The U.S. government is gearing up for a politically charged fight over Solyndra's bankruptcy plan, as the former solar panel maker supported by President Barack Obama revealed a further $23 million in potential tax breaks for its venture capital backers.

A U.S. bankruptcy judge on Friday cleared the way for creditors to vote on the plan, and scheduled a hearing to consider approval on Oct. 17, less than three weeks before the Nov. 6 elections.

An attorney for the Internal Revenue Service said his agency anticipated objecting, setting up a fight over tax breaks.

The tax breaks, which Solyndra's lawyers described on Friday as "business tax credits" from 2010 and 2011, will likely fuel Republican attacks that Solyndra was a sweetheart deal for a major Democratic fundraiser.

They are on top of $341 million in potential tax breaks available to venture capital backers Madrone Partners and Argonaut Ventures that Solyndra disclosed earlier this week.

Argonaut is the investment arm of a foundation tied to the Democratic fundraiser, Oklahoma billionaire George Kaiser.

The failure of the company Obama held up as an example of government backing for renewable energy jobs is a political weapon for Republicans ahead of the November elections as they highlight energy policies more favorable to fossil fuels.

Solyndra's bankruptcy plan could prove a further embarassment to the administration if it is seen rewarding risk-driven venture capitalists ahead of unsecured creditors such as suppliers and laid-off staff.

Solyndra has said in recent court filings it may not be able to repay any of the $528 million that the U.S. government had lent in 2009 to promote clean energy businesses.

Neither Argonaut nor Madrone immediately responded to requests for comment.

Stuart Gibson, a lawyer for the Internal Revenue Service, said at the hearing that his agency expects to object to Solyndra's repayment plan because the bankruptcy code bars plans in which the principal purpose is to avoid taxes.

Republicans have seized on Solyndra's failure to accuse the White House of rushing the $528 million loan in part to help the venture capital backers. The Obama administration has said the loan was based on the merits of Solyndra's business prospects.

Solyndra filed for Chapter 11 protection from creditors on Sept. 6, 2011, as it and other solar panel companies were hurt by a flood of cheap imports from China that drove down prices.

The company has auctioned virtually everything from inventory, office equipment and real estate to repay its debts, but may prove unable to pay any of its unsecured creditors.

Some of those creditors are nonetheless expected to vote for the plan, after Argonaut and Madrone agreed to provide as much as six cents on the dollar for their claims in exchange for the tax breaks. Without the money from the investment funds unsecured creditors would get nothing.

The investment funds plan to bring Solyndra's holding company out of bankruptcy and use the tax breaks.

Argonaut invested more than $200 million in Solyndra stock and lent the company $125 million, according to court and regulatory filings. Madrone, meanwhile, invested at least $36 million in Solyndra stock and lent the company at least $100 million.

Solyndra filed in 2010 for an initial public offering but never went public. Objections to its bankruptcy plan are due by Oct. 10.

This article is copyrighted by Reuters