The Department of the Treasury and the Internal Revenue Service issued Notice 2026-15 on February 12, 2026, to clarify how new foreign-entity restrictions affect eligibility for key clean energy tax credits enacted under the One, Big, Beautiful Bill.
At the center of the guidance is a new concept: whether a clean energy project or manufactured component receives “material assistance” from a prohibited foreign entity. If it does, the project may be disqualified from claiming certain credits—even if it otherwise meets all technical and operational requirements. This represents a meaningful shift in how eligibility is evaluated, moving beyond what a project produces to how and where critical inputs are sourced.
The restrictions apply to three major incentives that are central to clean energy and manufacturing investment. These include the clean electricity production credit under Section 45Y, the clean electricity investment credit under Section 48E, and the advanced manufacturing production credit under Section 45X. Together, these credits support electricity generation, energy storage technologies, and the domestic manufacturing of eligible components. Under the new law, eligibility now depends in part on supply-chain integrity.
In practical terms, taxpayers must determine whether prohibited foreign entities played a significant role in providing equipment, components, or other inputs tied to the credit. To make that determination, taxpayers are required to calculate a “material assistance cost ratio,” which measures the portion of a project’s or component’s costs that can be traced to prohibited foreign sources. If the ratio exceeds allowable thresholds, the credit may be lost.
Since formal regulations and sourcing tables are not yet available, Treasury and the IRS have issued interim rules to avoid project delays and uncertainty. These interim rules allow taxpayers to apply standardized assumptions and safe-harbor methodologies to evaluate compliance, rather than performing a full tracing analysis for each component. The goal is to provide a workable framework during the transition period while more detailed guidance is developed.
Timing is another critical element. For electricity-producing facilities and energy storage technologies, the interim rules apply to projects that begin construction after December 31, 2025, and remain available until updated safe harbor tables are released. For manufacturers claiming Section 45X credit, the rules apply to eligible components sold in taxable years beginning after July 4, 2025, the date the One Big Beautiful Bill became law.
The guidance also makes clear that this is not the final word. Treasury and the IRS plan to issue proposed regulations that more precisely define prohibited foreign entities, refine the measurement of material assistance, and introduce updated safe-harbor tables authorized by the statute. In the meantime, taxpayers are encouraged to provide feedback on definitional gaps, potential avoidance strategies, and other technical issues that could affect enforcement.
For clean energy developers and manufacturers, the message is clear: credit eligibility now depends as much on supply-chain decisions as on project performance. Early planning, vendor transparency, and careful documentation will be essential to managing risk as these rules continue to evolve. For additional information, contact your Stephano Slack tax manager/partner at 610-687-1600 or taxinfo@StephanoSlack.com.
Author Robert Radzinski, CPA, Manager, manages tax compliance for businesses and high-net-worth individuals. Rob can be contacted at 610-687-1600 or rradzinski@stephanoslack.com.
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