Constellation Energy Partners LLC (NYSE MKT: CEP) today announced that it has filed a preliminary proxy statement with the Securities and Exchange Commission regarding a proposed election to be treated as a corporation rather than a partnership for income tax purposes.
In order to make the election, further approval is required by CEP’s board of managers and by the company’s unitholders, with the vote for the latter approval included in the agenda for the company’s annual meeting that is currently scheduled to be held December 14, 2012. CEP is uncertain as to how our unitholders may vote their units. If approved, such election is expected to be effective as of January 1, 2013, which would eliminate the allocation of taxable income and the issuance of Schedule K-1s to unitholders for tax periods that begin on and after that date.
“An election to be treated as a corporation for income tax purposes is just one of the opportunities we’re pursuing for the benefit of our investors,” said Stephen R. Brunner, President and Chief Executive Officer of Constellation Energy Partners. “Almost 90% of our unitholders were allocated taxable income for the 2011 tax year as a result of their investment in CEP, and our costs associated with processing annual Schedule K-1 statements have averaged approximately $600,000 per year since our initial public offering. The election, if approved, would significantly simplify the taxes associated with investing in CEP, address the risk and uncertainty of taxable income allocations from CEP, and help with our goal of lowering costs.”
CEP has filed with the Securities and Exchange Commission (the “SEC”) a preliminary proxy statement in connection with its 2012 annual meeting of unitholders relating to, among other matters, its proposal to elect to be treated as a corporation for income tax purposes. If approved by its board of managers, CEP plans to file a definitive proxy statement with the SEC and make available such definitive proxy statement to unitholders of record on the record date for the meeting at which unitholders will be asked, among other matters, to elect to be treated as a corporation for income tax purposes. The company and certain of its managers, executive officers and other members of management may, under SEC rules, be deemed “participants” in the solicitation of proxies from the company’s unitholders with respect to the proposals set forth in the preliminary proxy statement. INVESTORS AND UNITHOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSALS PRESENTED AT THE COMPANY’S ANNUAL MEETING AND OTHER IMPORTANT INFORMATION INCLUDING THOSE PERSONS WHO MAY BE DEEMED “PARTICIPANTS” IN THE SOLICITATION.