Rulings under § 168(k) relating to Commodity Operations

Private Letter Ruling 201140002
This letter responds to a letter dated December 29, 2010, and supplemental correspondence, submitted by Taxpayer requesting rulings under § 168(k) of the Internal Revenue Code.

Taxpayer represents that the facts are as follows:
  • Parent is engaged in the industrial gas business with worldwide operations. The industrial gas business involves separating the atmosphere into its component parts through cryogenic and high pressure processes and delivering the resulting gases to customers.
  • Taxpayer is a limited partnership. For federal income tax purposes, Taxpayer is a disregarded entity that is included in Parent’s consolidated federal income tax return.
  • Taxpayer is responsible for providing service to large industry customers in the United States.
  • Taxpayer offers gas and energy solutions to these customers to improve their process efficiency and help them with their environmental responsibilities. In the United States, this business serves the refining, natural gas, chemical, and metals industries.
  • In connection with its business in the United States, Taxpayer operates a network of plants and an extensive pipeline system along the Location2 and the Location3. 
  •  Taxpayer separates the components of the atmosphere at its plants and transports the resulting gases to its customers via a network of pipelines. 
  •  Taxpayer generally constructs and/or acquires plant and pipeline assets in order to satisfy the requirements of specific customers and contracts. 
  •  Depending on a customer’s geographic location and the availability of plant and pipeline resources, Taxpayer has a variety of options regarding the method by which it provides the gases to a customer. 
  • Taxpayer may choose to construct a plant at or near a customer’s location to supply the desired product or it may extend existing pipeline or plant resources to a customer location to supply the product.

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