The U.S. Department of the Treasury and the Internal Revenue Service have released Notice 2026-15, laying out long-anticipated guidance on how the “foreign entity of concern” (FEOC) restrictions under the One, Big, Beautiful Bill Act (OBBBA) will apply to key clean energy tax credits. And if you’re claiming Sections 45Y, 48E, or 45X credits, this is not light reading.
The Notice rewires how eligibility is measured, introduces safe harbors to simplify compliance, and quietly drops a significant warning shot on intellectual property licensing agreements. For developers, manufacturers, and investors betting on production and investment credits, the message is clear: supply chain sourcing now carries tax consequences that can make or break project economics.
The Material Assistance Cost Ratio (MACR): A New Gatekeeper
At the heart of the Notice is a metric called the Material Assistance Cost Ratio, or MACR.
Under amendments to Sections 45Y (clean electricity production credit), 48E (clean electricity investment credit), and 45X (advanced manufacturing production credit), a project, facility, or component becomes ineligible for credits if it receives “material assistance” from a prohibited foreign entity (PFE).
How is “material assistance” defined? Through the MACR.
A project fails the test if its MACR falls below a specified threshold percentage, which generally increases annually in the coming years. In plain English: too much cost tied to PFEs, and your credit disappears.
Clean Electricity MACR (Sections 45Y and 48E)
For power projects and energy storage facilities, the MACR calculation requires taxpayers to:
- Identify all manufactured products (MPs) and manufactured product components (MPCs) used in the project.
- Track direct costs for each MP and MPC.
- Determine which costs are attributable to items mined, produced, or manufactured by a PFE (PFE Direct Costs).
The formula:
MACR = (Total Direct Costs – PFE Direct Costs) ÷ Total Direct Costs
Direct costs include:
- Direct materials
- Direct labor (for self-produced items)
- Acquisition cost (for purchased products)
There’s also a de minimis rule allowing up to 10% of total direct costs to be treated under simplified rules.
A separate MACR must be calculated for qualified interconnection property—a detail developers can’t afford to overlook.
Eligible Component MACR (Section 45X)
For manufacturers claiming the advanced manufacturing production credit, the focus shifts to Constituent Materials—the raw inputs used to produce eligible components.
Taxpayers must:
- Identify all Constituent Materials
- Track direct material costs
- Isolate the portion attributable to PFE-sourced materials
The structure mirrors the electricity credit approach but narrows in on material inputs rather than finished components.
Bottom line: granular cost accounting is now a tax credit survival skill.
Safe Harbors: Simplification with Limits
Recognizing the administrative burden, Treasury introduced three safe harbors. But they come with guardrails.
1. Identification Safe Harbor
Taxpayers may rely on Safe Harbor Tables originally issued in Notices 2023-38, 2024-41, and 2025-08 (domestic content bonus guidance) to define the exclusive list of MPs, MPCs, and Constituent Materials.
If it’s not listed in those tables, it’s disregarded for MACR purposes.
This creates certainty—but also restricts flexibility.
2. Cost Percentage Safe Harbor
Instead of tracking actual costs, taxpayers using the identification safe harbor may use assigned cost percentages from the tables.
Five-step method:
- Identify items using safe harbor tables.
- Determine whether each item was produced by a PFE.
- Sum assigned cost percentages for all identified items.
- Sum assigned percentages attributable to PFE-produced items.
- Apply the MACR formula using those percentages.
This approach trades precision for administrability—a welcome relief for complex supply chains.
3. Certification Safe Harbor
Taxpayers may rely on certifications from direct suppliers confirming whether items were produced by a PFE or establishing non-PFE cost portions.
But there are strict conditions:
- Certification must come from the direct supplier.
- It must be signed under penalties of perjury.
- It must be attached to the taxpayer’s return.
- It cannot be relied upon if the taxpayer knows—or has reason to know—it’s inaccurate.
Importantly, safe harbors cannot be used for qualified interconnection property.
Used property qualifying under the “80/20 rule” and certain steel or iron products identified in the Safe Harbor Tables are disregarded in MACR calculations.
Taxpayers must also attach a statement identifying which safe harbor(s) they are applying.
In other words: document everything.
IP Licensing: The Hidden Tripwire
If the MACR rules are technical, the intellectual property guidance is blunt.
The Notice states that Treasury and the IRS intend to issue proposed regulations providing that if a taxpayer makes a payment to a specified foreign entity under an IP licensing agreement—entered into or modified on or after July 4, 2025—that entity will be treated as exercising “effective control.”
If that happens, the taxpayer becomes a “foreign-influenced entity.”
And if you’re a foreign-influenced entity? You lose eligibility for Sections 45Y, 48E, and 45X credits.
That interpretation aligns closely with statutory language in the OBBBA—but it’s expansive. Even routine technology licensing arrangements could inadvertently trigger disqualification.
For companies licensing battery technology, inverter designs, semiconductor processes, or other clean-tech IP from foreign affiliates or counterparties, this is more than a footnote. It’s a structural tax risk.
Industry observers are already calling this a trap for the unwary.
Applicability Dates: The Clock Is Ticking
The effective dates vary:
Material Assistance Rules
- Apply to projects and facilities beginning construction after December 31, 2025 (Sections 45Y and 48E).
- Apply to components sold in taxable years beginning after July 4, 2025 (Section 45X).
Effective Control Rules
- Apply to taxable years beginning after July 4, 2025 (all three sections).
- Taxpayers may rely on Notice 2026-15 until 60 days after forthcoming proposed regulations are issued.
- Treasury has requested public comments by March 30, 2026.
What This Means for the Clean Energy Market
These credits—particularly 45Y and 48E—are central to project finance models for wind, solar, storage, and emerging clean technologies.
Now, eligibility hinges not just on emissions metrics or placed-in-service dates—but on supply chain origin tracing, contractual relationships, and IP payment flows.
Developers must coordinate closely with manufacturers. Manufacturers must audit suppliers. Legal teams must scrutinize licensing agreements signed after July 4, 2025.
This is compliance layered on top of capital planning layered on top of geopolitical risk management.
For projects already navigating interconnection bottlenecks, tariff exposure, and financing headwinds, the MACR framework adds yet another spreadsheet to the mix.
But for those who structure correctly, document thoroughly, and stay within thresholds, the credits remain powerful incentives.
The message from Treasury is unmistakable: clean energy incentives will continue—but not without guardrails tied to foreign influence and supply chain integrity.
The era of “just build and claim” is over.
FAQs
Q. What is the Material Assistance Cost Ratio (MACR)?
It is a calculation used to determine whether a project, facility, or component receives too much assistance from a prohibited foreign entity, potentially disqualifying it from certain clean energy tax credits.
Q. Which tax credits are affected by Notice 2026-15?
Sections 45Y, 48E, and 45X of the Internal Revenue Code.
Q. Can taxpayers use simplified methods instead of tracking actual costs?
Yes, through identification and cost percentage safe harbors, though not for qualified interconnection property.
Q. How do IP licensing agreements affect credit eligibility?
Payments under certain IP agreements entered into or modified after July 4, 2025 may cause a taxpayer to be treated as a foreign-influenced entity, disqualifying credits.
Q. When do the new rules take effect?
Generally for projects beginning construction after December 31, 2025, and for components sold in taxable years beginning after July 4, 2025.
