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The IRS released Notice 2026-15 on Feb. 12, providing interim guidance regarding restrictions to energy credits under Sections 45Y, 48E and 45X with respect to Prohibited Foreign Entities (PFE). These Foreign Entity of Concern (FEOC) restrictions were enacted in the One Big Beautiful Bill Act (OBBBA) in July 2025 and disallow credits to taxpayers who are a PFE or who receive material assistance from a PFE through imposition of a material assistance cost ratio (MACR).
The IRS notice provides a general framework for taxpayers to compute the MACR with respect to qualified facilities, energy storage technology (EST) or eligible components. This framework incorporates various safe harbors that expand and clarify the interim safe harbors provided in Sections 7701(a)(52). The notice also describes rules that the Treasury Department and the IRS expect to include in forthcoming proposed regulations for determining the application of certain PFE restrictions.
The safe harbors in the notice rely heavily on domestic content safe harbor guidance published in several notices between 2023 and 2025 listing manufactured products and components for certain technologies, such as ground mount and rooftop solar, battery energy storage technology and land base wind facilities. Use of these safe harbors makes these rules largely workable and favorable for taxpayers, especially for those that have components listed in those notices.
The new notice also provides additional safe harbors and reasonable allocation rules for purposes of determining direct costs related to qualified facilities, EST and eligible components, which will be helpful for taxpayers with or without qualified facilities or eligible components listed in prior guidance.
The Treasury Department and the IRS intend to issue more comprehensive proposed regulations and other guidance with respect to the definitions of a PFE and material assistance of a PFE. The notice requests general public comments by March 30, 2026, and with respect to certain questions around whether further clarification is needed, substantiation requirements, and whether any anti-abuse provisions would be necessary to prevent circumvention of the rules outlined in the notice.
Taxpayers may generally rely on the notice for taxable years in which the FEOC restrictions apply through a date that is 60 days after publication of forthcoming proposed regulations. A similar reliance is provided with respect to the 2023-2025 domestic content safe harbor tables. Taxpayers choosing to use any of the safe harbors provided in the notice must provide the IRS with a statement identifying the specific safe harbor, including the relevant information used and application of the safe harbor to the taxpayer’s components.
Grant Thornton is further evaluating this guidance in detail and will provide additional analysis and insights in the days to come.
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