U.S. Tax Proposals to Help the Renewable Energy Industry

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A variety of tax proposals are now under consideration in the U.S. that, if enacted, could help to stimulate investment in U.S. renewable energy projects.

One proposal would expand the beneficial tax attributes of master limited partnerships (MLPs) to renewable energy investments. MLPs are publicly traded investment vehicles, ownership interests in which are traded like corporate stock. While an MLP resembles a traditional corporate vehicle, an MLP that satisfies certain conditions is favorably treated as a partnership for tax purposes. Partnerships are not subject to tax at a corporate level, thereby avoiding the double taxation of profits (that is, tax on corporate income and tax on dividends) applicable to corporate entities, and greatly increasing the potential yield for MLP investors. Current law only allows this special tax treatment for MLPs that invest in oil, natural gas, coal extraction and pipeline projects. Draft legislation has been introduced to extend favorable MLP tax treatment to any entity that invests in renewable energy.

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