In the space of one week, two seismic policy shifts have reshaped the procurement landscape for energy infrastructure. Treasury released its first actionable FEOC guidance — and the Supreme Court struck down the administration's tariff regime, triggering an immediate replacement. Here's what it means for your projects.

Section 01

Treasury Releases FEOC Guidance

On February 13, Treasury and the IRS released proposed guidance on the Foreign Entity of Concern rules under the One Big Beautiful Bill Act, establishing how developers and manufacturers determine whether a project or component relies on "material assistance" from entities tied to China, Russia, Iran, or North Korea.

The stakes are high: projects receiving material assistance from a prohibited foreign entity (PFE) above the applicable threshold lose eligibility for the Section 45X advanced manufacturing credit, Section 48E clean electricity ITC, and Section 45Y clean electricity PTC. For BESS and solar, sourcing decisions now directly affect tax credit eligibility.

What the guidance establishes

Notice 2026-15 introduces interim safe harbor rules for calculating the Material Assistance Cost Ratio (MACR) — the compliance metric that determines whether a facility or component exceeds the allowable proportion of PFE-sourced content. The MACR is calculated by subtracting PFE-attributed equipment costs from total direct equipment costs, then dividing by total direct costs. Steel and iron components used for racking and mounting are excluded from the calculation.

The thresholds are tiered by technology and year, with requirements tightening annually:

  • Solar energy components sold in 2026: eligible component MACR cannot be less than 50%, increasing 10% per year through 2029, then to 85% after 2029.
  • Qualified facilities (solar, wind, other) beginning construction in 2026: facility MACR threshold of 40%.
  • Energy storage facilities beginning construction in 2026: threshold of 55%.
  • Battery components sold in 2026: threshold of 60%, increasing 5% per year through 2029.
  • Wind energy components sold in 2026: threshold of 85%, rising to 90% in 2027.

The safe harbors reference existing domestic content tables from 2023–2025 guidance (Notices 2024-41 and 2025-08), allowing taxpayers to use previously assigned cost percentages. Manufacturers generally only need to evaluate costs from direct suppliers — not the entire upstream supply chain — though the guidance leaves the definition of "prohibited foreign entity" itself to forthcoming proposed regulations.

Key deadline

Public comments on the proposed guidance are due March 30, 2026. Treasury has indicated it intends to issue more comprehensive proposed regulations on PFE definitions and material assistance rules, including new safe harbor tables. However, as industry advisor Rhone Resch has cautioned: tax equity investors will underwrite to this Notice. Don't wait for final rules.

Errors in MACR calculations are subject to a six-year assessment window, creating potential complications for project indemnity and insurance. Any license agreement entered into with a specified foreign entity after July 4, 2026, will trigger "foreign-influenced entity" classification if other requirements are met.

Section 02

Supreme Court Strikes Down IEEPA Tariffs — Administration Responds Within Hours

On February 20, the Supreme Court ruled 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the President to impose tariffs — invalidating the "Liberation Day" reciprocal tariffs and all country-specific IEEPA duties that had been in effect since 2025.

The response was immediate. Events have unfolded rapidly over six days:

February 20 — Morning Supreme Court issues 6-3 ruling. IEEPA tariffs declared unlawful. Justice Kavanaugh's dissent warns the refund process will be "a mess."
February 20 — Evening Trump signs executive order imposing 10% global tariff under Section 122 of the Trade Act of 1974. Separately signs orders terminating IEEPA tariff collection and continuing suspension of de minimis duty-free treatment.
February 21 Trump announces via Truth Social that the Section 122 rate will be raised to 15% — the statutory maximum. CBP announces IEEPA tariff collection will cease at midnight February 24.
February 22 Global Trade Alert reports the rate has been raised to 15%. However, no formal implementing proclamation for the increase has been publicly issued.
February 24 Section 122 tariff takes effect at 12:01 a.m. ET. IEEPA tariff collection ceases. A brief "on the water" exemption applies to goods in transit before Feb 24 that clear customs by Feb 28.
February 25–26 USTR Jamieson Greer states the administration intends to maintain China tariffs at 35%–50% using alternative authorities. EU postpones ratification of its US trade deal, saying it needs "full clarity" on next steps, and finds the Section 122 tariff may violate the agreement. USTR directed to launch new Section 301 investigations to build more durable tariff authority.

What changed

All IEEPA-based tariffs — including reciprocal tariffs of 10%–50% on nearly all trading partners and country-specific duties on China, Canada, Mexico, and dozens of other countries — have been eliminated and replaced by a flat global tariff under Section 122. The proclamation set the rate at 10%; Trump has announced 15%, though the formal implementing status of the increase remains unclear as of this writing. The tariff expires after 150 days (around July 24) unless Congress extends it.

Section 122's legality is already being challenged. The statute requires a finding of "fundamental international payments problems" — a precondition trade experts argue hasn't been met. The Section 122 authority has never been used before.

Refund eligibility for IEEPA duties already paid — estimated at $130–$200 billion — remains unresolved. The Supreme Court's opinion was silent on the refund process. The administration has signaled it won't issue refunds voluntarily. The Court of International Trade will handle refund disputes, but the timeline could stretch months or years.

What did NOT change — critical for energy infrastructure

Section 232 tariffs on steel and aluminum remain at 50%. These are the primary cost drivers for transformers, switchgear enclosures, structural steel, and substations. They do not stack with Section 122 — they apply instead on covered products.

Section 232 derivative product tariffs on 407 categories (expanded August 2025) — including wind turbine components, compressors, pumps, and heavy equipment — remain at 50%.

Section 232 tariffs on copper and other critical materials for electrical infrastructure — unaffected.

Section 301 tariffs on Chinese-origin goods — remain in full force. USTR Greer has indicated the administration intends to maintain China's effective tariff rate at 35%–50% through alternative authorities.

The Section 122 proclamation exempts energy products, critical minerals, and certain metals, largely mirroring old IEEPA exemptions. But the Yale Budget Lab confirms the current tariff regime still falls most heavily on metal products and electrical equipment.

Developing — Steel & aluminum rollback signals

On February 13 — one week before the Supreme Court ruling — the Financial Times reported the administration was preparing to scale back some Section 232 steel and aluminum tariffs on derivative products such as food cans, appliances, and other consumer goods. The White House called the report "baseless speculation," but Bloomberg characterized the development as significant. A rollback of derivative tariffs could have implications for energy infrastructure equipment pricing, though no action has been taken and the administration's public position remains that the 50% duties are staying. We are monitoring this closely.

Section 03

What This Means for Your Projects

FEOC compliance

The MACR thresholds are now defined and the clock is running. If you're pursuing tax credits on any project beginning construction in 2026 or later, you need to map your supply chain against these thresholds now — not when final regulations arrive. Tax equity will underwrite to the current guidance. GRID's Approved Vendor List process is built for exactly this: tracing component origins and evaluating supplier compliance against FEOC requirements.

Tariff exposure

Don't let the headlines fool you. The Supreme Court ruling did not reduce tariff costs for energy infrastructure procurement. The 50% Section 232 duties on steel and aluminum — the cost drivers for transformers, switchgear, and T&D equipment — are untouched. The 15% Section 122 tariff is temporary by law, but the administration is already building replacement authority through expedited Section 301 investigations, with results expected within 2–3 months. The tariff environment for energy infrastructure equipment is not getting simpler.

Meanwhile, lead times remain stretched and demand continues to surge from both data centers and renewable energy deployment. The combination of tariff uncertainty, tightening FEOC requirements, and constrained supply creates a window where locking in pricing and capacity commitments offers meaningful protection against further disruption.

Get ahead of what's coming

Supply chain tracing for FEOC compliance. Strategic sourcing to manage tariff exposure. Capacity commitments on long-lead equipment.

Talk to GRID →

Sources & References

  1. "Treasury issues FEOC guidance, clarifies material assistance cost ratio" — Utility Dive, Feb. 13, 2026 — Link
  2. IRS Notice 2026-15 (Full proposed guidance) — Link
  3. "New IRS Guidance Clarifies Material Assistance FEOC Requirements" — Foley Hoag, Feb. 2026 — Link
  4. "Treasury and IRS Provide Guidance Regarding Energy Tax Credit Limits on FEOCs" — Baker Botts, Feb. 2026 — Link
  5. "Treasury and IRS Issue FEOC Material Assistance Guidance" — Troutman Pepper Locke, Feb. 2026 — Link
  6. Learning Resources, Inc. v. Trump, 607 U.S. ___ (2026) — Full opinion — Link
  7. "Supreme Court Trump Tariffs Ruling: Analysis" — Tax Foundation, Feb. 20, 2026 — Link
  8. Section 122 Tariff Fact Sheet — The White House, Feb. 20, 2026 — Link
  9. "Supreme Court Holds IEEPA Tariffs Unlawful. What's Next?" — Perkins Coie, Feb. 2026 — Link
  10. "After the Supreme Court Ruling, What Is Next for Trump's Tariffs?" — Council on Foreign Relations, Feb. 22, 2026 — Link
  11. "Section 122 in effect: what the US tariff regime looks like now" — Global Trade Alert — Link
  12. "State of Tariffs: February 21, 2026" — Yale Budget Lab — Link
  13. "Industries still facing higher rates after Supreme Court ruling" — CNBC, Feb. 20, 2026 — Link
  14. Section 232 Expansion: 407 derivative product categories — Bureau of Industry and Security — Link
  15. "Supreme Court Tariff Ruling: IEEPA Revenue and Potential Refunds" — Penn Wharton Budget Model, Feb. 20, 2026 — Link
  16. "What Every Multinational Should Know About the New Section 122 Tariffs" — Foley & Lardner, Feb. 24, 2026 — Link