Treasury Department And IRS Release Prohibited Foreign Entity Guidance

The U.S. Department of the Treasury and IRS on February 12, 2026, released Notice 2026-15, which provides initial guidance regarding Prohibited Foreign Entities (PFEs), defined under Section 7701(a)(51) and Section 7701(a)(52) of the Internal Revenue Code (Code), as enacted by the One Big Beautiful Bill Act (OBBB). These rules are often referred to as the Foreign Entity of Concern, or FEOC, rules. The notice includes interim safe harbor guidance under Code Sections 45X, 45Y and 48E for gauging the material assistance cost ratio for a qualified facility, energy storage technology or eligible component for purposes of determining whether there was material assistance from a PFE. It also addresses certain PFE restrictions that the Treasury Department and IRS intend to include in the forthcoming proposed regulations.