Last year, in two Newsmax Insider columns, I sounded the alarm on the business practices of solar leasing companies, and the billions they were reaping at the expense of homeowners.
Since then, Congress and several state legislatures have begun to target the questionable practices of solar leasing companies like SolarCity.
Even though SolarCity is under fire for marketing alleged risky solar leases to uninformed homeowners, new disturbing disclosures reveal a possible tax abuse of over $1 billion.
What is more galling, the federal government officials have known about this scheme for years.
Solar industry observers at The Wall Street Journal and Bloomberg New Energy Finance have long pointed out that SolarCity is “essentially a financing business” whose most important customers are its investment fund partners, not homeowners.
SolarCity’s solar leasing business model hinges on investment fund partners, often-big banks, paying for the capital costs of each solar system that SolarCity installs, in exchange for lucrative federal tax credits, such as the investment tax credit (ITC), associated with solar systems.
As SolarCity continues to come under scrutiny from market analysts and investors, one of the most serious issues dogging SolarCity (and other solar leasing companies) is the charge that the company has misrepresented costs of its solar systems to the U.S. Department of Treasury when claiming the ITC.
Stating artificially higher costs for solar systems boosts the value of the tax credits, rewarding companies that play fast and loose with already generous federal and state subsidies for solar.
In late summer 2015, the Kroll Bond Rating Agency revealed that SolarCity had allegedly purchased an insurance policy that exists only to cover SolarCity’s financial obligations to investors if the Treasury determines that SolarCity misrepresented costs when claiming federal tax credits and moves to recapture the ill-gotten subsidies.
How much more additional tax credits has SolarCity been taking with such costs? A recent report by the Kroll Bond Rating Agency gives us an indication.
According to the Kroll report, SolarCity reports solar system costs when claiming tax credits that are 75 percent higher than solar system costs disclosed to investors in the company’s quarterly investor earnings call.
This means that for the SolarCity projects detailed in the Kroll report, SolarCity took $70 million in excess tax credits.
More startling, the projects detailed in the Kroll report represent only 6 percent of SolarCity’s total projects, as SolarCity has been building projects with such costs since 2009.
For the company’s entire portfolio of projects, SolarCity has claimed excess tax credits worth over $1 billion. And SolarCity is just one of many solar leasing companies with these creative costs.
While the scale of this profits for costs scheme is astounding, more astounding is the fact that government officials have known about the misrepresentation of costs for years.
We know the U.S. Department of Treasury’s Office of the Inspector General and the Department of Justice opened an investigation of SolarCity and other solar leasing companies in 2012.
Why has the investigation of SolarCity taken so long? After all, the investigation was started in 2012.
One can only speculate that the Obama administration is obstructing the investigation’s teeth and timing. All the while, SolarCity and the rest of the solar leasing industry continue to plow ahead, perpetuating the billion-dollar subsidy scheme.
In late 2013 and early 2014, Sen. Jeff Sessions wrote two letters inquiring into why Treasury officials had not put a stop to the abuse of the federal tax subsidies by the solar leasing companies.
Since that time, Congress has not put any pressure on Treasury to complete its investigation of solar companies misrepresenting costs. Given these resent disclosures by SolarCity, it is high time for Treasury and DOJ to make public their findings before the solar leasing companies pocket their next billion in taxpayer dollars.
Bradley A. Blakeman served as deputy assistant to President George W. Bush from 2001-04. He is currently a professor of politics and public policy at Georgetown University and a frequent contributor to Fox News Opinion. Read more reports from Bradley Blakeman — Click Here Now.
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