Some things defy comprehension

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I haven’t witnessed something this absurd in a long time. Here is the situation, in a nutshell.

In 2009, the U.S. Department of Energy (DOE) announced federal stimulus funds for smart grid development. For the most part, that money has not yet stimulated the development of the smart grid because it has not yet been awarded. One of the primary reasons for the delay is a decision on whether the stimulus funds will be considered taxable income to the recipients. 

In case you missed it, I’ll rephrase it a different way: potential recipients of federal stimulus money that is made available through the U.S. Department of the Treasury are waiting to see how much of those funds will need to be repaid to the same agency that is funding them. Huh? We are all taxpayers and none of us want to see tax money wasted. Federal paper chases are, perhaps, the largest waste of taxpayer money.

Consider this example:  Company A is awarded a stimulus grant of $30 million, but won’t receive it until there is resolution about if that $30 million will be taxed. If that company has an effective tax rate of 30 percent, it would mean their effective stimulus grant would be $21 million instead of the $30 million that was awarded.

Why on earth would the government award $30 million and then ask for $9 million of it back in taxes? It makes no sense and seems like a very complex way of making an award of $21 million. If they only wanted to award $21 million, then they should have done that and avoided these prolonged negotiations that are forestalling the development of the smart grid.

And, if it is ultimately decided that these funds are taxable, potential recipients may back away completely, or a significant paper chase may follow as tax forms are filed, then audited, then disputed, then litigated, then appealed, then negotiated, etc., etc., etc. Are the stimulus funds meant to stimulate work at the DOE, the Internal Revenue Service or on the smart grid?

We can only guess what kind of bureaucratic morass of misaligned missions converged to create this conundrum of incompetence, but this analyst believes it all to be remarkably silly.

I enjoy discussing industry issues with you. Please feel free to share your thoughts in the comments section, or reach me directly at bthielbar@energycentral.com [3]