Preparing for FEOC: What manufacturers need to know to be compliant

Energy tax credits continue to reshape the U.S. manufacturing landscape, with one requirement emerging as a defining factor in eligibility: foreign entity of concern (FEOC) compliance. FEOCs had their beginnings in the Inflation Reduction Act (IRA), specifically with the electric vehicle tax credit. FEOC rules expanded under the One Big Beautiful Bill Act (OBBBA) and the impact on manufacturers in the U.S. is only beginning to unfold.

FEOC basics and why it matters for manufacturers

The basics

The requirements for FEOC compliance were first introduced in the IRA’s 30D electric vehicle credit, restricting the use of battery minerals or components sourced from China, Iran, North Korea or Russia. The passage of the One Big Beautiful Bill Act (OBBBA) expanded these rules to include:

• Additional definitions of disallowed entities
• Restrictions on licensing agreements, royalty payments and other structured payments
• Guardrails on debt or financial arrangements that could create foreign influence

The goal of these requirements is clear — ensure that U.S. tax credits support domestic or allied-nation supply chains and not companies tied to FEOCs.

While there is no comprehensive list of required documents necessary to submit to be compliant, there is a certification letter that companies must sign stating that they are not a prohibited foreign entity, which includes two new terms introduced in OBBBA: Specified foreign entity and foreign influenced entity.

Why FEOC matters for manufacturers

Under the clean energy tax credit framework, FEOC is not a bonus credit, but rather a baseline requirement. This means that if you fail the FEOC certification process, the entire credit disappears. When you take into consideration that these credits can offset nearly half of project costs, compliance isn’t just a nice-to-have box checked off on a to-do list. It is instead a critical factor in a manufacturer’s strategy.

What FEOC compliance looks like today

The IRS has yet to publish a list of required documents for certification, but there is a certification that needs to be signed that declares the manufacturer is not a prohibited foreign entity. To support the certification, manufacturers must evaluate the following: