The Treasury Department’s top watchdog has opened an investigation into a popular grant program that helped finance a host of green energy projects, according to a recent SEC filing by one of the companies under investigation.
SolarCity Corp. revealed in its initial public offer (IPO) filing that it has been subpoenaed by Treasury’s inspector general for “documents dated, created, revised or referred to since January 1, 2007 that relate to our applications for U.S. Treasury grants or communications with certain other solar development companies or certain firms that appraise solar energy property for U.S. Treasury grant application purposes.”
The IG is looking for evidence of “possible misrepresentations” of the fair market value of a number of recipients of section 1603 grants, including SolarCity. The filing did not indicate which other companies have received subpoenas.
The 1603 program allows rooftop solar panel projects to convert tax credits to cash grants, and has doled out about $2.7 billion to qualified projects since 2009, according to Reuters.
Here’s what SolarCity revealed about the IG’s investigation:
The Inspector General is working with the Civil Division of the U.S. Department of Justice to investigate the administration and implementation of the U.S. Treasury grant program, including possible misrepresentations concerning the fair market value of the solar power systems submitted for grant under that program made in grant applications by companies in the solar industry, including us. We intend to cooperate fully with the Inspector General and the Department of Justice. We anticipate that at least six months will be required to gather all of the requested documents and provide them to the Inspector General, and at least another year following that for the Inspector General to conclude its review of the materials.
The IPO filing revealed a number of other interesting facts about SolarCity, including that two of the company’s investments funds are being audited by the Internal Revenue Service.
In October of 2012, we were notified that the Internal Revenue Service was commencing income tax audits of two of our investment funds which audit will include a review of the fair market value of the solar power systems submitted for grant under the 1603 Grant Program. If, at the conclusion of the audits currently being conducted, the Internal Revenue Service determines that the valuations were incorrect and that our investment funds received U.S. Treasury grants in excess of the amounts to which they were entitled, we could be subject to tax liabilities, including interest and penalties, and we could be required to make indemnity payments to the fund investors.
The company also revealed that, like many federally-supported green energy companies, it is highly dependent on continued taxpayer support. “Reductions in, or eliminations or expirations of, governmental incentives could adversely impact our results of operations and ability to compete in our industry by increasing our cost of capital,” the IPO filing explains, “causing us to increase the prices of our energy and solar energy systems, and reducing the size of our addressable market. In addition, this would adversely impact our ability to attract investment partners.”