The Tax Credit That Wasn’t Cut — and Almost No One Can Claim

When the U.S. passed its major budget bill in July 2025, storage looked like the winner of the clean energy fight. Solar and wind lost their investment and production tax credits on an accelerated timeline, phased out by the end of 2027 unless construction starts before mid-2026. Storage’s own credits weren’t touched by that particular cut.

What is the FEOC rule?

But the same bill embedded a separate mechanism that may end up cutting deeper: FEOC rules — “Foreign Entity of Concern” restrictions — that tie tax credit eligibility to how much of a project’s materials come from companies linked to China.

Why does this hit battery storage harder than solar or wind?

For solar and wind, this is an annoyance. For storage, it’s closer to an existential problem, because of one structural fact: battery cells account for roughly half of a storage project’s total equipment cost, and the vast majority of that supply chain is Chinese. By some industry tracking, nearly all U.S. battery storage systems contain at least one Chinese-sourced component, and most top-tier global BESS vendors are headquartered in China.

What’s the compliance threshold, and what happens if a project misses it?

The compliance threshold is specific and rising: projects starting construction in 2026 need at least 55% of costs from non-Chinese-linked sources to keep the credit; by 2030, that rises to 75%. Miss the threshold, and the project doesn’t lose part of the credit — it loses all of it, worth 30-40% of project cost. Treasury issued interim guidance in February 2026, with final rules expected by the end of the year — meaning 2026 construction starts are effectively the first cohort tested against a still-moving target.

What this means for market evaluators

This is the kind of detail that a “storage tax credit survived” headline completely misses. The credit exists on paper. Whether a given project can actually claim it depends on a supply chain audit most developers are only now being forced to run.

Takeaway: when a policy headline says a credit was “preserved,” check what else changed in the same bill. The mechanism that determines who can actually use a credit is often buried several layers below the mechanism that determines whether the credit exists.

This is exactly the kind of question the Policy, Regulation & Revenue Intelligence Toolkit is built for — turning a rule change like FEOC into a documented, defensible answer for a specific project: does it qualify, or not.