What Freedom Checks Really Mean

Contrary to the belief that freedom checks are free money, it means the cash payments paid to shareholders of a publicly traded company. Primarily, freedom checks are a luxury for those who invest in energy-related businesses. The law was initially introduced to promote investments in the energy sector. Currently, more than 550 companies pay these dividends to their investors. Together the companies are called Master Limited Partnerships (MLPs) and mostly operate refineries, drill new wells and transport fuel through pipelines. They are required to give 90 cents for every dollar to their investors to qualify for tax exemption.

Freedom checks can be traced back to President Nixon who believed that for the United States to maintain its power and independence, it has to invest in energy fully. Thus, he introduced freedom checks to act as incentives to investors. Usually, federal tax policies do not apply to master limited partnerships, and the members pay comparatively less on capital gains if they decide to sell their shares. Notably, investors can receive up to 160,000 every quarter, but the amount one receives usually depends on the number of shares one has invested.

Besides energy, freedom checks also apply to a select few industries such as Real Estates. Herein, investments are exempted from taxes, but nine-tenths of their proceedings have to go to investors. The whole point of such lucrative offers is to promote the growth of the specific industries. Matt Badiali, an investor who writes newsletters on the most lucrative tax-free investment, says that shares can sell for as low as 50 dollars, but to get a bigger free check means that you have to own more shares.

Investing in Master Limited partnerships is considered a low-risk investment because it concerns slow-growth industries such as refining and pipeline. Therefore, they can earn a steady income through the long-term contracts that they get and consequently they can pay the free checks to the investors. Also notable is that the fluctuating oil and gas prices do not affect MLPs as they mostly operate as highways and most of their income comes from transporting the products. Therefore, they can issue the free checks even when oil prices are at their lowest.

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