After 6 straight positive weeks, midstream took this week off and finished down just a little bit. Masks are coming off, stadiums and arenas are filling up, people are filling up their cars, and after this long weekend, offices will have higher attendance than we’ve seen in a long time. Good vibes permeated the stock market this week too, with rotation into growth stocks and away from energy stocks. Even with the slow end to the month, midstream is off to its best start ever, up 36-40% so far this year.
Subscribe for the full post…I did not include thoughts on the potential for the tax exemption for MLPs to be eliminated that was included in the proposed budget from Biden. I posted a tweet with my quick thoughts. The budget is very preliminary at this point, but a few points if partnerships were suddenly subject to corporate tax:
The tax revenue gain would not be much now that many large MLPs have converted, almost not worth the trouble.
Forcing MLPs to be taxpayers could lead to better corporate governance and positive stock price reactions if large MLPs fully converted and were eligible for equity indexes.
The conversation the last year or two has been about trying to expand qualifying income to include renewables assets, which seems more likely than eliminating the exemption.
The mechanics of forcing existing MLPs to be taxpayers would probably lead to ordinary income recapture, similar to what has happened for holders of other MLPs that have converted, which would further alienate retail investors.
I believe the risk of tax exemption going away is still low at this point, given likely pushback in congress, and I also believe the impact on MLP stock performance will be less than it would have been 10 years ago if it does go away.
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