NEW YORK (Reuters) - Mylan N.V. is best known for producing EpiPen emergency allergy treatments and generic drugs.

FILE PHOTO - EpiPen auto-injection epinephrine pens manufactured by Mylan NV pharmaceutical company for use by severe allergy sufferers are seen in Washington, U.S. on August 24, 2016. REUTERS/Jim Bourg/File Photo

But a non-pharmaceutical offering – refined coal – has quietly generated hundreds of millions of dollars of tax credits for the company over the last six years that have boosted its bottom line, according to a Reuters review of company filings.

Since 2011, Mylan has bought 99 percent stakes in five companies across the U.S. that own plants which process coal to reduce smog-causing emissions. It then sells the coal at a loss to power plants to generate the real benefit for the drug company: credits that allow Mylan to lower its own tax bill.

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These refined coal credits were approved by Congress in 2004 in order to incentivize companies to fund production of cleaner coal. They are available to any company that is willing to invest the capital, and are set to expire after 2021.

Mylan is one of only a few public companies, and the only publicly-traded pharmaceutical maker, that uses these tax credits, a Reuters review of a comprehensive database of filings with the U.S. Securities and Exchange Commission found. It is possible other companies receive an immaterial amount of the tax credits and decline to disclose them.

Future tax credits could prove valuable to Mylan, which has seen sales of its flagship EpiPen allergy treatment sag after consumer outrage over the allergy treatment’s $600 list price. The pricing issue, which has drawn scrutiny from members of Congress and the U.S. Department of Justice, and Chairman Robert Coury’s nearly $100 million pay package last year have caused a group of investors to launch an effort to vote down the company’s board at its annual meeting on Thursday.

Mylan already carries a low tax rate after moving its headquarters overseas in 2015. The coal credits helped the company lower its effective tax rate further, to just over four percent in 2014 and 7.4 percent in 2015. Last year, the company actually had a tax benefit of $358 million, giving it an effective tax rate of negative 294 percent.

Mylan confirmed Reuters’ calculations based on figures in the tax footnotes in the company’s annual reports. According to these calculations, Mylan used more than $100 million of “clean energy and research” tax credits in both 2016 and 2015, and around $95 million in 2014.

A person familiar with the matter told Reuters these coal operations have increased Mylan’s net earnings by around $40 million to $50 million in each of the past two years. That accounts for around 9 percent of the company’s earnings last year and more than 5 percent of its 2015 earnings.

Mylan has disclosed very little about the tax credit strategy or its coal refining operations. It did not announce the coal deals when they occurred or disclose how much they cost. Mylan has not discussed them on its earnings conference calls and does not disclose exactly how much in tax credits they generate or what effect they are having on its bottom line.

Wells Fargo analyst David Maris, who has a market perform rating on the company, said he believes that, from an investor standpoint, the coal transactions adds unnecessary complexity.

“The average investor looking at their financial statements or their press releases, would have no idea what this is or how it flows through to their profit and loss statement,” he said.

“BEING MINDFUL OF TAX PLANNING”

Mylan refers to losses and interest expense generated by its “clean energy investments,” as well as the fact that they qualify for tax credits, in tables and footnotes at the bottom of its earnings releases. In filings with regulators, it discloses some risks around the investments, their carrying value, and liabilities related to the investments.

“It does sound like they are being mindful of tax planning,” said Lisa De Simone, professor of accounting at Stanford Graduate School of Business. “From the perspective of shareholder value, companies have all of the incentive in the world to try to reduce their tax payments, to increase net income and increase distributions to shareholders.”

Mylan spokeswoman Nina Devlin said in an emailed statement that the tax credits are available to any interested company, and often “made outside of a company’s ordinary course of business, and companies involved in such projects range across a variety of non-energy related sectors.”

Other companies Reuters found that take the credits include insurance brokerage and risk management services firm Arthur J Gallagher, Waste Management Inc and industrial supply company WW Grainger. The companies vary in their level of disclosure of the investments, but some disclose the number of tax credits they receive from the facilities.

Devlin added that the health company recognizes that the production at the refined coal facilities will no longer be eligible for a tax credit beginning in 2022. “Nonetheless, on an ongoing basis, we consider appropriate opportunities for tax planning with respect to our global operations,” she added.

New York City Comptroller Scott Stringer spoke out against the tax strategy when informed about it by Reuters. Stringer, who is leading the effort to vote down Mylan’s current board, oversees New York City pensions that together own more than 1.1 million shares of Mylan stock.

“From the EpiPen pricing debacle to embracing complex tax avoidance strategies, Mylan’s board appears more focused on financial engineering than on the company’s core business,” he said.

COAL INTEREST DATES TO 2011

Mylan made the first investment in the coal producing plants in 2011, and expanded its total holdings to 5 plants by 2014.

Mylan Chief Executive Heather Bresch, who has led the company since 2012, has coal country roots: she is the daughter of U.S. Senator Joe Manchin of West Virginia, the second largest coal-producing state in the country. The company declined to discuss the origin of why it adopted the tax strategy.

Mylan says in its last two annual reports that its holdings are equity method investments in five limited liability corporations that own refined coal production plants, but does not name them.

Reuters was able to identify these operations by reviewing lists of the company’s subsidiaries included with its annual reports. Mylan has 99 percent stakes in 5 LLCs that own refined coal plants: Canton Fuels Company in Illinois, Chouteau Fuels Company in Oklahoma, Deogun Manufacturing Company in Utah, Marquis Industrial Company in Indiana and Powder Street LLC in West Virginia.

Mylan is booking losses from the plants, which is not unusual for these facilities. The companies often pay a middleman who manages the coal production facilities as well as other costs.

Mylan recorded pre-tax losses of $92.3 million in 2016, $93.2 million in 2015 and $78.9 million in 2014 from the operations. The loss generated by the coal plants, as well as depreciation, is tax deductible, according to tax experts.

But the tax credits generated by the facilities are extremely valuable. Last year, companies received $6.81 in tax credits for every ton of refined coal produced. Mylan produced around 16 million tons of refined coal last year, according to a person familiar with the matter.

According to the same person, expenses – including costs paid for the assets and adjusted for tax deductions – equate to around 60 percent of the gross credits earned.