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Government attorneys object to Solyndra plan

WILMINGTON, Del. -- Government attorneys are urging a Delaware bankruptcy judge to reject the proposed reorganization plan of failed solar power company Solyndra LLC.

Internal Revenue Service attorneys filed papers this week saying the plan's principal purpose is tax avoidance. The plan allows for two private equity funds that control Solyndra to potentially reap hundreds of millions of dollars in tax breaks after Solyndra emerges from bankruptcy, using net operating losses.

The Department of Energy, which loaned Solyndra $528 million, also is objecting to the plan, saying it fails to protect DOE's $30 million interest in pre-bankruptcy collateral.

The U.S. bankruptcy trustees also filed an objection centering on the reorganized shell company that would be used to take advantage of the net operating losses.

The plan is subject to a hearing next week.