2026 Foreign Entity of Concern (FEOC) Guidance
Clean Energy Tax Credits in 2026 & Beyond
Why FEOC Matters Now
The rules have become a central factor in how U.S. clean-energy tax credits are calculated and awarded. Clarifications under the One Big Beautiful Bill Act (OBBBA) expanded the role FEOC plays in determining eligibility for federal commercial solar and energy-storage incentives. As a result, equipment sourcing, supplier transparency, and procurement strategy now directly affect whether a project qualifies for its expected tax benefits (Hogan Lovells).
Although FEOC is a federal policy, its practical impact differs by market segment. Residential homeowners, residential installers, and commercial project owners each experience FEOC in different ways. We’ll outline and explain those differences and outlines how FEOC reshapes commercial clean-energy economics beginning in 2026.
What Is a Foreign Entity of Concern (FEOC)?
A Foreign Entity of Concern (FEOC) is an organization that is owned by, controlled by, or receives material assistance from a foreign entity that the U.S. government has identified as a national security or supply-chain risk. FEOC status is determined by ownership structure, control rights, and operational influence, not simply by where a product is manufactured.
As a result, a company marketed as a U.S. brand may still present FEOC exposure if it relies on restricted foreign ownership, financing, software control, or ongoing operational support.
FEOC and Federal Clean Energy Tax Credits
FEOC rules apply primarily to business clean-energy tax credits that were revised or created under OBBBA. These rules function as a gatekeeper: a project may meet all technical requirements for a tax credit, yet still see that credit reduced or denied if FEOC thresholds are exceeded.
Residential homeowner credits historically fell outside this framework. By contrast, commercial and third-party owned (TPO) projects are directly affected because they rely on business tax credits subject to FEOC review.
Who Is Responsible for FEOC Compliance?
Responsibility for FEOC compliance rests with the entity claiming the tax credit, not the installer or end user. For commercial and TPO projects, this is typically the project owner or a tax-equity structure.
Installers are not legally responsible for FEOC compliance. However, they often play a critical supporting role by providing sourcing documentation, equipment disclosures, and supplier information during financing and diligence. Homeowners are never responsible for FEOC compliance, even in TPO arrangements.
sol-Ark® enegy storage products feoc faqs
Information Date: April 6, 2026
Information included in these FAQs is based on Sol-Ark’s review of applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), interim guidance regarding the application of the material assistance cost rules enacted as part of the One Big Beautiful Bill Act (Pub. L. 119-21, enacted July 4, 2025) (“OBBBA”) as set forth in the Notice 2026-15 dated February 12, 2026 issued by the U.S. Department of the Treasury and the Internal Revenue Service (“Notice 2026-15”) and other information Sol-Ark reasonably believes material to the following statements. The information included in these FAQs speaks only as of the information date noted above, and Sol-Ark assumes no responsibility for updating this information.
Are your products FEOC-compliant?
- Sol-Ark® is not a “Prohibited Foreign Entity” (PFE), a Specified Foreign Entity or Foreign-Influenced Entity within the meaning of Section 7701(a)(51) of the Internal Revenue Code of 1986, as amended. We actively manage our supply chain to reduce FEOC exposure and support compliance with applicable laws and regulations.
Do you source components from China (or other flagged regions)?
- The “Country of Origin” for Sol-Ark® products is the United States of America (unless customers are separately informed otherwise in written correspondence from Sol-Ark), based on Sol-Ark’s current understanding of applicable laws, rules, and regulations, and investigations undertaken by Sol-Ark. The determination of “Country of Origin” is made solely for purposes of analysis under Sections 48E and 45Y of the Code and does not constitute a determination for U.S. customs, trade, or other purposes.
- Sol-Ark® manufactures inverters at our facility in Allen, Texas. Customer data is stored on U.S.-based Amazon Web Services (AWS) infrastructure managed by Sol-Ark®, consistent with Sol-Ark’s strong cybersecurity, data and privacy concerns.
- Sol-Ark® is a US-based veteran-founded company, with a mission to enable the most reliable, innovative, and affordable energy storage solutions that power families and businesses.
Can you certify non-FEOC compliance?
- Treasury Notice 2026-15 requires that certification be provided by the selling entity.
- Supply chain certifications are available for customers purchasing directly from Sol-Ark®.
- To support the market, Sol-Ark® offers guidance regarding Notice 2026-15 to customers purchasing through a third-party, such as distributors or installers, and to those third-party distributors and installers
What is the amount of FEOC content in your inverters?
- Sol-Ark® provides certifications regarding FEOC content to our customers in accordance with Notice 2026-15.
- Sol-Ark® believes that FEOC content in Sol-Ark manufactured products does not exceed 20%. Based on Manufacturer Suggested Retail Prices (MSRP) as in effect on the information date noted above and Sol-Ark’s current manufacturing processes and supply chain assessments.
- Specific FEOC content percentages are certified by Sol-Ark® for customer use through private correspondence upon request.
How do you calculate domestic content percentage?
- Sol-Ark® estimates domestic content based on (x) the value of its U.S. domestically sourced components and materials, plus direct labor costs incurred in the U.S. relative to (y) its total direct product costs for each product.
- Sol-Ark’s estimated domestic content percentages are based on its reasonable assessment of the value of components and materials sourced by it in the U.S. and the direct labor costs it incurs in connection with the manufacture of the applicable products.
- The determination of those values and direct costs requires the exercise of judgment and the use of estimates and assumptions by Sol-Ark® management. As of the information date as noted above, Sol-Ark® believes that the estimated domestic content in its products does not generally exceed 20%. Specific domestic content percentages are certified by Sol-Ark® for customer use through private correspondence upon request.
Where are your inverters manufactured?
- Sol-Ark® manufactures inverters at our facility in Allen, Texas. We employ over 70 engineers in Allen, Texas.
- Customer data is stored on U.S.-based Amazon Web Services (AWS) infrastructure managed by Sol-Ark®, consistent with Sol-Ark’s strong cybersecurity, data and privacy concerns.
How long do you maintain records required by the OBBBA?
Consistent with the requirements of Notice 2026-15, Sol-Ark® will retain customer certifications and the underlying books, records, and supporting documentation for at least six (6) years from the Information Date.
What FEOC Means for Residential Solar Companies
FEOC typically does not apply residential or homeowner projects. However, for TPO residential projects, FEOC may apply and should be evaluated early.
Homeowner-Owned Residential Projects
For customer-owned residential solar energy-storage systems, FEOC compliance is generally not required. These projects do not rely on business clean-energy tax credits that trigger FEOC “material assistance” tests.
While homeowners historically relied on the Residential Clean Energy Credit (§25D), that credit was repealed for expenditures made after December 31, 2025 under OBBBA.
As a result, homeowner-owned projects in 2026 do not rely on federal incentives that would invoke FEOC rules.
Third-Party Owned (TPO)
Residential Projects
FEOC becomes relevant when residential systems are deployed under third-party ownership models, such as leases or power-purchase agreements, that rely on business tax credits (for example, §48E). In these cases, the project owner not the homeowner must meet FEOC requirements.
FEOC considerations can affect:
- Equipment eligibility, especially inverters and battery systems
- Financing and tax-equity approval
- Supplier transparency and documentation requirements
What FEOC Means for Commercial & Industrial Projects
Remember that FEOC for commercial solar energy storage is centered on front-end procurement and financing, not a back-end, end-of-the-year legal checkbox.
Responsibility for FEOC compliance rests with the entity claiming the tax credit, not the installer or end user. For commercial and TPO projects, this is typically the project owner or a tax-equity structure.
Installers are not legally responsible for FEOC compliance. However, they often play a critical supporting role by providing sourcing documentation, equipment disclosures, and supplier information during financing and diligence. Homeowners are never responsible for FEOC compliance, even in TPO arrangements.
feoc & c&i Projects
What was once a procurement decision has become a financing and compliance issue. Because of this structure, heightened scrutiny falls on high-value, software-driven equipment, including:
- Grid-tied and hybrid commercial inverters
- Commercial battery energy-storage systems (BESS)
- Other advanced power-electronics equipment
Lenders and tax-equity investors increasingly evaluate: - Equipment ownership and manufacturing transparency
- Component sourcing and cost attribution
- Software control, firmware updates, and remote access
The Critical 2026 Shift: FEOC as a Credit Gatekeeper
The most significant change under OBBBA is that FEOC moved from a narrow, program-specific concern to a broad gatekeeper for clean-energy tax credits, with explicit percentage thresholds by equipment type and year (Hogan Lovells). These thresholds ratchet upward over time, meaning projects must demonstrate increasing levels of non-FEOC content as the calendar advances.
INTERNAL COMPANY RESPONSIBILITIES & EQUIPEMENT REQUIREMENTS SHIFT
- Procurement diligence becomes finance diligence
- Hybrid inverter and BESS scrutiny increases
- Design and vendor flexibility matter more
Understanding FEOC Compliance Thresholds (MACR)
OBBBA establishes Material Assistance Cost Ratio (MACR) thresholds by year and equipment category. These thresholds represent the minimum required percentage of non-FEOC content for a project to qualify for applicable tax credits.
MACR FORMULA
MACR = ((T − P) / T) × 100%
- Where: T = total direct cost of all manufactured products or components
- Where P = total direct cost of components sourced from a prohibited foreign entity
MACR Threshold Formula Shorthand
- Maximum FEOC percentage allowed ≈ 100%
Primary Commercial FEO Equipment Categories
- Inverters (central, commercial, microinverters)
- Solar energy components (modules, cells)
- Qualifying battery components (cells, modules, electrode materials)
- Energy-storage technology (BESS, enclosures, BMS, thermal systems, power electronics)
- Critical minerals (lithium, nickel, cobalt, manganese, graphite)
Why FEOC Is a Long-Term Strategic Issue for
commercial businesses
FEOC thresholds are designed to tighten over time and are widely expected to remain a permanent feature of U.S. clean-energy policy. Because solar and storage assets operate for decades, early alignment with compliant suppliers reduces long-term financial, operational, and support risk—particularly for software-driven systems.
Works Cited
Hogan Lovells. One Big Beautiful Bill Act Signed into Law: Clean Energy Credits and New FEOC/Prohibited Foreign Entity Rules. 2025,
www.hoganlovells.com/en/publications/one-big-beautiful-bill-act-signed-into-law-clean-energy-credits-and-new-feoc-prohibited-foreign.
Bipartisan Policy Center. Unpacking the FEOC Provisions in H.R. 1, the One Big Beautiful Bill Act. 2025, July. www.bipartisanpolicy.org/explainer/unpacking-the-feoc-provisions-in-the-one-big-beautiful-bill-act.