Congress Reintroduces Master Limited Partnerships Parity Act

U.S. Senator Chris Coons (D-DE) reintroduced the Master Limited Partnerships Parity Act (S. 1656). An identical bill, H.R. 2883, was reintroduced in the House by Representative Ted Poe (R-TX).

The legislation, which has bipartisan sponsors, was introduced in the two previous Congressional sessions. The bill amends Section 7704 of the Internal Revenue Code to permit income and gains from a number of renewable energy and energy efficiency technologies to be classified as qualifying income for Master Limited Partnership ("MLP") status. Master Limited Partnerships are publicly traded partnerships that, unlike other publicly traded partnerships that are taxed as corporations, are allowed to pass through taxable income and expense to partners.

Master Limited Partnerships have been used to finance capital-intensive investments in oil and gas exploration, development, and transportation. The Master Limited Partnership structure may be more appropriate for renewable energy projects in the future as the Section 45 and Section 48 tax credits expire, since individual investors in MLPs face challenges in using those credits.

In recent years, yieldcos have been introduced as a financing vehicle for assets that cannot be used in MLPs. It should be noted that the Obama Administration fiscal 2016 budget would tax MLPs with qualifying income and gains from activities related to fossil fuels as corporations as part of a proposed overhaul of energy taxation.

See: Press Release; Master Limited Partnerships Parity Act (S. 1656); H.R. 2883; Summary of the Act; Section-by-Section Summary of the Act.