Oct 03, 2016

Corporate Welfare for Solar Companies Results in Wasted Tax Dollars

Post by Derek Yale

Washington’s power to pick winners and losers was recently on full display. 
The Wall Street Journal reported on September 15, that “[c]ongressional lawmakers have launched a formal investigation into whether solar-energy companies improperly received billions of dollars in tax incentives from the Obama administration.”
These incentives are bad for two reasons. First, and perhaps most egregiously, they are a form of cronyism that allows lawmakers to pick winners and losers and award subsidies, tax credits, loan guarantees and other forms of corporate welfare.
Second, the government’s lack of oversight leads to a waste and abuse of taxpayer dollars.  
An earlier probe determined the IRS and Treasury Department “don’t have adequate controls over” a program that awarded approximately $25 billion to solar and other green energy companies. This lack of oversight makes it difficult to keep the recipients accountable to “ensure they don’t apply for other tax incentives in the future for the same investments.” 
The earlier investigation is now being expanded to determine how companies determine the tax basis for “a 30% investment tax credit on the cost of acquiring a [solar] system,” which provides “a dollar-for-dollar reduction in income taxes otherwise owed by a taxpayer.”
According to the Journal:

…the 30% calculation isn’t always straightforward because of the economics of the industry. Solar-energy developers don’t necessarily have the income to use the credits or the funds to buy and install solar energy systems. So they routinely enlist big investors and transfer the tax benefits. Some also lease systems to homeowners and businesses.

Eliminating Corporate Welfare
By engaging in corporate welfare, Washington sends a message that government officials have the power to bend the rules in a firm’s favor.  This incentivizes companies to pursue success through a rigged system, rather than generating value for others.
Congress, however, can easily reverse this trend by letting a whole slew of similar special-interest tax incentives expire in December.  By simply doing nothing, Congress can save taxpayers billions of dollars.