IRS Issued Battery Procurement Guidance
The Treasury released new interim rules for energy storage tax credit eligibility on February 12, 2026.
Updated on Sept. 22, 2026 in Electric Vehicles
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Should the government require strict ownership disclosures for tax credits despite potential supply chain hurdles?
The IRS released Notice 2026-15 on February 12, 2026, establishing material assistance cost ratio thresholds for federal tax credits. Project owners must now verify specific sourcing and ownership standards to qualify for benefits under Sections 45Y, 48E, and 45X.
Why it matters
The guidance aims to ensure domestic and compliant supply chains for battery and storage technology by mandating strict material assistance cost ratios. By disqualifying projects with certain foreign intellectual property agreements, the IRS is tightening oversight on federal energy incentives.
The 2026 energy storage material assistance threshold is set at 55%. These requirements follow a 9% global decline in critical mineral investment observed in 2025.
The players
IRS
The Internal Revenue Service is the agency responsible for administering federal tax codes and implementing energy credit compliance.
Treasury
The United States Department of the Treasury oversees federal financial systems and establishes regulatory frameworks for tax policy.
The details
Procurement teams are now requiring suppliers to provide comprehensive ownership and sourcing information during the request for proposals stage. Contracts must include terms mandating that suppliers notify buyers of any changes to these facts within a defined period to maintain project eligibility.
Timeline
July 4, 2025: IP licensing agreements after this date can disqualify projects.
2025: Global investment in critical minerals fell 9%.
February 12, 2026: The IRS released interim guidance in Notice 2026-15.
2026: The threshold for energy storage tax credit eligibility is 55%.
2030: The threshold for energy storage tax credit eligibility reaches 75%.
Roadmap
These standards reflect an industry-wide transition toward strictly verified, localized, or friendly-nation supply chains. As the top three refining nations are expected to control 82% of refined material supply through 2035, these rules force automakers to reduce reliance on centralized foreign sources.
These regulations may affect the cost and availability of electric vehicles by limiting which battery components qualify for subsidies. Buyers should anticipate that manufacturers will adjust their supply chains to meet these evolving federal thresholds.
The takeaway
The move underscores the increasing difficulty of securing tax-compliant materials amid a shrinking global investment landscape for critical minerals. Manufacturers are shifting toward rigorous audit protocols to avoid losing access to federal project credits.
Further reading
For more information on current industry standards, visit the Electric Vehicles section.
Live Poll
Should the government require strict ownership disclosures for tax credits despite potential supply chain hurdles?
