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Foreign Entities of Concern Guidance: What Clean Energy Companies Should Know 

March 18, 2026

Last year’s One Big Beautiful Bill Act (OBBBA) made several changes to federal clean energy tax credits. It’s important for American clean energy companies to understand how to navigate the OBBBA regulations to ensure compliance with U.S. tax law and avoid a surprise when applying for tax credits.

A significant change is the new “prohibited foreign entity” (PFE) restrictions, which are broadly intended to prevent U.S. tax credits from benefitting companies and other entities with ties to China, Russia, Iran, or North Korea (though not exclusively located in those countries). The law also seeks to boost U.S. domestic supply chains by limiting the use of materials and equipment produced by or purchased from PFEs in energy generation and storage projects, as well as for clean energy equipment manufactured using federal tax credits.

As a result of these restrictions, U.S. companies must address several key compliance considerations. These include the sourcing of equipment and other inputs, as well as tracking and calculating the percentage of project costs attributable to materials or components from PFEs, known under the statute as “material assistance.” Taxpayers must also avoid certain contracts, payments, and intellectual property (IP) licensing agreements that may give PFEs an impermissible level of direct influence, labeled “effective control,” among other requirements related to company leadership, ownership, and other factors.

The majority of new PFE rules under OBBBA took full effect for projects beginning construction after December 31, 2025 (though not all). On February 12, 2026, the Treasury Department and Internal Revenue Service (IRS) issued  Notice 2026-15, which provided the first substantive guidance to implement the new PFE restrictions.  

We have published additional analysis of OBBBA-related guidance on our website. We will be working with members and other partners to assess the workability of the guidance, identify additional issues for clarification, and develop detailed comments for the Treasury Department and the IRS. 

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