Fact Check: Uncertainties surround audit report story
You may have read recently about U.S. Treasury Department inspector general auditors flagging excess payments to an Illinois wind farm under the federal 1603 tax credit program. To clear up the uncertainties, let’s state the facts of the case.
Fact #1: These preliminary reports have a history of being corrected and resolved once auditors get a better understanding of the expenses involved. As a recent Bloomberg story states (http://www.bloomberg.com/news/2011-10-26/clean-energy-developers-reaped-excess-aid-under-u-s-program-auditors-say.html), during an earlier round of audits:
“Inspectors reversed initial decisions questioning $1 million in grant awards related to spare parts after Treasury Department officials said the costs were eligible under tax law.”
As the public report states in this latest case, the Treasury has not yet reached a final decision on this grant.
Fact #2: Under this program, all projects over $500,000 are required to submit an independent accountants' certification with their grant application. Every expenditure on this project and any other project that applied for and received a grant in excess of $500,000 was already substantiated and independently reviewed by an independent, third-party auditor.
Fact #3: The rules governing tax basis are extensive and the rules are being clarified more and more over time. Auditors and accountants incorporate clarifications from the government once they are made. The reversal of audit findings noted in Fact #2 points to this complexity and the benefit of trained auditors and accountants working together toward clarity.
Fact #4: Preliminary audit findings show the system is working. The government should offer the utmost scrutiny to these programs and flag issues when they find them. But this is not the end of the story. By offering additional information, companies often point out facts that the auditors missed or misunderstood, and increase transparency for taxpayers in the process.
Fact #5: Far and away the most important federal tax incentive for the wind industry, (the federal Production Tax Credit) cannot, has not and will not run into these same issues. With the PTC, you only get an incentive based upon what you verifiably produce; there is no incentive credit given based on investment.