For U.S. energy storage buyers, new changes to the tax code can make or break a project’s economic viability. As of July 4, 2025, under the One Big Beautiful Bill Act (OBBBA), energy storage systems from companies with Prohibited Foreign Entity (PFE) status or that are made up of components sourced from listed Foreign Entities of Concern (FEOC) risk losing eligibility for significant project savings through the Investment Tax Credit (ITC).
While the official rules are still under development as of the publication of this article, with final determination anticipated for release in Q4 of 2026, guidance released so far is clear: battery energy storage systems (BESS) with components sourced from Prohibited Foreign Entities are not considered Foreign-Entity-of-Concern-compliant and will not be eligible for the Investment Tax Credit, causing U.S. buyers to miss out on funding that is vital for energy storage project economics.
What FEOC Compliance and Non-PFE Status Actually Means
In the simplest of terms, Non-Prohibited Foreign Entity status is a classification for entities – not the actual products – to identify companies with a close connection or relationship with China, Russia, North Korea, Iran, or other countries listed on U.S. ‘bad actor’ lists. To ensure a company has no ties with any of these Prohibited Foreign Entities, a thorough, independent third-party review of a company’s ownership, control, and financing structure is non-negotiable.
While non-Prohibited Foreign Entity status is a classification for entities, Foreign Entity of Concern compliance relates to a company’s products, which are either FEOC-compliant or not. To be in compliance with Foreign Entity of Concern requirements, a company must be a non-Prohibited Foreign Entity AND conduct a thorough review of each source of each component that makes up its product or products. Following the Material Assistance Cost Ratio equation, the company can then begin to determine whether or not the product meets FEOC compliance.
Why Compliance is Critical for U.S. Energy Storage Buyers
The Investment Tax Credit can provide significant project funding for eligible energy storage buyers. At minimum, taxpayers with qualified energy storage technology can claim a base credit of 30% of the project cost through the Investment Tax Credit, while taxpayers who qualify for the maximum benefit could claim up to 70% of the total project cost.
However, significant savings through the Investment Tax Credit are not without significant risk. U.S. energy storage taxpayers claiming credit through the ITC are subject to a 10-year recapture period during which the IRS can audit the ITC eligibility of your energy storage project at any time, long after the project is up and running. Should the project be found in-eligible during the audit, the taxpayer could be liable to repay the full amount of the original credit, plus interest and penalties.
It is impossible to reach Investment Tax Credit eligibility without non-PFE status and FEOC compliance, and compliance claims are only as meaningful as the due diligence backing them. Without an independent review conducted by a trusted third party, it’s nearly impossible to know whether or not your ITC eligibility is protected.
Independently Verified Compliance vs. Compliance Claims
For U.S. buyers weighing energy storage options, the diligence question is not, “does this vendor say they comply?” The question should be, “has this vendor’s compliance been independently verified?”
Given the significant project savings locked behind ITC eligibility, plus a looming 10-year recapture period and steep penalties if the project is found to be non-compliant later, that distinction becomes key from the start.
Don’t leave hundreds of thousands – or even millions – of dollars in project funding up to chance. Ensure your energy storage supplier’s non-Prohibited Foreign Entity status and your equipment’s Foreign Entity of Concern compliance has undergone rigorous, independent review by a trusted third-party so you can have complete confidence in your Investment Tax Credit eligibility over the full 10-year recapture period.
World’s First Third-Party Verified Non-PFE Status, FEOC Compliance
Many in the industry claim non-PFE status and FEOC compliance, but Moment Energy is the first in the world to achieve independent verification of its non-PFE status and full FEOC compliance for its new battery energy storage system backed by third-party representation from a top 10 U.S. law firm, with documentation available for customers upon request.
Free Download: FEOC Compliance Buyer’s Checklist
Not sure what to look for? Click here to download Moment Energy’s free FEOC Compliance Buyer’s Checklist for more information on how to get started in procurement conversations with potential suppliers.
