William Shakespeare, in the play Julius Caesar, writes that timing is everything, and if acted upon, can create opportunity and even fortune. Senators Chris Coons (D-DE) and Jerry Moran (R-KS), and Representatives Ted Poe (R-TX-02) and Mike Thompson (D-CA-05) hope these words prove true as they introduce the Master Limited Partnerships Parity Act on October 25, 2017 in the midst of a larger, vigorous federal tax reform conversation.
The bills, also introduced in the previous two Congresses, now enjoy the support of twelve bipartisan cosponsors and numerous industry groups who hope that both Congress and the Administration’s current focus on tax reform will be enough to push it through or create space for it to be included as part of a larger package. As introduced, the legislation would extend access to the master limited partnership (MLP) structure for a host of clean energy resources currently excluded from the list of “qualified resources.” Many IDEA member technologies would be added to the list of qualified resources.
Current tax code enables companies to create MLPs to finance the construction of oil, gas and coal energy projects. MLPs allow businesses to be structured as partnerships for tax purposes and corporations whose ownership interests are traded on the stock market. This structure ensures that all income generated, instead of being taxed at the corporate and shareholder levels like a C Corporation, is only taxed at the shareholder level. An added benefit is the ability to sell shares in the project. These benefits have effectively attracted private capital and enhanced liquidity historically.
So how would the Master Limited Partnerships Parity Act impact IDEA members, if passed into law? Simply put, it would introduce another tool into our tool box. The MLP vehicle would become an option for members looking to build combined heat and power (CHP), waste heat to power, energy storage, district energy networks, solar PV projects, and much more (see attached MLP Section-by-Section guide for full list).
While IDEA can understand how some of the law’s requirements might be impractical or of limited interest for some of our members, IDEA supports the broad deliverables. IDEA supports the intent to increase access to capital for projects featuring clean energy technologies like district energy, CHP and microgrids and believes it can help to foster the growth of our market segment. Stay tuned.
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