INCOME TAXES	6 Months Ended
Jun. 30, 2012
INCOME TAXES	NOTE J — INCOME TAXES Tax Liabilities IRS Installment Agreement On November 17, 2010, Regional entered into an installment agreement (IRS Installment Agreement) with the Internal Revenue Service (IRS) for the payment of $384,000 owing in income taxes, penalties and interest in connection with the income tax return filed for the period November 2006 to July 27, 2007. Under the terms of the IRS Installment Agreement, Regional paid $60,000 upon entering into the IRS Installment Agreement and is required to pay $20,000 per month beginning December 2010 (except the January 2011 monthly installment whereby the monthly payment amount was $40,000) until all amounts owing under the IRS Installment Agreement, including continuing interest and penalties on outstanding balances, were paid in full. In addition to the $384,000, the IRS Installment Agreement provided for the $198,000 of income taxes, penalties and interest due in connection with the December 31, 2008 income tax return that was filed in 2010 to be included as part of the overall balance of the IRS Installment Agreement at such time that those balances outstanding were formally assigned for collection within the IRS. Regional paid all taxes due and owing to the IRS for the tax period July 28, 2007 to December 31, 2007 prior to entering into the IRS Installment Agreement. During 2009, the Partnership and RVOP allocated expenses to Regional for the period years 2008 and 2009. The amount of the allocated expenses for those periods totaled approximately $1,100,000. During the three months ended March 31, 2011, the Partnership and RVOP allocated additional expenses to Regional of $419,000 for the period from July 28, 2007 to December 31, 2007. Regional has amended its previously filed income tax returns for the period from July 28, 2007 to December 31, 2007 and for the year ended December 31, 2008 to reflect the allocated expenses and other income tax adjustments which eliminated the $198,000 amount referred to above. The effect on income tax payable and income tax expense for those changes was reflected in the 2009 consolidated financial statements of Central. During March 2012, the IRS Installment Agreement was fully paid. Subsequently, Regional received written notification from the IRS that the lien filed in connection with the IRS Installment Agreement was released. Estimated Taxes During the year ended December 31, 2011 and the six months ended June 30, 2012, Regional has accrued estimated taxes in the amount of $157,000 and $157,000, respectively. To date, Regional has not made any estimated tax payments in connection with the 2011 tax year. As a result, Regional is subject to penalties for such period. At the present time, Regional does not have the cash necessary to make such tax payments and, in the event Regional does not generate sufficient cash to make such payment, it intends to obtain an IRS installment agreement for the payment of such taxes. Late Filings and Delivery of Schedules K-1 to Unitholders The Partnership failed to file timely its federal and state partnership tax returns for the periods from January 1, 2008 through December 31, 2008 (2008 Tax Year) and January 1, 2009 through December 31, 2009 (2009 Tax Year). It filed the federal tax returns for the 2008 Tax Year and the 2009 Tax Year on June 14, 2011. The Partnership’s federal tax return for the period January 1, 2010 to December 31, 2010 (2010 Tax Year) was filed timely on August 3, 2011. The IRS has notified the Partnership that it intends to audit the federal tax returns for 2008 Taxable Year and the 2009 Taxable Year. The Partnership also failed to deliver timely the appropriate Schedules K-1 to Unitholders associated with the 2008 Tax Year and the 2009 Tax Year. The Partnership delivered the delinquent Schedules K-1 for such tax periods to Unitholders on June 23, 2011. On August 4, 2011, it also distributed Schedules K-1 for the 2010 Tax Year. The Partnership timely filed automatic extensions for the filing of its federal and state tax returns for the period January 1, 2011 through December 31, 2011 (2011 Tax Year) thereby extending the due date to file the tax returns and deliver Schedules K-1 for the 2011 Tax Year to its Unitholders to September 15, 2012. However, there is no certainty that the 2011 Tax Year tax returns or the Schedules K-1 for the 2011 Tax Year will be completed and delivered timely by the Partnership due its lack of operating capital. The Code provides for penalties to be assessed against pass-through entities, such as the Partnership, in connection with the late filing of federal partnership tax returns and the failure to furnish timely the required Schedules K-1 to investors. Similar penalties are also assessed by certain states for late filing of state partnership tax returns. The Code and state statutes also provide taxpayer relief in the form of reduction and/or abatement of penalties assessed for late filing of the returns where “reasonable cause” resulted in such late filings. In August, 2011, the IRS notified the Partnership that its calculation of penalties for the 2008 Tax Year and the 2009 Tax Year total approximately $2.5 million. The Partnership estimates that the maximum tax penalty exposure is $940,000 for all state penalties. The State of California notified the Partnership in February 2012 that its calculation of penalties owing to California for the 2008 Tax Year and the 2009 Tax Year total approximately $137,000. The Partnership has accrued a total of $1,122,000 through June 30, 2012 as its estimate of the penalty exposure related to its failure to file timely its federal and state tax returns for the tax years 2008 and 2009. During September 2011, the Partnership submitted to the IRS its request for a waiver of the penalties for failure to timely file the Partnership’s federal tax returns and associated K-1’s for tax years 2008 and 2009. The waiver request was made pursuant to Code Section 6698(a)(2) which provides that the penalty will not apply if the taxpayer establishes that its failure to file was due to reasonable cause. The Partnership also requested a waiver based on the IRS’s past administrative policies towards first offenders. During September 2011, the Partnership received notice from the IRS that is was opening an administrative procedure to audit the 2008 and 2009 tax returns of the Partnership and Central Energy GP LLC. To date, the Partnership has yet to receive a response from the IRS regarding its waiver request. In the event the Partnership does not receive a favorable response, it intends to seek additional remedies including exhaustion of all taxpayer appeal rights. The Partnership would also be entitled to pursue other avenues of relief. The IRS has taken a much stronger position against the taxpayer relief provisions of the Code during 2011. There can be no assurance that the Partnership’s request for relief from the federal tax penalties will be approved by the IRS or that the Partnership’s estimate of its penalty exposure is accurate. Central does not currently have the financial resources to pay the penalties that may be assessed by the IRS. Since filing the delinquent 2008 and 2009 state partnership tax returns, the Partnership has also (i) submitted a request for abatement of penalties based on reasonable cause and/or (ii) applied for participation into first offender programs which provide relief of the penalties to those states which impose significant penalties for late filing of state returns. There can be no assurance that the Partnership will receive any abatement of penalties or be accepted for participation in first offender programs and, if accepted, can continue to comply with the requirements of such programs. At the present time, Central does not have the financial resources to pay the penalties that may be assessed by any state tax authority.

NOTE J — INCOME TAXES

Tax Liabilities

IRS Installment Agreement

On November 17, 2010, Regional entered into an installment agreement (IRS Installment Agreement) with the Internal Revenue Service (IRS) for the payment of $384,000 owing in income taxes, penalties and interest in connection with the income tax return filed for the period November 2006 to July 27, 2007. Under the terms of the IRS Installment Agreement, Regional paid $60,000 upon entering into the IRS Installment Agreement and is required to pay $20,000 per month beginning December 2010 (except the January 2011 monthly installment whereby the monthly payment amount was $40,000) until all amounts owing under the IRS Installment Agreement, including continuing interest and penalties on outstanding balances, were paid in full. In addition to the $384,000, the IRS Installment Agreement provided for the $198,000 of income taxes, penalties and interest due in connection with the December 31, 2008 income tax return that was filed in 2010 to be included as part of the overall balance of the IRS Installment Agreement at such time that those balances outstanding were formally assigned for collection within the IRS. Regional paid all taxes due and owing to the IRS for the tax period July 28, 2007 to December 31, 2007 prior to entering into the IRS Installment Agreement.

During 2009, the Partnership and RVOP allocated expenses to Regional for the period years 2008 and 2009. The amount of the allocated expenses for those periods totaled approximately $1,100,000. During the three months ended March 31, 2011, the Partnership and RVOP allocated additional expenses to Regional of $419,000 for the period from July 28, 2007 to December 31, 2007. Regional has amended its previously filed income tax returns for the period from July 28, 2007 to December 31, 2007 and for the year ended December 31, 2008 to reflect the allocated expenses and other income tax adjustments which eliminated the $198,000 amount referred to above. The effect on income tax payable and income tax expense for those changes was reflected in the 2009 consolidated financial statements of Central.

During March 2012, the IRS Installment Agreement was fully paid. Subsequently, Regional received written notification from the IRS that the lien filed in connection with the IRS Installment Agreement was released.

Estimated Taxes

During the year ended December 31, 2011 and the six months ended June 30, 2012, Regional has accrued estimated taxes in the amount of $157,000 and $157,000, respectively. To date, Regional has not made any estimated tax payments in connection with the 2011 tax year. As a result, Regional is subject to penalties for such period. At the present time, Regional does not have the cash necessary to make such tax payments and, in the event Regional does not generate sufficient cash to make such payment, it intends to obtain an IRS installment agreement for the payment of such taxes.

Late Filings and Delivery of Schedules K-1 to Unitholders

The Partnership failed to file timely its federal and state partnership tax returns for the periods from January 1, 2008 through December 31, 2008 (2008 Tax Year) and January 1, 2009 through December 31, 2009 (2009 Tax Year). It filed the federal tax returns for the 2008 Tax Year and the 2009 Tax Year on June 14, 2011. The Partnership’s federal tax return for the period January 1, 2010 to December 31, 2010 (2010 Tax Year) was filed timely on August 3, 2011. The IRS has notified the Partnership that it intends to audit the federal tax returns for 2008 Taxable Year and the 2009 Taxable Year.

The Partnership also failed to deliver timely the appropriate Schedules K-1 to Unitholders associated with the 2008 Tax Year and the 2009 Tax Year. The Partnership delivered the delinquent Schedules K-1 for such tax periods to Unitholders on June 23, 2011. On August 4, 2011, it also distributed Schedules K-1 for the 2010 Tax Year. The Partnership timely filed automatic extensions for the filing of its federal and state tax returns for the period January 1, 2011 through December 31, 2011 (2011 Tax Year) thereby extending the due date to file the tax returns and deliver Schedules K-1 for the 2011 Tax Year to its Unitholders to September 15, 2012. However, there is no certainty that the 2011 Tax Year tax returns or the Schedules K-1 for the 2011 Tax Year will be completed and delivered timely by the Partnership due its lack of operating capital.

The Code provides for penalties to be assessed against pass-through entities, such as the Partnership, in connection with the late filing of federal partnership tax returns and the failure to furnish timely the required Schedules K-1 to investors. Similar penalties are also assessed by certain states for late filing of state partnership tax returns. The Code and state statutes also provide taxpayer relief in the form of reduction and/or abatement of penalties assessed for late filing of the returns where “reasonable cause” resulted in such late filings. In August, 2011, the IRS notified the Partnership that its calculation of penalties for the 2008 Tax Year and the 2009 Tax Year total approximately $2.5 million. The Partnership estimates that the maximum tax penalty exposure is $940,000 for all state penalties. The State of California notified the Partnership in February 2012 that its calculation of penalties owing to California for the 2008 Tax Year and the 2009 Tax Year total approximately $137,000. The Partnership has accrued a total of $1,122,000 through June 30, 2012 as its estimate of the penalty exposure related to its failure to file timely its federal and state tax returns for the tax years 2008 and 2009.

During September 2011, the Partnership submitted to the IRS its request for a waiver of the penalties for failure to timely file the Partnership’s federal tax returns and associated K-1’s for tax years 2008 and 2009. The waiver request was made pursuant to Code Section 6698(a)(2) which provides that the penalty will not apply if the taxpayer establishes that its failure to file was due to reasonable cause. The Partnership also requested a waiver based on the IRS’s past administrative policies towards first offenders. During September 2011, the Partnership received notice from the IRS that is was opening an administrative procedure to audit the 2008 and 2009 tax returns of the Partnership and Central Energy GP LLC. To date, the Partnership has yet to receive a response from the IRS regarding its waiver request. In the event the Partnership does not receive a favorable response, it intends to seek additional remedies including exhaustion of all taxpayer appeal rights. The Partnership would also be entitled to pursue other avenues of relief. The IRS has taken a much stronger position against the taxpayer relief provisions of the Code during 2011. There can be no assurance that the Partnership’s request for relief from the federal tax penalties will be approved by the IRS or that the Partnership’s estimate of its penalty exposure is accurate. Central does not currently have the financial resources to pay the penalties that may be assessed by the IRS.

Since filing the delinquent 2008 and 2009 state partnership tax returns, the Partnership has also (i) submitted a request for abatement of penalties based on reasonable cause and/or (ii) applied for participation into first offender programs which provide relief of the penalties to those states which impose significant penalties for late filing of state returns. There can be no assurance that the Partnership will receive any abatement of penalties or be accepted for participation in first offender programs and, if accepted, can continue to comply with the requirements of such programs. At the present time, Central does not have the financial resources to pay the penalties that may be assessed by any state tax authority.