It’s no secret that our tax system is outdated, overly complicated, and full of loopholes, and anyone in Washington can tell you that tax reform – especially bipartisan tax reform – isn’t easy. But we – a progressive Democrat from Delaware and a conservative Republican from Texas - believe that we can work together on common sense tax reforms, and we’ve found an unlikely place to start: the energy sector.
Almost everyone agrees that the United States needs to increase domestic energy production, and a number of Democrats and Republicans alike have argued for an “all of the above” energy strategy. Unfortunately, our broken tax system is getting in the way, but we have an idea to fix that: we can level the tax playing field for domestic energy projects, from fossil fuels to the latest clean energy technologies, with the Master Limited Partnerships Parity Act, which we introduced this week along with our bipartisan colleagues, Sens. Jerry Moran (R-Kan.), Rep. Mike Thompson (D-Calif.), as well as members of both parties representing a diverse set of districts and states from across the country.
For three decades, the federal government has supported certain energy industries and projects with an innovative provision in the tax code that allows energy companies to form something called a master limited partnership, or MLP. An MLP is essentially a limited partnership that enables business and individual projects to get access to capital at a lower cost than traditional funding approaches, making them highly attractive to private investment. MLPs are taxed as a partnership, but its ownership interests are traded like corporate stock on a market, and they’ve been highly successful in supporting energy infrastructure all around the country.
The problem is that by allowing only certain types of energy projects to use the MLP tax structure and not others, the federal government has been picking winners and losers in the energy market and excluding clean energy technologies which are also growing the economy every day.
So, what we’re proposing is simple: let’s allow a broad range of energy projects – from oil and natural gas to wind, solar, and biomass – to get the same tax support they need to succeed. We believe this small, but powerful tweak to the federal tax code could unleash significant private capital in the broader energy market, creating good jobs along the way.
The best part of this proposal is that it’s a win-win for domestic energy across the board: the clean energy industry would be able to use the same tax structure that traditional, fossil-fuel projects are able to use, and the fossil-fuel industry ensures this important tax structure will remain in place.
For years, the United States has been the world leader in innovation and competitiveness within the energy industry, but other countries are catching up, particularly with their investments in clean energy technologies. That’s why it’s essential that Congress supports American companies and workers to turn our economic challenges into growth by utilizing all our energy assets. By coupling technological and financial innovation, we can incentivize growth, increase employment opportunities, and strengthen America’s energy future.
We are at a critical moment when it comes to our nation’s energy policies, but the facts are clear: the global energy market is rapidly changing to become cleaner, more efficient, and more cost effective. The only question is whether American companies and American workers will be at the center of this new market or on the periphery. Let’s seize this moment by updating this part of tax code so that the United States will continue to lead the rest of the world into the future.
Coons is the junior senator from Delaware and Poe represents Texas' 2nd District.