The following year, to counter the threat of revenue erosion, Congress added IRC Section 7704 that provides that a publicly traded partnership will be taxed as a corporation unless the partnership meets certain gross income requirements.3
A partnership satisfies the gross income requirements of IRC Section 7704 when at least 90 percent of the partnership’s gross income is “qualified income.”4 Some forms of qualified income include interest, dividends, real property rents, income and gains derived from the exploration, development, mining or production, processing, refining, transportation (pipelines, ships, trucks), or the marketing of any mineral or natural resource.5
1. See Joint Committee on Taxation, General Explanation of the Tax Reform Act of 1986 (JCS-10-87) May 4, 1987.