What Is FEOC? Foreign Entity of Concern Explained for Battery Storage

FEOC stands for Foreign Entity of Concern. It is a regulatory classification under U.S. federal law that identifies entities posing national security risks due to their ties to foreign adversary governments. For battery energy storage system (BESS) developers, FEOC status determines whether a project qualifies for federal tax credits.

The term originates from the Infrastructure Investment and Jobs Act (IIJA) of 2021 and was expanded by the Inflation Reduction Act (IRA) of 2022 and the One Big, Beautiful Bill Act (OBBBA). It now applies broadly across clean energy tax credits, battery manufacturing grants, and EV incentives.

FEOC Definition Under Federal Law

The Department of Energy’s final interpretive guidance, issued in May 2024, defines a foreign entity as an FEOC if it meets any of the following criteria:

It is owned by, controlled by, or subject to the jurisdiction or direction of a government of a covered nation. Covered nations are defined as the People’s Republic of China, Russia, Iran, and North Korea.

It is an entity included on specific federal restriction lists, such as the Bureau of Industry and Security Entity List, the Treasury Department’s Non-SDN Chinese Military-Industrial Complex Companies List, or the DOD list of Chinese military companies.

It is determined by the Secretary of Energy, in consultation with the Secretary of Defense and Director of National Intelligence, to be engaged in conduct detrimental to U.S. national security.

The definition extends beyond direct government ownership. Subsidiaries, joint ventures, entities with licensing arrangements, and companies where a covered nation’s government holds significant influence can all qualify as FEOCs. The DOE guidance clarifies that “subject to the jurisdiction or direction of” captures entities that are organized, chartered, or incorporated under the laws of a covered nation.

Which Entities Qualify as FEOCs

In practice, the FEOC designation affects several categories of organizations in the battery supply chain:

Specified Foreign Entities (SFEs) are directly owned or controlled by a foreign adversary government. State-owned enterprises in China, Russia, Iran, and North Korea fall into this category.

Prohibited Foreign Entities (PFEs) is the broader operational term used in tax credit compliance. Under the OBBBA, PFE status can be triggered by ownership, debt holdings, appointment rights for covered officers, effective control, or material assistance relationships with other PFE-type entities.

For BESS developers, the most relevant PFEs are Chinese battery manufacturers. Companies like CATL, BYD, Gotion, and their subsidiaries are classified as PFEs due to their corporate structures and ties to the PRC government. Using components manufactured by these entities puts ITC eligibility at risk.

How FEOC Rules Affect BESS Projects

Starting in 2026, BESS projects claiming Section 48E or Section 45Y tax credits must demonstrate that their Material Assistance Cost Ratio (MACR) meets minimum thresholds. The MACR measures the percentage of manufactured product costs not attributable to PFEs. For energy storage, the threshold starts at 55% in 2026 and rises to 75% by 2030.

Failure to meet the MACR threshold results in full disqualification from the ITC — not a reduced credit, but complete loss. A 10-year recapture provision means projects must maintain compliance throughout the credit period. For a complete guide to MACR calculation, thresholds, and compliance strategies for BESS projects, see Carina Energy’s FEOC Compliance Guide at carina energy.

Carina Energy is a boutique owner’s representative firm specializing in BESS permitting and development. If you need help understanding how FEOC rules affect your project, visit our FEOC Compliance Guide for BESS at carina energy.