Legislative Report – MLP Parity Act

by GableGotwals

What: The MLP Parity Act (the “Act”) is a bill currently before the U.S. Senate Committee on Finance seeking to expand Section 7704(d) of the Internal Revenue Code (which defines “qualifying income” for publicly traded partnerships) to include income received from renewable energy sources, including: wind, geothermal, solar, hydropower, marine and hydrokinetic, electricity storage, energy-efficient buildings and carbon capture. The Act is short (spanning just over 600 words), but could have a significant impact on the current MLP landscape.

Pros: Those in favor of the Act contend that the Act will provide access to capital for renewable energy providers at a cost of capital perceived to be much lower than traditional financing.

Cons: Those opposing the Act argue that the characteristics of the traditional MLP model, based on distributing stable cash flows to unitholders derived from assets with predicable and well-proven operat­ing histories, do not match the nature of emerging renewables.

Who: Senator Chris Coons (D-DE) and Representative Ted Poe (R-TX) introduced the Act last year. We contacted Senator Coons’ office for an exclusive interview with The Oklahoma MLP Quarterly regarding his involvement with the Act and its anticipated progress in 2014. An excerpt from our interview is below.

Why did you decide to become a leader in supporting the Act?

“MLPs have proven to be very successful in the oil and gas sector. Delaware is leading the way in foster­ing clean energy research, innovation, and entrepreneurship. If clean and renewable sources of energy are to grow and compete in the American energy marketplace, and around the world as well, we have to make sure they are given a level playing field on which to operate. This is a strikingly simple, bipartisan bill that modernizes a section of our tax code, harmonizing it with the ‘all-of-the-above’ energy strategy that so many of us have endorsed as the blueprint for energy independence and our energy future.”

Why is the Act important in promoting American energy independence?

“The key to American energy independence is an all-of-the above strategy that includes a range of tradi­tional and renewable energy resources. The extension of access to this financing vehicle to a very wide range of renewable energy sources, energy storage, energy efficiency, and other options has the real po­tential to bring a significant wave of private capital off the sidelines and into the renewable energy mar­ketplace. It would not only level the playing field, but would also increase access to low-cost capital for all energy sources in our marketplace that is currently only available to primarily oil and gas beneficiaries.”

What progress do you expect for the MLP Parity Act in 2014?

“We’ve seen bipartisan and bicameral support for the MLP Parity Act grow in recent months and added Senators Landrieu and Collins as cosponsors in November 2013. I’m optimistic that we will continue to bring on additional bipartisan cosponsors and grow our coalition of support this year so we can advance this common-sense bill.”

This information is provided for educational and informational purposes only and does not contain legal advice. The information should in no way be taken as an indication of future legal results. Accordingly, you should not act on any information provided without consulting legal counsel. This article reflects the opinions of the authors and does not necessarily reflect the view of the Firm or all members of the Firm.

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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