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Viper Energy Partners to give up pass-through status, pay federal income taxes

Viper Energy Partners LP will relinquish its pass-through status after the board of directors and general partner unanimously voted to make the Permian Basin shale oil and gas driller an entity subject to federal corporate taxes.

The Diamondback Energy Inc subsidiary said the decision to simplify Viper's tax structure resulted from the federal tax overhaul of 2017, which lowered the corporate tax rate to 21% from 35% and instituted a 20% pass-through deduction. That legislation narrowed master limited partnerships' tax advantage over corporations and prompted speculation that some partnerships might accelerate restructuring as C corporations. Viper Energy, however, will remain an MLP despite its new tax status, according to a March 29 statement.

"Viper's tax status election will expand our investor universe to a broader range of investors, both domestic and international, who are looking for exposure to an oil and gas company that can grow at industry leading rates without spending any capital and maintaining 90% margins," said Travis Stice, CEO of Viper's general partner.

Viper will maintain its quarterly distributions of operational cash flow to shareholders.