December 23, 2019

Whitehouse, Warren, Brown Call on Government Watchdog to Probe Coal Tax Credit Program Exploited by Wall Street

Senators ask GAO to review IRS program that report shows fails to cut pollution – despite leading to billions in tax benefits for major financial firms

Washington, DC – Today, Senators Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), and Sherrod Brown (D-OH) called on the top congressional watchdog, the Government Accountability Office (GAO), to audit the IRS’s coal production tax credit, which has permitted coal refiners – many of them big Wall Street financial services companies – to claim roughly $1 billion annually in tax write-offs based on questionable pollution reduction data. 

In June, the senators called on the IRS to justify its award of tax credits following the release of a report by the group Resources for the Future (RFF) that found under real world conditions emission reductions achieved with refined coal fell “far short” of those necessary to obtain the tax credit.   The finding casts serious doubt on whether combusting refined coal at power plants generates emissions reductions required by law. 

“We ought to know if Wall Street-backed corporations are bilking the U.S. Treasury for massive sums of money based on a phony premise,” the senators said in a statement today.  “The data from private labs hired by these refiners to justify the use of these tax credits looks like it fails to measure dangerous pollutants from real-world burning of so-called ‘refined’ coal.  ”

Refined coal tax credits have become a big business for large financial services firms including Goldman Sachs, JPMorgan Chase, Capital One Financial, Fidelity Investments, and Arthur J. Gallagher.  Some of these companies have generated hundreds of millions of dollars in refined coal tax credits and boast of a “staggering” return on investment of several hundred percent.

RFF’s June study suggests that real-world combustion of refined coal produces roughly half the required emissions reductions for nitrogen oxides and mercury, and next to no reduction in sulfur dioxide emissions.

Text of the senators’ letter to the Comptroller General is below.  A PDF is available here

The senators’ June 10 request to the IRS is available here.

The Honorable Gene L. Dodaro

Comptroller General

U.S. Government Accountability Office

441 G Street, N.W.

Washington, D.C. 20548

Dear Mr. Dodaro,

We write to request that the Government Accountability Office evaluate the implementation of the refined coal production tax credit established by Section 45 of the Internal Revenue Code. In order to claim this tax credit, refiners must demonstrate that their refined coal reduces emissions of nitrogen oxides (NOx) by 20 percent and emissions of either sulfur dioxide or mercury by 40 percent per unit of thermal energy compared to unrefined coal. In recent years, media reports suggest that refiners claimed approximately a billion dollars in tax credits annually using the refined coal production tax credit.

Current Internal Revenue Service guidance allows refiners to demonstrate that they have achieved the required reductions through laboratory analysis rather than measuring the actual emissions generated from the refined coal combusted at the power plant. However, a recent report analyzing other emissions data raises questions about the extent to which the use of refined coal is actually achieving the emissions reductions required to claim the refined coal production tax credit.[1]

Given the questions raised by the report and the cost of the tax credit, we request that the Government Accountability Office respond to the following questions:

  1. Over the last decade, to what extent have refiners claimed the refined coal production tax credit?
  2. What is known about the extent to which refiners have achieved the emissions reductions required to claim the refined coal production tax credit?
  3. What processes and controls are in place to ensure that refiners are meeting the requirements to claim the refined coal production tax credit?

Thank you for your assistance with this request. 


[1] Brian Prest and Alan Krupnick. How Clean is “Refined Coal”? An Empirical Assessment of a Billion-Dollar Tax Credit (Washington, D.C.: Resources for the Future, November 2019)

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