Tax Code Change Would Level Playing Field for Clean Energy

Bipartisan legislation has been introduced to tweak the US tax code, making the same low-cost financing available for renewable energy as fossil fuel companies enjoy today. 

The Master Limited Partnerships Parity Act would allow wind, solar, biofuels and other clean energy projects to be structured as "master limited partnerships" (MLPs). Under this structure, shares can be traded as common stock, and they are taxed at the lower rate of partnership – avoiding higher corporate income tax rates.

All that’s required is a small tweak in the tax code, since fossil fuel projects already qualify. It would simply extend MLPs to  renewable energy projects as well. 

MLPs currently have a market capitalization of $350 billion, with 80% of that funding devoted to oil-and-gas projects, reports Reuters.

Senators Chris Coons (D-DE) and Jerry Moran (R-KS) and  Reps Ted Poe (R-TX), Mike Thompson (D-CA) and Peter Welch (D-VT) are the sponsors of the bill in the House (H.R. 6437) and Senate (S. 3275).

Chris Coons explains:

"By statute, MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction, and pipeline projects. These projects get access to capital at a lower cost and are more liquid than 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, starving a growing portion of America’s domestic energy sector of the capital it needs to build and grow."

Sponsors believe this could pass Congress because it boosts financing for renewables without penalizing or even affecting fossil fuel subsidies.

The bill seems to be attracting bipartisan support, including Senators from big oil states Lisa Murkowski (R-AK) and Mary Landrieu (D-LA), who are both co-sponsors.

Ted Poe (R-TX) likes the concept because, “As recent studies have shown, it is entirely possible that North America could be 100% energy independent in the near future. One way to achieve this goal is to produce as much domestic energy as we can. This bill, along with increased domestic oil and gas production, helps us get closer to that goal and will create jobs in the process."

29 Senators and Representatives sent a letter to President Obama calling for MLPs and Real Estate Investment Trusts (REITs) to be a priority in the federal government’s "all of the above" energy strategy.

"There are 2.3 trillion reasons the US should grow our domestic clean energy market," says Josh Freed, vice president for Clean Energy, Third Way. "That’s the potential size of the global clean energy market. WE can win a huge share of it if our national energy policies put clean and fossil technologies on a level playing field and we get more private investment into the clean energy market."

Learn more about the legislation:

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