Feb 12 (Reuters) – The U.S. Treasury Department on Thursday unveiled interim rules for enforcing provisions in President Donald Trump’s new tax law that restrict companies from claiming federal clean energy subsidies if they are overly reliant on Chinese-made equipment.
The guidance, which applies to lucrative tax credits for clean energy manufacturing and electricity generation, has been eagerly awaited by solar and wind project developers and factory owners since passage of Trump’s One Big Beautiful Bill Act last July.
The law accelerated the expiration of many Biden-era clean energy tax credits and introduced complex requirements meant to reduce U.S. reliance on supply chains controlled by what it called “prohibited foreign entities,” which include China, Russia, Iran and North Korea.
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Trump has used his second term to hinder the expansion of clean energy technologies, which he has criticized for being too reliant on Chinese supply chains.
Specifically, the Trump tax law prevents companies owned or influenced by Chinese firms from accessing the credits and restricts the use of components or labor sourced from Chinese companies.
Previously, the restrictions for foreign entities only applied to clean vehicle tax credits.
Though domestic manufacturing of solar and batteries has increased dramatically in recent years, producers still rely heavily on inputs and components made overseas, often by Chinese companies. China is by far the world’s largest producer of solar energy components.
“There’s been so many projects that have been in limbo, so having some clarification out there should certainly be more helpful than hurtful,” said Yogin Kothari, chief strategy officer for the Solar Energy Manufacturers for America Coalition.
In a public notice on its web site, Treasury’s Internal Revenue Service spelled out formulas and procedures for determining if a project or component received “material assistance” from a prohibited entity.
Taxpayers may use IRS-determined assigned cost percentages for components to determine whether a facility or component meets eligibility thresholds. They may also rely on supplier certifications that equipment or materials are eligible.
The Treasury’s Internal Revenue Service said the interim rules can be relied on until it proposes formal regulations. It is seeking public comments for 45 days for future guidance.
Reporting by Nichola Groom; editing by Deepa Babington and Lincoln Feast.
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