The US Treasury’s interim FEOC guidance has outlined “Material Assistance” provisions, which rely heavily on existing safe harbour calculations.
The guidance is “in line with expectations and doesn’t create any unanticipated obstacles”, according to Mike Hall of US renewables supply and analytics firm Anza Renewables.
The guidance, released 12 February by the Treasury, clarifies some of the provisions relating to FEOC that were expanded under the One, Big, Beautiful Bill Act (OBBBA) last summer. FEOC provisions limit the ability of companies to access US clean energy tax credits if they have certain corporate, financial or technical ties to Chinese firms.
The new guidance primarily outlines “Material Assistance” safe harbour provisions. The Treasury has said that project developers or manufacturers can use the existing domestic content safe harbour tables to calculate FEOC Material Assistance costs, as the new rules will be “substantially similar” to the provisions for domestic content introduced under the Inflation Reduction Act (IRA).
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Material assistance safe harbour means the proportion of FEOC-exposed components and products that are permitted in US clean energy production and manufacturing projects seeking access to tax credits. The provisions are calculated based on the cost of products and components, with thresholds rising as time goes on.
Relying on the existing safe harbour tables may be the most significant revelation in the guidance. It means that the supply chain requirements on US companies are less onerous than they could have been, as the table for domestic content only includes solar modules, cells and other module assembly components like glass and frames, inverters and other plant components like trackers. Crucially, it does not account for the cost of solar wafers, ingots or polysilicon.
“The safe harbour allows taxpayers to trace to the level of detail of the items listed in the IRS’s domestic content safe harbour tables with additional averaging rules to account for the business realities of procurement and tracing,” US clean energy tax credit financing firm Crux said in a blog. “These rules are in contrast to an impractical framework of tracing subcomponents or raw materials to each individual facility-eligible component.
For project deployments seeking the investment tax credit (ITC) or production tax credit (PTC), Crux said: “This is material compliance relief that obviates the need for deeper upstream tracing, and the tables outline a discrete list of components to be considered.”
For solar manufacturers seeking access to the 45X Advanced Manufacturing Credit, Crux said the guidance “indicates that taxpayers must generally evaluate only the costs from their direct suppliers or own production of constituent materials.” It added that manufacturers “only need to evaluate the specific [components] that appear in the safe harbour table that corresponds to that [component].”
“We’re still digesting the guidance, but our initial read is that this is in line with expectations and doesn’t create any unanticipated obstacles to FEOC compliance,” said Hall. “The interim safe harbour rules look like they provide an actionable pathway for project owners to qualify for the ITC.
“It’s important to remember that these guidelines don’t apply to projects that were safe harboured before 1 January 2026. We believe multiple years’ worth of PV and BESS projects were safe harboured in 2025 and don’t have a FEOC compliance burden.”
Unanswered questions
The Treasury said it expects to release more guidance, regulations and safe harbour tables in the future, and questions are still unanswered over some elements of FEOC restrictions.
The OBBBA introduced “effective control” measures where companies could be designated a “Foreign-influenced entity” if they confer control of part of their operation to a “Specified Foreign Entity”. This control can take the form of contract agreements, influence over certain timelines or operations and even intellectual property (IP) licensing agreements.
The new guidance did add some more clarity to the definition of “effective control”, as Crux explains: “The notice highlights that this definition would include licensing agreements for the provision of intellectual property with respect to a qualified facility that was entered into or modified on or after July 4, 2025. This is an important clarification that licensing agreements entered into after this date qualify as effective control even if they do not also meet one of the other prohibited provisions”.
Even before the guidance, the spectre of FEOC restrictions had caused shifts in the US solar industry. A survey from Crux in December found that US solar companies were not waiting for guidance before assessing their procurement and compliance with expected FEOC rules. There have also been discussions about developers and buyers choosing to ignore FEOC and sacrifice the tax credits in favour of faster, cheaper and more available products that infringe on the guidelines.
On the manufacturing side, we have also seen a number of ownership changes that are likely tied to FEOC and the Trump administrations broader protectionist stance. Chinese solar manufacturers Trina Solar and JA Solar have both sold module production facilities to US-based companies, and multinational manufacturer Canadian Solar restructured its manufacturing business to take direct ownership of its US assets from its Canada headquarters, reducing exposure to its manufacturing subsidiary, CSI Solar, which is listed on the Shanghai stock exchange.
Most recently, Vietnam-based manufacturer Boviet Solar announced that it is committed to US solar manufacturing despite reports that its Chinese parent company is considering selling the firm.
You can read Crux’s FEOC guidance blog here.
Energy Storage
According to a post by law firm Bracewell for legal blog JD Supra, the IRS guidance outlines methods for calculating a “material assistance cost ratio” (MACR) and sets interim safe harbours. If a qualified facility, energy storage technology (EST), or eligible component receives “material assistance” from a prohibited foreign entity (PFE), it becomes ineligible for tax credits under Sections 45Y, 48E, or 45X.
While there is some clarity for developers on what “effective control” is, it still remains unclear how companies should identify PFEs.
Notice 2026-15 includes the Cost Percentage Safe Harbour, permitting the use of Assigned Cost Percentages from Notice 2024-41 and Notice 2025-08 to calculate the total direct costs and direct costs from a PFE for MACR determination in solar, wind, and specific energy storage projects.
However, as Bracewell’s Steve Campbell, Elizabeth McGinley and Peter Rogers pointed out in their JD Supra post, this does not apply to qualified interconnection property or project additions, and it features a special rule for re-power projects meeting the 80/20 rule.
From the IRS, the 80/20 rule reads as follows:
“A retrofitted applicable wind or solar facility may qualify as originally placed in service even though it contains some used components of property, provided the fair market value of the used components of property is not more than 20 percent of the applicable wind or solar facility’s total value (the cost of the new components of property plus the value of the used components of property) (80/20 Rule).”
The guidelines omit several details regarding the definitions of “specified foreign entity” and “foreign-influenced entity.” It does not clarify how the presence of a “qualified business unit” (QBU) with its main office in a covered country affects whether the owner entity is classified as a specified foreign entity.
As the Bracewell lawyers pointed out, the guidance does not clarify whether the term “issued” in the statute, concerning debt, refers only to the initial issuance or also to debt obtained after that initial event. Furthermore, the Notice does not define what constitutes a “license agreement” or specify when a payment is deemed to be made in relation to such an agreement.
These uncertainties raise several of the most significant potential concerns for energy storage developers.
As Vaughn Morrison of law firm Troutman Pepper Locke explained in an October 2025 conversation with Energy-Storage.news Premium, “Our primary focus has been on negotiating risk allocation with suppliers and service contractors. This includes crafting contracts that may activate certain control categories, such as representations and covenants confirming that the counterpart is not, and will not become, a specified foreign entity.”
Morrison continued, “We’ve also dedicated significant effort to designing contracts that avoid triggering these categories, especially for clients with a more cautious approach. This involves removing affirmative licenses to prevent falling under licensing restrictions and adjusting clauses to ensure they are well within safe boundaries, providing greater certainty that these categories are not met.”
The Troutman Pepper Locke partner also mentioned that many companies have not historically needed to track debts and ownership details at this level of specificity. As a result, many are now “scrambling” to collect this information.
This article first appeared on our sister site PV Tech.
Additional reporting for Energy-Storage.news by April Bonner.
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