Legislation Would Give Renewable Energy Investors Access To Tax Advantage

Posted by SI Staff on June 08, 2012 No Comments
Categories : Policy Watch

Sens. Chris Coons, D-Del., and Jerry Moran, R-Kan., have introduced the Master Limited Partnerships Parity Act (MLP Parity Act), legislation that is designed to level the energy playing field by giving investors in renewable energy projects access to a decades-old tax advantage that is currently available only to investors in fossil-fuel-based energy projects.

The Solar Energy Industries Association, among other organizations, has endorsed the legislation.

According to the senators, the MLP Parity Act would adjust the federal tax code in order to unleash significant private capital by helping additional energy generation and renewable fuels companies form master limited partnerships, which combine the funding advantages of corporations and the tax advantages of partnerships.

‘Despite all the political rhetoric about the need for an all-of-the-above energy strategy, our current tax code clearly picks winners and losers in the energy space,’ Coons says. ‘Congress should be setting a realistic and stable policy pathway to sustain innovations in domestic energy development, and help the market work to its fullest potential. That starts with leveling the playing field and giving renewable energy the same shot at market success as fossil fuels.’

An MLP is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market, the senators explain. By statute, MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction and pipeline projects. These projects enjoy capital at a lower cost than with traditional financing approaches to energy projects, making them highly effective at attracting private investment.

Investors in renewable energy projects, however, have been explicitly prevented from forming MLPs, thus starving a growing portion of America's domestic energy sector of the capital it needs to build and grow, according to Coons and Moran.

A white paper on the MLP Parity Act can be downloaded here.

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