The Master Limited Partnerships (MLP) Parity Act now seeks to give renewable energy projects access to tax advantages traditionally enjoyed by fossil fuels. This was the statement made by four U.S. senators: Chris Coons, Jerry Moran, Debbie Stabenow and Lisa Murkowski.
The MLP Parity Act will expand the definition to include clean energy resources and infrastructure projects. The "depleteable sources" were originally not included with the intention to prevent companies of all kinds from reformulating themselves as MLPs to avoid corporate taxes, as Forbes states.
Some benefits of an MLP are that public trading allows MLPs to raise capital from a broader range of investors than if not traded. Additionally cash distributions are mostly tax-deferrable.
There is currently an estimated US$445 billion in MLP capital in the market with about $400 million invested in qualifying energy and natural resources. Close to 80% has been channeled into midstream oil and gas pipeline projects.
Senator Coon explains that the "federal government should not be in the business of picking winners and losers in the energy market." This has been nevertheless happening in the U.S. for nearly 30 years, where a provision in the tax code authorizes the formation of master limited partnerships or MLPs.
Until now, such MLPs have only been available to investors with fossil fuel portfolios. The perks for such oil, gas and coal projects is that access to capital is at a lower cost and more liquid than traditional financing options. This also makes it easy to attract private investment.
Renewable energy projects have been traditionally excluded from such capital and denied the right to form such MLPs. Now the Master Limited Partnership Parity Act aims to give the clean energy sector the same tax treatment that fossil fuels have enjoyed the last years. The bipartisan bill was introduced this week. If Congress approves the Act, this move can potentially lower financing costs for clean energy projects.
Rhone Resch, president and CEO of the Solar Energy Industries Association commented, "This bill is an important step toward leveling the playing field between clean, renewable energy and long-entrenched energy sources in America, by providing the solar industry with access to private capital in the same manner enjoyed by the oil and gas industry for almost 30 years.
"This bill represents smart public policy, and solar represents a clean, safe, affordable and inexhaustible supply of energy for our nation. We look forward to working with Senator Coon's and other stakeholders on this important issue."
Numerous clean energy businesses and organizations support this bill as Pew Charitable Trusts' clean energy letter to the tax reform working group shows.
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