Bill would expand tax-saving arrangement to renewables

Lawmakers unveiled a bill Wednesday that aims to lure investment dollars to renewable energy projects by giving the initiatives access to the same financing structure and tax treatment that have paid off for pipelines.

The measure, sponsored by Sens. Chris Coons, D-Del., and Jerry Moran, R-Kan., along with Reps. Ted Poe, R-Humble, and Mike Thompson, D-Calif., would allow renewable energy projects to qualify for master limited partnerships now available mostly to endeavors involving depletable natural resources, such as oil, gas and coal.

Beyond wind farms, solar arrays and other renewable initiatives, the bill would open up master limited partnerships to projects involving power from waste heat, carbon capture and sequestration, energy storage and energy efficient buildings.

The measure — revamped from a similar bill proposed last year — has picked up momentum, even in the oil and gas industry and its allies on Capitol Hill. Poe’s district in southeast Texas, for instance, is an oil and gas hotbed. And another oil industry ally, Sen. Lisa Murkowski, R-Alaska, is cosponsoring the legislation.

Poe and Murkowski say broadening the use of the partnership structure is about fairness and encouraging domestic energy development.

“The tax code currently hinders the United States’ ability to develop all energy and be more energy independent,” Poe told reporters Wednesday. “One way we can make our energy development across the board more competitive is to make these apply across the board.”

Master limited partnerships can issue publicly traded ownership shares as public corporations do. But they’re treated like partnerships that don’t pay corporate taxes, with income and tax liability distributed to investors instead.

They offer big financing advantages for expensive renewable energy projects that have been limited largely to attracting investment — at high rates of return — from a relatively small pool of companies able to take advantage of a clean power production tax credit.

By organizing as master limited partnerships, renewable power projects could instead raise funding from “people who want to invest in socially advantageous investment vehicles,” even if they don’t have deep pockets, Coons said.

Cosponsor Peter Welch, D-Vt., said expanding the reach of the partnerships would give those small investors a chance to “put their modest amount of money” toward renewable projects.

Despite popularity and momentum — including support from President Barack Obama’s energy secretary nominee during his recent confirmation hearing — the measure faces some major hurdles on Capitol Hill.

It could get bogged down, for example, by congressional plans to embark on a broad rewrite of the entire tax code. Even if that doesn’t happen this year, lawmakers may hold off on tinkering with individual tax issues like master limited partnerships.

And even existing provisions for master limited partnerships are under scrutiny from some lawmakers who say the U.S. can’t afford to offer or expand such tax breaks amid tight budgets.

But Coons said he thinks master limited partnerships are here to stay — even as part of a fundamental tax reform process. “I think practically, the odds that MLPs would be eliminated altogether are very low,” he said. “A wise approach would be to embrace them … and open the playing field so we create a new, reliable long-term financing vehicle for all types of energy.”

While the American Petroleum Institute — the oil industry’s most influential lobbying group — doesn’t officially support the proposal, a spokesman said the trade group has no objection to expanding master limited partnerships to renewables.