But wait, there's more. MLPs have some tax advantages that enhance returns, too.  An MLP is structured as a "pass-through entity." As a "pass-through" entity, the MLP does not pay any income tax itself. So, investors theoretically get more money distributed to them.  Then there's the way the quarterly distributions can be classified. Sometimes, it's as income. But distributions can also be classified as a return of capital — which is not taxable when the unitholder receives it. It's only when the investor actually sells their units that any profit would be taxable — and then it's at the capital gains tax rate, which generally lower than the regular income tax rate.