Master limited partnership (MLP), Limited Partnership & Unrelated Business Taxable Income (UBTI):

MLP and LP

MLPs and LPs may generate taxable income in a retirement account if the partnership reports unrelated business taxable income (UBTI), also called passive income.

UBTI

UBTI is income generated by the partnership outside of the primary investment strategy.

Taxability of UBTI in retirement accounts:

Retirement accounts with a total of $1,000 or more of UBTI are subject to a 990-T filing performed by NFS/FMTC.

UBTI is subject to taxation in all varieties of IRAs, retirement plans like Keoghs, and Health Savings Accounts (HSA).

May

Notification by Letter

Clients are notified by letter for the following processes that were performed on their behalf in April:
  • An Employer Identification Number (EIN) was assigned to the client's account.
  • A six-month extension was filed on the client's behalf.
  • Note: An extension does not guarantee the client will have a Form 990-T filing requirement.
    • Copies of the letters are available in XTRAC.
June

Determination

The determination of Form 990-T filing requirements and the amount of any excise tax payments due is calculated for clients that have completed K-1 data by the end of April.

July

Payments Processed

  • Excise tax payments are processed for accounts previously identified in June.
  • Form 990-T if filed with the IRS by the July deadline.
  • Clients are notified by letter if a Form 990-T is filed and the amount of excise tax paid, if owed. Late payments due to insufficient funds could result in IRS penalties and interest. See 990-T tax payment for more information.
  • Note: The letter includes a copy of Form 990-T. These forms are available in XTRAC.
September

Late Determination

  • The determination of Form 990-T filing requirements and the amount of excise tax payments due is calculated for clients that did not have complete K-1 data available until after May 1.
  • Excise tax payments are processed for accounts in late September and early October.
  • Clients are notified by letter if a Form 990-T is filed and the amount of excise tax paid, if owed. Late payments due to insufficient funds could result in IRS penalties and interest. See 990-T tax payment for more information.
  • Note: The letter includes a copy of Form 990-T. These forms are available in XTRAC.

Additional Support

If a client believes that their 990t needs a correction or update, the client will need to work with a CPA or Tax Advisor and provide detailed instructions for this in writing. Full details can be seen on types of corrections/updates in ReferencePoint.