The president has burdened our economy, job creators and American families with new taxes and red tape that punish American energy sources that do not fit into his vision of a green economy. The president has tried to build a Solyndra economy that subsidizes his political allies, corporations and a failed energy agenda that cannot survive without taxpayer support.
Yesterday, the Internal Revenue Service (IRS) filed court documents objecting to Solyndra’s bankruptcy reorganization plan, concluding the company’s private investors set it up to claim lucrative tax breaks in the event the company went belly up. According to a Washington Times article published yesterday, IRS attorneys found, “The undeniable conclusion is that tax benefits drive this plan.”
For the past eight months, the Energy and Commerce Committee has been investigating the Department of Energy’s (DOE) $535 million loan guarantee that was awarded to Solyndra in the spring of 2009. During that time, Solyndra executives, lobbyists, and investors, as well as officials at the DOE and Office of Management and Budget repeatedly told Committee investigators that Solyndra was financially sound.
Solyndra was awarded the first stimulus DOE loan in the spring of 2009 and was widely promoted by the White House as a stimulus jobs “success story” ever since, with President Obama visiting the plant in May 2010. After announcing its bankruptcy on August 31, 2011, Solyndra then became the subject of an FBI raid on September 8, 2011.
As America’s families struggle to pay the price of a gallon of gas and high electricity bills, the only energy legacy that President Obama seems to be interested in is one that funnels hardworking taxpayer dollars to “green” energy firms run by his political allies, like Solyndra. House Republicans understand that Americans deserve better.
The Internal Revenue Service urged a bankruptcy judge to reject solar panel maker Solyndra LLC's bankruptcy plan Wednesday, saying it amounts to little more than an avenue for owners of an empty corporate shell to avoid paying taxes.
"The undeniable conclusion is that tax benefits drive this plan," attorneys for the IRS wrote in a bankruptcy pleading.
Arguing that the bankruptcy court ought not confirm a plan "whose principal purpose is tax avoidance," attorneys said in filings in U.S. Bankruptcy Court in Delaware that the tax breaks would be worth more money than funds set aside for creditors.
Taxpayers are on the hook for more than a half-billion dollars after the company filed for bankruptcy last year, just two years after winning a loan guarantee from the Department of Energy.
What's more, government attorneys said that as far back as 2010, Solyndra owners had "planned meticulously" to be able to use Solyndra's net operating losses to offset future tax liabilities.
"The only reason for the shell corporation to exist post-confirmation is to enable its owners to exploit these tax attributes, which would be lost in liquidation," the IRS argued in court papers.
One owner valued the so-called tax attributes at $150 million, dwarfing the $7 million to $8 million set aside by the reorganization plan for unsecured creditors, according to the government's objection, which was filed by the Justice Department on behalf of the IRS.
Under Solyndra's reorganization plan, two big investors in the company, Madrone Partners LP and Argonaut Ventures, together would own nearly all of a shell company formed in the wake of Solyndra's bankruptcy reorganization.
But the IRS said in court papers that there was little reason for the shell company to exist other than to help the owners avoid taxes. Argonaut is the investment arm of a family foundation headed by Oklahoma businessman George Kaiser, a fundraiser for Barack Obama's 2008 presidential campaign. Madrone has ties to the family that owns Wal-Mart Stores Inc.
Even as company officials negotiated a restructuring deal with the Energy Department to keep Solyndra afloat, the company's owners were "intently focused" on how to preserve their ability to use net operating losses as they privately prepared for the possibility that Solyndra would go broke, according to the government attorneys.
In one email, dated Dec. 7, 2010, Steve Mitchell, a managing director at Argonaut who served on Solyndra's board, told attorneys that there was a "decent likelihood" that Solyndra would go bankrupt within 10 days.
Mr. Mitchell devoted much of the rest of the email to "the need to preserve an estimated $750 million of NOLs in Solyndra," referring to net operating losses, according to the court filing.
"We need to discuss appropriate course of action in the event of filing and trustee appointment," Mr. Mitchell told the attorneys. "The company has a significant NOL, potentially as high [as] $750 million, and George [Kaiser] has a high interest in understanding any manner in which we can preserve the NOLs."
A spokesman for Mr. Kaiser was not immediately available Wednesday.
The government attorneys said that while the reorganization plan had "some marginal benefits," there was no doubt that the most important priority was to "preserve a shell corporation to be able to reduce future tax liabilities by hundreds of millions of dollars."
In a deposition taken after Solyndra's bankruptcy, Mr. Mitchell was asked whether the survival of Solyndra's net operating losses was "an intended outcome," according to a transcript included in the court filings.
"You know, if I have stock for 363 days, and if I decide to sell it three days later so I can take advantage of that situation, it's not the reason I sold the stock, but it's an outcome, right?" Mr. Mitchell replied.
"Why wouldn't I get capital gains in a situation where money was lost," he said. "It's an asset there. We're paying these dollars to deal with other situations, which is to deal with the liabilities. But the asset is there, why not preserve it?"
In a separate deposition, Jamie McJunkin, a managing director with Madrone, answered "no" when asked whether one of the key components of the Solyndra restructuring was to preserve the company's net operating losses. At the same time, he said he didn't see a reason why the operating losses would be destroyed.
"They do have potential value at some point in the future," Mr. McJunkin said. "Size unknown."
Once a poster child of the Obama administration's stimulus program and Mr. Obama's efforts to encourage clean energy, Solyndra turned into a big political headache after its bankruptcy. Republicans have seized on Mr. Kaiser's political ties to Mr. Obama, but administration officials have said politics played no role in the loan deal and that investment decisions were made on the merits.
For questions or further information contact Sarah Makin