Ok. “BAM!” may be a bit self-serving in the SEO power word category but still…Across the clean energy sector, “navigating FEOC rules race” is on. Developers, EPC firms, financiers, and suppliers are pushing to complete or safe-harbor projects before the calendar turns — because the Investment Tax Credit (ITC) landscape is about to shift dramatically. The familiar rules that have governed project qualification for years will effectively sunset for projects beginning construction on or after January 1, 2026. What replaces them will be a more complex, compliance-driven framework that redefines how solar and battery projects qualify for incentives — and how companies must prove it.

This isn’t simply a policy tweak; it’s a fundamental reorientation of the clean energy supply chain. Many in the industry view 2025 as a transition year — the final window to lock in credits under the old structure before new “origin-based” standards take hold. Those standards, tied to the Foreign Entity of Concern (FEOC) rules, carry far-reaching implications for material sourcing, accounting, and ultimately the economics of every project moving forward.

On July 7, 2025, President Trump signed an Executive Order titled “Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources.” This directive introduced a new framework around Foreign Entities of Concern (FEOC)—rules designed to restrict solar and battery projects from using components linked to the governments of China, Russia, Iran, or North Korea if they wish to qualify for tax incentives.

The stated goal of the FEOC policy is to accelerate domestic manufacturing of solar and battery components by restricting imports from those nations. However, this approach conflicts with provisions in the One Big Beautiful Bill and concurrent OMB grant cancellations—together eliminating more than $24 billion in funding and an estimated 20,000 U.S. manufacturing jobs.

What FEOC Compliance Means

Starting in 2026, to qualify for ITC benefits:

• Solar projects must ensure that at least 40% of the total cost of manufactured products used in the power-generation system (excluding steel racking and wiring) are non-FEOC sourced.
• Battery projects must meet a 55% threshold.
  These minimums will rise by 5% per year until they level off at 60% for solar and 75% for batteries.
  This accounting must be performed at the line-item level, creating a substantial administrative burden on manufacturers and developers alike.

Complicating matters further are two new classifications:

• Specified Foreign Entity (SFE): focuses on ownership of a manufacturing company.
• Foreign-Influenced Entity (FIE): focuses on control, such as board seats or debt arrangements.

In practice, a company headquartered in China but producing modules in Malaysia—or even within the U.S.—could still be deemed non-compliant if ownership or control ties back to a FEOC. It’s about who controls the manufacturing, not merely where it takes place. Consulting a qualified tax attorney and reviewing the full definitions is strongly advised.

Administrative and Accounting Requirements

Ensuring FEOC compliance will introduce major oversight and reporting costs, including:

• Supply chain audits: verifying that all materials, components, and critical minerals are FEOC-free.
• Detailed recordkeeping: maintaining cost ledgers and traceable documentation of compliance.
• Supplier certifications: obtaining attestations from all manufacturers and vendors confirming compliance.
• Contract clauses: embedding language requiring traceability, disclosure, and audit rights.
• Due diligence: verifying ownership, financing, and control structures throughout the supply chain.

Steps Toward Compliance

• Audit your supply chain—confirm all equipment providers and contractors meet FEOC standards.
• Purchase directly from manufacturers where possible, since distributors may lack the data required for compliance.
• Start early: plan 2026 projects now to align procurement and documentation.
• Dual-source materials: establish confirmed FEOC-free options as rules tighten.
• Vet all contracts: avoid agreements granting FEOCs indirect control or influence.
• Stay informed: the Treasury has not yet issued definitive Cost Ratio tables for FEOC compliance (expected December 2026). Until then, developers should rely on IRS Notice 2025-08 (Domestic Content guidance) as the best interim reference.

Risks and Penalties

Failure to comply with FEOC rules can result in disqualification from tax credits, repayment of credits already claimed, and potential financial penalties. Given that IRS enforcement may retroactively audit cost ledgers, ongoing vigilance is critical.

The Broader Takeaway

The shift toward FEOC compliance represents more than a new set of tax rules — it signals a long-term policy trend toward energy independence, supply chain transparency, and domestic reinvestment. While the immediate transition will be difficult, especially for developers reliant on global manufacturing, those who adapt quickly will gain a competitive edge. The winners in 2026 and beyond will be those who view compliance not as a hurdle but as an opportunity to align with national priorities, strengthen supplier relationships, and differentiate through verified transparency.

Developers and asset owners should treat this moment as a strategic inflection point. Projects that proactively certify compliance, establish clear sourcing traceability, and build trust with regulators will be the first to benefit from future incentive programs and green manufacturing credits. Those who delay may face cost overruns, disqualification, or the loss of investor confidence.

From an industry perspective, FEOC compliance also underscores the growing importance of Energy-as-a-Service (EaaS) and long-term partnership models. By outsourcing ownership and compliance risk to experienced service providers, customers can still access advanced solar and battery systems without navigating every layer of regulatory complexity themselves.

Our Focus Moving Forward

Each project we develop or acquire is structured with transparency, compliance, and reliability at its core — ensuring both investors and customers retain confidence in a changing policy environment.

The FEOC landscape is evolving fast. The companies that thrive will be those who act early, invest in due diligence, and partner strategically. At ONSITE Utility Services, we believe the best way to prepare for uncertainty is to build resilience into the model itself — through the ONSITE Platform, compliance by design, and long-term operational integrity.

Disclaimer: The FEOC regulations are intricate and subject to change. This summary is not tax or legal advice. Consult a qualified professional to verify compliance for your specific project.