The Senate Finance Committee and the House Ways and Means
Committee sent letters to a number of solar companies seeking
information about the companies' use of federal tax incentives.
Senator Orrin Hatch (R-UT) and Representative Kevin Brady (R-TX)
jointly signed the letters that were sent to SunEdison, Abengoa SA,
NextEra Energy Inc. and NRG Energy Inc., all of which are
developers of commercial solar systems. Letters also were sent to
the residential solar companies SolarCity, SunRun and
The investigation, which began earlier this year, is focused on
two separate issues: (1) the absence of IRS and Treasury systems
used to keep track of solar grants and credits received, and the
consequent opportunity for energy companies to "double
dip" the benefits; and (2) the possibility that the amount of
the tax benefits received may be excessive due to falsely inflating
the tax basis of the solar power systems (thus inflating the
benefit which is 30% of the tax basis).
The letters ask for the details concerning the cash grants
received, the valuation of the systems, the third-party financing
of the systems, and the tax loss insurance. The inquiries posed in
the letters do not appear to be confined to a particular time
period. The responses are due by October 12, 2016.
Commentary / James Mann
The congressional investigation is an attempt to follow up on
the $25 billion of cash grants received under Section 1603 of the
American Recovery and Reinvestment Act of 2009. Projects under 1603
have been completed and the grants have been awarded. The new
inquiries address the investment tax credits claimed for solar
projects under Section 48 of the Internal Revenue Code (the set of
tax rules that now apply) including methods used to determine the
tax basis for solar energy properties, use of third party
financing, and use of tax loss insurance. Those questions are not
limited to 1603 cash grants, so the companies presumably will have
to disclose current tax basis valuation methods and financing
One purpose of the investigation may be to spur the IRS to
increase audit efforts for the cash grants that have been awarded
under the program. Another possible purpose is to pressure the IRS
into increased audit activity in this area in general - that is, to
examine Section 48 tax credits received as well as cash grants
received. Another possible purpose for this inquiry may be to
further the political position that solar energy subsidies in the
form of both cash grants and credits are wasteful and
Responses to these requests, if made public, may shed light on
the financing practices of these companies. One of the criticisms
of SunEdison (one recipient of the letters) before its bankruptcy
was that its financial disclosures were purposely opaque and did
not provide investors with meaningful information to assess the
company's capital raising efforts. Responses to these letters
may be an important step toward transparency and
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