Bipartisan Senators Seek Easier Financing for Renewables as U.S. Tax Reform Takes Shape
Existing U.S. federal subsidies for solar and wind generation have been a target of Trump administration criticism, but a tax reform measure prompted by the White House may have the unintended effect of replacing them with something better: tax break parity with fossils.
“One of the biggest boons for the oil and gas sector,” the Washington Post observes, “is the use of a legal entity called a master limited partnership, or MLP, which allows firms to lighten their tax loads and get easier access to investment in pipelines and other projects.”
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But now, Senators Christopher A. Coons (D-DE) and Jerry Moran (R-KS) plan to introduce a bill today “designed to allow firms building wind turbines, solar farms, and other alternative energy projects to use MLPs. If the expanded subsidy became law, it would arrive just as solar and wind tax credits are scheduled to wind down over the next five years.”
Similar legislation has been moved before, but had been stalled until a broader tax reform measure was on the table. That moment may have come, as Donald Trump presses Congress to give him a long-sought legislative win.
Under U.S. tax law, the Post explains, “money made by a publicly-traded company is taxed twice—both the corporation and its shareholders pay their own separate tax bills. But an MLP qualifies as a ‘pass-through’ company—earnings pass through the partnership to shareholders without being taxed.” In addition, “MLPs can sell off shares in the venture.”
Oil and gas companies have used MLPs to raise money for individual projects like pipelines and refineries since the 1980s, the paper notes, “but the current tax code prevents their use in wind, solar, hydropower, fuel cell, waste-heat-to-power, and energy-efficient building projects.”
The Coons-Moran proposal would level the investment playing field by giving developers of all these green technologies access to the same structure, a change that would be expected to make their projects more desirable to investors.
“The United States has the largest and most efficient capital markets in the world,” Moran said in a statement, “yet our renewable energy companies rarely have access to those markets.”
Kurt Waltzer, managing director of the Clean Air Task Force, applauded the initiative. “Allowing these technologies access to MLPs signals to investors to put money into even earlier-stage projects,” he told the Post.