Tax Insight

Interim guidance on prohibited foreign entity restrictions provides clarity while raising questions

Insight
5 minute read
May 07, 2026

What happened?

Notice 2026-15, released on February 12, 2026, provides interim guidance on the new prohibited foreign entity (PFE) restrictions enacted by the One Big Beautiful Bill Act (OBBBA) affecting the ability of taxpayers to claim certain tax credits. Specifically, the notice previews rules and provides safe harbors regarding the Clean Electricity Investment Credit under Section 48E, the Clean Electricity Production Credit under Section 45Y, and the Advanced Manufacturing Tax Credit under Section 45X on how to calculate a qualified facility’s, energy storage technology’s (EST), or eligible component’s material assistance cost ratio (MACR) to determine whether they include material assistance from a PFE.

Why is it relevant?

The PFE restrictions represent one of the most consequential changes to the energy tax credit landscape since the enactment of the Inflation Reduction Act in 2022. Notice 2026-15 addresses questions on how to calculate the MACR and provides taxpayers with some flexibility and interim safe harbors. However, the notice does not discuss some important aspects of the PFE restrictions where additional guidance would be necessary.

Actions to consider

Taxpayers should consider using the interim guidance in Notice 2026-15 to reduce uncertainty regarding their compliance with the PFE restrictions introduced by the OBBBA. However, reliance on some of the interim safe harbors may require the adjustment of procurement processes so that suppliers are obligated to provide the necessary assistance regarding certification.

Interested stakeholders should consider engaging in the rulemaking process by submitting comment letters on issues not addressed in the interim guidance or areas that need further clarification in the forthcoming proposed regulations.