Sen. Ron Wyden, D-Ore., the ranking member of the Senate Finance Committee, sent a letter to Treasury Secretary Jack Lew urging him to recover the tax benefits earned by Volkswagen for the cars it sold that turned out to have their emissions tests rigged, but without penalizing the taxpayers who had purchased the supposed energy efficient vehicles and claimed tax credits for them.

Wyden asked the Treasury Secretary to work with the Environmental Protection Agency and the Department of Justice as they consider levying penalties against Volkswagen Group, writing that tax benefits fraudulently earned by the automaker should be recovered. During the period of time in which Volkswagen illicitly evaded emissions standards with special “defeat devices” installed in their vehicles, the company was the beneficiary of two significant clean energy tax programs: the Alternative Motor Vehicle Credit and the Advanced Energy Manufacturing Credit.

“It is extremely troubling that Volkswagen may have defrauded its way into economic gain at the taxpayer’s expense,” Wyden wrote in the letter Wednesday.  “I urge you to work with the EPA and Department of Justice as they weigh levying fines and enforcement actions against Volkswagen and take the full value of these tax benefits into account. To the extent Volkswagen Group misled the Treasury Department and the Internal Revenue Service about the performance of its vehicles, the value of these tax incentives should be recaptured.”

Wyden added, however, that individual Volkswagen consumers in the U.S. who claimed the $1,300 Alternative Motor Vehicle Tax Credit after buying their cars should be protected from any tax penalties.

“The law makes clear that individuals should not be held liable for Volkswagen’s bad acts,” he wrote. “I would like your assurance that there will be no effort to recover tax credits from consumers who were duped by Volkswagen and claimed the benefits in good faith.”

On Tuesday, Wyden and the chairman of the Senate Finance Committee, Orrin Hatch, R-Utah,  sent a separate letter to Volkswagen asking about the use of “defeat devices” in diesel passenger cars and the subsequent certification of information to the Internal Revenue Service in order to meet requirements for federal tax credits and increase sales of these vehicles (see Senators Probe Volkswagen Tax Credits).

The House Energy and Commerce Committee grilled VW executives about the scandal during a hearing Thursday. The Environmental Protection Agency announced last month that Volkswagen installed defeat devices on nearly 500,000 vehicles in the U.S., including the Jetta, Beetle, Passat and Golf, along with the Audi A3. VW is recalling the cars, and has admitted that up to 11 million vehicles worldwide may have the devices installed in what has become known as the "diesel dupe." The devices had software that detected when the vehicle was undergoing an emissions test and would reduce emissions during the test, but then begin emitting more pollution when the vehicle was back on the road.

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