H.R. 1's Domestic Content Requirements: A Guide for Solar Developers
Table of contents
- What Changed with H.R. 1? The Domestic Content Bonus Gets Stricter
- The Timing here is everything
- Understanding PFE and FEOC: The New Compliance Reality
- Material Assistance Cost Ratio (MACR): What You Need to Do
- The Market Reality: A Tale of Two Approaches
- How SolarEdge is Simplifying the Path Forward
- A Critical Point: Entity Status vs. Manufacturing Location
- The Bigger Picture: Why This Matters for the Solar Industry
- The Bottom Line
- Schedule a meeting
The solar industry is experiencing a significant shift thanks to H.R. 1, also known as the One Big Beautiful Bill (the OBBBA), which introduced new requirements and opportunities around domestic content. For project developers looking to maximize tax credit benefits, understanding these changes—and acting quickly—is critical.
When we looked at the challenges developers were facing with domestic content compliance, we realized the market needed more than just information—it needed a clear path forward. We decided to focus on three areas: providing guidance and education, partnering with key suppliers, and creating practical solutions that simplify compliance.
Not sure what you need to know and why it matters right now? Keep reading.
Kleber Facchini
What Changed with H.R. 1? The Domestic Content Bonus Gets Stricter
H.R. 1 fixed a Congressional drafting error in the IRA under section 48E that has major implications for your projects.
Solar projects that begin construction after June 16, 2025, now need to meet 45% domestic content instead of 40% to obtain the domestic content bonus adder of 10%. And here's the kicker: that requirement increases annually by 5%. In 2026, you'll need to meet 50% domestic content, and in 2027, it's 55%.
Domestic Content Percentage Needed to Obtain the 10% Domestic Content Bonus Adder
| Construction Begin Date | Domestic Content % |
| After June 16, 2025 | 45% Domestic Content |
| 2026 | 50% Domestic Content |
| 2027 | 55% Domestic Content |
Based on H.R.1 and Current Treasury Guidance
But there's another critical timeline you need to circle on your calendar. Under H.R. 1, the "commence construction" timeline for the base credit has been shortened. Projects that begin construction on or before July 4, 2026, are eligible for tax credits under existing guidance that allows four years to complete the project. However, projects that begin construction after July 4, 2026, must be placed in service by December 31, 2027, to receive the credit.
Important Dates
The Timing Here is Everything
When you commence construction—using either the 5% method or the physical work of significant nature test—it locks in the regulatory requirements at that time. Safe harbor before the end of this year, and you lock in the 45% domestic content requirement before it rises to 50% in 2026.
Understanding PFE and FEOC: The New Compliance Reality
Beyond domestic content, H.R. 1 introduced two new acronyms that developers need to understand: PFE (Prohibited Foreign Entity) and FEOC (Foreign Entity of Concern). While we're still waiting on additional guidance from U.S. Department of the Treasury, here's what you need to know today.
A PFE requires consideration of whether an entity has ties to a "covered nation," which includes the People's Republic of China. A Chinese entity incorporated under Chinese laws is undoubtedly an SFE. When dealing with suppliers that have ties to Chinese entities, you'll want to verify criteria like:
- Less than 25% Chinese ownership
- No authority to appoint "covered officers"
- No contracts, agreements, or arrangements giving effective control to a Chinese entity
- No significant debt or licensing agreements
Here's the critical part: taxpayers themselves need to ensure they are not PFEs. Even U.S. companies can be PFEs if, for example, they have a licensing agreement with a Chinese entity. So, due diligence matters—for you and your supply chain.
Material Assistance Cost Ratio (MACR): What You Need to Do
To get 48E and 45Y credits, projects that begin construction after December 31, 2025, must comply with Material Assistance restrictions. You'll be required to calculate the "Material Assistance Cost Ratio" (MACR) for all manufactured product components in your project.
Here are the targets:
In 2026, Qualified energy facilities must source at least 40% non-FEOC components
- Energy storage projects must reach at least 55% non-FEOC
- These percentages increase each year
Unlike domestic content—where you only worry about U.S. origin—here you need to get to know your suppliers. You'll need to conduct due diligence and obtain signed certifications determining whether each manufacturer is a Prohibited Foreign Entity or non-PFE (making it FEOC or non-FEOC). This allows you to ensure your project has the required non-FEOC percentage sourced from manufacturers that are not Prohibited Foreign Entities.
Good news: While we await additional Treasury and IRS guidance, you can rely on IRS Notice 2025-08 (the current safe harbor domestic content table) through 60 days after formal guidance is issued. You can use this to determine the percentages your manufactured product components can contribute toward your non-FEOC total. For example, using Notice 2025-08, U.S.-manufactured rooftop MLPE optimizers and inverters can contribute 24.8% points toward the 40% non-FEOC requirement needed in 2026.
The Market Reality: A Tale of Two Approaches
We're seeing a significant divide in how the industry is responding to these opportunities. The large-scale players have already done their homework, locked in their positions, and safe-harbored products. For them, this isn't just an opportunity—it's a strategic advantage.
But small and mid-sized developers are navigating in the dark. They're intrigued by the promise of the bonus, yet uncertain about where to start. The rules feel complex, product availability seems uncertain, and the biggest question looms: Where do we even begin?
Kleber Facchini
We've seen projects that were on the edge of viability suddenly make sense after unlocking the domestic content bonus. In fact, some customers have told us directly: "The only reason this project is moving forward is because of the domestic content bonus." What was once a break-even scenario now pencils out nicely, turning hesitation into green lights.
How SolarEdge is Simplifying the Path Forward
When we looked at the challenges developers were facing with domestic content compliance, we realized the market needed more than just information—it needed a clear path forward. We decided to focus on three areas: providing guidance and education, partnering with key suppliers, and creating practical solutions that simplify compliance.
We've hosted webinars, shared educational materials, and collaborated with Novogradac, an independent CPA firm, to design a streamlined process for domestic content compliance.
The result is a comprehensive solution that combines:
- SolarEdge's C&I inverters
- Racking from Enstall (the parent company of PanelClaw and IronRidge)
- Novogradac's Agreed Upon Procedure (AUP)—a due-diligence process that validates domestic content compliance
This package can help meet domestic content requirements for rooftop applications and provides a clear path for validation and compliance, reducing the time and uncertainty for customers while ensuring eligibility for tax benefits.
Next, we're applying the same approach to carport applications. The solution will combine SolarEdge and Heliene modules, creating the same streamlined path we established for rooftops. Since carport compliance is more complex—often requiring high domestic content PV modules that are difficult to source—our goal is to simplify this process and offer more equipment options for developers. Learn more.
A Critical Point: Entity Status vs. Manufacturing Location
The risk: Simply moving manufacturing doesn't solve the PFE and FEOC issue if investment structure remains unchanged. Projects beginning construction after December 31, 2025, must reach the required percentage of non-FEOC components from suppliers. Your tax credit eligibility may hinge on supplier entity status you haven't verified.
Before you commit to any supplier, ask these questions:
- Where are the components I'm purchasing actually manufactured and by who?
- What is the manufacturer's ownership and investment structure?
- Can you provide certification of non-prohibited foreign entity status?
- The distinction between entity status and manufacturing location is creating real risk for projects starting construction in 2026 and beyond. To safeguard your project's ITC, you need to ensure your suppliers are non-PFE.
SolarEdge is among the few known non-PFE inverter manufacturers that can supply non-FEOC and domestic content C&I products. We're proud to be manufacturing in the U.S.—Florida, Texas, Utah—and we're happy to provide the required certification to our customers.
The Bigger Picture: Why This Matters for the Solar Industry
For individual projects, the math is clear: compliance can unlock that domestic content bonus credit, which means up to 10% savings on total project costs. In today's market, that can be the difference between a project moving forward or getting shelved. It gives developers more certainty in their financial models—huge when margins are tight and interest rates are high.
But zoom out, and the impact is even bigger.
These requirements are pushing the industry to build a stronger U.S.-based supply chain. That means less dependence on imports, fewer geopolitical risks, and more domestic manufacturing jobs. Over time, that could lead to better supply stability, shorter lead times, and more competitive pricing for U.S.-made components.
The Bottom Line
Domestic content compliance isn't just a box to check. For developers, it's a lever for project viability. For the industry, it's a step toward long-term resilience and growth. But remember: this is complicated territory, and the rules continue to evolve. Work with your tax experts to ensure you're making the right moves for your projects.
The window to lock in today’s percentage requirements is narrowing. Don't get left behind.
Statements regarding tax credit eligibility, including domestic content and FEOC compliance, are based on current interpretations of applicable laws and guidance. These are subject to change. SolarEdge does not provide tax or legal advice. Please consult your own tax and legal advisors for project-specific guidance.
