Senate Finance Committee Chair Orrin Hatch (R-UT) requested information concerning the use and administration of cash grants and energy tax credits from the U.S. Treasury Department ("Treasury"), the IRS and the Treasury Inspector General for Tax Administration ("TIGTA") under the Treasury's Section 1603 Program. The Section 1603 program was created by the American Recovery and Reinvestment Act of 2009 in order to subsidize "green energy." The program allows taxpayers making certain commercial investments in energy properties to elect to receive cash grants in lieu of claiming energy investment tax credits under Internal Revenue Code Section 48(a), which concerns energy credit. Senator Hatch noted that as of May 1, 2016, the Treasury Department has awarded over $25 billion in Section 1603 cash grants. In his information request to the Treasury Inspector General, Senator Hatch made the following statement:

"While the [Section 1603] program has undoubtedly funded legitimate projects throughout the country, it has also proven susceptible to misuse and fraud."

In his information request to the Treasury, Senator Hatch expressed his concern over an October 25, 2010, memorandum that detailed instances of "double dipping" and a "lack of skin in the game" by recipients of overlapping renewable energy subsidies, which included the Section 1603 program as well as Sections 1703 and 1705 energy loan guarantee programs administered by the Department of Energy. Senator Hatch also asked the Treasury to provide insights into (i) the "risk-based criteria" used in its Section 1603 review process, (ii) coordination between the Treasury and the DOE in awarding Section 1603 grants, and (iii) how the Treasury authenticates claims in Section 1603 annual performance reports of program participants.

In addition, Senator Hatch urged the IRS to respond to questions about the administration of the energy investment tax credit under Internal Revenue Code Section 48(a), which concerns energy credit. Topics about which he requested information included (i) the 1603 Compliance Initiative Project, and (ii) the IRS review of the fair-market value and verification processes for tax returns that claim the energy credit.

Lastly, Senator Hatch asked the TIGTA to conduct further oversight of the IRS:

  • by using a statistically valid sample of recipients of all sizes in order to determine the extent to which Section 1603 grant recipients have claimed disallowed energy credits;
  • by determining whether the IRS had prior knowledge and took appropriate action in cases in which a Section 1603 grant recipient also claimed an energy credit; and
  • by examining the particular methods of property valuation used by taxpayers who claimed the Section 1603 cash grant.

Senator Hatch requested that all three agencies deliver the information to him by June 30, 2016.

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