TheChek News Flow

By Brody Mullins, Ianthe Jeanne Dugan and Richard Rubin

Congressional lawmakers have launched a formal investigation into whether solar-energy companies improperly received billions of dollars in tax incentives from the Obama administration.

The Senate Finance Committee and the House Ways and Means Committee on Wednesday sent letters to seven foreign and domestic companies in the solar industry, expanding a more limited probe started earlier this year.

The recipients included three firms in the residential solar industry, SolarCity Corp., Sunrun Inc. and Sungevity Inc., and four solar utility companies -- SunEdison Inc., Abengoa SA, NextEra Energy Inc. and NRG Energy Inc.

A spokesman for SolarCity said the "answers to the questions posed are fairly straightforward, and we will provide them as requested."

Officials at SunEdison, Abengoa and NRG Energy declined to comment. NextEra, Sunrun and Sungevity didn't respond to requests for comment.

Congressional investigators are examining the use of tax incentives for solar-power companies, third-party financing and how the companies determine the value of the credits.

The probe is being run by Sen. Orrin Hatch (R., Utah), the chairman of the Senate Finance Committee, and Rep. Kevin Brady (R., Texas), the head of the Ways and Means panel.

Earlier this year, Mr. Hatch began looking into the roughly $25 billion in cash grants that solar and other "green energy" firms have received during the Obama administration. He concluded that the Treasury Department and the Internal Revenue Service -- which are also examining the valuations -- don't have adequate controls over the program.

At issue is a Treasury Department policy that gives solar firms a 30% investment tax credit on the cost of acquiring a system. The tax credit provides a dollar-for-dollar reduction in income taxes otherwise owed by a taxpayer; the companies could also opt to get a grant instead of a credit.

But the 30% calculation isn't always straightforward because of the economics of the industry. Solar-energy developers don't necessarily have the income to use the credits or the funds to buy and install solar energy systems. So they routinely enlist big investors and transfer the tax benefits. Some also lease systems to homeowners and businesses.

So there is debate over the fair market value of the solar energy systems -- the price paid by a buyer, whether it is a homeowner or an institutional investor. Those calculations are made by independent appraisers, solar firms say, following IRS guidelines.

Staff at the Senate Finance Committee said the Treasury Department and the IRS don't have a long-term method for identifying companies that received the cash grants in the past to ensure they don't apply for other tax incentives in the future for the same investments.

The Treasury Department's inspector general had recommended the creation of such a tracking system. Congressional investigators found that the IRS had taken some steps toward doing so, but hasn't put in place a system to track the grant recipients in the long term.

Some investment tax credits can be carried on a company's books for decades, so there is a worry that the IRS wouldn't catch companies that were double dipping in the federal tax incentives.

A Treasury Department spokeswoman declined to comment, citing pending litigation.

The Treasury Department in 2012 began asking solar firms for more information on their calculations about the fair market value of solar energy systems that have been built, according to public filings by solar firms. And the IRS has said it was weighing whether the valuations have been inflated. The inquiries are ongoing.

"If the Internal Revenue Service or the U.S. Treasury Department were to object to amounts we have claimed as too high of a fair market value on such systems, it could have a material adverse effect on our business, financial condition and prospects," Solar City wrote in a recent federal financial filing.

The firm has said that its valuations are correct, and even below Treasury Department guidance about where they should be. But it has said that its results could be affected if its position is disputed by a federal audit, the outcome of the Treasury investigation, or changes in guidelines. This could force them to reimburse some institutions that buy their tax credits as investments.

Solar City received about $501.1 million in credits through Dec. 31, 2014, so even a 5% adjustment downward "would obligate us to repay approximately $25.1 million to our fund investors," the company wrote.

The green energy tax program was launched in 2009 as part of President Barack Obama's plan to stimulate the U.S. economy and promote investments in renewable energy in the aftermath of the financial crisis.

Senior figures in the EU believe that Britain will give up on Brexit if they make negotiations as tough as possible, the Telegraph understands.

British officials are fighting to stop Europe adopting a no-compromise position in talks in the hope that the UK will change its mind about leaving the bloc.

This belief is fuelling the hardline message on issues like freedom of movement that have emerged from Berlin, Paris and Brussels in recent weeks.

More than five senior EU figures interviewed by the Telegraph this week expressed doubts that Britain would go through with Brexit when confronted by the “reality of the bureaucratic nightmare” and the “insane act of economic self-harm”, as they referred to Brexit.

One senior British official involved in the set up for the coming negotiations said the EU elite “seem to think the game is to make us change our minds”.

This stance has left officials fighting to explain to European leaders how “dangerous” a game they were playing, and how “unlikely” it was to succeed.

Who are the Brexit ministers?Play! 01:33

A second UK official source with knowledge of the talks added there was a danger that positions in the Brexit talks were already becoming “dangerously entrenched”, even before Theresa May invokes Article 50 that will open formal EU-UK "divorce" proceedings.

The sense that battle-lines are hardening across Europe came as the 27 EU leaders prepared for a summit on Friday in the Slovakian capital, Bratislava, designed to demonstrate unity and a determination to forge ahead with a European future without Britain.

The toughening mood was darkly hinted at by Donald Tusk, the European Council president, in a nine-point letter urging EU leaders to use the Bratislava summit to restore citizens' fading faith in the European Union.

In a thinly veiled appeal to make sure Britain was left demonstrably worse-off by Brexit, Mr Tusk insisted that the 27 should resolutely “stick to the Treaty” on issues like free movement.

“If we do so, there will be no room for doubt that it is a good thing to be a member of the Union,” he wrote.

Tusk tells May to get on with Brexit: The ball's in your courtPlay! 01:31

The EU’s choice of lead negotiators – the French finance expert Michel Barnier, for the European Commission and Guy Verhofstadt, the former Belgian prime minister and arch-ferderalist, for the Parliament – has also been taken as a clear sign of the EU’s determination to drive a hard bargain.

The appointments were described on Thursday as "very, very tough" by Herman van Rumpuy, the former European Council president, who warned that negotiations would be “difficult” for Britain.

In the European Parliament, which must ratify any Article 50 deal agreed by the EU 27, the mood against Britain was further soured this week by personal attacks on Mr Verhofstadt by former Ukip leader Nigel Farage and the Brexit secretary, David Davis.

Mr Davis referred to his future interlocutor as “Satan” when addressing the Foreign Affairs select committee, while Mr Farage – long a thorn in the side of pro-EU MEPs – lambasted Mr Verhofstadt as a “fanatic” whose appointment amounted to “declaring war” in the coming talks.

Nigel Farage calls EU's top Brexit negotiator a 'fanatic'Play! 01:27

“Perhaps there was a time when this could not have got nasty,” said one source close to Mr Verhofstadt, “but when the Brexit minister calls the chief negotiator ‘Satan’ what response, really, does Britain expect?”

Those sentiments were echoed by Burkhard Balz, a German MEP whose leading role on the European Parliament’s economic and monetary affairs committee makes him influential on financial services regulation, said Britain must not underestimate the determination of the rest of Europe to deprive the UK of its EU financial passporting rights and euro clearing.

He also warned Europe would accept economic pain to defend its core principles and that the belief among Brexiters that the demands of German and French exporters could substantially soften terms was overblown.

“This summer I travelled all over Germany, and the main reason was to talk about Brexit. Every time, in every place, the biggest round of applause was when I said the ‘the time of cherry-picking and rebates is over’. That is how the German people feel about the situation,” he told the Telegraph.