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Senator Chris Coons (D. DE) will be introducing some pretty important legislation on Wednesday:

http://www.platts.com/...

Senator Chris Coons plans to unveil a bill later this week that would allow US wind farms, solar energy facilities and other renewable energy projects to form tax-advantageous publicly-traded business structures.

Coons, a Delaware Democrat, plans to introduce the Master Limited Partnerships Parity Act on Wednesday, according to Ian Koski, a Coons spokesman.

The bill would allow renewable energy structures to form as MLPs, which are taxed as a partnership, but have ownership interests -- usually known as units -- that are traded like corporate stock on a market.

Forming a renewable project under such a structure would stop profits from being taxed at both the corporate and shareholder level since it would be treated as a partnership for tax purposes.

Oil and gas projects can currently be structured as MLPs, which they have been doing since the 1980s, but renewables projects cannot.

Coons introduced a similar bill in 2012, but it languished in committee.

The bill to be introduced Wednesday would allow more renewable energy projects to be structured as MLPs, according to Koski. In addition to solar and wind projects, waste-heat to power, carbon capture and storage, biochemicals, and energy-efficient building projects could be structured as MLPs under the bill, according to Koski. - Platts, 4/22/13
Senators Jerry Moran (R. KS), Lisa Murkowski (R. AK) and Debbie Stabenow (D. MI) are also co-sponsors.  Coons explains on his website how an MLP works:

http://www.coons.senate.gov/...

An MLP is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market. Whereas profit from publicly traded C corporations is taxed at both the corporate level and the shareholder level, income from MLPs is taxed only at the shareholder level because it is treated as a partnership for tax purposes.

An MLP consists of limited partners (investors) and general partners (managers). The limited partners — who can number in the thousands — provide capital and receive quarterly required distributions generally equivalent to shareholder dividends in a C-corporation. They play no role in the operation of the MLP, while the general partners manage the MLP's daily operations. General partners can take the form of another company or a group of individuals, typically holding a 2 percent ownership stake.

Writing in the New York Times on June 2, Dan Reicher and Felix Mormann of Stanford University's Steyer-Taylor Center for Energy Policy and Finance described the appeal of MLPs: "Master limited partnerships carry the fund-raising advantages of a corporation: ownership interests are publicly traded and offer investors the liquidity, limited liability and dividends of classic corporations. Their market capitalization exceeds $350 billion. With average dividends of just 6 percent, these investment vehicles could substantially reduce the cost of financing renewables."

Because MLPs are so attractive to investors, they have been proven to bring new capital into American energy projects. This is especially important in the case of renewable-energy generation, where it is harder for investors to see as quick a return as compared to fossil fuel-based energy generation, for which much of the processing and transportation infrastructure was built decades ago. Constructing the same level of critical infrastructure for renewable energy sources will take time and investment, so the MLP Parity Act levels the playing field and helps address that problem.

An MLP must generate at least 90 percent of its income from qualified sources, such as real estate or natural resources, including crude oil, natural gas, petroleum products, coal, timber, and other minerals. Section 613 of the federal tax code specifically requires qualifying energy sources to be "depletable" resources – meaning we are working against our own goal of an "all of the above" energy strategy that includes additional homegrown renewable energy sources.

What makes this bill different from the last bill Coons and Moran introduced last time?  Coons spokesman, Ian Koski, explains:

http://thehill.com/...

Koski said the bill is more mature than the one Coons and Moran sponsored last session, adding that he thinks it has a better chance of becoming law.

With Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, on board, and the concept attracting attention from the White House, the bill has a bit of momentum.

The prospect of overhauling the tax code might also bring oil-patch lawmakers behind the bill, the legislation’s proponents have said.

Senators at a bill introduction for last year’s effort said they wanted to convince lawmakers from such states to offer master limited partnerships to renewable energy projects as a concession to keep the mechanism in the tax code. - The Hill, 4/22/13

The Master Limited Partnerships Parity Act has been endorsed by NRG Energy, Third Way, Solar Energy Industries Association, Biomass Power Association, Advanced Biofuels Association, Natural Resources Defense Council, Covanta Energy, Offshore Wind Development Coalition, Advanced Ethanol Council, Environmental Entrepreneurs, American Council On Renewable Energy, American Wind Energy Association and DuPont.  If you'd like to read more about the bill, you can do so here:

http://www.coons.senate.gov/...

And if you have questions about the legislation, you can contact Coons office here:

202-224-5042

Originally posted to pdc on Mon Apr 22, 2013 at 08:00 PM PDT.

Also republished by Climate Hawks.

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Comment Preferences

  •  I'm in favor of rooftop solar, with the "profit" (1+ / 0-)
    Recommended by:
    Odysseus

    or energy savings acrruing to the homeowner, school district, hospital, or even renter as opposed to big central utility co. dominated ventures that once again keeps the consumer under the thumb of the utility.

    I see an advantage to this bill, but I also see a focus on "investors" and "Wall Street" rather than the consumer.

    We should have learned our lesson with corn ethanol, that not every modest improvement over fossil fuel domination is necessarily a good thing.

    I look forward to being convinced.

    You can't make this stuff up.

    by David54 on Mon Apr 22, 2013 at 08:14:04 PM PDT

  •  So another tax break for rich investors? (4+ / 0-)
    Recommended by:
    PatriciaVa, ichibon, tgrshark13, Odysseus

    This basically makes renewable energy companies tax free.

    Why not get rid of MLPs all together for all types of energy company?

    Why should certain companies get tax advantages like this while others do not?

    Or just eliminate corporate tax for all companies and raise personal rates.

    But stop throwing special interest crap into the tax code!

    •  Meanwhile, Coons voted for a 24B tax hike on wking (2+ / 0-)
      Recommended by:
      ichibon, tgrshark13

      and middle-class Americans today.  He voted for cloture on....

      http://www.senate.gov/...

      Apparently, many Dems aren't satisfied with current income and wealth inequality; they want to exacerbate it.

      So disappointed.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. www.hamiltonproject.org

      by PatriciaVa on Mon Apr 22, 2013 at 09:08:47 PM PDT

      [ Parent ]

    •  no, it doesn't. There is an error (1+ / 0-)
      Recommended by:
      wilderness voice

      in the diarist's write up when it was said

      Forming a renewable project under such a structure would stop profits from being taxed at both the corporate and shareholder level since it would be treated as a partnership for tax purposes.
      That is wrong. In Coons words:
      An MLP is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market. Whereas profit from publicly traded C corporations is taxed at both the corporate level and the shareholder level, income from MLPs is taxed only at the shareholder level because it is treated as a partnership for tax purposes.
      This just extends an existing tax classification to all forms of energy.
      Or just eliminate corporate tax for all companies and raise personal rates.
      I'd go along with that as long as the rates on dividends and cap gains were the same as on all other income.

      So what are you doing towords getting rid of corporate taxes?

      I'm asking you to believe. Not in my ability to bring about real change in Washington ... *I'm asking you to believe in yours.* Barack Obama

      by samddobermann on Tue Apr 23, 2013 at 02:18:05 AM PDT

      [ Parent ]

      •  Actually it is not an error. (1+ / 0-)
        Recommended by:
        Odysseus

        MLPs (and REITS) receive tax advantages at the corporate level. This is a tax break of substantial value for the owners of the company, who in a traditional company would have to be "taxed twice" at the corporate level and at the individual (are we seeing a Republican meme here?).

        However, high net worth individuals are much more likely to be able to take advantage of complicated tax-avoidance measures and therefore reap additional benefits from MLP ownership. Furthermore, in many cases MLPs, because of the way they give back dividends (i.e. Return of Capital), are not suitable for ownership in IRAs that are more common for the average retail investor. Here again, advantage accrues to the wealthy. This is complicated stuff and those who are considering investing should consult a tax- and/or investment-professional before doing so.

        Its worth noting that alternative energy companies have an available structure right now in the REIT structure. REITs have to return at least 90% of net income to investors and can access the same capital markets that MLPs can. In fact, to cut their federal tax bills, many companies are considering transitioning to the REIT structure to avoid federal taxes.

        http://www.nytimes.com/...

        I won't believe corporations are people until Texas executes one. Leo Gerard.

        by tgrshark13 on Tue Apr 23, 2013 at 06:57:52 AM PDT

        [ Parent ]

        •  As a tax attorney before I retired (0+ / 0-)

          I can see the advantages clearly.

          Just because the wealthy can use OTHER ways of getting around taxes doesn't mean this can't be useful to many. And it would be a useful way to transition out of the current mess.

          Oh and I inherited an IRA which had a REIT. They are useful.

          I'm asking you to believe. Not in my ability to bring about real change in Washington ... *I'm asking you to believe in yours.* Barack Obama

          by samddobermann on Thu Apr 25, 2013 at 01:15:48 PM PDT

          [ Parent ]

  •  I don't think the tax code should be used for (1+ / 0-)
    Recommended by:
    Odysseus

    moral suasion, to promote some behavior and prohibit others.  On the federal level, the purpose of the tax code should be to keep the currency moving and coming back to where it originates -- i.e. to recycle. On the state and local level, taxes should be collected to pay for the services being delivered to the whole community, not special interests.
    Let free enterprise take care of what people want and the public sector of what people need and don't want. For convenience, I'd characterize the latter as the seven 'i's:

    incineration
    inundation
    infestation
    invasion
    injury
    incarceration
    ignorance

    We organize governments to deliver services and prevent abuse.

    by hannah on Tue Apr 23, 2013 at 01:41:18 AM PDT

    •  The tax code will always influence (1+ / 0-)
      Recommended by:
      wilderness voice

      behavior. The thing is to shape it for the public good. The promoters of aristocracy will work hard enough to bend any system to their desires.

      I'm asking you to believe. Not in my ability to bring about real change in Washington ... *I'm asking you to believe in yours.* Barack Obama

      by samddobermann on Tue Apr 23, 2013 at 02:21:51 AM PDT

      [ Parent ]

      •  The autocrats need to be denied the use of (1+ / 0-)
        Recommended by:
        Odysseus

        currency and the law as tools of oppression. Deprivators will always aim to deprive. We don't have to make it easy and legal for them.

        We organize governments to deliver services and prevent abuse.

        by hannah on Tue Apr 23, 2013 at 03:21:11 AM PDT

        [ Parent ]

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