US Treasury watchdog investigates solar tax grant program

WASHINGTON, Oct 9 (Reuters) - The Treasury Department'sinspector general is investigating a popular stimulus programthat helped rooftop solar panel projects turn tax credits intocash grants.

The Treasury's internal watchdog is looking at how thedepartment managed the program and is searching for "possiblemisrepresentations" about the fair market value of solar systemsthat received grants, one large installer of solar panelsdisclosed in a filing with U.S. regulators late last week.

The inspector general issued subpoenas to SolarCity Corp andother big players in the market, working with the JusticeDepartment's civil division, San Mateo, California-basedSolarCity said.

A spokesman for the Treasury Department's inspector generaldeclined to comment.

The watchdog has asked for documents dating back to 2007,including communications with other solar development companiesand firms that appraised solar energy property for the grants,SolarCity said.

The program, known as Section 1603, allowed renewable energyproject owners to recover 30 percent of their construction costsin cash. It has been credited with helping boost the solarindustry at a time when it was difficult to find financing.

The cash grant program reverted to a tax credit at the endof last year. Solar developers have been able to sell suchincentives to investors who finance the projects.

SolarCity said it did not know of specific allegations ofmisrepresentation. If any were found, the company could facedamages, penalties and tax liabilities, it said.

"We anticipate that at least six months will be required togather all of the requested documents and provide them to theInspector General, and at least another year following that forthe Inspector General to conclude its review of the materials,"the company said in its filing.

The disclosure was made in SolarCity's U.S. Securities andExchange Commission filing for an initial public offering. Itwants to raise up to $201 million.

SolarCity said the Internal Revenue Service is also auditingtwo of SolarCity's investment funds and is reviewing the fairmarket value of the solar power systems receiving grants.

Companies that have provided funds to finance SolarCity'sprojects include Google Inc and U.S. Bancorp .Such investors use the 30 percent federal tax credit for solarenergy systems to reduce their tax liabilities.

(Reporting by Roberta Rampton, Rachelle Younglai and AyeshaRascoe; Editing by Dan Grebler)


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