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If any of the following risks were actually to occur, our business, financial condition, results of operations or cash flows could be materially adversely affected.
−Removed: Summary Risk Factors
+Added: Risk Factor Summary
Risks Inherent in Our Business
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• If we are unable to make acquisitions from Westlake or third parties on economically acceptable terms, our future growth would be limited, and any acquisitions we make may reduce, rather than increase, our cash generated from operations on a per unit basis.
+Added: • Our operations and assets are subject to climate-related risks and uncertainties.
Risks Relating to Our Partnership Structure
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• The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Westlake or other large holders.
−Removed: • Our tax treatment depends on our status as a partnership for federal income tax purposes, and not being subject to a material amount of entity-level taxation.
+Added: • Our tax treatment depends on our status as a partnership for U.S.
+Added: federal income tax purposes, and not being subject to a material amount of entity-level taxation.
Our cash available for distribution to unitholders may be substantially reduced if we become subject to entity-level taxation as a result of the Internal Revenue Service ("IRS") treating us as a corporation or legislative, judicial or administrative changes, and may also be reduced by any audit adjustments if imposed directly on the partnership.
• Even if unitholders do not receive any cash distributions from us, unitholders will be required to pay taxes on their share of our taxable income.
−Removed: A unitholder's share of our taxable income may be increased as a result of the IRS successfully contesting any of the federal income tax positions we take.
+Added: A unitholder's share of our taxable income may be increased as a result of the IRS successfully contesting any of the U.S.
+Added: federal income tax positions we take.
• Tax-exempt entities and non-U.S.
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Westlake may be unable to generate enough cash flow from operations to meet its minimum obligations under the Ethylene Sales Agreement if its business is adversely impacted by competition, operational problems, general adverse economic conditions or the inability to obtain feedstock.
−Removed: For example, lower prices of crude oil, such as the prices experienced from the third quarter of 2014 through 2020 have led to a reduction in the cost advantage for natural gas liquids-based ethylene derivatives in North America, such as Westlake's, as compared to naphtha-based ethylene derivatives.
−Removed: As a result, Westlake's margins and cash flows have been negatively impacted.
−Removed: While crude oil prices stabilized and increased in 2021, activity has still not reached the level it was at prior to these events and therefore these events continue to have a negative impact on Westlake's margins and cash flows.
+Added: For example, lower prices of crude oil, such as the prices experienced from the third quarter of 2014 through 2020 led to a reduction in the cost advantage for natural gas liquids-based ethylene derivatives in North America, such as Westlake's, as compared to naphtha-based ethylene derivatives.
+Added: As a result, Westlake's margins and cash flows were negatively impacted.
If Westlake were unable to meet its minimum payment obligations to OpCo as a result of any one or more of these factors, our ability to make distributions to our unitholders would be reduced or eliminated.
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Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could materially adversely affect Westlake's business, financial condition and results of operations.
−Removed: The COVID-19 pandemic has resulted in authorities implementing numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, among others.
+Added: The COVID-19 pandemic at its peak resulted in authorities implementing numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, among others.
+Added: There were widespread adverse impacts on the global economy, many of Westlake's facilities and its employees, customers and suppliers.
We have also encountered supply chain constraints and disruptions and workforce availability issues as a result of COVID-19 related actions and vaccination requirements.
−Removed: Despite the availability of vaccines, the COVID-19 pandemic may continue unabated or worsen, including as a result of the emergence of more infectious strains of the virus or vaccine hesitancy.
−Removed: The perceived risk of infection and health risks associated with COVID-19 has and will continue to alter behaviors of consumers and policies of companies around the world.
−Removed: Westlake, which provides us operating services, has modified certain business practices (including those related to employee travel, employee work locations and employee work practices), to comply with government restrictions and implement, where appropriate, practices encouraged by governmental and health authorities.
−Removed: However, the quarantine of personnel or the inability to access our or Westlake's facilities could adversely affect our and Westlake's operations.
−Removed: We or Westlake may take further actions as required by government authorities from time to time or that we or Westlake determine are in the best interests of our employees, customers, Westlake's partners and suppliers.
−Removed: There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform certain functions could be harmed.
−Removed: The ultimate extent of the impact of COVID-19 on Westlake's business, financial condition and results of operations will depend largely on future developments, including the duration and spread of COVID-19, the impact of governmental actions designed to prevent the spread of COVID-19 and the development, availability, timely distribution and acceptance of effective treatments and vaccines worldwide, all of which are highly uncertain and cannot be predicted with certainty at this time.
+Added: At the peak of the COVID-19 pandemic, Westlake, which provides us operating services, modified certain business practices (including those related to employee travel, employee work locations and employee work practices), to conform to government restrictions and best practices encouraged by governmental and regulatory authorities.
+Added: The ultimate extent of the impact of COVID-19 on Westlake's business, financial condition and results of operations will depend largely on future developments, including the resurgence and duration of COVID-19, the impact of governmental actions designed to prevent the spread of COVID-19 and the development, availability, timely distribution and acceptance of effective treatments and vaccines worldwide, all of which are highly uncertain and cannot be predicted with certainty at this time.
OpCo is a restricted subsidiary under certain indentures governing Westlake's senior notes.
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• terrorist attacks.
−Removed: All these hazards can cause personal injury and loss of life, catastrophic damage to or destruction of property and equipment and environmental damage, and may result in a suspension of operations and the imposition of civil or criminal penalties.
+Added: All of these hazards can cause personal injury and loss of life, catastrophic damage to or destruction of property and equipment and environmental damage, and may result in a suspension of operations and the imposition of civil or criminal penalties.
We could become subject to environmental claims brought by governmental entities or third parties.
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In addition, we may be liable for existing contamination related to certain of our facilities for which, in some cases, we believe third parties are liable in the event such third parties fail to perform their obligations.
+Added: Our operations and assets are subject to climate-related risks and uncertainties.
+Added: We are subject to increasing climate-related risks and uncertainties, many of which are outside of our control.
+Added: Climate change may result in more frequent severe weather events, potential changes in precipitation patterns and variability in weather patterns, which can disrupt our operations as well as those of our customers, partners and suppliers.
+Added: Climate change may result in heightened hurricane activity in the Gulf of Mexico and other weather and natural disaster hazards that pose a risk to OpCo's facilities, particularly those in Louisiana.
+Added: The transition to lower greenhouse gas emissions technology, the effects of carbon pricing, changes in public sentiment, regulations, taxes, public mandates or requirements, increases in climate-related lawsuits, insurance premiums and implementation of more robust disaster recovery and business continuity plans may increase costs to maintain or resume our operations, which could in turn negatively impact our business and results of operations.
Failure to adequately protect critical data and technology systems could materially affect our operations.
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If we or our securities are unable to meet the ESG standards or investment criteria set by these investors and funds, we may lose investors or investors may allocate a portion of their capital away from us, our cost of capital may increase, and our common unit price may be negatively impacted.
−Removed: Our tax treatment depends on our status as a partnership for federal income tax purposes, and not being subject to a material amount of entity-level taxation.
−Removed: If the Internal Revenue Service ("IRS"), were to treat us as a corporation for federal income tax purposes, or we become subject to entity-level taxation for state tax purposes, our cash available for distribution to our unitholders would be substantially reduced.
+Added: Our tax treatment depends on our status as a partnership for U.S.
+Added: federal income tax purposes, and not being subject to a material amount of entity-level taxation.
+Added: If the Internal Revenue Service ("IRS"), were to treat us as a corporation for U.S.
+Added: federal income tax purposes, or we become subject to entity-level taxation for state tax purposes, our cash available for distribution to our unitholders would be substantially reduced.
The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for U.S.
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federal income tax purposes or otherwise subject us to taxation as an entity.
−Removed: If we were treated as a corporation for federal income tax purposes, we would pay U.S.
+Added: If we were treated as a corporation for U.S.
+Added: federal income tax purposes, we would pay U.S.
federal income tax on our taxable income at the corporate tax rate.
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You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our common units.
−Removed: If the IRS were to contest the federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce our cash available for distribution to our unitholders.
+Added: If the IRS were to contest the U.S.
+Added: federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce our cash available for distribution to our unitholders.
The IRS may adopt positions that differ from the positions we take.
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Even if unitholders do not receive any cash distributions from us, unitholders will be required to pay taxes on their share of our taxable income.
−Removed: Unitholders are required to pay federal income taxes and, in some cases, state and local income taxes, on unitholders' share of our taxable income, whether or not they receive cash distributions from us.
+Added: Unitholders are required to pay U.S.
+Added: federal income taxes and, in some cases, state and local income taxes, on their share of our taxable income, whether or not they receive cash distributions from us.
Unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due from them with respect to that income.
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A unitholder's ratio of its share of taxable income to the cash received by it may also be affected by changes in law.
−Removed: From time to time, in connection with an offering of our common units, we may state an estimate of the ratio of federal taxable income to cash distributions that a purchaser of common units in that offering may receive in a given period.
+Added: From time to time, in connection with an offering of our common units, we may state an estimate of the ratio of U.S.
+Added: federal taxable income to cash distributions that a purchaser of common units in that offering may receive in a given period.
These estimates depend in part on factors that are unique to the offering with respect to which the estimate is stated, so the expected ratio applicable to other common units will be different, and in many cases less favorable, than these estimates.
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In general, we are entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or business during our taxable year.
−Removed: However, our deduction for "business interest" is limited to the sum of our business interest income and 30% of our "adjusted taxable income." For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization, or depletion to the extent such depreciation, amortization, or depletion is not capitalized into cost of goods sold with respect to inventory.
+Added: However, our deduction for "business interest" is limited to the sum of our business interest income and 30% of our "adjusted taxable income." For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income.
+Added: In the case of taxable years beginning on or after January 1, 2022, our adjusted taxable income is computed by taking into account any deduction allowable for depreciation, amortization, or depletion.
If our "business interest" is subject to limitation under these rules, our unitholders will be limited in their ability to deduct their share of any interest expense that has been allocated to them.
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federal income tax on the gain realized from the sale or disposition of that unit.
+Added: In addition to the withholding tax imposed on distributions of effectively connected income, distributions to a non-U.S.
+Added: unitholder will also be subject to a 10% withholding tax on the amount of any distribution in excess of our cumulative net income.
+Added: Due to the complexity of the calculation and lack of clarity in how it would apply to us, we intend to treat all of our distributions as being in excess of our cumulative net income for such purposes and subject to such 10% withholding tax.
+Added: Accordingly, distributions to a non-U.S.
+Added: unitholder will be subject to a combined withholding tax rate equal to the sum of the highest applicable effective tax rate and 10%.
Moreover, the transferee of an interest in a partnership that is engaged in a U.S.
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While the determination of a partner's "amount realized" generally includes any decrease of a partner's share of the partnership's liabilities, the Treasury Regulations provide that the "amount realized" on a transfer of an interest in a publicly-traded partnership, such as our common units, will generally be the amount of gross proceeds paid to the broker effecting the applicable transfer on behalf of the transferor, and thus will be determined without regard to any decrease in that partner's share of a publicly-traded partnership's liabilities.
−Removed: The Treasury regulations and other guidance from the IRS further provide that withholding on a transfer of an interest in a publicly-traded partnership will not be imposed on a transfer that occurs prior to January 1, 2023.
−Removed: Thereafter, the obligation to withhold on a transfer of interests in a publicly traded partnership that is effected through a broker is imposed on the transferor's broker.
+Added: For a transfer of interests in a publicly traded partnership that is effected through a broker on or after January 1, 2023, the obligation to withhold is imposed on the transferor's broker.
Current and prospective non-U.S.
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As we make acquisitions or expand our business, we may own assets or conduct business in additional states that impose similar taxes.
−Removed: It is our unitholders' responsibility to file all United States federal, foreign, state and local tax returns and pay any taxes due in these jurisdictions.
+Added: It is our unitholders' responsibility to file all U.S.
+Added: federal, foreign, state and local tax returns and pay any taxes due in these jurisdictions.
Unitholders should consult with their own tax advisors regarding the filing of such tax returns, the payment of such taxes, and the deductibility of any taxes paid.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.