FEOC Restrictions on Energy Tax Credits: An Update

Tax Credit

Changes to FEOC Application from House Legislation in Senate Draft of June 16

Changes to FEOC Application Embodied in Passed Senate Legislation of July 1

Effective Date (for SFEs & FIEs)

Material Assistance Cost Ratios (Qualified Facilities, Energy Storage Technology, & Eligible Components)

Clean Energy Production Credit (Section 45Y)

Previously had to begin construction within 60 days of enactment of legislation and place project in service by the end of 2028. Now must commence construction by 12/31/2025 if “Material Assistance” is received from a Prohibited Foreign Entity (PFE). FEOC restrictions previously effective January 1, 2026. New effective dates for Specified Foreign Entities (SFEs) & Foreign-Influenced Entities (FIEs).

For taxable years beginning after the date of enactment, a taxpayer cannot be a PFE. Any qualified facilities that begin construction after December 31, 2025, cannot receive material assistance from a PFE (as under House version).

SFE & FIE – Tax year after enactment of bill

Qualified Facilities: 2026 (40%); 2027 (45%); 2028 (50%); 2029 (55%); after 2029 (60%).

Energy Storage Technology: 2026 (55%); 2027 (60%); 2028 (65%); 2029 (70%); after 2029 (75%).

Clean Electricity Investment Credit (Section 48E)

Previously had to begin construction within 60 days of enactment of legislation and place project in service by the end of 2028. Now must commence construction by 12/31/2025 if “Material Assistance” from a PFE. New effective dates.

For taxable years beginning after the date of enactment, a taxpayer cannot be a PFE. Any qualified facilities that begin construction after December 31, 2025, cannot receive material assistance from a PFE (as under House version).

SFE & FIE – Tax year after enactment of bill

Qualified Facilities: 2026 (40%); 2027 (45%); 2028 (50%); 2029 (55%); after 2029 (60%).

Energy Storage Technology: 2026 (55%); 2027 (60%); 2028 (65%); 2029 (70%); after 2029 (75%).

Zero-Emission Nuclear Power Production Credit (Section 45U)

New effective dates.

For taxable years beginning after the date of enactment, a taxpayer cannot be an SFE and two years after the date of enactment cannot be an FIE.

SFE – Tax year after enactment

FIE – two years after enactment

N/A

Advanced Manufacturing Production Credit (Section 45X)

No credit allowed for components manufactured beginning in 2026 if Material Assistance of a PFE. New effective dates.

For taxable years beginning after the date of enactment, a taxpayer cannot be a PFE or receive any material assistance from a PFE. For taxable years beginning after the date of enactment, no credit will be available for any eligible components that are deemed to be produced through “effective control” by an SFE.

SFE & FIE – Tax year after enactment of bill

Eligible Components:

Solar: 2026 (50%); 2027 (60%); 2028 (70%); 2029 (80%); after 2029 (85%).

Wind: 2026 (85%); 2027 (90%).

Inverters: 2026 (50%); 2027 (55%); 2028 (60%); 2029 (65%); after 2029 (70%).

Battery Components: 2026 (60%); 2027 (65%); 2028 (70%); 2029 (80%); after 2029 (85%).

Critical Minerals: Sold after 12/31/2025 but before 1/1/2030 (0%); 2030 (25%); 2031 (30%); 2032 (40%); after 2032 (50%).

Credit for Carbon Oxide Sequestration (Section 45Q)

New effective dates.

For taxable years beginning after the date of enactment, the taxpayer cannot be a PFE.

SFE & FIE – Tax year after enactment

N/A

Clean Fuel Production Credit (Section 45Z)

Previously no FEOC limitations; now FEOCs apply.

For taxable years beginning after the date of enactment, a taxpayer cannot be an SFE, and for taxable years beginning two years after enactment, a taxpayer cannot be an FIE.

SFE – Tax year after enactment

FIE – two years after enactment

N/A