H.R. 1 , the “One Big Beautiful Bill Act (OBBBA)”, establishes two major compliance provisions that clean energy developers and manufacturers must navigate: “beginning of construction” (BOC) rules and new sourcing restrictions tied to Foreign Entities of Concern (FEOCs). These provisions affect qualification for multiple IRA tax credits and influence how clean energy projects are structured, financed, and sourced going forward. Here’s what you need to know:
BOC IRS Guidance Now Law
IRS Notices 2013-29 and 2018-59 are now codified into the law, helping to determine BOC eligibility more accurately
There are two ways to measure BOC
- Physical work of a significant nature, and/or
- 5% Safe Harbor
Continuity requirement: After BOC is established, taxpayers must maintain continuous efforts to advance the project.
Compliance Tip: Keep detailed records of invoices, contracts, and construction milestones to demonstrate continuous construction efforts and protect eligibility through IRS review or audit.
FEOC and Foreign Influence Restrictions
H.R. 1 sets new eligibility rules for projects that source materials from foreign entities considered a risk to U.S. interests.
All prohibited foreign entities (PFEs) feature new restrictions, including
- Specified foreign entities (SFEs), and
- Foreign-influenced entities (FIEs)
Material Assistance Cost Ratio: Taxpayers must calculate this ratio to determine if PFE inputs exceed allowable limits, based on a threshold percentage that changes by year and technology type.
Compliance Tip: Developers and manufacturers should review ownership structures and supply chains for ties to foreign entities flagged under H.R. 1. Continuously track sourcing costs to ensure your project doesn’t exceed allowed foreign content thresholds.
Early planning, documentation, and supplier diligence will be critical to ensure that your clean energy projects remain credit-eligible in the post-IRA era. Contact us today for compliance assistance on your clean energy projects.
