IRS Tells Kucinich Treasury Can't Talk to Him About BABs Used for Power Plant

The Internal Revenue Service has told Rep. Dennis Kucinich that Treasury Department officials cannot talk with him about the Build America Bonds used to finance the coal-fired Prairie State Energy Campus power plant in Illinois, which has experienced cost overruns and operational problems.

The Democrat from Ohio, who lost the Democratic primary and is leaving Congress, had sent Treasury officials a letter in October asking them to investigate whether it was proper for BABS to have been used to finance the power plant. BABs are taxable and the Treasury makes subsidy payments to issuers, which equal 35% of their interest costs.

American Municipal Power, Inc., a nonprofit electric cooperative, issued a total of about $796.6 million of BABs for the project in 2009 and 2010, according to the Municipal Securities Rulemaking Board's website.

Kucinich complained while BABs were supposed to expand finance options for state and local governments, in this case the BAB subsidy is going to "a private, multi-national energy firm," while 217 municipalities and 17 electric cooperatives in seven states are obligated to pay PSGC whether or not the power plant generates any power for them.

He claimed that residents of Cleveland, one of the cities, would be on the hook for $19 million above what they would have paid had Cleveland Public Power bought electricity on the open market rather than from PSGC.

But Robert Henn, acting director of the IRS' tax-exempt bond office, told Kucinich: "Disclosure restrictions in the Internal Revenue Code that protect the privacy of all taxpayers' tax returns and tax return information prevent me from discussing what action, if any, we may take on a particular bond issue."

"I can tell you, however, that we work diligently within the boundaries of our enforcement and voluntary compliance programs to resolve violations of federal tax requirements for tax-advantaged bonds in a manner that ensures fairness to all taxpayers," Henn said in the letter, which was sent to Kucinich last month.

Kucinich's staff did not return calls for comment.

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Washington
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