REC Silicon wins tax dispute; company's future uncertain

MOSES LAKE – An appellate court has ruled in favor of REC Silicon in a decade-old dispute with state officials over a tax exemption for natural gas use at its Moses Lake manufacturing facility, which produced silicon materials sold to solar and electronics industries.

In its civil lawsuit against the Washington Department of Revenue, REC successfully argued that it was entitled to the exemption and refunds totaling $1.72 million that the company paid in state use taxes levied on natural gas from January 2012 to late 2017.

But the overall significance of the legal victory seems uncertain, given the series of events involving REC over the past year. In late December 2024, the Norwegian-based company announced it was discontinuing production of high-grade polysilicon, subsequently laying off over 200 employees at the Moses Lake plant. It similarly did so in February 2024 at its Butte, Montana facility.

The company said in a news release that it would instead focus on “optimizing production” of silicon gases – another product used by electronics industries – with a goal of returning to “profitability.”

At the time, REC Silicon was reportedly the only U.S. company producing silane, considered a critical precursor to improve performance in silicon battery development for electric vehicles. Two other companies – Group14 and Sila Nanotechnologies – are currently pursuing such technology with manufacturing facilities in the Moses Lake area.

In its processing, REC needed natural gas to produce silane gas, which was used to “grow” the high-quality polysilicon needed for semiconductors, and to fuel heaters which provided energy to purify the product.

A Washington law requires consumers to pay a use tax on natural gas purchased from sources outside the state, but the law also provides several exemptions. Among them is a tax exemption for gases and chemicals used in manufacturing materials for semiconductors, including gases “to grow the product.”

The law stemmed from legislation enacted in 2006 to promote investment in Washington’s semiconductor manufacturing industry and enhance the state’s competitiveness.

At one point, the Revenue department issued a partial refund of $81,000, but otherwise denied REC’s requests, saying state law required natural gas to “directly contact the product being produced.” That determination was upheld by the state Board of Tax Appeals.

But in a unanimous opinion issued last month, a trio of judges from the state's Division III Court of Appeals overturned those decisions, saying REC’s processes did in fact meet the legislature’s criteria for the tax exemption.

“Since it is undisputed that REC uses natural gas in the production of semiconductor materials to grow its product, one of the listed uses under the exemption, REC is entitlted to a refund of the tax paid to use natural gas for this purpose,” Judge Tracy Staab stated in the 23-page opinion.

Fellow Judges George Fearing and John Cooney concurred.

REC Silicon was represented on appeal by attorneys Aaron Johnson, Daniel Kittle, and Brett Durbin with the Seattle law firm of Ballard Spahr LLP. The Washington Attorney General’s Office represented the Department of Revenue and state Board of Tax Appeals.

In December 2023, REC initially appealed the state’s tax rulings to Grant County Superior Court. The Attorney General’s Office, in turn, asked for the case to be sent directly to the appellate court, a request that then-Judge John Knodell approved in September 2024.

Over the past two decades, Grant County has experienced its own tax disputes with REC regarding assessment values of the industrial-zoned property along Moses Lake’s Wheeler Corridor. In 2010, the county valued the facility at $1.26 billion and levied a tax bill of $16 million. The company – which once boasted in billboards and newspaper ads that it was the biggest taxpayer in Grant County – paid under protest but subsequently filed a lawsuit seeking a refund.

Litigation continued until the county and REC reached a settlement in October 2019. Settlement provisions called for the company to make a $3 million payment to the county before the end of that year, followed by annual payments of $1.75 million through 2026. The money has been distributed among a number of jurisdictions, including the county, City of Moses Lake, regional library system, and Moses Lake school, port, hospital, and mosquito-control districts.

As of this week, the Grant County Assessor’s Office lists the 200-acre property with a taxable value of $132.5 million, and the company paid a county tax bill of nearly $1.23 million in 2025. Its valuation has fluctuated greatly over time: in 2012, REC Silicon was assessed at $771.4 million. But in 2020, the taxable value dropped to $62.1 million, after the facility paused operations a year earlier due to retaliatory tariffs imposed by China in its trade war with the first Trump Administration.

REC has continued to experience other corporate uncertainty in its operations and financial outlook in recent years. In 2022, Korean conglomerate Hanwha Group became REC's largest shareholder with a multi-year contract to provide materials for a subsidiary solar panel manufacturing operation in Georgia, Solar Power World reported last summer.

However, termination of that agreement was called into question when REC ceased its polysilicon production at Moses Lake, announcing in mid-December 2024 that the material had received “an unsuccessful (purity) qualification test.” What ensued was a tumble in the Norwegian parent company’s public stock price, followed by Hanwha making an $88.6 million offer in April 2025 to acquire all outstanding shares of the company and turn it private, according to industry reports.

A Florida-based investment firm described Hanwha’s buyout bid as a “significantly undervalued proposal.” Water Street Capital Inc., a minority holder of REC Silicon ASA stock, filed a request last June in U.S. District Court in Spokane, seeking an order for documents and testimony from the company and its corporate officers for use in potential litigation in Norway.

According to court filings, Water Street Capital wants more information about REC’s purity testing processes and standards along with terms of Hanwha’s supply agreement.

Most recently, a group of shareholders demanded a vote on a proposal to investigate the relationship between REC Grade Silicon LLC and Hanwha Q Cells Georgia Inc.

Issues raised in the investigative request included whether Hanwha was “was in a position to exercise influence over the testing process” and the “dramatic consequences …. (and) conditions under which Hanwha was allowed to terminate the Supply Agreement.”

REC Silicon ASA’s board of directors notified shareholders of an “extraordinancy general meeting” that was conducted online last month, on Dec. 10. Stockholders representing nearly 78% of the company’s 420.6 million shares participated. The investigation proposal was supported by 22.5% of the stock representatives. The meeting was declared closed.

But questions about a potential multi-national corporate takeover, and its impact to the Grant County economy, still remain.