The U.S. Treasury’s long-awaited interim guidance on Foreign Entities of Concern (FEOC) has finally arrived, and it’s a sigh of relief for many in the clean energy sector—but not without its share of lingering questions and potential controversies. Here’s the kicker: while the guidance clarifies some rules, it also leaves room for debate and strategic maneuvering that could reshape the industry.
Released on February 12, this guidance sheds light on provisions expanded under the One, Big, Beautiful Bill Act (OBBBA) last summer. At its core, FEOC rules aim to restrict companies with ties to Chinese firms from accessing U.S. clean energy tax credits. But here’s where it gets controversial: the Treasury’s approach to defining “Material Assistance” safe harbor provisions has sparked both relief and scrutiny. Essentially, these provisions outline how much of a project’s components can be FEOC-exposed while still qualifying for tax credits—a critical detail for developers and manufacturers.
The Treasury has confirmed that project developers can lean on existing domestic content safe harbor tables from the Inflation Reduction Act (IRA) to calculate FEOC Material Assistance costs. This is a big deal because it simplifies compliance, especially since the new rules are “substantially similar” to those in the IRA. But here’s the part most people miss: these tables only include specific components like solar modules, cells, glass, frames, and inverters. Notably absent? Solar wafers, ingots, and polysilicon—key materials in solar manufacturing. This exclusion could be a game-changer for companies navigating supply chain complexities.
Crux, a leading clean energy tax credit financing firm, weighed in on the guidance, highlighting its practicality. They noted that the safe harbor rules allow taxpayers to trace costs using IRS tables with averaging rules, avoiding the impracticality of tracking every subcomponent or raw material. For projects seeking the Investment Tax Credit (ITC) or Production Tax Credit (PTC), this is a significant compliance relief. Similarly, solar manufacturers eyeing the 45X Advanced Manufacturing Credit only need to evaluate costs from direct suppliers or their own production, focusing on components listed in the safe harbor tables.
However, not everyone is convinced. While Hall, an industry expert, praised the guidance as actionable, others argue it leaves too much room for interpretation. And this is where it gets controversial: What happens to projects that were safe harbored before January 1, 2026? According to Hall, these projects—likely years’ worth of PV and BESS installations—are exempt from FEOC compliance. But does this create an uneven playing field for newer projects?**
The Treasury promises more guidance and regulations down the line, but unanswered questions remain. For instance, the OBBBA’s “effective control” measures—which designate companies as “Foreign-influenced entities” if they cede control to a “Specified Foreign Entity”—are still murky. While the new guidance clarifies that licensing agreements for intellectual property qualify as effective control if entered into after July 4, 2025, the broader implications are up for debate. Is this a fair safeguard, or an overreach that stifles innovation and collaboration?
The industry is already reacting. A Crux survey revealed that U.S. solar companies aren’t waiting for further guidance, instead proactively assessing their procurement strategies. Some developers are even considering bypassing FEOC rules altogether, opting for cheaper, faster products that may not comply but offer immediate benefits. On the manufacturing front, ownership shifts are underway, with Chinese giants like Trina Solar and JA Solar selling U.S. facilities to local companies. Canadian Solar, meanwhile, restructured to reduce exposure to its Shanghai-listed subsidiary, CSI Solar. Is this the beginning of a broader decoupling from Chinese supply chains, or a temporary strategic shift?
Most recently, Vietnam-based Boviet Solar pledged its commitment to U.S. manufacturing despite rumors of its Chinese parent company considering a sale. This raises another question: How will global manufacturers navigate FEOC restrictions while maintaining competitiveness?
As the dust settles on this interim guidance, one thing is clear: the clean energy landscape is in flux. The Treasury’s rules offer a pathway forward, but they also open the door to strategic decisions, controversies, and unanswered questions. What do you think? Are these measures a necessary safeguard for U.S. energy independence, or do they go too far in restricting global collaboration? Share your thoughts in the comments—this conversation is far from over.
For a deeper dive, check out Crux’s FEOC guidance blog here.
