The United States continues to support clean energy development through federal tax incentives, including tax credits designed to encourage investment in renewable energy projects such as solar farms, battery storage systems, EV charging infrastructure, and other qualifying clean electricity projects.

Learn more from the U.S. Department of the Treasury: https://home.treasury.gov/policy-issues/inflation-reduction-act/clean-energy-tax-incentives

Beginning in 2026, certain projects seeking federal tax credits under Internal Revenue Code Sections 45Y and 48E may also need to satisfy additional ownership and supply chain requirements introduced through guidance issued by the U.S. Department of the Treasury and the Internal Revenue Service (IRS).

Read IRS Notice 2026-15 here: https://www.irs.gov/pub/irs-drop/n-26-15.pdf

These rules will not affect every project in the same way. Their application depends on the specific facts and circumstances of each project, including factors such as the project's construction date, ownership structure, financing arrangements, equipment sourcing, and contractual relationships, as described in IRS Notice 2026-15.

Whether you're a developer or an investor, understanding these changes can help you better evaluate renewable energy opportunities.

This article is for educational purposes only and does not constitute legal, tax, or investment advice. It summarizes portions of publicly available guidance and does not cover every exception or requirement. Because these rules are complex and may change over time, developers and investors should consult qualified legal and tax professionals regarding their specific circumstances.

What You'll Learn

In this article, we'll cover:

• What the new IRS rules are

• Why they were introduced

• Which clean energy projects may be affected

• How these rules could influence project financing

• What developers and investors should watch for

Why Were These Rules Introduced?

Congress expanded clean energy incentives through the Inflation Reduction Act of 2022, while also introducing provisions intended to strengthen domestic manufacturing and reduce reliance on certain foreign entities within critical clean energy supply chains. Read more about the legislation here: https://www.congress.gov/bill/117th-congress/house-bill/5376

To implement these provisions, the Treasury Department and IRS released guidance explaining how taxpayers determine whether projects qualify for certain clean energy tax credits and how compliance is evaluated. The current guidance is available in IRS Notice 2026-15: https://www.irs.gov/pub/irs-drop/n-26-15.pdf

In addition to evaluating whether a project produces qualifying clean electricity, the guidance may also consider:

• Who owns or controls the project

• Financing arrangements

• Licensing agreements

• Equipment sourcing

• Supply chain documentation

Because the guidance contains exceptions, transition rules, and project-specific requirements, eligibility must always be evaluated based on the facts and circumstances of each project.

Which Tax Credits Are Affected?

The guidance primarily applies to two federal tax incentives.

Section 45Y

The Clean Electricity Production Credit provides tax incentives for qualifying clean electricity generation. Learn more from the IRS here:

https://www.irs.gov/credits-deductions/businesses/clean-electricity-production-credit-and-clean-electricity-investment-credit

Section 48E

The Clean Electricity Investment Credit supports investment in qualifying clean electricity facilities. Learn more here:

https://www.irs.gov/credits-deductions/businesses/clean-electricity-production-credit-and-clean-electricity-investment-credit

Projects beginning construction after January 1, 2026 may be subject to additional compliance requirements depending on the project's specific facts and circumstances. Refer to IRS Notice 2026-15 for additional information:

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

What Is a Prohibited Foreign Entity?

One significant part of the guidance involves Prohibited Foreign Entities (PFEs).

In general, these rules evaluate whether certain ownership structures, contractual rights, financing arrangements, or supply chain relationships could affect a project's eligibility for federal tax credits.

The purpose of these provisions is to strengthen domestic manufacturing while reducing reliance on certain foreign entities in critical clean energy supply chains. Additional information is available in IRS Notice 2026-15:

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

The Two Main Areas of Compliance

The guidance generally evaluates two separate areas.

1. Ownership and Control Requirements

A project's eligibility may be affected if a prohibited foreign entity possesses certain ownership interests or contractual rights that provide significant influence over the project.

Depending on the facts and circumstances, this may include:

• Ownership interests

• Board appointment rights

• Certain financing arrangements

• Management authority

• Licensing agreements

The specific analysis depends on the applicable Treasury and IRS guidance outlined in IRS Notice 2026-15.

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

2. Supply Chain Requirements

The guidance also evaluates where certain manufactured products and components originate.

Depending on the project, this may include equipment such as:

• Solar modules

• Solar cells

• Battery systems

• Inverters

• Transformers

• EV charging equipment

Developers may need documentation supporting the origin of equipment and demonstrating compliance with applicable sourcing requirements.

See IRS Notice 2026-15 for additional information:

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

Why Supply Chains Matter

For many projects beginning construction in 2026 or later, eligibility for certain tax credits may depend on satisfying the applicable Material Assistance Cost Ratio (MACR) requirements established by the IRS.

The applicable thresholds vary depending on the project type, technology, construction date, and other factors. Developers should rely on the latest IRS guidance and qualified tax professionals when determining which requirements apply to a specific project.

If a project does not satisfy the applicable requirements, it could lose eligibility for certain federal tax credits.

Learn more in IRS Notice 2026-15:

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

How Could This Affect Renewable Energy Projects?

Federal tax credits often play an important role in project financing.

Depending on the project, they may help:

• Reduce development costs

• Improve project economics

• Support financing

• Strengthen cash flow

If a project loses anticipated tax credits because it does not satisfy applicable requirements, that could affect project economics, financing assumptions, repayment capacity, or projected investor returns.

The impact will depend on each project's financing structure and other circumstances.

Does Starting Construction Early Avoid These Rules?

Not necessarily.

Certain projects that began construction before January 1, 2026 may qualify for transition provisions described in IRS Notice 2026-15.

However, satisfying beginning-of-construction requirements does not automatically exempt a project from all ownership, control, or compliance requirements.

Because these rules are highly fact-specific, developers should seek qualified legal and tax advice before relying on any transition provisions.

Read the guidance here:

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

What Should Developers Prepare?

Projects relying on these tax credits may need documentation such as:

• Bills of materials

• Equipment sourcing records

• Supplier certifications

• Ownership disclosures

• Independent tax opinions

• Financial analyses

The exact documentation required depends on the project's specific facts and the applicable IRS guidance. Developers should consult qualified legal and tax professionals to determine the documentation appropriate for their project.

Additional guidance is available in IRS Notice 2026-15:

https://www.irs.gov/pub/irs-drop/n-26-15.pdf

What Should Investors Know?

Most investors will never need to calculate these compliance requirements themselves.

However, understanding that tax credit eligibility can affect project economics may help when evaluating renewable energy investment opportunities.

Questions investors may consider include:

• Does the project rely heavily on federal tax credits?

• Has the developer discussed compliance risks?

• Are important project risks clearly disclosed?

Tax credit eligibility is only one factor among many when evaluating an investment opportunity. Investors should carefully review all offering materials and consider their own financial goals, risk tolerance, and investment timeline before making any investment decision.

Final Thoughts

Federal tax incentives continue to play an important role in supporting renewable energy development across the United States.

Recent Treasury and IRS guidance introduces additional compliance considerations for some projects beginning construction in 2026 and beyond.

For developers, that means increased attention to ownership structures, supply chains, and documentation.

For investors, it highlights another factor that may influence project economics alongside operational, financial, regulatory, and market risks.

Understanding these rules can help developers and investors ask better questions, conduct more informed due diligence, and make better-informed decisions.

Learn More

IRS Notice 2026-15
https://www.irs.gov/pub/irs-drop/n-26-15.pdf

IRS Clean Electricity Production Credit & Investment Credit (Sections 45Y & 48E)
https://www.irs.gov/credits-deductions/businesses/clean-electricity-production-credit-and-clean-electricity-investment-credit

U.S. Department of the Treasury: Clean Energy Tax Incentives
https://home.treasury.gov/policy-issues/inflation-reduction-act/clean-energy-tax-incentives

Inflation Reduction Act of 2022
https://www.congress.gov/bill/117th-congress/house-bill/5376

SEC Regulation Crowdfunding
https://www.sec.gov/resources-small-businesses/exempt-offerings/regulation-crowdfunding