ALPS Alerian MLP ETF (NYSEArca: AMLP) has about $4 billion in assets. The Investment Company Act of 1940 forbids open-end funds from owning more than 25% of their portfolio in MLPs, AMLP is structured as a C-corporation and pays income tax at the corporate level. Any taxable income they receive from the underlying MLPs is an annual tax liability, and upon the sale of the portfolio’s shares, they must also pay up at the corporate level. Functionally, investors are being taxed twice.
As long as interest rates remain low, MLPs will be able to cheaply finance new projects and grow, reports Woodham.
ALPS Alerian MLP ETF
Tisha Guerrero contributed to this article.