* Would give tax break to green energy projects
* Administration eyes REIT tax break -analyst
By Roberta Rampton
WASHINGTON, June 7 A freshman U.S. Democratic
senator thinks he may have found a way to encourage investment
in wind, solar and biofuel projects without sapping too many
taxpayer dollars or injecting new venom into a bitter partisan
battle over energy incentives.
Chris Coons introduced legislation on Thursday that would
allow a broad range of renewable power generation and
transmission projects to qualify for a tax structure used widely
by pipeline and other energy-related companies.
The bill is unlikely to be considered until after the
November presidential election, but may give lawmakers food for
thought as they wrestle with whether to extend tax breaks for
green energy set to expire this year.
The "master limited partnership," or MLP, structure allows
certain types of companies to raise money in the stock market,
while having income taxed only at the unit holder level,
avoiding corporate income taxes.
"It's something that's been used for decades," said Coons,
who represents Delaware, a state where financing has fallen
short for offshore wind power projects.
"This is one energy financing vehicle that we should all be
able to agree on," he said in an interview.
Under the current law, MLPs must generate at least 90
percent of their income from real estate or natural resources
like fossil fuels or timber - and must return most of its cash
to its investors, who are taxed on those returns.
There are about 100 MLPs in the United States with a total
market capitalization of more than $350 billion, including the
likes of pipeline giants Enterprise Products Partners
and Kinder Morgan Energy Partners.
NO MORE WINNERS AND LOSERS
Coons' two-page bill is landing when government support for
energy has become highly politicized heading into the Nov. 6
Democrats have railed against tax breaks for big oil
companies, which they argue are unnecessary given high gasoline
prices and record profits.
Existing government tax breaks designed to help
commercialize renewable power are expiring, and face an uphill
political battle for renewal.
Republicans have campaigned against green energy incentives
championed by President Barack Obama, such as the $535 million
loan guarantee for Solyndra, a bankrupt solar manufacturer.
"What I heard time and time again from the Republicans on
the (Senate Energy) committee and on the floor was the criticism
that we were, as they put it, picking winners and losers," Coons
Coons argued his bill cut out the politics by having the
policy apply to all forms of energy, not just renewables.
He has won support from Republican Senator Jerry Moran of
Kansas, who co-sponsored the bill along with five Democratic
Others have expressed support for the idea but have told
Coons he may need to wait until Congress begins to tackle a
broad overhaul of the tax code next year.
In the past, MLPs have been eyed as a special-interest
loophole that could face elimination under tax reforms.
"This is a proposal that turns that argument on its head and
says, 'Well if it works, why not do more of it?'" said Christine
Tezak, an energy policy analyst at Robert W. Baird & Co.
REVENUES, COSTS STILL TO BE DETERMINED
Coons said the bill could unleash "billions of dollars" in
investment for r enewable energy MLPs, n oting more precise
projections would depend on w h ether current tax credits and
exemptions for the sector continue.
A study by Southern Methodist University's Maguire Energy
Institute has estimated expanding MLP structure to renewables
could mean $3.2 billion to $5.6 billion in the next 10 years for
the industry, although an aide to Coons cautioned the study's
results were not a precise comparison with what is included in
the draft legislation.
The bill has not yet been "scored" by congressional
number-crunchers who will estimate its cost to taxpayers.
The current cost of existing oil- and gas-related MLPs to
the tax base has been estimated at a relatively modest $2.4
billion over 10 years.
It is unlikely Congress would consider the Coons bill until
next year, given the pre-election gridlock and a long list of
spending and tax bills that must be passed before the end of
2012, said Whitney Stanco, senior policy analyst with Guggenheim
"Bringing it up now and having the discussion now is
positive to creating some momentum behind it later," she said.
REITS ANOTHER OPTION?
In the near term, Stanco said it was more likely the Obama
administration would look at extending the "real estate
investment trust" or REIT, tax structure to renewable energy.
Like MLPs, REITs are not required to pay corporate tax but
must distribute most of their income to investors.
Stanco told clients on Wednesday that the Energy and
Treasury Departments were in "preliminary discussions" on
whether the Internal Revenue Service could issue guidance on an
extension, and what type of income would be covered.
"I think the idea about opening up the REIT structure to
renewables administratively is gaining some traction," Stanco
said in an interview, noting the action may not require
The Energy Department is looking for ways to help renewable
energy projects get private capital, a spokeswoman said without
commenting on whether discussions were under way. A Treasury
Department spokeswoman had no comment and referred an inquiry to
the Energy Department.
Coons said he thought the Internal Revenue Service may need
"explicit statutory authority" to expand the REIT structure.
"I think it would require legislation, but that's part of
what we're looking at," he said.