Screen Shot 2015 09 21 At 9.59.42 AM

Proposed Master Limited Partnerships Parity Act Levels Playing Field

Investment tax credits have been the cornerstone of our Federal government’s incentive policy for renewable energy development. Scheduled to expire in 2016, policy experts questions if and how much tax credits should play a role in the future. Felix Morman of Stanford University’s Steyer-Taylor Center for Energy Policy and Finance presents a compelling argument that tax credits are ultimately an inefficient policy and proposes reform to promote more cost-effective policies through capital markets and crowdfunding. His rationale is explained in the report, Beyond Tax Credits: Smarter Tax Policy for a Cleaner, More Democratic Energy Future (Yale Journal on Regulations, 2014). In this report, Mr.Mormann argues, “tax equity investment drives up a project’s financing charges and transaction costs, limits investment liquidity, and restricts growth in the renewable energy marketplace.”

His analysis suggests that only a fraction of the subsidy value of tax credits go towards financing new renewable energy projects and provides a compelling argument to completely overhaul our Federal government’s approach to incentivizing renewable energy policy development. He proposes that, “Federal policymakers should give renewables access to master limited partnerships (MLPs) and real estate investment trusts (REITs)… Merging the tax benefits of a partnership with the fundraising advantages of a corporation, MLPs and REITs could significantly reduce the cost of capital for renewable energy projects, broaden their investor appeal, and move renewables closer to subsidy independence.”

Pagosa Verde welcomes and endorses his innovative views on restructuring renewable incentive energy policies. This summer, U.S. Senators Chris Coons (D-DE) and Jerry Moran (R-KS), and Representatives Ted Poe (R-TX-02) and Mike Thompson (D-CA-05) took it a step farther by re-introducing bipartisan legislation for The Master Limited Partnerships Parity Act. The bill levels the energy playing field by giving investors in renewable energy projects access to a decades-old corporate structure whose tax advantage is currently available only to investors in fossil fuel-based energy projects.