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Renewable Energy Investments Made Easier

A relatively small change to the tax code could make all the difference in renewable energy investments, and while it’s not likely to happen this year, 2013 could be a decisive year for a more equitable sharing of preferential tax treatment across the energy sector.

While the fossil fuel industry has benefited for three decades from the privilege of Master Limited Partnerships (MLPs), which exempt investors from some corporate income taxes, renewable energy has not enjoyed this preferential treatment, and in fact, the law specifically bans renewable energy investors from getting in on MLPs, but that is set to change very soon.

On 7 June, Senator Christopher Coons (D-Delaware) and Senator Jerry Moran (R-Kansas) submitted legislation that would allow renewable energy investors to benefit from MLPs. The Master Limited Partnerships Parity Act would extend MLPs to include energy-related investments beyond oil, natural gas, coal and pipelines.

To backtrack briefly, MLPs are special purpose investment vehicles that offer exemptions to investors from certain corporate income taxes but require that the majority of income is distributed to partnership shareholders every quarter. The benefits of MLPs are that in comparison with traditional corporations, they lower taxation and capital costs by eliminating double taxation and allowing for access to new sources of capital.

In an early June press release, Senator Moran stated: “Master limited partnerships…

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