Compliance
Compliance: Navigating Material Assistance Restrictions for Energy Tax Credits
New rules under the One, Big, Beautiful Bill require energy projects to avoid “prohibited foreign entity” assistance and follow interim safe harbors — here's how to stay compliant.
By NomadicTax Research Team • 5-8 min read • March 31, 2026
## What Are the Material Assistance Restrictions?
Under OBBB, energy tax credits — such as clean electricity credit (Sections 45Y, 48E) and advanced manufacturing production credit (Section 45X) — become **ineligible** if the relevant facility or component receives *material assistance* from a **prohibited foreign entity (PFE)**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-certain-energy-tax-credits-regarding-material-assistance-provided-by-prohibited-foreign-entities-under-the-one-big-beautiful-bill?utm_source=openai))
The IRS has issued **interim guidance via Notice 2026-15** to clarify how to calculate the *material assistance cost ratio (MACR)* and provided safe harbors during the transition period. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-certain-energy-tax-credits-regarding-material-assistance-provided-by-prohibited-foreign-entities-under-the-one-big-beautiful-bill?utm_source=openai))
## Key Requirements & Transition Periods
- For **qualified facilities or energy storage technologies** beginning construction after **December 31, 2025**, rules about PFE-assistance and MACR apply through interim safe harbors until formal safe harbor tables are published. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-certain-energy-tax-credits-regarding-material-assistance-provided-by-prohibited-foreign-entities-under-the-one-big-beautiful-bill?utm_source=openai))
- For **eligible components** sold in tax years beginning after **July 4, 2025**, PFE restrictions apply similarly until the IRS publishes formal guidance. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-certain-energy-tax-credits-regarding-material-assistance-provided-by-prohibited-foreign-entities-under-the-one-big-beautiful-bill?utm_source=openai))
## Practical Example
You own a solar facility placed in service in **mid-2026** that uses inverters manufactured abroad. Under interim guidance, you’ll calculate the proportion of component costs tied to PFEs via MACR. If that exceeds thresholds (once safe harbor tables are official), the facility may lose eligibility for those credits. Using materials with domestic sourcing or proven certification may reduce or eliminate PFE exposure.
## What Can Taxpayers Do Now to Stay Compliant
- Inventory all component vendors to identify any classified PFEs under Code Section 7701(a)(52).
- Estimate cost ratios now (via interim MACR) to assess whether any components may jeopardize credit eligibility.
- Use safe harbor options — when in place — to lock in favorable treatment during the interim period.
- Maintain thorough documentation: vendor contracts, country‐of‐origin reports, import certificates, component breakdowns. These will be crucial if audited.
## Actionable Compliance Checklist
| Task | Timing | Description |
|------|--------|-------------|
| Vendor due diligence | Immediately | Assess supply chains for PFE status. |
| Cost allocation | During project costing | Estimate MACR under interim safe harbors. |
| Recordkeeping | Ongoing | Keep invoices, origin certifications, certifications of facility components. |
| Monitor IRS releases | Ongoing | Safe harbor tables and final regs are coming. |
Ensuring compliance under the new material assistance restrictions is essential for claiming energy tax credits. Businesses should audit supply chains, stay ahead of guidance, and document everything to avoid losing incentives due to foreign ties.