MLP Renewables Bill Scored at a Modest $1.3 Billion

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Senator Coons (D-DE), the lead sponsor of the Master Limited Partnership Parity Act (S. 795), has received the scoring estimate for that bill from the Joint Committee on Taxation. According to the senator’s office, it is scored at a $1.3 billion cost over its first 10 years.1 Ten years is the period used for scoring. One would hope it would be relatively easy to find “revenue raisers” to offset that modest cost. Revenue raisers are often closing what are perceived by the public to be tax loopholes.

The typical cost of a one-year extension of the production tax credit is usually several times the estimate for the permanent legislative changes proposed in the MLP Parity Act; however, tax credits are also far more valuable to the renewables industry than the MLP Parity Act is. See here. Thus, the MLP Parity Act should be passed to give renewables the same tax advantage provided to fossil fuels, rather than as a trade for not extending tax credits for renewables.

The MLP Parity Act has a glitch for the solar industry: it does not include income from solar leases in the definition of “qualifying income.” Section 7704(c)(2) of the Internal Revenue Code requires an MLP, to avoid characterization as a corporation (and a second layer of tax), to have 90 percent of its gross income be “qualifying income.” This apparent inadvertent omission is important to the solar industry, because a large percentage of residential solar is financed using a lease to the homeowner. Thus, if the MLP Parity Act is enacted in its current form, residential solar projects using a lease to the homeowner would not be good candidates for inclusion in an MLP. 

The MLP Parity Act has bipartisan and bicameral support and appears to be supported by the White House. See here.


1 Ari Natter, Senate Bill on Master Limited Partnerships to Cover $1.3 Billion Over 10 Years, Daily Tax Report G-6 (Nov. 19, 2013).

 

Topics:  Master Limited Partnerships, Renewable Energy

Published In: Energy & Utilities Updates, Environmental Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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