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A New Bill to Watch – Revival of the Master Limited Partnerships Parity Act


Synopsis:

The renewable energy industry may be able to use an ownership structure that has benefited the oil and gas industry for decades.

Today, legislators reintroduced the Master Limited Partnerships Parity Act in both the U.S. House of Representatives and the U.S. Senate. The bill would allow renewable energy companies to form Master Limited Partnerships (MLPs), an ownership structure that provides both tax benefits and improved access to investment capital. The bill expands on a bill introduced in the last Congress to include more renewable energy activities.

Issue:

An MLP is a business structure that is taxed as a partnership, but whose ownership interests are traded on a market like corporate stock. The ownership structure provides a significant tax benefit: income from MLPs is only taxed at the shareholder level. In contrast, profits from publicly-traded Subchapter C corporations are taxed at both the corporate level and the shareholder level. MLPs also offer investors the liquidity, limited liability, and profits provided by the MLP.

The 6-page bill essentially amends Internal Revenue Code Section §7704(d)(1), which provides the list of qualifying income for MLPs. The list currently excludes renewable energy activities. This is not the first time legislation including renewables has been introduced in the context of MLPs.  The original bill was first introduced by Senator Coons last year, but the bill never passed.  This is a reintroduction of the original bipartisan bill with the addition of certain renewable activities and bipartisan sponsors in the House.

“Note however, as drafted, this bill only modifies Section §7704, and does not modify the Section §469 passive activity or Section §465 at-risk rules.”

The bill would expand the list to include:

  • Solar (PV and CSP)
  • Wind
  • Hydropower
  • Marine/Hydrokinetic
  • Fuel Cells
  • Electricity Storage
  • Combined Heat and Power
  • Biomass
  • Waste Heat to Power
  • Renewable Fuels
  • Biodiesel
  • Biorefineries
  • Energy Efficient Buildings
  • Carbon Capture and Storage
     

Bi-partisan support for the bill includes President Obama’s science advisors, past Secretary of the Dept. of Energy, Steven Chu, and his likely successor Ernest Moniz.

In the Senate, the bill is currently sponsored by Sen. Chris Coons (D-Del.), Sen. Jerry Moran (R-Kan.), Sen. Debbie Stabenow (D-Mich.) and Sen. Lisa Murkowski (R-Alaska). Also, more than two-dozen senators have urged President Obama to support the bill. In the House, the bill is sponsored by Rep. Ted Poe (R-TX-02), Rep. Mike Thompson (D-CA-05), Rep. Peter Welch (D-VT-AL), Rep. Chris Gibson (R-NY-19), Rep. Cory Gardner (R-CO-04).

Suggested Action/Contact:

Please contact a CohnReznick renewable energy professional to determine how this proposed legislation may impact your renewable energy project. For more information, please visit CohnReznick’s renewable energy webpage and contact:

Timothy Kemper, CPA
Regional Managing Partner - South/Central
Renewable Energy Industry Practice - Co-National Director
Tel: 404-847-7764

Anton Cohen, CPA
Partner
Renewable Energy Industry Practice - Co-National Director
Tel: 301-280-1822

Lee Peterson, JD
Senior Manager
Tel: 404-847-7744
 


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
 

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