Webinar: Policy and clean energy landscape with Keith Martin and Darren Van’t Hof

Webinar: Policy and clean energy landscape with Keith Martin and Darren Van’t Hof

Norton Rose Fulbright's Keith Martin and Reunion's Darren Van't Hof cover FEOC guidance, the §48E tax equity slowdown, post-reconciliation bill legislative outlook, and what's driving the transfer market in 2026.

‍Recording: Policy and clean energy landscape with Keith Martin and Darren Van’t Hof

Key takeaways

FEOC exposure has three prongs: material assistance, ownership, and effective control.

Material assistance is a math exercise that caps the share of prohibited foreign entity (PFE) made equipment in a project. Ownership looks at the entity claiming the credit and asks whether it has too much PFE equity, debt, management participation, or appears on certain prohibited company lists. Effective control scrubs supply contracts with the majority of PFE-owned vendors for any of 13 prohibited provisions.

In February 2026, Treasury provided guidance on FEOC material assistance, but did not address ownership and effective control. Proposed regulations, which will provide further clarity, are not expected until year-end at the earliest.

Notice 2026-15, issued February 12, 2026, set out three interim safe harbors for calculating the material assistance cost ratio (MACR) under Sections 45X, 45Y, and 48E. It did not address critical questions around PFE ownership or what constitutes effective control. Treasury is not expected to issue proposed regulations until year-end at the earliest, though it has floated narrower "skinny guidance" of unspecified scope.

Insurers are generally not providing coverage for FEOC risks. Nonetheless, some §48E deals are still getting done.

With the exception of a few policies covering material assistance, insurers are generally not providing coverage for FEOC risk due to lack of Treasury guidance. That said, there are §48E deals getting done, either through a strong sponsor indemnity, or via buyers that are willing to underwrite the sponsor’s credit directly. 

Two of three major banks have pulled back from investments in §48E due to uncertainty around whether banks themselves are considered PFEs.

Banks holding foreign debt may be considered PFEs, and therefore unable to utilize tax credits subject to FEOC rules such as §45Y or §48E. Potential solutions run through Treasury regulations; by evaluating FEOC at the partnership level rather than the partner level, or by letting banks test their debt at issuance rather than tracking it continuously. 

Keith Martin notes a significant volume of §45X deals in 2026, which has been bolstered by challenges with IRS direct pay.

Keith noted that his practice has seen more §45X deals than any other credit type so far in 2026, despite the presence of FEOC restrictions. While manufacturers have the option for a 5-year direct pay from the IRS, direct pay is administered through a refund from the IRS and manufacturers have had difficulty communicating with the IRS due to staffing shortages.

The transfer market is running full speed ahead, with higher activity compared to 2025. Buyers are focused particularly on legacy §45 and §48 credits with no FEOC exposure, and §45Z credits with limited FEOC exposure.

Overall the tax credit transfer market is very busy, driven by significant transactions on credits with limited exposure to FEOC. Buyers have also shown increasing preference for deals with strong counterparties, with an increasing number of buyers focused on the financial strength of the seller or guarantor.

Over a dozen preferred equity providers are active in the market as an alternative to tax equity.

‍Because much of this capital is not bank-regulated, the structures have a bit more flexibility compared to traditional tax equity (e.g., marginally higher step-ups).

Only legacy §45 and §48 credits get favorable treatment for purposes of BEAT, and it’s unlikely that other credits will gain favorable treatment.

When the Base Erosion and Anti-Abuse Tax (BEAT) was first drafted, the renewable energy industry was able to secure favorable treatment for Section 45 and 48 credits. The favorable treatment does not extend to other energy tax credits such as §45U, §45Y, §45X, §45Z, and §48E, and this policy seems unlikely to change.

Developers began construction on over 150 to 200 GW of projects before July 4, 2026 to lock in tax credit eligibility.

Developers rushed to start construction before the end of 2024, which provided exemption from all FEOC requirements. There was another rush to start construction before the end of 2025, to gain exemption from FEOC material assistance requirements. Finally, developers have a few more weeks to start construction before July 4, 2026 which will generally give them until the end or 2030 to place projects in service. Project pipelines are always subject to significant fall-out due to permitting, and supply chain, and other project-specific risks.

Developers have primarily been establishing the beginning of construction through procurement of main power transformers.

However on June 6, 2026 (a week after our podcast was recorded), a US district court rejected President Trump’s executive order that the only way for wind and solar projects to establish beginning of construction is through providing “physical work of a significant nature,” which includes procuring the main power transformer. Read more about the ruling here.

An ITC extension is likely off the table through at least the next Congress, though panelists expressed optimism around state-level policy changes particularly around permitting.

House Republicans introduced a bill to extend the solar and wind ITC, but it has no path forward in the current Congress and is highly unlikely to move in the next Congress. Panelists expressed more optimism in state-level policy changes particularly around permitting, which is top of mind for many developers.

Conversation topics

• 0:00 - 2:45 Welcome, introductions, session agenda
• 2:45 - 5:57 Reunion research
• 5:57 - 22:27 FEOC guidance
• 22:27 - 28:47 48E and the tax equity slowdown
• 28:47 - 41:27 Legislative outlook post OBBA
• 41:27 - 45:34 AI, data centers, and geopolitics
• 45:34 - 53:55 Audience Q&A
• 53:55 - 56:26 Closing thoughts

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