WASHINGTON (Reuters) - The U.S. Treasury Department is looking into increased use by companies of the master limited partnership (MLP) as a business structure, a department spokesperson said on Monday, hours after a pioneering user turned its back on the MLP.

Houston-based Kinder Morgan Inc , the biggest U.S. pipeline company, said it will consolidate into a single corporation, folding together its existing organization of several master limited partnerships (MLPs).

The Treasury statement, sent in an email, came in answer to questions from Reuters following Kinder Morgan's news.

"We at Treasury are looking into the effects of these transactions on future tax revenues," the spokesperson said.

"Instances where the tax base may be eroded serve as a reminder of why we need Congress to enact business tax reform that broadens the tax base and lowers tax rates."

Kinder Morgan's investors had grown concerned that the tax-advantaged MLP structure popularized by the company was hurting its growth and was too complicated.

Under the terms of its restructuring, it will consolidate its MLPs Kinder Morgan Energy Partners and El Paso Pipeline Partners LP with Kinder Morgan Management LLC and organize into a single C-corporation.

The move represented a turning point for the rise of MLPs, which are publicly traded but pay no corporate income tax, unlike C-corporations which are more familiar to investors.

MLP status has been limited by the Internal Revenue Service to certain kinds of businesses, including oil and gas companies and real estate investment trusts. But a range of other businesses in recent years have tried to use the MLP structure.

The IRS, which answers to the Treasury Department, said in early April that it had temporarily stopped issuing private letter rulings (PLRs) that companies often seek to get the agency's blessing when setting up new MLPs.

IRS Commissioner John Koskinen told reporters that the agency had imposed a "pause" on the rulings so it could review the qualifications for MLPs. An IRS spokesman said on Monday that the pause remains in place.


(Reporting by Kevin Drawbaugh; Editing by Howard Goller, David Gregorio and Bernard Orr)