Active Investigations

WASHINGTON—U.S. Sen. Jeff Sessions (R-AL), Ranking Member of the Senate Budget Committee, sent a follow-up letter today to Treasury Secretary Jack Lew regarding billions of dollars in tax credits provided to an unprofitable solar energy company. Sessions originally wrote Lew in November 2013, but the Treasury Department's response lacked sufficient detail.

Text of Sessions’ letter follows:

"Dear Secretary Lew:

I appreciate the January 13, 2014, response to my November 18, 2013, letter related to the Section 1603 program under the American Recovery and Reinvestment Act (AARA).

It is my understanding that because of the costs associated with solar panels, especially for residential homes, leasing solar systems now predominate. It is much easier for a homeowner to lease a system, with no upfront costs, including installation, rather than pay to purchase rooftop solar panels. This shifts the majority, if not all, of the tax benefits to the installers/lessors of the systems, not the homeowners. In some instances, lessors of the panels receive a 30 percent investment tax credit, along with 15 percent in accelerated tax depreciation. Indeed, as of February 1, 2014, solar companies had been paid more than $20 billion from the treasury for such installations. According to your own statistics, more than $20 billion to power 6.5 million homes does not appear to be a good investment.

The January 13, 2014, response to my letter appears to have been limited, and a fuller response is required. The purpose of the 1603 program is to incentivize solar energy by reimbursing eligible applicants for a percentage of the cost of installing specified systems. Congress and the American people are entitled to know the cost per system and how it is calculated. The January 13, 2014, response states in essence that Treasury follows the statutory requirements. Again, I believe a fuller explanation is necessary. Please provide responses to the following:

  1. What public accounting mechanisms and controls are in place to ensure accountability prior to funds being disbursed?
     
  2. Solar leasing companies retain the federal and state incentives that would normally go to the customer if they purchased a system instead of leasing it. Does Treasury regulate or monitor these leasing transactions?  Please explain why or why not. Are there any risks or exposure to taxpayers from these incentives, or even the leases themselves, being bundled and/or securitized by the solar leasing firms?
     
  3. It is my understanding that a number of the solar panels installed in the United States are manufactured in overseas locations such as China. Section 1605 of the ARRA states: “None of the funds appropriated or otherwise made available by this Act may be used for a project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States” (emphasis added). Please explain whether Treasury understands Section 1605 to apply to the Section 1603 program and, if so, how Treasury ensures the appropriate compliance. If Treasury believes Section 1605 does not apply to the Section 1603 program, please explain why.
     
  4. Section 1606 of the ARRA states: “Notwithstanding any other provision of law and in a manner consistent with other provisions in this Act, all laborers and mechanics employed by contractors and subcontractors on projects funded directly by or assisted in whole or in part by and through the Federal Government pursuant to this Act shall be paid wages at rates not less than those prevailing on projects of a character similar in the locality as determined by the Secretary of Labor in accordance with subchapter IV of chapter 31 of title 40, United States Code.” Please explain whether Treasury understands Section 1606 to apply to the Section 1603 program and, if so, how Treasury determines the appropriate compliance. If Treasury believes Section 1606 does not apply to the Section 1603 program, please explain why.
     
  5. For each of the 10 largest solar leasing/financing companies, please provide the following information:

a. Total number of individual projects awarded a cash grant under the Section 1603 program associated with or developed by the solar leasing/financing company;

b. Total installed capacity (in kW-DC) for projects awarded a cash grant under the Section 1603 program associated with or developed by the solar leasing/financing company;

c. Total dollar value of reported project costs for all projects awarded a cash grant under the Section 1603 program associated with or developed by the solar leasing/financing company;

d. Total dollar value of Section 1603 funding requested for all projects associated with or developed by the solar leasing/financing company;

e. Total dollar value of Section 1603 funding awarded for all projects associated with or developed by the solar leasing/financing company;                              

6.  Various legislative proposals (S. 2003 and H.R. 2502) have been introduced to modify the ITC eligibility from “placed in service” before 2017 to “construction begins” before 2017. To better understand the budgetary impact of these proposed modifications of the ITC, a clearer picture of how the inclusion of a “construction begins” provision impacts the Section 1603 program is necessary. Included below is what I understand to be the list of technology categories eligible for cash grants under the Section 1603 program. I have subdivided solar electric into four separate categories to better understand how the “construction begins” provision has impacted different sectors of the solar industry.

 

Large wind

Solar thermal

Small wind

Solar electric – concentrating solar power

Closed-loop biomass

Solar electric - utility PV (over 1000 kW-DC)

Open-loop biomass

Solar electric – commercial PV (1000 to 15 kW-DC)

Landfill gas

Solar electric – residential PV (under 15 kW-DC)

Trash

Fuel Cells

Hydropower

Microturbines

Marine & hydrokinetic

Combined heat and power

Geothermal (under IRC sec. 45)

Geothermal heat pumps

Geothermal (under IRC sec. 48)

 

 

For each of the technology categories in the table shown above, please provide the following information:

a. Number of individual projects that received cash grants under the Section 1603 program placed in service before January 1, 2012;

b. Total dollar value of the cash grants awarded under the Section 1603 program to projects placed in service before January 1, 2012;

c. Number of individual projects that received cash grants under the Section 1603 program placed in service from January 1, 2012 to December 31, 2013

d. Total dollar value of the cash grants awarded under the Section 1603 program to projects placed in service from January 1, 2012 to December 31, 2013;

e. Estimated number of individual projects that will receive cash grants under the Section 1603 program that will be placed in service from January 1, 2013 to the close of the program; and,

f. Estimated total dollar value of the cash grants awarded under the Section 1603 program to projects that will be placed in service from January 1, 2013 to the close of the program.

Before this program is extended or modified, Congress should have a fuller and more public understanding of its benefit and costs, which is currently lacking. Please have your staff provide this information both in hard copy and in an electronic, searchable format no later than May 29, 2014."