August 16, 2022
Fargo, US 76 F

Sponsors say Senate tax measure would spark in renewable energy projects

Senators Chris Coons and Jerry Moran introduced legislation Thursday they say would “level the energy playing field” by giving investors in renewable-energy projects access to a decades-old tax advantage now available only to investors in fossil fuel-based energy projects.

The Master Limited Partnerships Parity Act would tweak the tax code to increase private capital and help additional energy-generation and renewable fuels companies form master limited partnerships, which combine the funding advantages of corporations and the tax advantages of partnerships.

Coons says the proposed structure is the same currently offered to oil, pipeline and drilling companies.

“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 said in a statement. “Congress should be setting a realistic, 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.”

“Master limited partnerships have been largely responsible for the tremendous growth in our country’s energy infrastructure,” Senator Moran said. “In order to grow
our economy and increase our energy security, sound economic tools like the MLP should be expanded to include additional domestic energy sources. This legislation simply builds on a successful model.”

A master limited partnership (MLP) is a business structure that is taxed as a partnership, but whose ownership interests are traded like corporate stock on a market. By statute, MLPs have only been available to investors in energy portfolios for oil, natural gas, coal extraction, and pipeline projects, which 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, the authors say.

Joining Coons as co-sponsors on the bill are Sens. Jon Tester, Al Franken, Amy Klobuchar, Jeanne Shaheen and Sheldon Whitehouse.

The measure has the endorsement of the American Wind Energy Association, Third Way, Solar Energy Industries Association, Biomass Power Association, Biotechnology Industry Organization, Ocean Renewable Energy Coalition, American Council on Renewable Energy, Natural Resources Defense Council, Advanced Biofuels Association, Offshore Wind Development Coalition, and the Advanced Ethanol Council.

A recent report from the Democratic group Third Way and the Maguire Energy Institute at Southern Methodist University favors the partnership structure for renewable projects, noting a significant portion of the government’s tax credits are ending up in the hands of financiers, rather than energy companies. Most renewable energy developers have to go the tax equity market to get loans and funding from large investors because they don’t owe enough in taxes to take advantage of the credits.

The partnership structure would make renewable energy firms less reliant on tax equity and “could attract capital to the sector, reduce the risk of investments, impose some market discipline on the players, and offer a way to grow a sector of the economy that will be important in meeting America’s future energy needs,” the report says.

Source: 25’x25 Weekly REsource

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