OREANDA-NEWS. Westlake Chemical Partners and SunCoke Energy Partners have released public complaints on the proposed changes to the US master limited partnership (MLP) taxation policy.

Under the Internal Revenue Service's (IRS) proposed changes, both companies could lose their MLP statuses because of a change in classification criteria.

For the IRS to recognize a company as an MLP, as opposed to a corporation, at least 90pc of its income must be generated from operations meeting specified criteria. A company can also receive a private letter ruling (PLR) from the IRS to qualify if their operations are interpretable as meeting the stipulations.

The proposed changes draw a fine line between mineral and natural resource operations, such as refining and petrochemical operations, qualifying some for MLP status and excluding others. Newly excluded MLPs and those holding PLRs will not be permanently grandfathered in under the new policy, but rather they would be granted a 10-year transition period before losing MLP status.

Westlake believes that the proposed regulations result in unequal treatment of ethylene producers by favoring oil refineries over strictly petrochemical operators because the new regulations specifically exclude petrochemical cracking from the criteria. Westlake received a PLR to qualify its ethylene operations for MLP status prior to its IPO last August.

The company has raised its concerns with the IRS and US Department of Treasury on the grounds that the announcement is unfair to Westlake's shareholders, whose investments were adversely impacted by proposal's announcement.

Westlake now seeks to persuade the IRS to either expand the proposal to be consistent with its PLR or offer an extended — or permanent — grandfathering clause.

SunCoke faces a similar situation to Westlake. The company's coal-to-coke processing operations will no longer qualify under the new regulations because of a narrowing of definitions. But, unlike Westlake, SunCoke does not hold a PLR and must therefore provide a reasonable interpretation of the statute to be grandfathered even termporarily.

SunCoke has requested clarification from the IRS and Treasury Department as to whether the coking of coal qualifies as MLP income. The company also released a legal opinion justifying its coking operations under the new proposal.

SunCoke's market capitalization has shrunk since the IRS' announcement on 6 May.

The IRS has asked for comments on the proposal and public hearing requests by 4 August.

The change was prompted by the growing number of PLR requests made by companies since 2008.