Battle Creek Times

The National Association of Energy Service Companies (NAESCO) has announced on X that expanded "foreign entity of concern" (FEOC) rules under the Inflation Reduction Act are impacting access to clean-energy tax credits and federal funding for energy service companies (ESCOs).

According to the Bipartisan Policy Center, the FEOC rules introduced under the Inflation Reduction Act bar entities classified as "Specified Foreign Entities" (SFEs) or "Foreign-Influenced Entities" (FIEs) from claiming clean-energy incentives, including §45X. The analysis states these restrictions aim to prevent U.S. tax-credit benefits from flowing to companies owned, controlled, or materially assisted by certain foreign governments or corporations, particularly those associated with China, Russia, Iran, or North Korea. The report further explains that the goal is to protect domestic manufacturing and supply-chain integrity amid national-security concerns.

Climate Solutions Law reports that the FEOC restrictions phase in over one to two years from enactment, allowing manufacturers and service companies time to adjust supply chains and financing arrangements before full enforcement. The analysis indicates that the legal definition of "material assistance" remains open-ended, suggesting partial foreign sourcing, technology licensing, or financing might still be permissible under certain conditions. This provision offers firms flexibility during the transition period while encouraging a shift toward domestic- and allied-based production and ownership models.

Norton Rose Fulbright's article "Working Through The FEOC Maze" explains that under the Inflation Reduction Act, FEOC rules not only bar entity-level disqualifications but also trigger credit loss when a project uses excessive "material assistance" from a prohibited foreign entity in its inputs or contracts. The article describes how key tax credits such as §45X (advanced manufacturing), §45Y (clean electricity production), and §48E (clean electricity investment) face escalating "material assistance" cost ratios over time, requiring greater domestic input percentages for eligibility. It warns that payment arrangements, licensing agreements, and foreign investments could confer "effective control," potentially triggering disqualifications even before full implementation deadlines.

According to its website, NAESCO is a trade association representing energy service companies across the United States that deliver energy-efficiency, infrastructure-modernization, and clean-energy solutions through performance contracting and financing models. The association provides advocacy, education, and technical resources to support its members in adapting to evolving federal incentive and regulatory frameworks. NAESCO also organizes conferences and working groups such as the R3 series to help members stay current with policy shifts like the FEOC restrictions and changes brought by the Inflation Reduction Act.