Trade & Customs
Covered nations behind every PFE test (China, Russia, Iran, North Korea)
Minimum non-PFE cost ratio for 45Y and 48E facilities in 2026
Supply-chain depth you must trace under Notice 2026-15
Regulation Overview
FEOC compliance is the diligence standard governing whether U.S. clean energy tax credits can be claimed. A foreign entity of concern is an entity owned by, controlled by, or subject to the direction of China, Russia, Iran or North Korea. The One Big Beautiful Bill Act turned that definition into the most consequential gating item in the clean energy credit market.
The rules first reached the section 30D clean vehicle credit under the Inflation Reduction Act. That credit, along with 25E and 45W, was terminated for vehicles acquired after September 30, 2025. FEOC compliance now governs the credits that remain live: 45X advanced manufacturing, 45Y clean electricity production, and 48E clean electricity investment.
FEOC compliance requires cost and origin data from every supplier. When a prohibited foreign entity appears, the affected credit can be lost in full, so portfolio-wide screening is continuous.
Developers and owners claiming the 45Y or 48E clean electricity credits
Manufacturers claiming the 45X advanced manufacturing production credit
Energy storage project owners subject to higher cost-ratio thresholds
Tax-equity investors and transferees buying credits under section 6418
Suppliers and sub-tier vendors whose components feed credit-eligible products
EPC contractors and project sponsors supporting credit claims
Key Thresholds
The non-PFE cost ratio rises every year. A facility that clears 40% in 2026 must clear 45% in 2027 and 60% by 2030. FEOC compliance is not a one-time filing. The same bill of materials has to be recalculated as thresholds move and as suppliers change sourcing, which means last year's analysis is already stale.
Notice 2026-15 requires project owners to look two tiers up the supply chain to assess material assistance. Suppliers rarely volunteer sub-tier origin. Your team requests cost and country data, waits, receives inconsistent formats, and still cannot confirm whether a prohibited foreign entity sits beneath a tier-one vendor.
The material assistance test is pass or fail. If the cost ratio falls below the threshold by a single point, the facility or component loses the entire credit, not a prorated share. Without component-level cost mapping, you cannot see how close a project sits to the line or which supplier is pulling it under.
The interim safe harbors reduce calculation effort but still demand retained evidence: supplier declarations, direct-cost data, and safe-harbor table support for each eligible component. Under IRS audit, FEOC compliance is only as strong as the records behind it. Manual tracking across hundreds of components is difficult to defend.
Certivo In Action
Certivo in Action — FEOC Workflow
Features Tabs
From Manual Tracing to Exception Management
CORA collects and extracts cost and origin data automatically. Your team focuses on the suppliers and components that need judgment, not on manual supply-chain tracing.
Material Assistance Confidence
See the material assistance cost ratio for every project against the current threshold, so a binary disqualification does not surface during an audit.
Proactive FEOC Compliance Monitoring
As thresholds rise and safe harbor tables change, Certivo re-screens the portfolio and flags the projects at risk before the next filing.
Frequently Asked Questions
Which tax credits do the FEOC rules apply to, and are any still available?
The material assistance rules apply to the 45X advanced manufacturing, 45Y clean electricity production, and 48E clean electricity investment credits. The 30D, 25E and 45W vehicle credits that first carried FEOC restrictions were terminated after September 30, 2025. Certivo's CORA engine tracks which credits remain live and applies the current rules to each.
What is the material assistance cost ratio and how is it calculated?
The MACR is the share of direct costs not attributable to a prohibited foreign entity, calculated as total direct costs minus PFE costs, divided by total direct costs. The result must meet or exceed the threshold for the applicable year. CORA calculates the MACR at facility and component level from validated supplier cost data.
How far up the supply chain do we have to trace?
Under Notice 2026-15, owners claiming 45Y or 48E must assess material assistance two tiers up the supply chain. Suppliers seldom provide sub-tier origin on their own. CORA's multi-tier supplier campaigns collect, chase and consolidate that data into one traceable record.
What are the penalties for getting FEOC compliance wrong?
A failed material assistance test disallows the affected credit in full, and the IRS can apply accuracy-related penalties with an extended assessment window for material-assistance claims. Certain 48E effective-control violations carry a separate recapture regime. CORA's audit trail documents each determination so a claim can be defended. Confirm exposure with tax counsel.
How does Certivo keep us current as thresholds rise and safe harbor tables change?
CORA's Scout agent monitors the threshold schedule and Treasury safe harbor updates, expires affected supplier evidence, and sends collection back out. The Registrar agent regenerates audit-ready documentation, so FEOC compliance keeps pace with each annual change rather than lagging a year behind.