If Oil Companies Can Have Master Limited Partnerships, Why Can’t Clean Energy Companies?
Richard Caperton, Guest Blogger on Apr 26, 2013 at 12:25 pm
This week, Senator Chris #$%$ (D-DE) and a diverse group of original co-sponsors introduce a bill that would lower the cost of capital for clean energy, a critical piece of deploying clean energy at the scale needed to fight climate change. The bill — the Master Limited Partnerships Parity Act — would allow renewable energy and energy efficiency to access the MLP structure.
The MLP Parity Act is a common-sense bill with bipartisan, bicameral support that simply levels the playing field for clean energy. Now, when someone tells you that they have a “common-sense bill with bipartisan, bicameral support that simply levels the playing field for clean energy,” you should be skeptical. Allow me to address that skepticism.
First, a little background. (Take a deep breath, and bear with me for just a second.) When a business starts, it can be organized in any number of corporate structures. S-Corporations, C-Corporations, sole proprietorships, limited liability corporations, and countless other structures all have unique implications for how a company can raise money and how they’re taxed.
A master limited partnership is a type of “publicly traded partnership,” which has two valuable characteristics: it can raise money on public exchanges, is traded just like stocks, and it doesn’t pay corporate income taxes. All of the income flows through to shareholders, who pay a personal income tax, so there’s no “double-taxation” as happens with other corporations. (Okay, exhale.)
The problem is that the law that created MLP’s says that only certain types of companies can use this structure. Renewable energy and energy efficiency are not eligible, so most MLP’s in the energy industry are oil and gas pipeline companies. The MLP Parity Act simply adds renewable energy and
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