The One Big Beautiful Bill Act (OBBBA) established new rules for what type of solar products are eligible for certain tax credits. The foreign entity of concern (FEOC) rule denies the federal investment tax credit to projects that use too many Chinese components and prevents U.S.-made products that use too many Chinese components from accessing Sec. 45X credits. It’s a convoluted exercise for the solar panel market, where it’s nearly impossible to avoid using some Chinese component in the final product.
Credit: ForeFront Power
The FEOC rule also denies tax credits to companies that have Chinese investments or are under Chinese technology licenses. The market is awaiting final FEOC explanation from the Dept. of the Treasury (now expected sometime in 2026), but there has been a scramble to scrub supply chains and finances since HR1 passage.
China-influenced companies with U.S. manufacturing plants have been swapping operations ownership to appear less foreign. Trina Solar sold its Dallas solar panel assembly facility to T1 Energy; JA Solar sold its Phoenix solar panel plant to Corning; and Canadian Solar established a new U.S. division to own its solar panel and battery operations relevant to the American market. Roth Capital Partners said that various Washington, D.C., contacts have stated that “the government knows who the FEOCs are and no amount of restructuring, ownership changes or legal maneuvers is likely to work if the substantial portion of the business is in China, the IP being used in Chinese [or] the Chinese company has effective control.”
