Renewable Energy Wins Republicans Backing Oil-Gas Benefit: TaxesLydia Beyoud
Renewable energy developers may win some tax benefits from Congress that only oil and gas companies can enjoy right now.
A bipartisan bill introduced in the Senate last week would allow renewable and clean energy-related companies to structure their businesses as master limited partnerships -- avoiding double taxation while also trading ownership interests on the market, similar to corporate stock, Bloomberg BNA reported.
This treatment -- available to oil and gas projects and a limited number of traditional fossil fuel-related industries -- gives them access to private capital at a much lower cost than investors in other energy projects, said Senator Chris Coons, the Delaware Democrat who sponsored the bill.
“That starves a growing and vital part of our domestic energy sector of the capital that it needs to grow,” said Coons, a member of the Senate Energy and Natural Resources Committee. “That just doesn’t make any sense.”
The Master Limited Partnerships Parity Act would change the tax code and give clean energy parity.
Representative Ted Poe, a Republican from Texas, a co-sponsor of the parallel bill being introduced in the House, supports the effort even with his constituents’ strong ties to the oil and gas industries.
That’s because “the tax code currently hinders the United States’ ability to develop all energy and be more energy-independent,” he said at a press conference last week.
“In my view, it should be a piece of rational tax reform,” Coons said. He said the measure could also be passed on its own.
Fairness in Efforts
The bill represents an opportunity for legislators considering tax reform to do more than just simplify the code, putting work on fairness and modernization in their reform efforts, Coons spokesman Ian Koski told Bloomberg BNA after the meeting.
The senator’s aides estimated the legislative change would result in a loss of $1 billion in federal revenue over 10 years.
The bill has received support from both parties, including Republican co-sponsors Senator Lisa Murkowski of Alaska, the ranking member of the Committee on Energy and Natural Resources, and Senator Jerry Moran, a Republican from Kansas, whose home state serves as headquarters to Koch Industries, the major fossil fuel manufacturer headed by billionaires Charles and David Koch. Senator Debbie Stabenow, a Democrat from Michigan, is another co-sponsor.
The American Petroleum Institute publicly announced its support for expanding the partnership structures to renewable energy projects April 23, while more than 236 renewable energy-related groups signed an April 24 letter to Congress in support of the bill.
Not everyone interested in alternative energy may be willing to sign on yet, however. Senate Finance Committee member
Ron Wyden, a Democrat from Oregon, told BNA April 23 that he was “very interested” in the legislation though he has no immediate plans to sign on as a co-sponsor of the Coons bill, because of his own ongoing tax reform efforts.
Wyden introduced tax reform legislation in 2011 that would have eliminated all tax incentives for the oil and gas industry, including the partnership tax treatment. However, Coons said the likelihood of the treatment being done away with is low.
A wiser approach would be to embrace them as a tax-advantaged capital formation vehicle and open the playing field to create a long-term financing vehicle for all types of American energy, Coons said.
The bill’s supporters say opening up the tax treatment to renewable energy may bring a wave of investment and development similar to that experienced by the oil and gas industries, and currently the hydraulic fracturing, or fracking, boom.
The structure will be “particularly important in creating a strong new market (now virtually non-existent) for owners of existing and even recently completed projects to sell those projects to an MLP, thereby accelerating the investment of capital into new projects,” the coalition of 236 renewable energy sector supports said in its letter to Congress.
The bill would also allow a new group of smaller investors to come to the market, bringing more resources to the renewable sector, Andrew Savage, a spokesman for Vermont-based solar technology manufacturer AllEarth Renewables, told BNA April 24.
“There’s also evidence that MLPs could drive down the cost of renewables themselves by driving down the cost of capital for those projects, which is an exciting thing for the industry, Savage said.