unitholders and our general partner. Our methodology may be viewed as understating the value of our assets. In
that case, there may be a shift of income, gain, loss and deduction between certain unitholders and the general
partner, which may be unfavorable to such unitholders. Moreover, subsequent purchasers of common units may
have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to our tangible assets
and a lesser portion allocated to our intangible assets. The IRS may challenge our valuation methods, or our
allocation of the Section 743(b) adjustment attributable to our tangible and intangible assets, and allocations of
income, gain, loss and deduction between the general partner and certain of our unitholders.
A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable
income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’
sale of common units and could have a negative impact on the value of the common units or result in audit
adjustments to our unitholders’ tax returns without the benefit of additional deductions.
The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period
will result in the termination of our partnership for federal income tax purposes.
We will be considered to have terminated for federal income tax purposes if there is a sale or exchange of
50% or more of the total interests in our capital and profits within a twelve-month period. Our termination,
among other things, would result in the closing of our taxable year for all unitholders, which would result in us
filing two tax returns (and our unitholders could receive two Schedule K-1’s) for one calendar year. Our
termination could also result in a significant deferral of depreciation deductions allowable in computing our
taxable income. In the case of a unitholder reporting on a taxable year other than a calendar year, the closing of
our taxable year may result in more than twelve months of our taxable income or loss being includable in his
taxable income for the year of termination. Our termination currently would not affect our classification as a
partnership for federal income tax purposes, but instead, we would be treated as a new partnership for tax
purposes. If treated as a new partnership, we must make new tax elections and could be subject to penalties if
we are unable to determine that a termination occurred. The IRS has announced recently a publicly traded
partnership technical termination relief procedure, whereby if a publicly traded partnership that has technically
terminated requests and the IRS grants special relief, among other things, the partnership will only have to
provide one Schedule K-1 to unitholders for the year, notwithstanding two partnership tax yeas resulting from
the technical termination.
Unitholders may be subject to state and local taxes and return filing requirements in states where they do
not reside as a result of investing in our units.
In addition to federal income taxes, unitholders may be subject to other taxes, including foreign, state and
local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the
various jurisdictions in which we conduct business or own property, even if the unitholders do not live in any of
those jurisdictions. Unitholders may be required to file foreign, state and local income tax returns and pay state
and local income taxes in some or all of these jurisdictions. Further, the unitholder may be subject to penalties
for failure to comply with those requirements. We own assets and conduct business in the states of Arkansas,
Colorado, Connecticut, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, New
Hampshire, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Virginia,
West Virginia and Wyoming. Each of these states, other than Texas and Wyoming, currently imposes a
personal income tax on individuals. A majority of these states impose an income tax on corporations and other
entities. As we make acquisitions or expand our business, we may own assets or do business in additional states
that impose a personal income tax. It is each unitholder’s responsibility to file all United States federal, foreign,
state and local tax returns.
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