Oct. 19 (Bloomberg) -- A Senate Republican is questioning the tax status of a charitable foundation that became the biggest private backer of Solyndra LLC, the solar-panel maker that failed after getting a U.S. loan guarantee.
Senator Charles Grassley of Iowa said the George Kaiser Family Foundation may not qualify for the favorable tax treatment it has claimed as a public charity.
Grassley questioned the role of the foundation started by Kaiser, an oil billionaire and a fundraiser for President Barack Obama’s 2008 campaign, in backing Solyndra. The solar-panel maker filed for bankruptcy on Sept. 6, two years after receiving the $535 million loan guarantee.
“The government didn’t just lose out on its investment through the $535 million loan guarantee,” Grassley said yesterday at a Senate Finance Committee hearing. “It also lost out on the tremendous subsidy it provided the George Kaiser Family Foundation through the charitable contribution deduction.”
Donors of cash and publicly traded securities to public charities can deduct as much as 50 percent of adjusted gross income, according to Grassley. The percentage drops to 30 percent if the donations are made to a private foundation, according to Grassley, who said the organization doesn’t spend enough money on charitable endeavors.
The Tulsa, Oklahoma-based foundation that Kaiser started owns about 36 percent of Solyndra, mostly through its Argonaut Ventures I investment fund. The foundation has said George Kaiser wasn’t an investor in Solyndra and didn’t lobby the administration for the loan guarantee the company received.
FBI, Congress Inquire
The Fremont, California, maker of solar panels is now the subject of inquiries by congressional committees and the Federal Bureau of Investigation.
“We are taking on some of the most difficult and expensive problems in American society,” Ken Levit, executive director of the foundation, said yesterday in an e-mailed statement. “Government, at all levels, is pulling back from its responsibilities in these areas and leaving a greater role for the private sector.”
Levit said the foundation has started three major civic projects with “several hundred million dollars of further obligation” and is studying what works.
“With all of these future commitments, we feel we are prudently preserving resource capacity,” Levit said.
The George Kaiser Family Foundation used its role backing the Tulsa Community Foundation to convert from a private charity to a public “supporting organization” 10 years ago, according to Grassley.
‘Low Level’ Support
The foundation’s “low level of support” for the Tulsa foundation “raises serious questions” about whether it qualifies for its favored status, Grassley said in a letter Oct. 17 to Treasury Secretary Timothy Geithner and Douglas Shulman, commissioner of the Internal Revenue Service.
“If it had remained a private foundation, it likely would not have been able to invest as much as it did in Solyndra or the other private equity or hedge funds it invested in,” Grassley said at the hearing.
The foundation claims assets of $4 billion and has given out less than 2 percent of its total assets in grants over three years, or about $215.4 million, according to Grassley’s letter. Of that, about $10.5 million went to the Tulsa group.
Grassley urged the administration to tighten loopholes that let charities avoid payout requirements. Grassley, who first questioned the George Kaiser Family Foundation’s status in 2005, said he had his staff take a fresh look into its finances after Solyndra’s failure.
Had the foundation remained private it would have needed to release at least an additional $230 million to charities over the three years and to pay excise taxes on its investment income, according to Grassley’s letter.
--With assistance from Andrew Zajac in Washington. Editors: Larry Liebert, Steve Geimann
To contact the reporter on this story: Jim Snyder in Washington at email@example.com
To contact the editor responsible for this story: Larry Liebert at firstname.lastname@example.org