Get site_name without html
The problem is that you are using bad modifier for the t() function. 

$variables = array(
    '@site_name' =&gt; variable_get('site_name'),
    '@tags' =&gt; $params['tags'],
);

$subject = t('@site_name: Verify your Subscription', $variables);
error_log("subject=$subject");


Note the @site_name change. 
If you use 


@site_name --  it will be run through check_plain and returns without any theming. 
%site_name -- check_plain with theme_placeholder. 
!site_name -- Allows all HTML.


Also note that this is not limited to site name. Whenever you use t() function, you should use above placeholder pattern to ensure CSRF-safe variable display. 
Do not use t() function for use-entered variables. For an example, t($form_state['values']['name']); is bad!. Real use of t() function is when you use it with your own text and optionally user-entered data. 

Good luck!