FEOC Compliance & Claiming the Solar ITC: How PowerFlex Makes Both Possible

The federal Investment Tax Credit (ITC) remains one of the most powerful financial tools available to commercial and industrial organizations investing in solar energy — but the rules governing project qualifications are changing. The One Big Beautiful Bill Act (OBBBA) has reshaped the ITC landscape, and Foreign Entity of Concern (FEOC) regulations have added a new layer of compliance requirements for solar project owners to navigate.

For many C&I enterprises, this combination of a tightened timeline and complex new sourcing rules can make an otherwise attractive investment feel uncertain. Let’s break down what FEOC regulations mean for your solar project's ITC eligibility, and how PowerFlex's approach to procurement, documentation, and project delivery puts you in the best possible position to claim the credit.

What the OBBBA Changed and Why Timing Matters

Before diving into the specifics of FEOC, it's worth understanding the new ITC framework established by the OBBBA. Under the legislation, organizations have until the end of 2027 to place a qualified solar system into service to remain eligible for the ITC, unless the project has been safe-harbored. (Qualified battery energy storage systems remain eligible for the ITC until 2033.)

For many corporations evaluating large-scale solar projects, the window for non-safe-harbored projects is extremely tight. The good news is, through PowerFlex’s strategic safe-harboring tactics, the placed-in-service deadline can be extended to 2030 — giving customers ample time to plan, permit, and execute a project without forfeiting ITC eligibility. The credit itself remains compelling, offering a tax reduction equal to 30–50% of total qualified project costs.  

Understanding FEOC Regulations and What They Mean for Solar

Foreign Entity of Concern regulations are designed to limit equipment sourced from parties within — or tied to — countries deemed a national security risk (what the OBBBA designates as a Prohibited Foreign Entity, or PFE). Any commercial solar and battery project commencing construction in 2026 and beyond must satisfy three FEOC-related requirements to qualify for the ITC:

1. Material Assistance Cost Ratio (MACR) Test

Projects must demonstrate that a minimum percentage of their equipment is sourced from non-PFE suppliers. This is verified through a calculation called the Material Assistance Cost Ratio (MACR) and backed by manufacturer certification.

Importantly, not every piece of solar hardware is subject to this test. Under its latest guidance, the IRS has outlined specific equipment categories that must meet the MACR threshold, including solar modules, inverters, and racking systems. Getting this calculation right and documenting it properly is critical to a clean ITC claim.

2. Ownership Test

A qualified solar project cannot be owned in whole or in part by a PFE, that is, an entity directly tied to any of the nations restricted by the OBBBA: China, Iran, North Korea, or Russia.

For most U.S.-based organizations, the Ownership Test is straightforward to satisfy; however, it becomes more relevant for projects involving foreign capital partners, joint ventures with international entities, or complex ownership structures. Organizations with these kinds of structures should carefully assess their ownership composition before commencing construction on a project in which they intend to claim the ITC.

3. Effective Control Test

Perhaps the most nuanced of the FEOC compliance requirements is the Effective Control Test, which examines whether a contractual or licensing arrangement — rather than direct ownership — gives a PFE meaningful authority over a project or its components.  

An entity that makes payments to a PFE under such an arrangement may be classified as a Foreign-Influenced Entity (FIE), and therefore a PFE, even if no equity ownership relationship exists.

The types of contractual provisions that can trigger this classification are broad, including those that grant a foreign entity the ability to dictate production output or timing. For project developers and asset owners, this makes contract review and ongoing supplier due diligence essential components of an FEOC compliance strategy.

Treasury Dept. Provides New Clarity on Compliance

Meeting FEOC requirements in full may seem daunting, especially for organizations operating with lean teams and tight timelines. Fortunately, the U.S. Treasury Department has released interim guidance on how solar customers can demonstrate FEOC compliance, specifically by allowing them to rely on manufacturer certifications as part of their documentation package.  

Rather than requiring project developers to trace every component back through the supply chain independently, taxpayers can now rely on verified manufacturer certifications as evidence of compliance. For project teams managing complex equipment procurement across multiple vendors, this streamlines the compliance process considerably, provided the right documentation is collected and organized from the outset.

How PowerFlex Addresses FEOC Requirements

PowerFlex has developed its technology strategy, supply chain, and project delivery approach specifically to meet these evolving standards. Here's what that means in practice for our customers:

Integrated Compliance Built Into Every Project

Our projects are structured to satisfy FEOC thresholds from the start. Rather than treating FEOC compliance as an afterthought or a box to check at the end of a project, PowerFlex builds it into procurement and project planning from day one. The result is a clearer path to ITC eligibility without last-minute scrambles to source alternative equipment or rework documentation.

Verified Documentation to Support Underwriting

One of the most common friction points in ITC claims is demonstrating that a project's equipment actually meets FEOC requirements. PowerFlex provides vendor reliance letters and FEOC compliance certificates for the equipment categories that matter most to the MACR calculation, such as inverters, racking systems, and solar modules. This documentation package is designed to facilitate seamless underwriting and give all parties confidence in the project's eligibility before construction begins.

Trust PowerFlex With Your Commercial Solar Project  

The combination of OBBBA deadlines and FEOC requirements has raised the bar for successfully claiming the ITC for a commercial solar project. But for organizations that work with the right partner, a 30% (or higher) tax credit is well within reach.

PowerFlex has aligned our projects, procurement, and documentation practices with today's regulatory reality. Whether you're evaluating a new solar deployment or trying to understand how FEOC rules affect a project already in the pipeline, our team is here to help you navigate every step of the compliance process.

Ready to learn more? Contact a PowerFlex expert today to discuss your project and how we can help maximize your ITC eligibility.

This content is for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal, or accounting advice.