If 10% of the 200 amp breaker is 20amps according to the 10ft tap rule of 240.21(B)...
Wouldn't it be 20amps and 125% of the 120amp inverter output = 170amps?
The language is poorly written, but if you look at it this way ...
Taps. In systems where inverter output connections are made at feeders, any taps shall be sized based on (the sum of 125 percent of the inverter(s) output circuit current and the rating of the overcurrent device protecting the feeder conductors) as calculated in 240.21(B).
...then you apply the 240.21(B) calculation to the whole sum. Which makes sense because the tap rules are based on the amount of current available, so if it's okay to have a tap with 10% ampacity of a utility supplied breaker, it should be okay to have 10% of utility+solar.
You are proposing we look at it this way...
Taps. In systems where inverter output connections are made at feeders, any taps shall be sized based on the sum of (125 percent of the inverter(s) output circuit current) and (the rating of the overcurrent device protecting the feeder conductors as calculated in 240.21(B).)
That makes just as much sense as an interpretation of poor sentence construction, but it makes less sense from any principle of code or physics, if you ask me. Also, if they wanted what you are thinking they could have just said "the sum of 125 percent of the inverter output circuit current and the minimum ampacity required by 240.21(B)."
Either way you look at it, "as calculated in 240.21(B)" is very poor wording because neither the sum nor the rating of the overcurrent device is calculated there, which is what the wording literally implies.
FWIW, here is the 2017 'First Draft'.
Taps. In systems where power source output connections are made at feeders, any taps shall be sized based on the sum of 125 percent of the power source(s) output circuit current and the rating of the overcurrent device protecting the feeder conductors as calculated in 240.21(B). Power source output circuit conductors, where smaller than the feeder conductors, shall be sized to carry not less than the larger of 705.60 or 240.21(B).
...and here is my proposed revision.
Taps. In systems where power source output connections are made at feeders, the output conductors shall be permitted to be sized as tap conductors according to 240.21(B) under the following conditions:
a) for calculation purposes, the assumed rating of the overcurrent device protecting the feeder shall be the sum of the primary source overcurrent device rating and 125% of the output circuit current of all other sources that can supply additional current to the feeder
b) the power source output conductors and overcurrent device shall not be smaller than required by 705.60