The Internal Revenue Service and the Treasury Department plan to propose regulations on a provision of the One Big Beautiful Bill Act restricting certain energy-related tax credits when so-called “prohibited foreign entities” have provided any material assistance.
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In Notice 2026-15, the IRS and the Treasury provided guidance Thursday ahead of the proposed regulations in determining whether electricity-producing qualified facilities, energy storage technologies, or eligible components are receiving material assistance from a prohibited foreign entity and would be ineligible for those energy tax credits.
The OBBBA added new restrictions to clean electricity credits under Sections 45Y and 48E of the Tax Code, and the advanced manufacturing production credit under Section 45X to determine eligibility for credits when there is material assistance from a PFE.
Notice 2026-15 says the Treasury and the IRS intend to propose regulations with respect to the definition of a PFE and the calculation of the material assistance cost ratio that taxpayers must use to determine whether there was material assistance from a PFE. The notice also spells out how to use interim safe harbors authorized by the OBBBA and includes some examples of calculations that can be performed under those safe harbors.
The notice also says the Treasury and IRS intend to propose regulations as well as further guidance with respect to the definition of a PFE and the material assistance rules, including new safe harbor tables authorized in the OBBBA.
A taxpayer can rely on the rules provided in the notice to calculate the material assistance cost ratio for any Section 45Y or 48E qualified facility or energy storage technology the construction of which begins after Dec. 31, 2025, until 60 days after the publication of the forthcoming safe harbor tables; and any Section 45X eligible components sold in taxable years beginning after July 4, 2025, the date of the OBBB’s enactment, until the date that the forthcoming safe harbor tables are published.
The notice also asks for comments 45 days from the date of publication giving feedback on the definitional, anti-circumvention and other issues requested for future guidance.
