by us in determining the amount of our liability for federal income tax, rather than being passed through to our unitholders. Our partnership agreement provides that if a law is enacted or existing law is
modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target
distribution amounts may be adjusted to reflect the impact of that law on us.
Our taxation as a corporation would materially reduce the cash available for distribution to unitholders and thus
would likely substantially reduce the value of our units. Any distribution made to a unitholder at a time we are treated as a corporation would be (i) a taxable dividend to the extent of our current or accumulated earnings and profits, then
(ii) a nontaxable return of capital to the extent of the unitholders adjusted tax basis in its units (determined separately for each unit), and thereafter (iii) taxable capital gain.
At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state
income, franchise, or other forms of taxation. Imposition of a similar tax on us in the jurisdictions in which we operate or in other jurisdictions to which we may expand could substantially reduce our cash available for distribution to our
unitholders.
The remainder of this discussion is based on the opinion of Vinson & Elkins L.L.P. that we will be treated as a
partnership for federal income tax purposes.
Tax Consequences of Unit Ownership
Limited Partner Status
Unitholders
of Westlake Chemical Partners LP who are admitted as limited partners of the partnership, as well as unitholders whose units are held in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive
rights attendant to the ownership of their units will be treated as partners of Westlake Chemical Partners LP for federal income tax purposes.
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In addition, a beneficial owner of units whose units have been transferred to a short seller to
complete a short sale would appear to lose status as a partner with respect to such units for federal income tax purposes. Please read Tax Consequences of Unit OwnershipTreatment of Securities Loans.
Income, gain, deductions or losses would not appear to be reportable by a unitholder who is not a partner for federal income tax purposes, and
any cash distributions received by a unitholder who is not a partner for federal income tax purposes would therefore appear to be fully taxable as ordinary income. A unitholder who is not treated as a partner in us as described above are urged to
consult its own tax advisors with respect to the tax consequences applicable to such unitholder under its particular circumstances.
Flow-Through of
Taxable Income
Subject to the discussion below under Entity-Level Collections of Unitholder Taxes and
Administrative MattersInformation Returns and Audit Procedures, with respect to payments we may be required to make on behalf of our unitholders, we will not pay any federal income tax. Rather, each unitholder will be
required to report on its federal income tax return each year its share of our income, gains, losses and deductions for our taxable year or years ending with or within its taxable year. Consequently, we may allocate income to a unitholder even if
that unitholder has not received a cash distribution.
Basis of Units
A unitholders tax basis in its units initially will be the amount paid for those units increased by the unitholders initial
allocable share of our liabilities. That basis generally will be (i) increased by the unitholders share of our income and any increases in such unitholders share of our liabilities, and (ii) decreased, but not below zero, by
the amount of all distributions to the unitholder, the unitholders share of our losses, and any decreases in its share of our liabilities. The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must
combine those interests and maintain a single adjusted tax basis for all of those interests.
Treatment of Distributions
Distributions made by us to a unitholder generally will not be taxable to the unitholder, unless such distributions are of cash or marketable
securities that are treated as cash and exceed the unitholders tax basis in its units, in which case the unitholder generally will recognize gain taxable in the manner described below under Disposition of Units.
Any reduction in a unitholders share of our nonrecourse liabilities (liabilities for which no partner bears the economic
risk of loss) will be treated as a distribution by us of cash to that unitholder. A decrease in a unitholders percentage interest in us because of our issuance of additional units may decrease the unitholders share of our nonrecourse
liabilities. For purposes of the foregoing, a unitholders share of our nonrecourse liabilities generally will be based upon that unitholders share of the unrealized appreciation (or depreciation) in our assets, to the extent thereof,
with any excess nonrecourse liabilities allocated based on the unitholders share of our profits. Please read Disposition of Units.
A
non-pro
rata distribution of money or property (including a deemed distribution as a result of the
reallocation of our nonrecourse liabilities described above) may cause a unitholder to recognize ordinary income if the distribution reduces the unitholders share of our unrealized receivables, including depreciation recapture and
substantially appreciated inventory items, both as defined in Section 751 of the Code (Section 751 Assets). To the extent of such reduction, the unitholder would be deemed to receive its proportionate share of the
Section 751 Assets and exchange such assets with us in return for a portion of the
non-pro
rata distribution. This deemed exchange will result in the unitholders recognition of ordinary income in an
amount equal to the excess of (1) the
non-pro
rata portion of that distribution over (2) the unitholders tax basis (typically zero) in the Section 751 Assets deemed to be relinquished in
the exchange.
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Limitations on Deductibility of Losses
A unitholder may not be entitled to deduct the full amount of loss we allocate to it because its share of our losses will be limited to the
lesser of (i) the unitholders adjusted tax basis in its units, and (ii) in the case of a unitholder that is an individual, estate, trust or certain types of closely-held corporations, the amount for which the unitholder is considered
to be at risk with respect to our activities. A unitholder will be at risk to the extent of its adjusted tax basis in its units, reduced by (1) any portion of that basis attributable to the unitholders share of our nonrecourse
liabilities, (2) any portion of that basis representing amounts otherwise protected against loss because of a guarantee, stop loss agreement or similar arrangement, and (3) any amount of money the unitholder borrows to acquire or hold its
units, if the lender of those borrowed funds owns an interest in us, is related to another unitholder or can look only to the units for repayment. A unitholder subject to the at risk limitation must recapture losses deducted in previous years to the
extent that distributions (including distributions deemed to result from a reduction in a unitholders share of nonrecourse liabilities) cause the unitholders at risk amount to be less than zero at the end of any taxable year.
Losses disallowed to a unitholder or recaptured as a result of the basis or at risk limitations will carry forward and will be allowable as a
deduction in a later year to the extent that the unitholders adjusted tax basis or at risk amount, whichever is the limiting factor, is subsequently increased. Upon a taxable disposition of units, any gain recognized by a unitholder can be
offset by losses that were previously suspended by the at risk limitation but not losses suspended by the basis limitation. Any loss previously suspended by the at risk limitation in excess of that gain can no longer be used, and will not be
available to offset a unitholders salary or active business income.
In addition to the basis and at risk limitations, a passive
activity loss limitation limits the deductibility of losses incurred by individuals, estates, trusts, some closely-held corporations and personal service corporations from passive activities (such as, trade or business activities in
which the taxpayer does not materially participate). The passive loss limitations are applied separately with respect to each publicly-traded partnership. Consequently, any passive losses we generate will be available to offset only passive income
generated by us. Passive losses that exceed a unitholders share of passive income we generate may be deducted in full when the unitholder disposes of all of its units in a fully taxable transaction with an unrelated party. The passive loss
rules are applied after other applicable limitations on deductions, including the at risk and basis limitations.
Limitations on Interest Deductions
The deductibility of a
non-corporate
taxpayers investment interest
expense is limited to the amount of that taxpayers net investment income. Investment interest expense includes:
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interest on indebtedness allocable to property held for investment;
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interest expense allocated against portfolio income; and
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the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent allocable against portfolio income.
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The computation of a unitholders investment interest expense will take into account interest on any margin account borrowing or other
loan incurred to purchase or carry a unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly
connected with the production of investment income. Net investment income does not include qualified dividend income (if applicable) or gains attributable to the disposition of property held for investment. A unitholders share of a
publicly-traded partnerships portfolio income and, according to the IRS, net passive income will be treated as investment income for purposes of the investment interest expense limitation.
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Entity-Level Collections of Unitholder Taxes
If we are required or elect under applicable law to pay any federal, state, local or
non-U.S.
tax on
behalf of any current or former unitholder or our general partner, our partnership agreement authorizes us to treat the payment as a distribution of cash to the relevant unitholder or general partner. Where the tax is payable on behalf of all
unitholders or we cannot determine the specific unitholder on whose behalf the tax is payable, our partnership agreement authorizes us to treat the payment as a distribution to all current unitholders. Payments by us as described above could give
rise to an overpayment of tax on behalf of a unitholder, in which event the unitholder may be entitled to claim a refund of the overpayment amount. Please read Administrative MattersInformation Returns and Audit Procedures.
Each unitholder is urged to consult its tax advisor to determine the consequences to them of any tax payment we make on its behalf.
Allocation of
Income, Gain, Loss and Deduction
In general, if we have a net profit, our items of income, gain, loss and deduction will be
allocated amongst our unitholders and our general partner in accordance with their percentage interests in us. If distributions are made in respect of the incentive distribution rights, gross income will be allocated to the recipients to the extent
of such distributions. In addition, for any taxable year ending on or before December 31, 2020, holders of common units (excluding converted subordinated units held by Westlake or its affiliates) may be allocated additional gross operating
income; provided that no such special allocation shall be made to the extent a purchaser of common units in this offering would be allocated an amount of U.S. federal taxable income on the common units purchased in this offering with respect to such
taxable year that would exceed 20% of the cash distributed on the common units purchased in this offering with respect to such year.
Specified items of our income, gain, loss and deduction will be allocated under Section 704(c) of the Code (or the principles of Section
704(c) of the Code) to account for any difference between the adjusted tax basis and fair market value of our assets at the time such assets are contributed to us and at the time of any subsequent offering of our units (a
Book-Tax
Disparity). As a result, the federal income tax burden associated with any
Book-Tax
Disparity immediately prior to an offering will be borne by our
partners holding interests in us prior to such offering. In addition, items of recapture income will be specially allocated to the extent possible (subject to the limitations described above) to the unitholder who was allocated the deduction giving
rise to that recapture income in order to minimize the recognition of ordinary income by other unitholders.
An allocation of items of our
income, gain, loss or deduction, other than an allocation required by the Code to eliminate a
Book-Tax
Disparity, will be given effect for federal income tax purposes in determining a unitholders share
of an item of income, gain, loss or deduction only if the allocation has substantial economic effect. In any other case, a unitholders share of an item will be determined on the basis of the unitholders interest in us, which
will be determined by taking into account all the facts and circumstances, including (i) the unitholders relative contributions to us, (ii) the interests of all the partners in profits and losses, (iii) the interest of all the
partners in cash flow and (iv) the rights of all the partners to distributions of capital upon liquidation. Vinson & Elkins L.L.P. is of the opinion that, with the exception of the issues described in Section 754
Election and Disposition of Units Allocations Between Transferors and Transferees, allocations of income, gain, loss or deduction under our partnership agreement will be given effect for federal income tax
purposes.
Treatment of Securities Loans
A unitholder whose units are loaned (for example, a loan to a short seller to cover a short sale of units) may be treated as having
disposed of those units. If so, such unitholder would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss as a result of such deemed disposition. As a result,
during this period (i) any of our income, gain, loss or deduction allocated to those units would not be reportable by the lending unitholder, and (ii) any cash distributions received by the lending unitholder as to those units may be
treated as ordinary taxable income.
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Due to a lack of controlling authority, Vinson & Elkins L.L.P. has not rendered an
opinion regarding the tax treatment of a unitholder that enters into a securities loan with respect to its units. A unitholder desiring to assure its status as partners and avoid the risk of income recognition from a loan of its units is urged to
modify any applicable brokerage account agreements to prohibit its brokers from borrowing and lending its units. The IRS has announced that it is studying issues relating to the tax treatment of short sales of partnership interests. Please read
Disposition of UnitsRecognition of Gain or Loss.
Tax Rates
Under current law, the highest marginal federal income tax rates for individuals applicable to ordinary income and long-term capital gains
(generally, gains from the sale or exchange of certain investment assets held for more than one year) are 39.6% and 20%, respectively. These rates are subject to change by new legislation at any time.
In addition, a 3.8% net investment income tax (NIIT) applies to certain net investment income earned by individuals, estates, and
trusts. For these purposes, net investment income generally includes a unitholders allocable share of our income and gain realized by a unitholder from a sale of units. In the case of an individual, the tax will be imposed on the lesser of
(i) the unitholders net investment income from all investments, or (ii) the amount by which the unitholders modified adjusted gross income exceeds $250,000 (if the unitholder is married and filing jointly or a surviving
spouse), $125,000 (if married filing separately) or $200,000 (if the unitholder is unmarried or in any other case). In the case of an estate or trust, the tax will be imposed on the lesser of (i) undistributed net investment income, or
(ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins.
Section 754 Election We have made the election permitted by Section 754 of the Code that permits us to adjust the tax bases in our
assets as to specific purchasers of our units under Section 743(b) of the Code to reflect the unit purchase price. That election is irrevocable without the consent of the IRS. The Section 743(b) adjustment separately applies to each purchaser of
units based upon the values and adjusted tax basis of each of our assets at the time of the relevant purchase, and the adjustment will reflect the purchase price paid. The Section 743(b) adjustment does not apply to a person who purchases units
directly from us. For purposes of this discussion, a unitholders basis in our assets will be considered to have two components: (1) its share of the tax basis in our assets as to all unitholders and (2) its Section 743(b)
adjustment to that tax basis (which may be positive or negative). The Section 743(b) adjustment does not apply to a person who purchases units directly from us.
Under Treasury Regulations, a Section 743(b) adjustment attributable to property depreciable under Section 168 of the Code, may be
amortizable over the remaining cost recovery period for such property, while a Section 743(b) adjustment attributable to properties subject to depreciation under Section 167 of the Code, must be amortized straight-line or using the 150%
declining balance method. As a result, if we owned any assets subject to depreciation under Section 167 of the Code, the amortization rates could give rise to differences in the taxation of unitholders purchasing units from us and unitholders
purchasing from other unitholders.
Under our partnership agreement, we are authorized to take a position to preserve the uniformity of
units even if that position is not consistent with applicable Treasury Regulations. Please read Disposition of UnitsUniformity of Units. Consistent with our partnership agreement, we intend to treat properties depreciable
under Section 167 of the Code, if any, in the same manner as properties depreciable under Section 168 of the Code for this purpose. These positions are consistent with the methods employed by other publicly traded partnerships but are
inconsistent with the existing Treasury Regulations, and Vinson & Elkins L.L.P. has not opined on the validity of this approach.
The IRS may challenge the positions we adopt with respect to depreciating or amortizing the Section 743(b) adjustment to preserve the
uniformity of units due to lack of controlling authority. Because a unitholders
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adjusted tax basis for its units is reduced by its share of our items of deduction or loss, any position we take that understates deductions will overstate a unitholders basis in its units,
and may cause the unitholder to understate gain or overstate loss on any sale of such units. Please read Disposition of Units Recognition of Gain or Loss. If a challenge to such treatment were sustained, the gain from
the sale of units may be increased without the benefit of additional deductions.
The calculations involved in the Section 754
election are complex and are made on the basis of assumptions as to the value of our assets and other matters. The IRS could seek to reallocate some or all of any Section 743(b) adjustment we allocated to our assets subject to depreciation to
goodwill or nondepreciable assets. Goodwill, as an intangible asset, is amortizable over a longer period of time or under a less accelerated method than certain of our tangible assets. We cannot assure any unitholder that the determinations we make
will not be successfully challenged by the IRS or that the resulting deductions will not be reduced or disallowed altogether. Should the IRS require a different tax basis adjustment to be made, and should, in our opinion, the expense of compliance
exceed the benefit of the election, we may seek permission from the IRS to revoke our Section 754 election. If permission is granted, a subsequent purchaser of units may be allocated more income than it would have been allocated had the
election not been revoked.
Tax Treatment of Operations
Accounting Method and Taxable Year
We will use the year ending December 31 as our taxable year and the accrual method of accounting for federal income tax purposes. Each
unitholder will be required to include in its tax return its share of our income, gain, loss and deduction for each taxable year ending within or with its taxable year. In addition, a unitholder who has a taxable year ending on a date other than
December 31 and who disposes of all of its units following the close of our taxable year but before the close of its taxable year must include its share of our income, gain, loss and deduction in income for its taxable year, with the result
that it will be required to include in income for its taxable year its share of more than twelve months of our income, gain, loss and deduction. Please read Disposition of UnitsAllocations Between Transferors and Transferees.
Tax Basis, Depreciation and Amortization
The tax basis of each of our assets will be used for purposes of computing depreciation and cost recovery deductions and, ultimately, gain or
loss on the disposition of these assets. If we dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any gain, determined by reference to the amount of depreciation and deductions previously taken, may be subject to
the recapture rules and taxed as ordinary income rather than capital gain. Similarly, a unitholder who has taken cost recovery or depreciation deductions with respect to property we own will likely be required to recapture some or all of those
deductions as ordinary income upon a sale of its interest in us. Please read Tax Consequences of Unit OwnershipAllocation of Income, Gain, Loss and Deduction and Disposition of Units Recognition of Gain or
Loss.
The costs we incur in offering and selling our units (called syndication expenses) must be capitalized and cannot
be deducted currently, ratably or upon our termination. While there are uncertainties regarding the classification of certain costs as organization expenses, which may be amortized by us, and as syndication expenses, which may not be amortized by
us, the underwriting discounts and commissions we incur will be treated as syndication expenses. Please read Disposition of Units Recognition of Gain or Loss.
Valuation and Tax Basis of Each of Our Properties
The federal income tax consequences of the ownership and disposition of units will depend in part on our estimates of the relative fair market
values and the tax basis of each of our assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we will make many of the relative fair
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market value estimates ourselves. These estimates and determinations of tax basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value
or basis are later found to be incorrect, the character and amount of items of income, gain, loss or deduction previously reported by a unitholder could change, and such unitholder could be required to adjust its tax liability for prior years and
incur interest and penalties with respect to those adjustments.
Disposition of Units
Recognition of Gain or Loss
A
unitholder will be required to recognize gain or loss on a sale or exchange of a unit equal to the difference, if any, between the unitholders amount realized and the adjusted tax basis in the unit sold. A unitholders amount realized
generally will equal the sum of the cash and the fair market value of other property it receives plus its share of our nonrecourse liabilities with respect to the unit sold or exchanged. Because the amount realized includes a unitholders share
of our nonrecourse liabilities, the gain recognized on the sale or exchange of a unit could result in a tax liability in excess of any cash received from the sale or exchange.
Except as noted below, gain or loss recognized by a unitholder on the sale or exchange of a unit held for more than one year generally will be
taxable as long-term capital gain or loss. However, gain or loss recognized on the disposition of units will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to
Section 751 Assets, such as depreciation recapture and our inventory items, regardless of whether such inventory item is substantially appreciated in value. Ordinary income attributable to Section 751 Assets may exceed net
taxable gain realized on the sale or exchange of a unit and may be recognized even if there is a net taxable loss realized on the sale or exchange of a unit. Thus, a unitholder may recognize both ordinary income and capital gain or loss upon a sale
or exchange of a unit. Net capital loss may offset capital gains and, in the case of individuals, up to $3,000 of ordinary income per year.
For purposes of calculating gain or loss on the sale or exchange of a unit, the unitholders adjusted tax basis will be adjusted by its
allocable share of our income or loss in respect of its unit for the year of the sale. Furthermore, as described above, the IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests
and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of that tax basis must be allocated to the interests sold using an equitable apportionment
method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partners tax basis in its entire interest in the partnership as the value of the interest sold bears to the
value of the partners entire interest in the partnership.
Treasury Regulations under Section 1223 of the Code allow a selling
unitholder who can identify units transferred with an ascertainable holding period to elect to use the actual holding period of the units transferred. Thus, according to the ruling discussed in the paragraph above, a unitholder will be unable to
select high or low basis units to sell or exchange as would be the case with corporate stock, but, according to the Treasury Regulations, it may designate specific units sold for purposes of determining the holding period of the units transferred. A
unitholder electing to use the actual holding period of any unit transferred must consistently use that identification method for all subsequent sales or exchanges of our units. A unitholder considering the purchase of additional units or a sale or
exchange of units purchased in separate transactions is urged to consult its tax advisor as to the possible consequences of this ruling and application of the Treasury Regulations.
Specific provisions of the Code affect the taxation of some financial products and securities, including partnership interests, by treating a
taxpayer as having sold an appreciated financial position, including a partnership interest with respect to which gain would be recognized if it were sold, assigned or terminated at its fair market value, in the event the taxpayer or a
related person enters into:
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an offsetting notional principal contract; or
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a futures or forward contract with respect to the partnership interest or substantially identical property.
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Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional principal contract or a futures or forward contract
with respect to the partnership interest, the taxpayer will be treated as having sold that position if the taxpayer or a related person then acquires the partnership interest or substantially identical property. The Secretary of the Treasury is
authorized to issue Treasury Regulations that treat a taxpayer that enters into transactions or positions that have substantially the same effect as the preceding transactions as having constructively sold the financial position. Please read
Tax Consequences of Unit OwnershipTreatment of Securities Loans.
Allocations Between Transferors and Transferees
In general, our taxable income or loss will be determined annually, will be prorated on a monthly basis and will be subsequently
apportioned among the unitholders in proportion to the number of units owned by each of them as of the opening of the applicable exchange on the first business day of the month (the Allocation Date). Nevertheless, we allocate certain
deductions for depreciation of capital additions based upon the date the underlying property is placed in service, and gain or loss realized on a sale or other disposition of our assets or, in the discretion of the general partner, any other
extraordinary item of income, gain, loss or deduction will be allocated among the unitholders on the Allocation Date in the month in which such income, gain, loss or deduction is recognized. As a result, a unitholder transferring units may be
allocated income, gain, loss and deduction realized after the date of transfer.
Although simplifying conventions are contemplated by the
Code and most publicly traded partnerships use similar simplifying conventions, the use of this method may not be permitted under existing Treasury Regulations. The Department of the Treasury and the IRS issued final Treasury Regulations pursuant to
which a publicly traded partnership may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders. Nonetheless, the regulations do not specifically authorize the use of the proration method we
have adopted. Accordingly, Vinson & Elkins L.L.P. is unable to opine on the validity of this method of allocating income and deductions between transferee and transferor unitholders. If the IRS determines that this method is not
allowed under the final Treasury Regulations our taxable income or losses could be reallocated among our unitholders. Under our partnership agreement, we are authorized to revise our method of allocation between transferee and transferor
unitholders, as well as among unitholders whose interests vary during a taxable year, to conform to a method permitted under the Treasury Regulations.
A unitholder who disposes of units prior to the record date set for a cash distribution for that quarter will be allocated items of our
income, gain, loss and deduction attributable to the month of disposition but will not be entitled to receive a cash distribution for that period.
Notification Requirements
A
unitholder who sells or purchases any of its units is generally required to notify us in writing of that transaction within 30 days after the transaction (or, if earlier, January 15 of the year following the transaction in the case of a
seller). Upon receiving such notifications, we are required to notify the IRS of that transaction and to furnish specified information to the transferor and transferee. Failure to notify us of a transfer of units may, in some cases, lead to the
imposition of penalties. However, these reporting requirements do not apply to a sale by an individual who is a citizen of the United States and who effects the sale through a broker who will satisfy such requirements.
Technical Termination
We will be
considered to have technically terminated our partnership for federal income tax purposes upon the sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period.
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For purposes of measuring whether the 50% threshold is reached, multiple sales of the same unit are counted only once. A technical termination results in the closing of our taxable year for all
unitholders. In the case of a unitholder reporting on a taxable year other than the calendar year, the closing of our taxable year may result in more than twelve months of our taxable income or loss being includable in such unitholders taxable
income for the year of termination.
A technical termination occurring on a date other than December 31 would require that we file
two tax returns for one fiscal year, thereby increasing our administration and tax preparation costs. However, pursuant to an IRS relief procedure the IRS may allow a technically terminated partnership to provide a single Schedule
K-1
for the calendar year in which a termination occurs. Following a technical termination, we would be required to make new tax elections, including a new election under Section 754 of the Code, and the
termination would result in a deferral of our deductions for depreciation and thus may increase the taxable income allocable to our unitholders. A technical termination could also result in penalties if we were unable to determine that the technical
termination had occurred. Moreover, a technical termination may either accelerate the application of, or subject us to, any tax legislation enacted before the technical termination that would not otherwise have been applied to us as a continuing
partnership as opposed to a terminating partnership.
Uniformity of Units
Because we cannot match transferors and transferees of units and for other reasons, we must maintain uniformity of the economic and tax
characteristics of the units to a purchaser of these units. As a result of the need to preserve uniformity, we may be unable to completely comply with a number of federal income tax requirements. Any
non-uniformity
could have a negative impact on the value of the units. Please read Tax Consequences of Unit OwnershipSection 754 Election.
Our partnership agreement permits our general partner to take positions in filing our tax returns that preserve the uniformity of our units.
These positions may include reducing the depreciation, amortization or loss deductions to which a unitholder would otherwise be entitled or reporting a slower amortization of Section 743(b) adjustments for some unitholders than that to which
they would otherwise be entitled. Vinson & Elkins L.L.P. is unable to opine as to the validity of such filing positions.
A
unitholders adjusted tax basis in units is reduced by its share of our deductions (whether or not such deductions were claimed on an individual income tax return) so that any position that we take that understates deductions will overstate the
unitholders basis in its units, and may cause the unitholder to understate gain or overstate loss on any sale of such units. Please read Disposition of UnitsRecognition of Gain or Loss and Tax
Consequences of Unit OwnershipSection 754 Election above. The IRS may challenge one or more of any positions we take to preserve the uniformity of units. If such a challenge were sustained, the uniformity of units might be affected,
and, under some circumstances, the gain from the sale of units might be increased without the benefit of additional deductions.
Tax-Exempt
Organizations and Other Investors
Ownership of units by employee benefit plans and other
tax-exempt
organizations, as well as by
non-resident
alien individuals,
non-U.S.
corporations and other
non-U.S.
persons (collectively,
Non-U.S.
Unitholders) raises issues unique to those investors and, as described below, may have substantially adverse tax
consequences to them. Each prospective unitholder that is a
tax-exempt
entity or
Non-U.S.
Unitholder should consult its tax advisors before investing in our units.
Employee benefit plans and most other
tax-exempt
organizations, including IRAs and other retirement
plans, are subject to federal income tax on unrelated business taxable income. Virtually all of our income will be unrelated business taxable income and will be taxable to a
tax-exempt
unitholder.
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Non-U.S.
Unitholders are taxed by the United States on
income effectively connected with a U.S. trade or business (effectively connected income) and on certain types of U.S.-source
non-effectively
connected income (such as dividends), unless exempted
or further limited by an income tax treaty. Each
Non-U.S.
Unitholder will be considered to be engaged in business in the United States because of its ownership of our units. Furthermore, it is probable that
Non-U.S.
Unitholders will be deemed to conduct such activities through a permanent establishment in the United States within the meaning of any applicable tax treaty. Consequently, each
Non-U.S.
Unitholder will be required to file federal tax returns to report its share of our income, gain, loss or deduction and pay federal income tax on its share of our net income or gain. Moreover, under rules
applicable to publicly traded partnerships, distributions to
Non-U.S.
Unitholders are subject to withholding at the highest applicable effective tax rate. Each
Non-U.S.
Unitholder must obtain a taxpayer identification number from the IRS and submit that number to our transfer agent on a Form
W-8BEN
or
W-8BEN-E
(or other applicable or successor form) in order to obtain credit for these withholding taxes.
In addition, if a
Non-U.S.
Unitholder is classified as a
non-U.S.
corporation, it will be treated as engaged in a United States trade or business and may be subject to the U.S. branch profits tax at a rate of 30%, in addition to regular federal income tax, on its
share of our income and gain as adjusted for changes in the foreign corporations U.S. net equity to the extent reflected in the corporations earnings and profits. That tax may be reduced or eliminated by an income tax treaty
between the United States and the country in which the foreign corporate unitholder is a qualified resident. In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Code.
A
Non-U.S.
Unitholder who sells or otherwise disposes of a unit will be subject to federal income
tax on gain realized from the sale or disposition of that unit to the extent the gain is effectively connected with a U.S. trade or business of the
Non-U.S.
Unitholder. Under a ruling published by the IRS
interpreting the scope of effectively connected income, gain realized by a
Non-U.S.
Unitholder from the sale of its interest in a partnership that is engaged in a trade or business in the United
States will be considered to be effectively connected with a U.S. trade or business. Thus, part or all of a
Non-U.S.
Unitholders gain from the sale or other disposition of units may be
treated as effectively connected with a unitholders indirect U.S. trade or business constituted by its investment in us.
Moreover,
under the Foreign Investment in Real Property Tax Act, as long as our partnership units continue to be regularly traded on an established securities marker, a
Non-U.S.
Unitholder generally will only be subject
to federal income tax upon the sale or disposition of a unit if at any time during the shorter of the five-year period ending on the date of the disposition or the
Non-U.S.
Unitholders holding period for
the unit (i) such
Non-U.S.
Unitholder owned (directly or indirectly constructively applying certain attribution rules) more than 5% of our units and (ii) 50% or more of the fair market value of our real
property interests and other assets used or held for use in a trade or business consisted of U.S. real property interests (which include U.S. real estate, including land, improvements, and associated personal property, and interests in certain
entities holding U.S. real estate). If our units were not considered to be regularly traded on an established securities market, such
Non-U.S.
Unitholder (regardless of the percentage of units owned) would be
subject to U.S. federal income tax on a taxable disposition of our units, and a 15% withholding tax would apply to the gross proceeds from such disposition (as described in the preceding paragraph). More than 50% of our assets may consist of U.S.
real property interests. Therefore, each
Non-U.S.
Unitholder may be subject to federal income tax on gain from the sale or disposition of its units.
Administrative Matters
Information Returns and
Audit Procedures
We intend to furnish to each unitholder, within 90 days after the close of each taxable year, specific tax
information, including a Schedule
K-1,
which describes its share of our income, gain, loss and deduction for our preceding taxable year. In preparing this information, which will not be reviewed by counsel, we
will take
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various accounting and reporting positions, some of which have been mentioned earlier, to determine each unitholders share of income, gain, loss and deduction. We cannot assure our
unitholders that those positions will yield a result that conforms to all of the requirements of the Code, Treasury Regulations or administrative interpretations of the IRS.
The IRS may audit our federal income tax information returns. Neither we nor Vinson & Elkins L.L.P. can assure prospective
unitholders that the IRS will not successfully challenge the positions we adopt, and such a challenge could adversely affect the value of the units. Adjustments resulting from an IRS audit may require each unitholder to adjust a prior years
tax liability, and may result in an audit of the unitholders own return. Any audit of a unitholders return could result in adjustments unrelated to our returns.
Publicly traded partnerships are treated as entities separate from its owners for purposes of federal income tax audits, judicial review of
administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and deduction are determined in a partnership proceeding rather than in separate proceedings of the partners. The Code
requires that one partner be designated as the Tax Matters Partner for these purposes, and our partnership agreement designates our general partner.
The Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in our returns.
The Tax Matters Partner may bind a unitholder with less than a 1% profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax
Matters Partner may seek judicial review, by which all the unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any unitholder having
at least a 1% interest in profits or by any group of unitholders having in the aggregate at least a 5% interest in profits. However, only one action for judicial review may go forward, and each unitholder with an interest in the outcome may
participate in that action.
A unitholder must file a statement with the IRS identifying the treatment of any item on its federal income
tax return that is not consistent with the treatment of the item on our return. Intentional or negligent disregard of this consistency requirement may subject a unitholder to substantial penalties.
Pursuant to the Bipartisan Budget Act of 2015, for taxable years beginning after December 31, 2017, if the IRS makes audit adjustments to
our income tax returns, it may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us, unless we elect to have our general partner and unitholders take any audit
adjustment into account in accordance with their interests in us during the taxable year under audit. Similarly, for such taxable years, if the IRS makes audit adjustments to income tax returns filed by an entity in which we are a member or partner,
it may assess and collect any taxes (including penalties and interest) resulting from such audit adjustment directly from such entity. Generally, we expect to elect to have our general partner and unitholders take any such audit adjustment into
account in accordance with their interests in us during the taxable year under audit, but there can be no assurance that such election will be effective in all circumstances. With respect to audit adjustments as to an entity in which we are a member
or partner, the Joint Committee of Taxation has stated that we would not be able to have our general partner and our unitholders take such audit adjustment into account. If we are unable to have our general partner and our unitholders take such
audit adjustment into account in accordance with their interests in us during the taxable year under audit, our then current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such unitholders did not
own our units during the taxable year under audit. If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties, and interest, our cash available for distribution to our unitholders might be substantially
reduced. These rules are not applicable for taxable years beginning on or prior to December 31, 2017. Congress has proposed changes to the Bipartisan Budget Act, and we anticipate that amendments may be made. Accordingly, the manner in which
these rules may apply to us in the future is uncertain.
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Additionally, pursuant to the Bipartisan Budget Act of 2015, the Code will no longer require that
we designate a Tax Matters Partner. Instead, for taxable years beginning after December 31, 2017, we will be required to designate a partner, or other person, with a substantial presence in the United States as the partnership representative
(Partnership Representative). The Partnership Representative will have the sole authority to act on our behalf for purposes of, among other things, federal income tax audits and judicial review of administrative adjustments by the
IRS. If we do not make such a designation, the IRS can select any person as the Partnership Representative. We currently anticipate that we will designate our general partner as the Partnership Representative. Further, any actions taken by us
or by the Partnership Representative on our behalf with respect to, among other things, federal income tax audits and judicial review of administrative adjustments by the IRS, will be binding on us and all of the unitholders.
Additional Withholding Requirements
Withholding taxes may apply to certain types of payments made to foreign financial institutions (as specially defined in the Code)
and certain other foreign entities. Specifically, a 30% withholding tax may be imposed on interest, dividends and other fixed or determinable annual or periodical gains, profits and income from sources within the United States (FDAP
Income), or gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States (Gross Proceeds) paid to a foreign financial institution or to a
non-financial
foreign entity (as specially defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting, (ii) the
non-financial
foreign entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner or (iii) the foreign financial
institution or
non-financial
foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in
clause (i) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report
certain information about such accounts, and withhold 30% on payments to noncompliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement
with the United States governing these requirements may be subject to different rules.
These rules generally apply to payments of FDAP
Income currently and generally will apply to payments of relevant Gross Proceeds made on or after January 1, 2019. Thus, to the extent we have FDAP Income or we have Gross Proceeds on or after January 1, 2019 that are not treated as
effectively connected with a U.S. trade or business (please read
Tax-Exempt
Organizations and Other InvestorsIncome Allocations, Distributions and Dispositions), a unitholder who is
foreign financial institution or certain other foreign entity, or a person that hold its units through such foreign entities, may be subject to withholding on distributions they receive from us, or its distributive share of our income, pursuant to
the rules described above.
Each prospective unitholder should consult its own tax advisors regarding the potential application of these
withholding provisions to its investment in our units.
Nominee Reporting
Persons who hold an interest in us as a nominee for another person are required to furnish to us:
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the name, address and taxpayer identification number of the beneficial owner and the nominee;
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a statement regarding whether the beneficial owner is:
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a
non-U.S.
government, an international organization or any wholly-owned agency or instrumentality of either of the foregoing; or
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the amount and description of units held, acquired or transferred for the beneficial owner; and
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specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales.
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Each broker and financial institution is required to furnish additional information, including whether such broker or financial institution is
a U.S. person and specific information on units such broker or financial institution acquires, holds or transfers for its own account. A penalty of $250 per failure, up to a maximum of $3 million per calendar year, is imposed by the Code for
failure to report that information to us. The nominee is required to supply the beneficial owner of the units with the information furnished to us.
Accuracy-Related Penalties
Certain penalties may be imposed as a result of an underpayment of tax that is attributable to one or more specified causes, including
negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation misstatements. No penalty will be imposed, however, for any portion of an underpayment if it is shown that there was a reasonable
cause for the underpayment of that portion and that the taxpayer acted in good faith regarding the underpayment of that portion. We do not anticipate that any accuracy-related penalties will be assessed against us.
State, Local, and Other Tax Considerations
In addition to federal income taxes, unitholders may be subject to other taxes, including state and local income taxes, unincorporated business
taxes, and estate, inheritance or intangibles taxes that may be imposed by the various jurisdictions in which we conduct business or own property now or in the future or in which the unitholder is a resident. We will initially own assets and conduct
business in Kentucky, Louisiana, and Texas; Kentucky and Louisiana currently impose a personal income tax on individuals, corporations, and other entities. As we make acquisitions or expand our business, we may own property or conduct business in
additional states that impose a personal income tax. Although an analysis of those various taxes is not presented here, each prospective unitholder should consider its potential impact on its investment in us.
A unitholder may be required to file income tax returns and pay income taxes in some or all of the jurisdictions in which we do business or
own property, though such unitholder may not be required to file a return and pay taxes in certain jurisdictions because its income from such jurisdictions falls below the jurisdictions filing and payment requirement. Further, a unitholder may
be subject to penalties for a failure to comply with any filing or payment requirement applicable to such unitholder. Some of the jurisdictions may require us, or we may elect, to withhold a percentage of income from amounts to be distributed to a
unitholder who is not a resident of the jurisdiction. Withholding, the amount of which may be greater or less than a particular unitholders income tax liability to the jurisdiction, generally does not relieve a nonresident unitholder from the
obligation to file an income tax return.
It is the responsibility of each unitholder to investigate the legal and tax consequences,
under the laws of pertinent jurisdictions, of its investment in us. We strongly recommend that each prospective unitholder consult, and depend upon, its own tax counsel or other advisor with regard to those matters. Further, it is the responsibility
of each unitholder to file all state, local and
non-U.S.,
as well as federal tax returns that may be required of it. Vinson & Elkins L.L.P. has not rendered an opinion on the state, local, alternative
minimum tax or
non-U.S.
tax consequences of an investment in us.
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MATERIAL U.S. TAX CONSEQUENCES OF OWNERSHIP OF DEBT SECURITIES
A description of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of debt securities
will be set forth on the prospectus supplement relating to the offering of debt securities.
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CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the acquisition and holding of our common units by employee benefit plans
that are subject to Title I of ERISA, plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code or employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA),
certain church plans (as defined in Section 3(33) of ERISA),
non-U.S.
plans (as described in Section 4(b)(4) of ERISA) or other plans that are not subject to the foregoing but may be subject to provisions
under any other federal, state, local,
non-U.S.
or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, Similar Laws), and entities whose underlying
assets are considered to include plan assets of any such plan, account or arrangement (each, a Plan).
This
summary is based on the provisions of ERISA and the Code (and related regulations and administrative and judicial interpretations) as of the date of this prospectus. This summary does not purport to be complete, and no assurance can be given that
future legislation, court decisions, regulations, rulings or pronouncements will not significantly modify the requirements summarized below. Any of these changes may be retroactive and may thereby apply to transactions entered into prior to the date
of their enactment or release. This discussion is general in nature and is not intended to be all inclusive, nor should it be construed as investment or legal advice.
General Fiduciary Matters
ERISA and the Code impose
certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an ERISA Plan) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other
interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of an ERISA Plan or the management or disposition of the assets of an ERISA Plan, or who renders investment advice
for a fee or other compensation to an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.
In considering an investment in our common
units with a portion of the assets of any Plan, a fiduciary should consider the Plans particular circumstances and all of the facts and circumstances of the investment and determine whether the acquisition and holding of such units is in
accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code, or any Similar Law relating to the fiduciarys duties to the Plan. Among other things, consideration should be given to:
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whether the investment is prudent under Section 404(a)(1)(B) of ERISA and any other applicable Similar Laws;
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whether, in making the investment, the Plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA and any other applicable Similar Laws;
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whether the investment is permitted under the terms of the applicable documents governing the Plan;
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whether the acquisition or holding of the common units will constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (please see discussion under
Prohibited Transaction Issues below);
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whether the Plan will be considered to hold, as plan assets, (i) only common units or (ii) an undivided interest in our underlying assets (please see the discussion under Plan Asset Issues
below); and
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whether the investment will result in recognition of unrelated business taxable income by the Plan and, if so, the potential
after-tax
investment return. Please read
Material U.S. Federal Income Tax ConsequencesTax Exempt Organizations and Other Investors.
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Prohibited Transaction
Issues
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions
involving plan assets with persons or entities who are parties in interest, within the meaning of
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ERISA, or disqualified persons, within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engages in a
non-exempt
prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engages in such a
non-exempt
prohibited transaction may be subject to excise taxes, penalties and liabilities under ERISA and the Code. The acquisition and/or holding of our common units by an ERISA Plan with respect to which the
issuer, the initial purchaser, or a guarantor is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code,
unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption.
Because of the foregoing, our common units should not be acquired or held by any person investing plan assets of any Plan, unless
such acquisition and holding will not constitute a
non-exempt
prohibited transaction under ERISA and the Code or a similar violation of any applicable Similar Laws.
Plan Asset Issues
Additionally, a
fiduciary of a Plan should consider whether the Plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that our general partner would become a fiduciary of the Plan and our operations would be subject to
the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Code and any other applicable Similar Laws.
The U.S. Department of Labor (the DOL) regulations provide guidance with respect to whether the assets of an entity in which ERISA
Plans acquire equity interests would be deemed plan assets under certain circumstances. Under these regulations, an entitys underlying assets generally would not be considered to be plan assets if, among other things:
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the units acquired by ERISA Plans are publicly offered securitiesi.e., the units are part of a class of securities that is widely held by 100 or more investors independent of the issuer and each other, are
freely transferable (as defined in the DOL regulations), and are either registered under certain provisions of the federal securities laws or sold to the ERISA Plan as part of a public offering under certain conditions;
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(b)
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the entity is an operating companyi.e., it is primarily engaged in the production or sale of a product or service, other than the investment of capital, either directly or through a majority-owned
subsidiary or subsidiaries; or
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there is no significant investment by benefit plan investors (as defined in Section 3(42) of ERISA), which is defined to mean that immediately after the most recent acquisition by a benefit
plan investor of any equity interest in the entity, less than 25% of the total value of each class of equity interest (disregarding certain interests held by our general partner, its affiliates, and certain other persons (other than benefit plan
investors) with discretionary authority or control over the assets of the entity or who provide investment advice for a fee (direct or indirect) with respect to such assets, and any affiliates thereof) is held by ERISA Plans, IRAs and certain other
Plans (but not including governmental plans, foreign plans and certain church plans), and entities whose underlying assets are deemed to include plan assets by reason of a Plans investment in the entity.
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Due to the complexity of these rules and the excise taxes, penalties and liabilities that may be imposed upon persons involved in
non-exempt
prohibited transactions, it is particularly important that fiduciaries, or other persons considering acquiring and/or holding our common units on behalf of, or with the assets of, any Plan, consult with
their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the acquisition and holding of our common units. Purchasers of our
common units have the exclusive responsibility for ensuring that their acquisition and holding of such units complies with the fiduciary responsibility rules of ERISA and does not
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violate the prohibited transaction rules of ERISA, the Code or applicable Similar Laws. The sale of common units to a Plan is in no respect a representation by us or any of our affiliates or
representatives that such an investment meets all relevant legal requirements with respect to investments by any such Plan or that such investment is appropriate for any such Plan.
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