Federal Tax Credits: Material Assistance Rules for Mere Mortals

The Department of the Treasury released long-awaited interim guidance on the “prohibited foreign entities” (PFE) rules that apply to some federal tax credits for energy property on February 12, 2026. The new interim guidance, Guidance to Apply Interim Safe Harbors for Purposes of Determining a Taxpayer’s Material Assistance from a Prohibited Foreign Entity; Other Prohibited Foreign Entity Guidance Notice 2026-15, provides information about how to comply with the PFE restrictions imposed by Public Law 119-21 (OBBBA). Note that PFE rules are often also called “foreign entities of concern” (FEOC) requirements by practitioners. 

OBBBA requires that project owners calculate a “material assistance cost ratio” (MACR) for each of their projects. Roughly speaking, the test answers the questions: “How much of my project’s supply chain costs can be attributed to non-PFE suppliers?” and “is that enough?” 

These rules are complex and are necessary for project owners to understand if they wish to utilize the federal tax credits. 

The Tax Law Center at New York University Law School published a clear and practical explainer, which summarizes the rules set by OBBBA and the new interim guidance, and walks readers through the steps to calculate the MACR, including what costs to include/exclude, what to track, how to use safe harbor tables to ease the burden of compliance, when the determination must be made regarding PFEs and MACR, and other critical elements such as what we do not yet know.  

In this CESA webinar, the explainer co-author and experts from Tax Law Center at NYU Law, Senior Fellow Seth Hanlon and Senior Attorney Advisor Kyle Sweeney, will present the new guidance and answer questions about its implications during a Q&A moderated by CESA Deputy Director Vero Bourg-Meyer.