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What Business Owners, Investors, and Manufacturers Need to Know About Notice 2026-15

On February 12, 2026, the U.S. Department of the Treasury and the Internal Revenue Service released IR-2026-23, announcing new interim guidance under Notice 2026-15 regarding energy tax credits and “material assistance” from prohibited foreign entities (PFEs).

The guidance affects eligibility for:

These changes were enacted under the One, Big, Beautiful Bill and introduce a new compliance layer for taxpayers claiming major clean energy incentives.

At Velin & Associates, Inc., CPA Los Angeles, we are advising clients who invest in renewable projects, manufacture components, or participate in energy infrastructure supply chains. If your business touches solar, battery storage, EV infrastructure, manufacturing, or large-scale development, this update is significant.

What Changed?

The new law restricts eligibility for certain energy credits if a project receives “material assistance” from a Prohibited Foreign Entity (PFE).”

If material assistance exists, the facility or eligible component may become ineligible for federal credits.

This is not a minor documentation issue. It can eliminate millions of dollars in anticipated credits.

Which Credits Are Affected?

1️⃣ Clean Electricity Production Credit – IRC §45Y

Replaces the former production tax credit framework for electricity generated from qualifying clean energy sources.

2️⃣ Clean Electricity Investment Credit – IRC §48E

Provides investment-based credits for qualified clean energy facilities and energy storage technologies.

3️⃣ Advanced Manufacturing Production Credit – IRC §45X

Applies to eligible components manufactured and sold, such as:

These credits are frequently utilized by:

What Is a “Prohibited Foreign Entity”?

Notice 2026-15 states that Treasury and IRS intend to issue regulations defining a PFE more specifically. However, PFEs generally refer to certain foreign entities that raise national security or trade concerns.

The notice confirms:

Until then, taxpayers must rely on interim guidance and safe harbors.

What Is “Material Assistance”?

Material assistance relates to whether a significant portion of a facility’s costs or components originate from or involve a PFE.

To determine this, taxpayers must calculate a Material Assistance Cost Ratio.

If the ratio exceeds permitted thresholds, the credit may be disallowed.

Interim Safe Harbors

The One, Big, Beautiful Bill authorized interim safe harbor tables. Notice 2026-15 explains:

Taxpayers may rely on interim calculation methods until:

This creates a temporary compliance window.

Example 1: Solar Developer in California

A Los Angeles-based development group begins construction of a solar facility in January 2026.

Total project cost: $50 million
Imported solar modules: $20 million
Of that, $12 million traced to a supplier later classified as a PFE

Material assistance cost ratio:

$12M ÷ $50M = 24%

If regulatory thresholds disallow projects above a certain percentage, the entire §48E credit could be denied.

On a 30% investment credit, that could represent $15 million in lost tax benefit.

Supply chain due diligence is no longer optional.

Example 2: Battery Manufacturer Claiming §45X Credit

A manufacturer produces battery modules and claims the §45X advanced manufacturing production credit.

If raw components originate from a PFE and exceed safe harbor limits, the production credit for those units could be disallowed.

Manufacturers must now evaluate:

This is particularly relevant for technology-oriented businesses expanding into energy storage.

Construction Start Date Matters

The notice applies differently depending on:

✔ When construction begins (for §45Y and §48E)
✔ When eligible components are sold (for §45X)

Timing affects whether interim guidance or final safe harbor tables control.

Strategic timing decisions may impact eligibility.

Anti-Circumvention Focus

Treasury has indicated forthcoming anti-circumvention rules.

This means:

Businesses attempting to restructure supply chains superficially may face risk.

Why This Matters in Los Angeles

Our Los Angeles client base includes:

Energy credits often intersect with:

A misstep in PFE compliance could invalidate projected returns.

Planning Considerations for 2026 and Beyond

✔ Conduct supply chain audits
✔ Review vendor ownership structures
✔ Document sourcing origin
✔ Model material assistance ratios
✔ Monitor forthcoming safe harbor tables
✔ Coordinate with legal counsel on foreign entity exposure

Investors and developers should not assume prior compliance standards remain sufficient.

Comment Period

Notice 2026-15 invites public comments within 45 days of publication regarding:

Further regulatory clarification is expected.

The Bottom Line

The energy credit landscape is becoming more compliance-driven and geopolitically sensitive.

The combination of:

creates a technical environment that requires modeling before capital deployment.

For high-income investors, manufacturers, and developers, these credits can represent millions in tax value — but only if eligibility is preserved.

Work With Advisors Who Understand Complex Tax Incentives

At Velin & Associates, Inc., we provide strategic tax planning for:

Energy tax incentives are no longer just about installation — they are about sourcing, structure, and documentation. For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

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