Calls for Strengthening of Section 48E, 45Y, and FEOC Restrictions in Reconciliation Bill
WASHINGTON, D.C. — The Coalition for a Prosperous America (CPA) today warned that the Senate version of President Trump’s reconciliation bill—known as the One Big Beautiful Bill—contains a critical loophole in both the Section 48E investment tax credit and 45Y production tax credit in the Inflation Reduction Act (IRA), creating an unintended but dangerous giveaway to China’s solar industry.
While CPA applauds the inclusion of Foreign Entity of Concern (FEOC) prohibitions to the IRA tax credits, the Senate Finance Committee draft text fails to take into account that 48E and 45Y create the platform and means to have an enforceable FEOC prohibition. If the Senate’s version were to become law, the FEOC prohibition would only last through 2026, all but guaranteeing that every solar project deployed after 2026 will use Chinese solar equipment. CPA urges immediate Senate action to strengthen FEOC restrictions and correct the loophole that could otherwise devastate U.S. solar manufacturing efforts.
Failing to protect 48E and 45Y, and retain the domestic content incentives, will result in continued reliance on subsidized Chinese solar equipment, undermining U.S. industrial and national security. Additionally, it creates an incentive for project developers to rush to bring in cheap CCP-linked products for their projects, effectively safe harboring them for use. Recent reports have exposed cybersecurity risks from Chinese-made solar components, emphasizing the importance of stringent FEOC measures and robust domestic production incentives.
“The current Senate draft of both 48E and 45Y contains a glaring loophole that effectively hands China’s solar industry a significant advantage, undermining President Trump’s core objective of revitalizing American manufacturing,” said Jon Toomey, President of CPA. “Without addressing this flaw, this provision will incentivize the continued use of dumped and subsidized Chinese solar equipment made with slave labor, including those with documented cybersecurity risks. We strongly urge the Senate to adopt the House Ways & Means phasedown schedule starting in 2029, while retaining the domestic content incentives, and to implement stricter FEOC restrictions immediately. This critical adjustment will ensure American solar manufacturers can compete on a level playing field.”
CPA specifically recommends the following to fix the loophole:
- Adopt the House phasedown schedule beginning in 2029 as well retaining the domestic content incentives, reducing the current credit by 20% in 2029, 40% in 2030, 60% in 2031, and eliminating it by 2032, allowing adequate time for FEOC restrictions to become effective.
- Increase the stringency of FEOC restrictions by lowering ownership thresholds defining “prohibited foreign entities” to the House level of 10% and applying “material assistance” prohibitions immediately upon enactment.
- For purposes of determining the ‘commencement of construction’ of a solar facility in relation to the applicability of the FEOC provisions under Sections 48E and 45Y, a project will be deemed to commence construction no earlier than January 1, 2026, if it neither (1) entered into a binding written contract for 5% of the total qualifying facility costs on or before June 16, 2025, or (2) satisfied the Physical Work Test by December 31, 2025.
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