The U.S. Department of the Treasury and IRS recently issued Notice 2026-15, providing interim guidance on how taxpayers may determine whether a qualified facility, energy storage technology or eligible component includes “material assistance” from a prohibited foreign entity (PFE). This guidance represents the first operational framework for applying the material assistance cost ratio (MACR) rules enacted under the One Big Beautiful Bill Act (OBBBA) and is expected to serve as the primary compliance pathway until formal regulations are finalized.
The notice establishes safe harbor methodologies, supplier certification frameworks and cost attribution rules that collectively clarify how taxpayers can demonstrate eligibility for sections 45Y, 48E and 45X energy credits.
MACR calculation framework
MACR is calculated as the ratio of total direct manufacturing costs not attributable to PFEs divided by total direct manufacturing costs. MACR calculations center on direct costs attributable to manufactured products and manufactured product components incorporated into qualified facilities (sections 48E and 45Y) or eligible components and critical minerals (section 45X). A qualified facility, energy storage technology or eligible component is ineligible for applicable energy credits if its MACR falls below the applicable statutory thresholds. Read our foreign entity of concern (FEOC) guidance here for more details about the basics of MACR.
Notice 2026-15 confirms that for sections 48E and 45Y, MACR is calculated using the taxpayer’s acquisition cost of manufactured products incorporated into the facility. Project owners are not required to reconstruct the manufacturer’s internal cost structure. Instead, manufacturers certify the portion of product costs attributable to PFE-produced components, and the remaining portion of the acquisition cost is treated as non-PFE cost. For section 45X, MACR is calculated based on the manufacturer’s own direct material costs incurred to produce eligible components.
The framework in Notice 2026-15 reflects a supply-chain-based eligibility test, focused specifically on direct manufacturing costs rather than construction or installation costs. The guidance also explicitly includes freight and tariff costs as direct costs.
Notice 2026-15 also confirms that manufactured products, components, and materials acquired pursuant to binding written contracts entered into prior to June 16, 2025, may be excluded from section 45X MACR calculations.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
Average costing and weighted average attribution are explicitly permitted
The guidance allows taxpayers to calculate average costs and PFE attribution percentages across defined periods of time, rather than tracing individual components to specific units or facilities. Taxpayers may:
Calculate average direct costs for manufactured products incorporated during “a specified period of time” (see below).
Determine the percentage of components produced by PFEs based on quantity of units sourced.
Apply the resulting percentage to total costs to determine PFE-attributable costs.
Notice 2026-15 also provides flexibility to define multiple specified periods of time within a taxable year. These periods may be as short as one day, provided they are contiguous and collectively cover the entire taxable year. This flexibility allows taxpayers to isolate supply chain disruptions or temporary sourcing from PFEs without adversely affecting MACR calculations for the remainder of the year.
From Baker Tilly’s perspective, this provides a practical and scalable pathway for compliance. Taxpayers may calculate total costs for a component category over a defined period and apply a quantity-based percentage of PFE-sourced units to determine PFE cost attribution. This avoids the need for precise traceability of individual components through the production process. This clarification is especially valuable for manufacturers claiming section 45X credits, where component-level traceability across high-volume production environments would otherwise be operationally infeasible.
De minimis assignment rule provides flexibility for minor components
Notice 2026-15 introduces a de minimis assignment rule that allows taxpayers to assign certain low-cost manufactured product components across facilities rather than tracking them individually. This rule applies where the total direct costs of assigned components represent less than 10% of total direct costs for the qualified facility or eligible component.
The notice also provides an additional de minimis rule for energy storage technologies (ESTs) under one megawatt by allowing taxpayers to assign manufactured product components across multiple storage units and use average costing methodologies rather than tracking each individual component to a specific unit. Where a taxpayer has a mix of PFE and non-PFE components used across multiple qualified facilities or components, the taxpayer could interpret that they are allowed to assign the PFE components to a location of their choice as long as the component is less than 10% of direct cost.
Separate MACR determinations required for each facility and eligible component
Notice 2026-15 clarifies that MACR must be determined separately for each qualified facility, EST or eligible component. MACR determinations cannot be averaged across portfolios of projects or facilities.
Qualified interconnection property must also be evaluated separately from the qualified facility. If the interconnection property fails to meet MACR requirements, it can be removed from the eligible basis without disqualifying the entire facility (as long as the facility meets the applicable MACR threshold).
Supplier certifications and safe harbor framework
Notice 2026-15 establishes safe harbor pathways designed to simplify MACR compliance and allow taxpayers to rely on standardized methodologies and supplier certifications.
Taxpayers may rely on supplier certifications and the assigned cost percentages provided in Notice 2025-08 until Treasury issues updated safe harbor tables (expected sometime before Dec. 31, 2026). Taxpayers may also continue to rely on those tables for facilities that begin construction (48E/45Y) or for eligible components sold (45X) within 60 days after updated tables are issued.
Identification safe harbor
Taxpayers may identify relevant manufactured products and components by reference to existing domestic content safe harbor tables (Notices 2023-38, 2024-41, and 2025-08). These tables serve as an “exclusive and exhaustive” list of relevant components for safe harbor purposes, allowing taxpayers to focus on diligence at the manufactured component level.
Cost percentage safe harbor
Taxpayers may use assigned cost percentages provided in safe harbor tables in lieu of calculating actual direct costs. This methodology provides a standardized, administrable compliance pathway and is expected to be widely used for solar, wind and battery storage technologies, given that the safe-harbor tables already exist in the domestic content notices.
While the same cost tables may be used for both domestic content and MACR purposes, the mechanics of the calculation differ. For domestic content purposes, if a manufactured product component listed in the table is not included in the project, its assigned cost percentage is included in the denominator with a zero percent domestic content value in the numerator. By contrast, for MACR purposes, if a listed manufactured product component is not incorporated into the qualified facility or eligible component, its assigned cost percentage is excluded from both the numerator and denominator. This distinction can materially affect the resulting percentage and should be considered when modeling MACRs.
Supplier certification safe harbor
Taxpayers may rely on supplier certifications, attesting that manufactured products were not produced by PFEs or specifying the portion of costs attributable to PFE-produced components. These certifications must be signed under penalties of perjury and retained for at least six years, among other assertions. The guidance confirms taxpayers may rely on supplier certifications unless they know or have reason to know the certification is inaccurate, providing a reasonable reliance standard.
Looking ahead
Notice 2026-15 represents a significant step toward operationalizing the FEOC compliance framework and restoring certainty in the transferable credit market. Prior to this guidance, uncertainty surrounding supply chain tracing and cost attribution was widely viewed as a constraint on project development and tax credit transactions.
Baker Tilly expects the final regulatory framework to expand on the definitions of PFEs, clarify effective control rules, and provide additional guidance for technologies not currently covered by safe harbor tables. Our tax professionals will continue to monitor the situation, providing timely updates and strategic insight. If you have questions on how this may impact your tax situation, please contact your Baker Tilly tax advisor.
