IRS Drops Interim Rules on Foreign Entity Bans for Clean Energy Credits [US]

IRS Drops Interim Rules on Foreign Entity Bans for Clean Energy Credits [US]

Treasury and the IRS published Notice 2026-15 on 12 February 2026, setting interim safe harbours for determining whether prohibited foreign entities (PFEs) are providing material assistance to your clean energy projects. If they are, you lose the credits.

The guidance covers three credits: §45X (advanced manufacturing production), §45Y (clean electricity production), and §48E (clean electricity investment). All three now carry foreign entity restrictions under the One Big Beautiful Bill Act (OBBBA), which Congress enacted on 4 July 2025.

What Counts as a Prohibited Foreign Entity

PFEs fall into two buckets. First, specified foreign entities: those tied to China, Russia, Iran, North Korea, or involved in military programmes or forced labour. Second, foreign-influenced entities: any entity with 25% or more foreign ownership, control, or veto rights from those countries.

If a PFE provides material assistance (defined as more than 10% of facility or component costs), the credit vanishes. Taxpayers must certify compliance, retain records for six years, and face perjury penalties for false statements.

Interim Safe Harbours and What's Next

Notice 2026-15 gives you calculation examples for the material assistance cost ratio. You can rely on these rules for §45Y and §48E facilities where construction began after 31 December 2025, and for §45X components sold in tax years starting after 4 July 2025. That window closes 60 days after Treasury publishes final safe harbour tables.

Treasury also flagged forthcoming regulations on "effective control" and anti-circumvention measures. Comments are due 45 days from publication.

Practical Reality

If you're claiming these credits, you now need to trace upstream supply chains and certify foreign ownership at multiple tiers. Treasury has provided certification forms (BB and CC) that don't require full upstream knowledge, which is something. But CFOs restructuring deals should expect diligence costs to climb.

The solar sector welcomed the interim guidance but noted the compliance burden is substantive. If your projects touch these credits, read Notice 2026-15 and flag it for tax counsel. Deadline pressure is real, and the penalties are not theoretical.