United States: Reintroduction Of Master Limited Partnerships Parity Act On April 24, 2013

Senator Christopher Coons (D-DE) has reintroduced the Master Limited Partnerships Parity Act, which would provide MLP tax treatment for renewable energy projects. The bill, S. 795, has been modified to expand the types of renewable income that qualify for MLP treatment beyond those included in the bill he had introduced in the previous Congress on June 7, 2012.

Senate co-sponsors include Senators Jerry Moran (R-KS), Debbie Stabenow (D-MI), and Lisa Murkowski (R-AK). The companion bill, H.R. 1696, has been introduced in the House of Representatives by Representative Ted Poe (R-TX), and co-sponsored by Representatives Earl Blumenauer (D-OR), Mike Thompson (D-CA), Peter Welch (D-VT), Chris Gibson (R-NY), and Cory Gardner (R-CO).

A publicly traded partnership will qualify for partnership tax treatment if 90 percent or more of its gross income is "qualifying income." Current law includes in this definition income from certain specified natural resources activities as well as from transportation and storage of certain alternative fuels.

The new MLP Parity Act, like the 2012 bill, would expand the definition of qualifying income to include income from domestic renewable or "clean" energy sources. Qualifying income under the bill would include income derived from:

  • electric power exclusively produced by qualified energy resources, including wind, biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, qualified hydropower production, and marine and hydrokinetic energy;
  • certain energy property, such as certain solar and wind equipment, and equipment producing energy from geothermal deposits, fuel cells, or micro turbines; and
  • the production, storage and transportation of renewable fuels (defined as fuel produced from renewable biomass that is used to replace or reduce the quantity of fossil fuel present in a transportation fuel). 

The latest version of the bill adds new sources of qualifying income and modifies sources included in the prior bill, including income derived from:

  • the receipt and sale of electric power that has been stored in a device directly connected to the grid;
  • the generation, storage, or distribution of thermal energy from "combined heat and power system property," without the facility size limitations in current law;
  • the generation, storage or distribution of renewable thermal energy from qualified energy resources, and certain other solar and geothermal equipment;
  • the use of recoverable waste energy;
  • the production, storage or transportation of any renewable chemicals (defined as a monomer, polymer, plastic, formulated product, or chemical substance produced from renewable biomass);
  • the audit and installation of energy efficient building property;
  • industrial gasification projects that separate and sequester at least 75 percent of total qualified carbon dioxide; and
  • the generation or storage of electric power produced from certain qualified facilities which capture and sequester at least 500,000 metric tons of carbon dioxide during the taxable year.

If enacted, the MLP Parity Act would retain all of the activities generating qualifying income under current law, while extending MLP treatment to the range of renewables activities described above. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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