• Impacts ability to qualify for sections 45Y, 48E, and 45X credits
• Provides further clarity on safe harbor guidance

The US Department of Treasury released guidance on Foreign Entity of Concern (FEOC) on February 12 as it relates to the ability of certain projects to qualify for tax credits, according to a press release.

The rules, retroactive to January 1, 2026, apply to projects that qualify under Section 45Y Clean Electricity Production Credit, Section 48E Clean Electricity Investment Credit, and Section 45X Advanced Manufacturing Production Credit.

Passed on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) phases out tax credits for solar-and-wind projects under Section 45Y and 48E, extends the storage credit under Section 48 and also generally phases out 45X starting in 2030, with one exception being wind energy eligible components after 2027, according to commentary from the law firm of Miller Chevalier.

However, the projects would be ineligible for certain energy tax credits if they received material assistance from a prohibited foreign entity (PFE). The Internal Revenue Service, in a 95-page document, specified what those FEOC restrictions were.

CLICK HERE to read the full restrictions.

PAGE 12 of the PDF addresses applicable threshold percentages of certain components

The notice explains that a taxpayer may rely on the rules provided in the notice to calculate the material assistance cost ratio for:

• Any Section 45Y or 48E qualified facility or energy storage technology where the construction of which begins after December 31, 2025, until 60 days after the publication of the forthcoming safe harbor tables
• Any Section 45X eligible components sold in taxable years beginning after July 4, 2025, the date of the OBBBA’s enactment, until the date that the forthcoming safe harbor tables are published

*This story was originally published exclusively for NPM subscribers.