SXCP Responds to IRS’s Proposed Regulations
Vinson & Elkins Responds to IRS’s Proposed Regulations
SXCP Qualifying Income Status FAQs
LISLE, Ill.--(BUSINESS WIRE)--Jun. 16, 2015-- SunCoke Energy, Inc. (NYSE: SXC) and SunCoke Energy Partners, L.P. (NYSE: SXCP) today submitted a joint comment letter with the U.S. Department of the Treasury and the Internal Revenue Service
(collectively, the “Treasury”) regarding proposed regulations recently
issued by Treasury addressing what activities of publicly traded
partnerships generate “qualifying income” within the meaning of section
7704(d)(1)(E) of the Internal Revenue Code. Under current law, at least
90 percent of the income of a publicly traded partnership such as SunCoke Energy Partners
must be qualifying income if it is not to be treated as a corporation
for U.S. federal tax purposes. SunCoke is seeking clarification
regarding the treatment of the coking of coal as a qualifying activity
that produces qualifying income.
Although we are seeking clarification of the proposed regulations, we
believe that the proposed regulations as currently drafted support the
position that the coking of coal is a qualifying activity. For example,
under the proposed regulations an activity that meets the definition of
“refining” in section 1.613-4(g)(6)(iii) of the percentage depletion
regulations is a qualifying activity. That regulation defines refining
as an activity that eliminates impurities or foreign matter from smelted
or partially processed metallic and non-metallic ores and minerals.
Under this language, smelting is a qualifying activity. Coking of coal
does not involve different kinds of physical or chemical changes from
smelting. Like smelting and refining, coking of coal drives off
impurities resulting in a purer carbon product. In addition, the
proposed regulations treat the production of petroleum coke from the
heavy fractions of the crude oil fractionation process as a qualifying
activity. This process also uses heat to chemically change the feedstock
to a purer carbon product.
In the event that a publicly traded partnership is impacted by the
final regulations, the proposed regulations provide for a 10-year
grandfathering period. In order to be grandfathered, a partnership
either must have received a private letter ruling or be engaged in the
activity based on a reasonable interpretation of the statute and its
legislative history. We believe that the receipt of the opinion of our
counsel, Vinson & Elkins LLP, that our coking operations generate qualifying income provides that reasonable interpretation.
We believe that section 7704(d)(1)(E) and its legislative history
fully support the position that coking of coal generates qualifying
income and that any final regulations will clarify the coking of coal is
a qualifying activity.
We suggest that investors and other interested parties read our
comment letter to the proposed regulations for a more complete
discussion of why we believe it is very clear that coking of coal
generates qualifying income under the statute and its legislative
history. We have included that letter, as well as information on the
comment process and the mechanics of filing comments, on SXCP’s website
at http://www.sxcpartners.com/ as well as SXC’s website at http://www.suncoke.com/.
SUNCOKE ENERGY, INC.
SunCoke Energy, Inc.
(NYSE: SXC) supplies high-quality coke to the integrated steel industry
under long-term take-or-pay coke contracts that pass through commodity
and certain operating costs to customers. We utilize an innovative
heat-recovery cokemaking technology that captures excess heat for steam
or electrical power generation. We are the sponsor of SunCoke Energy Partners, L.P.
(NYSE: SXCP), a publicly traded master limited partnership, holding a 2
percent general partner interest, 56 percent limited partnership
interest and all of the incentive distribution rights. Our cokemaking
facilities are located in Illinois, Indiana, Ohio, Virginia, Brazil and India. In addition, we own approximately 110 million tons of proven and probable coal reserves in Virginia and West Virginia. To learn more about SunCoke Energy, Inc., visit our website at www.suncoke.com.
SUNCOKE ENERGY PARTNERS, L.P.
SunCoke Energy Partners, L.P.
(NYSE: SXCP) is a publicly traded master limited partnership that
manufactures high-quality coke used in the blast furnace production of
steel and provides coal handling services to the coke, steel and power
industries. In our cokemaking business, we utilize an innovative
heat-recovery technology that captures excess heat for steam or
electrical power generation and have long-term take-or-pay coke
contracts that pass through commodity and certain operating costs. Our
coal handling terminals have the collective capacity to blend and
transload more than 30 million tons of coal each year and are
strategically located to reach key U.S. ports in the Gulf Coast, East Coast and Great Lakes. SXCP’s General Partner is a wholly owned subsidiary of SunCoke Energy, Inc. (NYSE: SXC), which has more than 50 years of cokemaking experience serving the integrated steel industry. To learn more about SunCoke Energy Partners, L.P., visit our website at www.sxcpartners.com.
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Source: SunCoke Energy Partners, L.P.
SunCoke Energy Partners, L.P.
Investors & Media:
Lisa Ciota: 630-824-1987
or
Media:
Steve Carlson: 630-824-1783