FEOC Solar Requirements 2026: 48E Compliance Guide
Last updated: Sept 23, 2026. FEOC and PFE guidance is still evolving. Treasury is required to publish additional safe harbor tables by December 31, 2026.
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Solar FEOC requirements in 2026 can affect whether a project qualifies for the Section 48E or 45Y clean energy tax credit. For projects beginning construction after December 31, 2025, taxpayers must determine whether the project receives prohibited levels of material assistance from a prohibited foreign entity, or PFE, under the rules established by the One Big Beautiful Bill Act and IRS Notice 2026-15.
For solar projects beginning construction in 2026, the minimum material assistance cost ratio, or MACR, is generally 40% for a qualified electricity-generating facility and 55% for energy storage technology. The MACR measures applicable non-PFE sourcing rather than simply where final equipment was assembled.
Installers usually are not the taxpayer making the final FEOC determination, but their equipment selections, supplier certifications, substitutions, battery choices, and project records can affect 48E compliance. This guide covers the 2026 FEOC rules for solar, MACR thresholds, PFE supplier documentation, equipment sourcing, and the steps installers should take before procurement.
What Are the Solar FEOC Requirements in 2026?
Solar FEOC requirements restrict how much material assistance a 48E or 45Y project can receive from prohibited foreign entities. Current federal tax law generally uses the term prohibited foreign entity (PFE) rather than FEOC, although FEOC remains common solar-industry terminology.
For projects beginning construction after December 31, 2025, taxpayers claiming certain credits under Sections 48E, 45Y, or 45X must evaluate the applicable PFE restrictions. For Section 48E and 45Y projects, material assistance is measured using the material assistance cost ratio, or MACR.
Term | What It Means for Solar Projects |
FEOC | Common industry shorthand for foreign-entity sourcing restrictions affecting federal clean energy incentives |
PFE | Prohibited foreign entity, the terminology used in current federal tax rules |
MACR | Material assistance cost ratio used to evaluate how much project cost is attributable to non-PFE sources |
48E | Clean Electricity Investment Credit that can apply to qualifying solar and energy storage projects |
45Y | Clean Electricity Production Credit for qualifying electricity-generating facilities |
Domestic content | A separate test that may increase the value of an eligible credit but does not establish PFE compliance |
2026 Solar FEOC Requirements at a Glance
Requirement | 2026 rule |
Solar generating facility | Generally must meet a 40% minimum MACR |
Energy storage technology | Generally must meet a 55% minimum MACR |
Construction timing | New material-assistance rules apply to affected projects beginning construction after Dec. 31, 2025 |
Main federal guidance | IRS Notice 2026-15 |
Primary sourcing issue | Material assistance from prohibited foreign entities |
Supplier documentation | Certifications and sourcing records may be needed to support the taxpayer's calculation |
Equipment substitutions | Should be reviewed before approval because sourcing changes may affect the MACR |
Domestic content | Separate bonus-credit test; passing FEOC does not establish domestic-content eligibility |
Which Solar Projects Are Subject to FEOC and PFE Rules?
Installers may hear these called FEOC rules, but current tax law focuses on prohibited foreign entities, or PFEs. The restrictions can apply to projects claiming credits under Section 48E, Section 45Y, and Section 45X.
Projects that may require PFE compliance review include:
Commercial solar facilities claiming Section 48E or 45Y
Qualifying third-party-owned solar projects, including certain PPA structures
Business- or third-party-owned energy storage claiming Section 48E
Projects including qualified interconnection property in the Section 48E qualified investment
Manufacturers claiming Section 45X for eligible solar components
Traditional residential solar leases should not automatically be treated as eligible 48E projects. The One Big Beautiful Bill generally restricts Section 48E for qualifying solar property rented or leased to another party. Some PPA structures may still qualify because the project owner sells electricity rather than leasing the solar equipment, but eligibility depends on the specific ownership and contract structure.
Cash-sale residential installers generally are not the taxpayer claiming Section 48E. However, the same modules, inverters, batteries, and supplier documentation may matter when working with commercial customers, TPO providers, or financing partners.
For a broader explanation of which solar projects can still qualify for federal incentives in 2026, see GreenLancer's guide to the Section 48E solar tax credit requirements.
What to Ask Your Suppliers Before Equipment Is Selected
Supplier documentation is one of the first places FEOC compliance can break down because the taxpayer needs reliable sourcing information to support the MACR calculation. That certification has to meet specific requirements, so it helps to know what a compliant one looks like before you request it.
Run through this checklist with any equipment supplier:
Is this product manufactured, produced, or assembled by a prohibited foreign entity?
Are any key components sourced from a PFE?
Can you provide a signed supplier certification with the required identification number and penalties-of-perjury language?
Which safe harbor does it rely on, Identification or Cost Percentage?
Will you retain the certification for at least six years? Both supplier and taxpayer are required to.
Does it cover the equipment and listed manufactured product components used in this project, including modules, inverters, batteries, and any applicable racking or balance-of-system items?
Does it apply to this specific product model, SKU, purchase order, or project, rather than a blanket company-wide claim?
A taxpayer cannot rely on a certification it knows, or has reason to know, is inaccurate. Good faith reliance on paperwork only protects you if the paperwork actually holds up.
What to Ask Your TPO or Financing Partner
Many installers will not personally calculate the MACR. That work generally falls to the taxpayer claiming the credit, often a project owner, financing partner, or qualifying TPO provider. But installers are often the ones selecting equipment, substituting products, and passing documentation upstream.
Are you requiring a specific approved equipment list for FEOC or PFE compliance?
Who collects and holds the supplier certifications, you or us?
Do we need to preserve purchase orders, spec sheets, or distributor documentation on our end?
Can equipment substitutions after contract signing create credit eligibility issues?
Are batteries, inverters, racking, and interconnection equipment reviewed separately from the modules?
What Makes a Company a Prohibited Foreign Entity?
Prohibited foreign entity solar equipment generally falls into one of two categories:
A specified foreign entity: a company or government tied to China, Russia, Iran, or North Korea
A foreign-influenced entity: a company with disqualifying ownership, control, or debt ties to a specified foreign entity
Norton Rose Fulbright's breakdown of the law describes this as a three-part test. Is the taxpayer itself a PFE? Does the project receive material assistance from a PFE? Does a contract give a PFE effective control over the project?
The ownership math gets detailed fast, including single-owner and aggregate ownership thresholds plus a debt attribution test. It is worth reviewing with a tax advisor if your supply chain touches any of these categories.
What Is the Material Assistance Cost Ratio (MACR) for Solar?
The material assistance cost ratio, or MACR, measures the portion of applicable direct costs treated as coming from non-PFE sources. A solar or storage project must meet or exceed the minimum MACR for its technology and construction-start year to satisfy the Section 48E or 45Y material-assistance requirement.
MACR = (applicable total direct costs − applicable PFE direct costs) ÷ applicable total direct costs
A higher MACR means a larger share of the project's applicable direct costs comes from sources that are not PFEs. The project must meet or exceed the applicable minimum MACR for its construction-start year.
The higher the ratio, the less a project depends on PFE-sourced components. One worked example puts it simply: if total direct costs are $1,000 and $375 comes from PFE-sourced items, the MACR is 62.5 percent.
MACR Thresholds for Solar and Storage
Project or Credit Category | 2026 MACR Threshold |
Qualified electricity-generating facility under Section 48E or 45Y | 40% |
Energy storage technology under Section 48E | 55% |
Certain eligible solar components under Section 45X | 50%, depending on the applicable component category |
For a solar facility beginning construction in 2026, at least 40% of the applicable direct costs used in the MACR calculation generally must come from non-PFE sources. For energy storage technology beginning construction in 2026, that threshold is 55%.
These percentages are minimum MACR thresholds, not a simple allowance for purchasing a certain percentage of equipment from PFEs. The calculation depends on the applicable direct costs, supplier status, manufactured product components, and IRS safe harbor rules.
What Is the FEOC MACR for Solar Batteries in 2026?
Energy storage technology beginning construction in 2026 generally must meet a 55% minimum MACR. This is higher than the 40% threshold that generally applies to a qualified electricity-generating facility beginning construction in 2026. On a solar-plus-storage project, the battery should therefore not simply be assumed to use the PV facility's MACR. The taxpayer may need to evaluate the energy storage technology separately under the applicable Section 48E rules.
What Does and Doesn't Count Toward the Ratio
Not every material in a project counts toward the MACR the same way. Steel and iron construction materials that are structural in function generally fall outside the calculation, unless they are specifically identified as a manufactured product or component. Other materials should be checked against the applicable IRS tables and your own supplier documentation rather than assumed.
How Do You Know if Solar Panels Are FEOC Compliant?
There is no universal federal list of FEOC-compliant solar panels. Whether a module can be used on a compliant project depends on the specific product, its manufactured product components and suppliers, applicable PFE relationships, and the project's overall MACR calculation.
A module assembled in the United States is not automatically PFE-compliant, and a module that satisfies the PFE rules does not automatically qualify for the domestic content bonus.
FEOC Requirements for Qualified Interconnection Property
Qualified interconnection property may need its own MACR calculation, separate from the rest of the project, if those costs are being included in the qualified investment. This is one of the more useful nuances for installers who handle utility interconnection paperwork.
A low or uncalculated interconnection MACR does not disqualify the underlying facility's 48E credit. It just means those interconnection costs may need to be left out of the qualified investment. The reverse is not true. If the facility itself fails its MACR, the interconnection property fails too.
Once the project owner or tax advisor establishes the applicable equipment and compliance requirements, GreenLancer can support the project with solar permit plan sets, engineering, PE stamps, and utility interconnection applications.
FEOC vs. Domestic Content: Related, But Not the Same
Installers often confuse PFE compliance with the domestic content bonus because both involve equipment sourcing and some of the same safe harbor tables. They are separate tax-credit tests.
Requirement | Primary Question | Potential Result |
FEOC/PFE material assistance | Does the project receive too much material assistance from prohibited foreign entities? | Can affect eligibility for the underlying credit |
Domestic content | Does enough qualifying equipment or component cost come from U.S. sources? | May qualify the project for a bonus credit rate |
A project can satisfy PFE requirements without qualifying for the domestic content bonus. It can also meet domestic content requirements while still requiring a separate PFE review. For 2026 thresholds, safe harbor rules, and documentation, see our domestic content bonus checklist for solar installers.
For equipment-specific sourcing guidance, see GreenLancer's guide to domestic content and U.S.-manufactured solar panels.
What Happens If a Project Fails the MACR Test
Failing the applicable MACR generally affects the credit eligibility of the specific facility, energy storage technology, eligible component, or qualified interconnection property being tested. It does not automatically disqualify unrelated projects installed by the same company.
The credit gets disallowed for that specific item, not every project the company has ever installed
The IRS can assess a deficiency tied to a material assistance error within six years of when the return was filed
Accuracy-related penalties can apply, and MACR errors may face a lower threshold for being treated as a substantial underpayment
Suppliers who knowingly or negligently provide false certifications can face a separate penalty, generally the greater of 10 percent of the resulting underpayment or $5,000, unless they can show reasonable cause
Some parts of PFE status determination are still unsettled. McGuireWoods flags several open questions that Treasury has not yet addressed in follow-up guidance.
Solar FEOC Compliance Checklist for Installers
Installers typically are not responsible for making the taxpayer's final FEOC or MACR determination. However, equipment selection, supplier records, substitutions, and final project documentation can affect the information used to establish compliance. Use this checklist from procurement through project closeout.
Before Equipment Procurement
Confirm whether the project owner plans to claim Section 48E or 45Y.
Ask who is responsible for the formal MACR determination.
Obtain the approved equipment list from the owner, financier, or TPO provider.
Confirm what supplier certifications and sourcing documents are required.
Verify modules, inverters, batteries, racking, and other relevant equipment before issuing purchase orders.
During Design and Construction
Keep model numbers and equipment schedules consistent across procurement, design, permitting, and financing records.
Preserve supplier certifications, purchase orders, invoices, equipment data sheets, and relevant sourcing records.
Route equipment substitutions through the party responsible for tax-credit compliance before installation.
Recheck batteries and other separately evaluated technology rather than assuming the PV calculation covers them.
Before Project Closeout
Confirm that installed equipment matches the final approved equipment list.
Record substitutions and the documentation supporting them.
Provide the final equipment schedule and supporting sourcing documentation to the taxpayer or financing partner.
Retain project records for the period required by applicable tax rules and project agreements.
This workflow is especially important when financing, tax-credit qualification, engineering, permitting, and procurement are happening on parallel timelines.
What the Installer Is Responsible For
Installers generally do not make the taxpayer's final FEOC or MACR determination. Their role is often to provide accurate equipment information, follow approved sourcing requirements, preserve supplier documentation, flag substitutions, and make sure the installed equipment matches the records provided to the taxpayer or financing partner.
How FEOC Rules Apply to Solar Battery Storage
Energy storage technology has its own MACR threshold under the interim PFE guidance. For storage beginning construction in 2026, the minimum MACR is 55%, compared with 40% for qualified electricity-generating facilities.
That distinction matters on solar-plus-storage projects because the battery should not simply be treated as part of the PV facility's 40% calculation. Taxpayers may need to evaluate the storage technology separately under the applicable Section 48E rules.
Installers should confirm battery manufacturer and model requirements with the project owner or financing partner before procurement and verify whether supplier certifications are required for cells, modules, battery packs, or other manufactured product components used in the applicable MACR calculation.
For broader system design considerations, see GreenLancer's guide to solar plus storage systems.
FAQ on FEOC Rules for Solar Installers
What are the FEOC requirements for solar in 2026?
For qualifying solar projects beginning construction in 2026, taxpayers generally need to evaluate whether the facility receives prohibited material assistance from a PFE. Qualified electricity-generating facilities generally have a 40% minimum MACR in 2026, while energy storage technology generally has a 55% minimum MACR.
What is a prohibited foreign entity in solar?
A prohibited foreign entity, or PFE, is either a specified foreign entity tied to China, Russia, Iran, or North Korea, or a foreign-influenced entity with disqualifying ownership, control, or debt ties to one of those. This PFE status is what determines whether prohibited foreign entity solar equipment disqualifies a project from claiming credits under Section 48E, 45Y, or 45X.
What is the FEOC threshold for solar projects in 2026?
The 2026 minimum MACR is generally 40% for a qualified electricity-generating facility and 55% for energy storage technology. These are minimum non-PFE cost-ratio thresholds, not simple limits on the percentage of equipment that can come from a PFE.
Do residential installers need to worry about FEOC?
Cash-sale installers are usually not the taxpayer claiming 48E, but the same equipment and documentation often affect their TPO partners, lease and PPA providers, and commercial customers. Even a cash-sale business can get pulled into 48E FEOC compliance questions if a supplier's paperwork changes or a distributor drops a product line.
What is the MACR for solar batteries in 2026?
Energy storage technology beginning construction in 2026 generally has a 55% minimum material assistance cost ratio. Solar-plus-storage projects may therefore require separate treatment of the PV facility and the battery for Section 48E purposes.
How much PFE-sourced equipment can a 48E project include in 2026?
Non-PFE content needs to make up at least 40 percent of total direct costs for a qualified facility in 2026, and at least 55 percent for storage. That does not mean installers should treat the remaining percentage as a safe allowance. The calculation depends on direct costs, supplier status, and the applicable IRS tables, and these thresholds are set by the required minimum MACR increases for later construction-start years.
Is there a list of FEOC-compliant solar panels?
No universal federal list identifies solar panels as FEOC compliant. Compliance depends on the specific product, relevant components and suppliers, applicable PFE relationships, and the project's overall MACR calculation.
Is FEOC compliance based on country of origin or supplier status?
It is based on the status of the entity that mined, produced, or manufactured the component, not simply the country where it was assembled or shipped from. That distinction matters for solar equipment sourcing rules in 2026, since a product assembled domestically can still fail the test if a prohibited foreign entity produced a key underlying material.
Can equipment substitutions affect 48E FEOC compliance?
Yes. Replacing a module, inverter, battery, racking product, or other relevant component can change sourcing information used in the MACR determination. Installers should confirm substitutions with the party responsible for tax-credit compliance before procurement or installation.
How do I verify a supplier is FEOC compliant?
Request a signed certification that includes the supplier's identification number, is signed under penalties of perjury, and states whether the product was produced or manufactured by a PFE. Use the supplier checklist above as a starting point, and treat solar supplier documentation requirements as part of your standard intake process for every new equipment line, not a one-time check.
Does FEOC affect leased or TPO systems?
Yes. TPO providers claim the 48E credit directly, so their equipment sourcing is subject to the same material assistance rules as any other qualified facility. If you sell or install for a TPO partner, ask directly how they are handling 48E FEOC compliance before you commit to a supplier.
How is FEOC different from domestic content?
Domestic content affects whether a project earns a bonus credit rate. FEOC and PFE material assistance rules affect whether a project qualifies for the credit at all. Both frameworks reference some of the same domestic content safe harbor tables, which is exactly why the two get mixed up so often.
Bottom Line
GreenLancer is not a tax advisor, but our solar design, engineering, interconnection, and plan set teams help installers keep project documentation organized before sourcing decisions turn into permitting, financing, or closeout problems.
This is not tax advice. FEOC guidance is still evolving, and Treasury is expected to publish additional safe harbor tables by December 31, 2026. Confirm specifics with a tax or accounting professional before making sourcing decisions, firms like Grant Thornton publish ongoing updates as guidance develops.
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