FEOC Compliance

One gap in your supply chain can cost your project its tax credits entirely.

The One Big Beautiful Bill Act introduced comprehensive new Foreign Entity of Concern requirements for projects claiming the Section 48E Clean Electricity Investment Tax Credit (ITC) or Section 45Y Production Tax Credit (PTC). Ownership and effective control obligations apply from July 2025. All three FEOC tests, supply chain, ownership, and effective control, apply to projects beginning construction on or after January 1, 2026. From supply chain screening to ownership monitoring, Empact manages all three FEOC obligations through the full 10-year recapture window.

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What Changed

The One Big Beautiful Bill Act changed the rules. Here is what your project is now subject to.

Projects beginning construction on or after January 1, 2026 are subject to all three FEOC requirements under the One Big Beautiful Bill Act (OBBBA), effective July 4, 2025.

The stakes are higher than under the IRA, and the documentation requirements are more demanding. Empact delivers a formal compliance assessment report giving your tax equity and counsel the documented evidence they need to close.

Projects that began construction before January 1, 2026 are exempt from FEOC requirements. Empact documents and certifies that exemption status so it holds up under IRS scrutiny.

Three FEOC Tests

Your project must pass all three FEOC tests. Empact manages the process from start to finish.

Test 1, Company Ownership

Your project cannot have Prohibited Foreign Entity involvement in its ownership structure.

Empact reviews corporate ownership, headquarters location, and governmental entity lists to confirm no connection at any level of the ownership chain. Empact delivers a formal ownership assessment report your tax counsel can rely on.

Test 2, Effective Control

A Prohibited Foreign Entity cannot hold effective control over project operations or energy generation.

Empact reviews contracts, MSAs, and procurement agreements to identify and remediate provisions that could confer control to a Prohibited Foreign Entity. Exposure runs 10 years after placed-in-service. Empact reviews and flags each contract provision that could create an effective control issue before it reaches your counsel.

Test 3, Material Assistance (MACR)

The Material Assistance Cost Ratio (MACR) determines whether your project contains too much content from Prohibited Foreign Entities.

Thresholds tighten every year. Empact calculates your MACR, documents your supply chain, and certifies compliance against the applicable threshold. Empact draws from original supplier documentation and certifications, not self-reported data, so your MACR calculation holds up under IRS scrutiny.

40%

Qualified Facilities (solar, wind, hydro). Rises 5%/yr to 60% by 2029.

55%

Energy Storage (battery and storage tech). 2026 threshold.

50%

Components 45X (solar, battery, inverter). 2026 threshold.

Source: IRS Notice 2026-15. Guidance on Effective Control and Ownership tests is expected in forthcoming proposed regulations.

Compliance Timeline

What applies to your project depends on when you began construction.

Before 2023

Pre-IRA

  • No FEOC rules apply

2023

IRA Enacted

  • 45X FEOC applies
  • No 45Y/48E FEOC

2024

IRA + Guidance

  • 45X FEOC applies

2025

OBBBA Signed

  • 45X FEOC applies
  • OBBBA enacted Jul 4

Jan 2026+

Full FEOC

  • All 3 tests apply
  • MACR thresholds active
  • 10-yr recapture

2027–2029

Escalating

  • Thresholds tighten
  • MACR rises 5%/yr
  • Full enforcement

Empact protects your project across all three tests.

Screen & Certify

Bill of Material review, supplier certifications, and Material Assistance Cost Ratio (MACR) calculation, fully documented across all three tests and ready for formal tax opinions.

Review & Document

Contract review for effective control provisions, ownership structure analysis, and a compliance report your tax counsel can rely on to issue formal opinions.

Monitor Continuously

Ongoing ownership and counterparty monitoring through the full 10-year recapture period, so a change in your ownership structure never becomes a surprise.

Talk to Our FEOC Team

FEOC compliance requires expertise that most project teams don't have in-house.

Purpose-built for clean energy

We understand the supply chain, the contracts, and the regulatory nuance that generalist counsel doesn't. The documentation we produce meets the standard institutional investors and insurers require to close.

Built for the complexity of clean energy compliance.

We don't hand you a checklist. We conduct the review, source original documentation, organize the evidence, and deliver certifications your tax counsel can rely on.

Monitoring doesn't stop at close

Most compliance programs end at placed-in-service. Empact monitors ownership and counterparty relationships through the full 10-year recapture window. When something changes, we work with your team to address it before it becomes a problem for your counsel.

What Empact Delivers

Everything your tax counsel, investors, and insurers need, delivered audit-ready.

Bill of Materials review and MACR calculation documented across all three tests

Supplier certifications collected and organized

Supplier documentation sourced from original records and organized for IRS and tax equity review

Effective control compliance report ready for formal tax opinions

Ownership and counterparty monitoring through the full 10-year recapture period

All three FEOC tests certified and audit-ready for scrutiny

Have questions about FEOC compliance? Visit our FAQ →

New to the rules? Read our FEOC Compliance Guide.

The July 4, 2026 compliance deadline is closer than it looks. Empact's FEOC team is ready to screen your supply chain, review your contracts, and certify your compliance before the window closes.

Talk to Our FEOC Team