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Oregon claws back $13 million from Tesla over inflated solar credits, report says

Oregon claws back $13 million from Tesla over inflated solar credits, report says

The state of Oregon has recovered $13 million it paid to Tesla for solar power projects, after an investigation concluded the company inflated prices to qualify for higher tax credits, said a report in the Oregonian/OregonLive on Thursday.

Tesla Energy, formerly known as SolarCity, overstated the costs of 14 large-scale solar power projects in the state by 100 percent to secure the higher credits, the report said. An investigation by the Oregon Department of Justice determined that Tesla was only entitled to $6.7 million of the $16.7 million in tax credits it collected for the projects.

The settlement included $12.5 million in restitution and $500,000 in legal fees.

Neither Tesla Energy nor its accounting firm, Novogradac & Company, admitted wrongdoing in the settlement, it added.

Tesla said in a statement sent to CNBC that SolarCity had provided accurate information in its tax credit applications and was “entitled to every dollar of tax credits that it received.” The company said the Oregon attorney general made “hyperbolic claims” of “false applications” and “inflated costs” and that the dispute reflected differing interpretations of Oregon tax credit regulations.

The Oregon attorney general’s office was not immediately available for comment to CNBC.

Tesla’s solar power business has been the subject of scrutiny and some criticism ever since Tesla absorbed it through its acquisition of SolarCity. Tesla CEO Elon Musk chaired SolarCity and the company counted some of his close relatives as top executives.

Shortly before the acquisition, Musk demonstrated a new kind of glass roof tile Tesla was developing that would be able power a home with solar energy. But in the last two years, very few of these “solar roofs” have been installed.

Read the full report in the Oregonian/OregonLive.

Here is Tesla’s full statement:

“SolarCity provided accurate information in its applications for Oregon’s Business Energy Tax Credits (BETCs), and was entitled to every dollar of tax credits that it received. Contrary to the Oregon Attorney General’s hyperbolic claims of ‘false applications’ and ‘inflated’ costs, this dispute merely reflects a difference of opinion about how to interpret an Oregon regulation regarding BETC credits that were received by SolarCity many years ago.

These are the facts:

  • SolarCity read the applicable regulation carefully and in good faith understood it to mean that it could properly apply for BETCs based on the fair market value of its solar energy systems. Fair market value is the standard approach for valuation, and it is what other governments use. SolarCity reasonably believed the same approach was to be used in Oregon.
  • SolarCity worked with Novogradac, an expert accounting firm, as required by Oregon regulations. Novogradac prepared BETC reports following the guidance provided by the Oregon Department of Energy. SolarCity had no reason to question that they were accurately following Oregon’s rules.
  • SolarCity was transparent about how it was calculating the BETCs it was claiming.
  • SolarCity’s applications were 10-20% lower than those of comparable BETC applicants. Thus, the idea that SolarCity was trying to claim excessive BETCs is clearly incorrect.
  • Although the State now takes the position that SolarCity should not have used the fair market value of the systems and instead should only have used its out-of-pocket construction costs, we do not believe that is the correct interpretation of the regulation. Nevertheless, we recognize there is a difference of opinion about how to interpret the regulation, and thus decided to resolve this matter with the State.

Oregon’s residents have benefited from years of clean energy as a result of SolarCity’s projects, just as the State intended when it created the BETC program. The Attorney General noted that the BETC program was intended to ‘help local businesses create clean energy jobs and stimulate the economy,’ and that’s precisely what happened. In the case of the Oregon University System, SolarCity stepped in when four other developers had tried and failed to install solar energy systems. SolarCity’s participation in the BETC program provided clean energy projects that would otherwise have been impossible.

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