The United States Treasury Department has unveiled interim rules for enforcing the provisions in President Donald Trump’s new tax law, under which companies are restricted from claiming federal subsidies on clean energy if they rely heavily on Chinese-made equipment.
The interim rules, which apply to lucrative tax credits, have been highly anticipated by solar and wind project developers and factory owners since Trump proposed his One Big Beautiful Bill Act in July 2025.
New Law Restricts Tax Credits On China Reliant Companies
The law has accelerated the expiration of several Biden-era clean energy tax credits and now includes complicated requirements that aim to reduce U.S. reliance on supply chains controlled by what they have labelled as ‘prohibited foreign entities,’ such as China, Russia, Iran and North Korea.
Trump’s agenda for his second term has aimed to hinder the expansion of clean energy technologies, which he believes are overly reliant on Chinese supply chains.
Specifically, Trump’s new tax law prevents companies that are owned, influenced or reliant on Chinese firms from accessing these clean energy credits and restricts the use of components and labour sourced from Chinese companies. Previously, these restrictions for foreign entities were only applicable to clean vehicle tax credits.
While domestic manufacturing for solar and batteries has seen considerable growth in recent years, producers largely still rely on inputs and equipment manufactured overseas, very often by Chinese companies, since China is 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.
Guidance on Prohibited Supply Chains
In a public notice on the website of the Treasury’s Internal Revenue Service, the forms and procedures for determining if a project or component has received “material assistance” from prohibited entities are listed.
It is possible for taxpayers to use IRS-determined assigned cost percentages for components to identify if a facility or component meets the eligibility thresholds. They can also rely on supplier certifications to prove that the materials or components meet the criteria.
The Treasury has announced that the interim rules will be enforced until they are able to propose formal regulations.
(With inputs from Reuters)
