House advances 'One Big Beautiful Bill': Implications of new FEOC restrictions on clean energy tax credits

Most of the major Inflation Reduction Act (IRA) credits that survive in the bill are now subject to new FEOC restrictions—particularly denying credits for facilities or projects receiving “material assistance” from such entities. Below is a summary of the affected credits, including the date of termination and the effective date of FEOC restrictions:

*This table assumes enactment in 2025

Key provisions of the FEOC rule

Under the bill, eligibility for these credits is generally denied where a “prohibited foreign entity” (i.e., a FEOC) is involved in certain aspects of the facility’s development or ownership. There are several prongs:

• Ownership: The facility cannot be owned, in whole or part, by a FEOC. In other words, it cannot be a “foreign-controlled entity.” 
• Control/Operation: FEOCs may not operate or have control rights over the project. In other words, it cannot be a “foreign-influenced entity.”
• Use of Components or Assistance: The most sweeping limitation applies to any project whose construction “involves material assistance” from a FEOC.

“Material Assistance” — The core restriction

Almost certainly the most significant restriction, the material assistance provision denies eligibility for any credit to any facility that receives “material assistance” from a prohibited foreign entity. Material assistance is defined as: 

• Any component, subcomponent, or critical mineral (as defined under §45X(c)(6)) that is extracted, processed, recycled, manufactured, or assembled by a prohibited foreign entity;
• Any design of the property that is based on copyrights, patents, know-how, or trade secrets provided by such entities.

Exceptions: What doesn’t count as “Material Assistance”?

The bill provides limited safe harbors for certain non-specialized materials:

• Assembly parts and constituent materials do not constitute material assistance ifthey are:
  • Not uniquely designed or formulated for the type of facility or component that benefits from the tax credit; and
  • Not exclusively or predominantly produced or sourced from prohibited foreign entities.

A key interpretive question arises: would the fact that a component (say, steel or circuit boards) is used across a variety of facility types mean that it qualifies under the “not designed exclusively” clause? That seems plausible—and may be critical to structuring compliance strategies. However, the “predominantly available” test introduces ambiguity, especially in markets where supply chains are heavily concentrated in China.

Authored by Jamie M. Wickett and Erida Tosini-Corea.