Solyndra investors could reap tax windfall

Two investment companies stand to receive hundreds of millions of dollars in tax breaks under a bankruptcy exit plan for failed solar company Solyndra, government lawyers say.

Nearly a year to the day after the solar company filed for bankruptcy owing taxpayers more than $500 million, Solyndra is poised to restructure under a deal that government lawyers fear could provide a tax windfall to the investors.

The investment companies, Argonaut Ventures and Madrone Capital Partners, may be able to use net operating losses at Solyndra to avoid “hundreds of millions of dollars in future income taxes” unrelated to the solar-panel manufacturer, according to a recent court filing by Obama administration lawyers.

In addition to earlier financing, both companies provided $75 million to Solyndra last year in a controversial restructuring deal approved by the Department of Energy (DOE) that allowed the financiers to be paid back before taxpayers in case of a default.

Taxpayers are expected to receive little of the $528 million that Solyndra still owes to the federal government, but DOE officials have defended the restructuring, saying it was the best chance of keeping Solyndra in business.

Republicans said that the restructuring only caused taxpayers to lose more money and that the arrangement violated federal rules.

Argonaut is the investment arm of a family foundation in Oklahoma headed by businessman George Kaiser, who was a fundraiser for then-Sen. Barack Obama’s 2008 presidential campaign. Madrone has ties to the family that owns Wal-Mart.

Bankruptcy attorneys for Solyndra have not yet filed a response to the opposition to their disclosure statement.
The Justice Department, which represents the DOE, said the restructuring would leave an entity with no assets and no debts, according to its recent filing.

“It will, however, hold ‘tax attributes’ consisting of more than one-half billion dollars in net operating losses,” the government filing states. “The equity holders … may then, assuming they meet the other requirements of the Internal Revenue Code, use those net operating losses to reduce their income tax liabilities on income earned from other sources completely unrelated to Solyndra.”

Saying a judge should oppose the disclosure statement, government attorneys argue the plan doesn’t shed any light on whether there’s any intention to use the net operating losses after bankruptcy.

Madrone and Argonaut are entitled to receive the $75 million they invested in last year’s restructuring ahead of taxpayers, but that’s not most of what they invested. The companies had earlier poured hundreds of millions of dollars into the solar-panel maker. But like the money it received from the government, Solyndra spent that investment. Those funds aren’t subject to be repaid back before taxpayers.

Once a poster child of the Obama administration’s stimulus program and Mr. Obama’s efforts to encourage clean energy sources, 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.

Administration officials and the company both have blamed stiff competition from China and falling solar-panel prices for Solyndra’s collapse, while Republicans said the administration ignored warning signs and severely mishandled the loan restructuring.

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