Master limited partnerships
Master limited partnerships took a step closer in late April to use in the renewable energy market, but they remain a hard sell in Congress.
MLPs are large partnerships in which the partnership interests are traded on a stock exchange or over-the-counter market. Publicly-traded partnerships are taxed like corporations in the United States. Thus, their earnings are taxed at the partnership level and then again when distributed as “dividends” to partners. However, the US tax code makes an exception for partnerships that receive at least 90% of their gross income each year from dividends, interest, rents from real property or from an active mineral or natural resources business.
Senator Chris Coons (D.-Delaware) reintroduced a bill in late April that would allow MLPs to own renewable energy projects as well as a long list of other types of new assets they are not able to own currently. The expanded list includes fuel cells, combined-heat-and-power projects of up to 50 megawatts in size, electricity storage devices, renewable chemicals companies, installers of energy efficiency improvements, large industrial facilities that capture and store their carbon dioxide emissions and gasification projects that gasify coal, petroleum residue, biomass or other materials and that capture and store at least 75% of the carbon dioxide emissions.
The bill inadvertently would block some rooftop solar systems from being owned by MLPs. Under the bill, solar systems on which customers have signed power contracts to buy electricity could be put in MLPs, but solar systems that are leased to customers could not be.
Coons has done an excellent job of building support for the bill. However, it is unlikely to be taken up until Congress tackles broader corporate tax reform, at which time Congress will have to decide how many industries it is willing to allow to operate without having to pay corporate income taxes. The more industries added to the list, the harder it is to sell. The renewables companies argue for parity with fossil fuel companies.