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ARTICLE · 17 JULY 2026

The Prohibited Foreign Entity (Or FEOC) Rules And Battery Storage

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Battery storage developers and equipment manufacturers face complex new Prohibited Foreign Entity rules that restrict federal tax credit eligibility based on ties to certain foreign entities, primarily China. These rules create three categories of restrictions affecting the ITC, PTC, and 45X credits, with compliance requirements that remain unclear despite limited Treasury guidance.

GlobalTax
Aaron Lang
Aaron Lang
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Over the past year, battery storage developers and equipment manufacturers have had to contend with new “Prohibited Foreign Entity” (PFE) rules—commonly called the FEOC (“foreign entity of concern”) requirements. 

Enacted on July 4, 2025, as part of the “One Big Beautiful Bill Act” (OBBBA), the PFE rules bar developers and manufacturers with specified ties to certain foreign entities—primarily entities with certain ties to China—from eligibility for key federal tax credits—including the Section 48E clean energy investment tax credit (ITC), the Section 45Y clean energy production tax credit (PTC), and the Section 45X advanced manufacturing credit. This post analyses the PFE rules specifically as they relate to the battery storage industry.

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