Executive Summary
On February 12, 2026, the Department of the Treasury and the IRS issued Notice 2026-15, providing the first substantive compliance framework for the prohibited foreign entity restrictions enacted by the One Big Beautiful Bill Act. The restrictions deny Section 45Y production tax credits and Section 48E investment tax credits to electricity-generating facilities and energy storage technologies that receive material assistance from a prohibited foreign entity above statutory thresholds. They also deny Section 45X advanced manufacturing credits to eligible components with excessive prohibited foreign entity content. The notice introduces the Material Assistance Cost Ratio, the formula developers and manufacturers must calculate at the project level to determine credit eligibility, along with three interim safe harbors and a six-year recordkeeping and penalty framework. Comprehensive proposed regulations are forthcoming. Comments on the notice closed March 30, 2026. These restrictions apply to technology-neutral credits only and do not affect legacy credits under Sections 45 and 48.
What Happened
The One Big Beautiful Bill Act, enacted July 4, 2025, added prohibited foreign entity restrictions to three clean energy tax credit programs: Section 45Y (clean electricity production tax credit), Section 48E (clean electricity investment tax credit), and Section 45X…
