Energy Transfer 2015 Annual Report Download - page 65

Table of Contents
We have adopted certain valuation methodologies in determining Unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge
these methods or the resulting allocations, and such a challenge could adversely affect the value of our common units.
In determining the items of income, gain, loss and deduction allocable to our Unitholders, we must routinely determine the fair market value of our respective
assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates using
a methodology based on the market value of our common units as a means to measure the fair market value of our respective assets. The IRS may challenge
these valuation methods and the resulting allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the amount, character, and timing 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 profit 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 technically terminated as a partnership 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. For purposes of determining whether the 50% threshold has been met, multiple sales of the
same unit will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all Unitholders which
would require us to file two federal partnership tax returns (and our Unitholders could receive two Schedules K-1 if relief was not available, as described
below) for one fiscal year, and could result in a 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 also result in more than twelve months of our taxable income or
loss being includable in such Unitholder’s taxable income for the year of termination. Our termination currently would not affect our classification as a
partnership for federal income tax purposes. We would be treated as a new partnership for tax purposes on the technical termination date, and would be
required to make new tax elections and could be subject to penalties if we were unable to determine in a timely manner that a termination occurred. The IRS
has recently announced a relief procedure whereby a publicly traded partnership that has technically terminated may be permitted to provide only a single
Schedule K-1 to Unitholders for the two tax years within the fiscal year in which the termination occurs.
Unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of investing in our
Common Units.
In addition to federal income taxes, the Unitholders may be subject to other taxes, including 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 now or in the future, even if they
do not live in any of those jurisdictions. Unitholders may be required to file state and local income tax returns and pay state and local income taxes in some
or all of the jurisdictions. We currently own property or conduct business in many states, most of which impose an income tax on individuals, corporations
and other entities. As we make acquisitions or expand our business, we may control assets or conduct business in additional states that impose a personal or
corporate income tax. Further, Unitholders may be subject to penalties for failure to comply with those requirements. It is the responsibility of each
Unitholder to file all federal, state and local tax returns.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
A description of our properties is included in “Item 1. Business.” In addition, we own office buildings for our executive offices in Dallas, Texas and office
buildings in Newton Square, Pennsylvania and Houston, Corpus Christi and San Antonio, Texas. While we may require additional office space as our
business expands, we believe that our existing facilities are adequate to meet our needs for the immediate future, and that additional facilities will be
available on commercially reasonable terms as needed.
We believe that we have satisfactory title to or valid rights to use all of our material properties. Although some of our properties are subject to liabilities and
leases, liens for taxes not yet due and payable, encumbrances securing payment obligations under non-competition agreements and immaterial
encumbrances, easements and restrictions, we do not believe that any such burdens will materially interfere with our continued use of such properties in our
business, taken as a whole. In addition, we believe that we have, or are in the process of obtaining, all required material approvals, authorizations, orders,
licenses, permits, franchises
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