The Department of the Treasury is looking at a January release of guidance for the foreign-entity-of-concern rules that the One Big Beautiful Bill Act imposed on the Inflation Reduction Act’s 45Y, 45X and 48E clean energy tax credits, strategy firm Capstone said in a Monday policy analysis.
The firm said it believes the guidance “is likely to be taxpayer-friendly rather than punitive, benefiting manufacturers such as First Solar Inc. and Enphase Energy Inc,” and it will address “the most uncertain aspects” of the FEOC rules, like material assistance, payment restrictions and effective control.
“We expect the Internal Revenue Service to prioritize administrability and, therefore, not require taxpayers to vet every level of their supply chain,” Capstone said. “After the release of sub-regulatory guidance, we expect industry advocates to push the administration to adopt favorable final rules.”
Companies are already preparing for the release of that guidance by seeking divestitures, mapping supply chains, renegotiating contracts and utilizing safe harbor tables along with supplier certifications, according to an analysis released last week by Crux, a finance technology company that connects tax credit buyers and sellers.
The industry is “not waiting for guidance,” Crux’s report said. More than 90% of the 50 clean energy developers and manufacturers the report authors surveyed “have already initiated ownership reviews, contract audits, and supply chain mapping.”
“This proactive stance indicates that many companies intend to begin 2026 with preparation well underway, even as regulatory clarity remains incomplete,” the report said.
Around 8% of the surveyed companies reported that specified foreign entity or foreign-influenced entity owners are allowed to appoint directors or officers, and those companies reported taking a “variety of mitigation measures,” including liquidating ownership.
Around 80% of companies that reported having effective control payments to prohibited foreign entities in certain contracts said they are revising contract terms to exclude those payments, Crux said.
Crux said that only 38% of the firms surveyed describe themselves as “fully prepared” for 2026, “but most have started building frameworks for compliance” even as they wait for formal guidance from the Treasury Department.
“Treasury is likely to open a formal rulemaking process for FEOC in Q2 2026, offering an opportunity for stakeholder input,” Capstone said. “Treasury will likely take an approach similar to that used for the revised beginning of construction (BOC) rules for wind and solar tax credits, prioritizing administrability over setting anti-China or anti-renewables policy via rulemaking.”
Capstone said it’s “likely” that the Treasury Department aims to release final rules by the end of next year, “but we believe that timeline is ambitious given Biden-era precedent.” The analysis noted that the Biden administration took 20 months to finalize its 30D FEOC guidance after the passage of the IRA.
“Treasury likely sought to release this guidance prior to 2026, but delays related to the government shutdown may have impacted timing,” the firm said.
