Tax Writers Warm to Giving Renewables Parity with Fossil Fuels
by Nick Juliano (MidWest Energy News) A proposal to allow renewable energy developers to take advantage of a tax structure that has long been popular among fossil fuel companies is gaining traction among lawmakers tasked with overhauling the tax code.
Rep. Kevin Brady (R-Texas), who is leading a working group examining energy tax provisions, praised the idea of opening master limited partnerships (MLPs) to renewable energy companies. The structures have been popular among oil and gas, pipeline and coal companies as a way to attract investors, but current law does not allow renewable companies like wind and solar developers to use them.
Legislation allowing wind, solar and other renewable energy companies to establish MLPs will be reintroduced in the House and Senate later this month, and the idea has emerged as a key focus of the renewable energy industry and policy watchers as Congress pursues its overhaul of the tax code.
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MLPs are taxed as limited partnerships, but they allow investors to purchase shares in companies that are traded like stock on an exchange. Proponents say they allow for a more diverse array of investment and reduce overhead costs.
Renewable energy developers currently rely primarily on federal tax credits to reduce their costs — the production tax credit, which provides $23 for every megawatt-hour of electricity generated, benefits wind, geothermal, biomass and some hydro developers, while the investment tax credit is primarily used by solar companies to recoup up to 30 percent of their costs.
But because many companies’ tax bills are too small to fully claim those benefits, they have to rely on tax equity markets to partner with banks or other large firms that essentially purchase the tax benefits. Industry sources have complained that that arrangement creates high overhead costs, and some in the industry are looking at MLPs as a cheaper way to raise the money they would need. READ MORE and MORE (Bloomberg) and MORE (Cohn Reznick) and MORE (Crain’s Detroit Business)
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