It certainly is true that income you earn in other states raises the potential for tax liability. Some MLPs operate in a LOT of states (I know KMP showed activity on my Dad's K-1 in 31 states...although all were 0 or negative in 2009).

A lot of people have posted that they report any positive income earned in a state they already file in, and ignore the rest. This is a pragmatic and widespread practice, although not necessarily fully correct. With a moderate investment in an MLP, you are likely to show small amounts of income in an individual state. The minimum reporting threshold in most states means there are no reporting requirements for a lot of such investors. However, there are a couple of states with no minimum reporting threshold; worst case is even if you owe no $$, you have to report $1 of income. I don't have a list of which states are no-threshold states, but there are some.

Some posters have worried that with all tax data being submitted electronically these days (by the MLPs), some tax-starved state may actually be willing to chase after a few $$ of potential tax revenue. That may seem far fetched, but you can't say "it will NEVER happen".

Seems to me that the larger your MLP investment, the more likely this is to come up. It seems unlikely to me that a $10k investment will ever stir up trouble, but a $10M one ???

All of this of course is yet another advantage of KMR...tax simplicity...nothing to report until you sell.