Banyan hill senior editor and financial writer championed the concept of freedom checks for many years. In the early 1980s, the US government committed itself to a reduction of oil and gas imports, which was due to over-dependence of the government on oil and gas imports from the Middle East. Congress enacted a new law called Statute 26-F that gives tax benefits to companies that engage in the production of oil and gas within the country. The law encourages the US citizens to invest in the natural resources sector.
Statute 26-F allowed the formation of Master Limited Partnerships (MLPs) which are publicly traded. MLP is a company that deals in the production, transportation, storage and processing of oil and gas in the US. Investors buy shares in the MLPs and the capital raised is used in the production of oil and gas through the purchase of infrastructure, paying workers and marketing the products generated after exploration and processing.
The payments that the investors receive are referred to as freedom checks and are payable on a monthly or quarterly basis. Checks follow the concept of dividends paid on stock shares, but unlike dividends, Checks do not attract income tax. In case an investor wants to sell their shares in an MLP, they are charged tax at the capital gains tax which is lower compared to income tax. Investment in this sector is, therefore, more favorable than in any other sector as long as an investor selects an MLP that will grow.
Currently, there are over 550 MLPs in the US in the oil and gas sector. The government also allows real estate investment trusts to apply to be MLPs. There trusts mainly generate income from rental properties and also pay at least 90 percent of their earnings to their shareholders. The advantage of freedom checks is that investors with as low as $10 can still invest and watch as their money grows over the years. Unlike many get rich quick schemes that are scams, freedom checks are legitimate, and all that an investor requires is an investment in a master limited partnership, and the earnings start coming.
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