TMLP targets master limited partnerships (MLPs), the tax-advantaged entities that own America's energy infrastructure — pipelines, storage terminals, and processing plants. These assets generate steady cash flows from long-term contracts, making MLPs more like toll roads than oil wells.
How It Works
The fund holds MLPs directly, passing through their tax characteristics including the dreaded K-1 forms. Unlike MLP ETNs that dodge K-1s but carry credit risk, or C-corp MLP funds that face double taxation, TMLP maintains the pure MLP structure. This means investors get the full distribution yield but also the full tax complexity.
Key Features
- Direct MLP ownership preserves tax benefits that C-corp funds lose to corporate taxes
- Energy infrastructure focus means cash flows tied to volume, not commodity prices
- Quarterly distributions typically 50-80% tax-deferred via return of capital treatment
Risks
- K-1 tax forms create filing headaches and potential state tax obligations in multiple jurisdictions
- Distribution cuts during energy downturns can slash income by 30-50% as seen in 2015-2016 and 2020
- Unrelated business taxable income (UBTI) can trigger taxes in IRAs above $1,000 threshold
Who Should Own This
Best for taxable accounts of high-net-worth investors seeking 5-8% yields who can handle K-1 complexity and have a tax preparer familiar with MLPs. The tax-deferred distributions work well for those needing current income while deferring tax bills. Absolutely avoid in IRAs due to UBTI issues.