The Federal Energy Regulatory Commission (FERC) has refused to rehear or modify a June 15, 1995, rate order (Opinion 397) that denied Lakehead Pipe Line Partners, L.P. any income-tax allowance related to "curative allocations" under section 704(c) of the Internal Revenue Code that increase the general partner's taxable income beyond his or her proportion of company ownership.
The ruling (Opinion 397-A) affirms Lakehead's entitlement to a tax allowance based on the income attributable to corporate partners, but imposes a limit. (Opinion 397 allowed Lakehead to collect a tax allowance equal to the general partner's and other corporate interests' share of taxable partnership taxable income.)
Lakehead maintains that the decision contradicts legislation passed by Congress concerning publicly traded partnerships that conduct business in the natural resources industry, and plans to appeal both opinions. Lakehead said the decision reduces its current and future earnings, will have a negative effect on its ability to increase cash distribution levels, and may affect current dividends.
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