2025 Energy Transfer K-1 Guide: Three Entities, Three Mistakes to Avoid

K-3 schedules (international tax information) are available separately. Most ET unitholders don't need the K-3 — it reports foreign tax items that are typically zero or immaterial for a domestic midstream MLP.

When you buy ET on your brokerage, you see one ticker and one price. But Energy Transfer LP is structured as a holding partnership that owns controlling interests in two subsidiary publicly traded partnerships. Your annual K-1 package contains data for three separate entities:

1. Energy Transfer LP — The parent entity. Owns the largest pipeline network in the U.S. Typically receives ~85–90% of your initial basis allocation.
2. USA Compression Partners (USAC) — A compression services MLP that ET controls. Provides natural gas compression for producers and midstream operators.
3. Sunoco LP (SUN) — A fuel distribution MLP that ET controls. Distributes motor fuels to convenience stores, independent dealers, and commercial customers.

Why does this structure exist? ET acquired controlling GP interests in USAC and SUN through prior mergers and transactions. Because each entity remains a separate publicly traded partnership, the IRS requires them to issue separate K-1 schedules — even though you only bought one ticker. Each K-1 has its own EIN (Employer Identification Number) in Part I, Box A.

The §469(k) rule: Under IRC Section 469(k), each publicly traded partnership is a separate "canister" for passive activity purposes. This means:

• A loss from ET parent cannot offset income from USAC
• A loss from USAC cannot offset income from SUN
• Suspended losses from one entity are only released when you dispose of that specific entity — and since selling ET units disposes of all three simultaneously, they all release at once

Entering an ET K-1 correctly requires three separate K-1 entries in your tax software. Here's the step-by-step process for TurboTax (Premier or higher is required for K-1 entry in the online version):

Here's what basis erosion looks like for a typical ET position over three years. These are illustrative figures — your K-1 will differ based on units owned, purchase date, and specific partnership allocations each year. If the return-of-capital mechanic is new to you, start with how MLP distributions work.

Enter data from one of your ET sub-entity K-1s to calculate the adjusted basis for that entity. Run this separately for each sub-entity (ET, USAC, SUN).

Energy Transfer operates in approximately 44 states — one of the broadest geographic footprints of any MLP. Your K-1 state schedule allocates income to each of these states. In theory, each state could require a nonresident filing. In practice, most retail investors file in a handful of states at most.

States to watch: Louisiana, Pennsylvania, and Oklahoma have relatively low filing thresholds and are major ET operating states. If your allocated income in any of these states exceeds a few hundred dollars, check whether a nonresident return is required.

Texas: Texas has no state income tax but does have a franchise (margin) tax. This is almost always irrelevant for individual unitholders with small positions — the franchise tax is structured as a business tax, not an individual income tax.

Composite returns: ET offers composite return filing in some states, meaning the partnership files and pays state tax on your behalf. Check the supplemental materials in your K-1 package or contact Tax Package Support to confirm which states are covered. See our complete MLP State Filing Requirements guide for the full framework.

A surprising number of current ET unitholders did not buy ET directly — they acquired units through mergers with predecessor entities. If this applies to you, your initial basis calculation is different from a standard market purchase.

• Entering only one K-1: You have three. Check that your tax software or CPA has entries for all three EINs. If your return shows only one K-1 for ET, two entities are missing. → TurboTax K-1 entry guide
• Using combined totals instead of entity breakdowns: The first page of the K-1 package may show aggregate numbers. Use the entity-specific K-1 pages — each starts with a different EIN in Part I, Box A. → Track each entity separately in the Basis Tracker
• Mixing up liability figures: Each sub-entity has its own Item K (Partner's Share of Liabilities). Don't use the parent entity's liabilities for USAC or SUN. Liability changes directly affect your basis. → Basis Worksheet Explained
• Ignoring negative basis risk per entity: If one sub-entity has high distributions relative to income, its basis can approach zero independently — even if the other entities are healthy. Monitor each entity's basis health separately. → What happens when basis reaches zero
• Not adjusting for mergers: If you came into ET through a merger (ETE/ETP, ENBL, CEQP), your initial basis needs to reflect the exchange ratio and any boot received. Using your original purchase price of the predecessor entity is incorrect. → Why your broker's basis is wrong
• Forgetting the "PTP" checkbox: In TurboTax, you must check "Publicly Traded Partnership" for each of the three K-1 entries. Without it, the passive activity rules are applied incorrectly. → PTP passive loss rules explained