Policy Implementation State — May 2026 Baseline

Three policy domains determine whether a US battery manufacturer can claim federal credits on a component sold this year: the 45X advanced manufacturing production credit as preserved and guardrailed by the OBBBA, the prohibited foreign entity restrictions expanded by Notice 2026-15into Sections 45X and 48E, and the graphite FEOC exemption expiring December 31, 2026. In each domain, the statute says one thing, Treasury guidance clarifies a narrower thing, and enforcement reality is narrower still. Below: those layers mapped by domain, every source named, every gap identified, as of May 19, 2026.

45X Credit — Preserved, Phase-Out Unchanged, PFE Guardrails Operative

The OBBBA did not accelerate the 45X phase-out. Earlier House drafts proposed acceleration. The enacted law preserves the original IRA schedule: $35/kWh for cells, $10/kWh for modules, with critical minerals now following the same phase-down. Wind energy components are repealed for sales after 2027. Everything else in the 45X universe operates on the original timeline.

Year	Credit Level	Notes
2025–2030	100%	Full credit: $35/kWh cells, $10/kWh modules
2031	75%	Phase-down begins; critical minerals now included (changed from pre-OBBBA law, which had no minerals phase-out)
2032	50%
2033	25%
After 2033	0%	Full expiration

The OBBBA added PFE guardrails conditioning credit eligibility on supply chain composition. For eligible components sold in taxable years beginning after July 4, 2025, the taxpayer cannot be a PFE, cannot receive material assistance from a PFE, and cannot produce components through "effective control" by a specified foreign entity. The definition of "battery module" was tightened to require all essential equipment for battery functionality. For taxable years beginning after 2026, secondary components qualify for 45X only if produced in the same facility as their primary components, with at least 65% of total direct material costs attributable to US-mined, produced, or manufactured primary components. Section 6418 transfer remains available; transfers to specified foreign entities are prohibited.

Enforceability. The credit structure and phase-out schedule are statutory and self-executing. The PFE guardrails are statutory but depend on Treasury's definition of PFE status, which has not been finalized (see next section). The 65% domestic material cost threshold for secondary components applies to taxable years beginning after 2026 but the measurement methodology has not been fully specified.

Disclosure state. No public registry of 45X credit claims by facility exists. IRS and Treasury have not published facility-specific data. The only aggregate figures in the public record come from voluntary company earnings disclosures. LG Energy Solution disclosed 1.6 trillion won (approximately $1.2B) in AMPC receipts for calendar year 2025 in its earnings materials. No IRS-side verification of any company's claim is publicly accessible as of May 19, 2026. The total 45X credit pool, the distribution across cell versus module versus mineral claims, the compliance posture of individual claimants: all invisible to outside observers.

FEOC/PFE Enforcement Expansion Into 45X and 48E

The FEOC restrictions now governing battery manufacturing credits originated in a different part of the code. Under the IRA as enacted in 2022, FEOC rules applied only to Section 30D clean vehicle credits, restricting consumer EV tax credit eligibility based on battery component and critical mineral sourcing. The OBBBA expanded these restrictions into Sections 45X (advanced manufacturing production credits) and 48E (clean electricity investment credits). The PFE framework now governs consumer vehicle incentives, the credits claimed by cell and module manufacturers, and the investment credits available to utility-scale battery storage projects. This expansion is why Notice 2026-15 matters: it is the first Treasury attempt to operationalize PFE compliance for manufacturers and project developers who were not previously subject to FEOC rules.

Notice 2026-15, issued February 12, 2026, provides interim guidance on calculating the material assistance cost ratio (MACR) for Sections 45Y, 48E, and 45X. The MACR is the mechanism by which Treasury determines whether a facility or component includes PFE involvement exceeding statutory thresholds. Technically consequential and deliberately narrow.

Resolved by the Notice

The Notice establishes separate MACR calculation structures for facility-level credits (45Y/48E) and component-level credits (45X). For 45X, the MACR formula divides total direct material costs paid to PFE sources by total direct material costs for the eligible component. Direct labor costs are excluded from the 45X denominator, which materially affects the ratio for manufacturers with significant labor content. The ratio is calculated per eligible component sold during the taxable year, with averaging permitted under detailed timing rules.

For Sections 45Y and 48E, the facility-level MACR divides total direct costs attributable to PFE-manufactured products incorporated into a qualified facility or energy storage technology by total direct costs for all manufactured products incorporated. MACR restrictions apply to qualified facilities and ESTs where construction begins after December 31, 2025. This date is the statutory trigger for when new construction falls under PFE compliance requirements for 45Y and 48E. It is distinct from the transition relief dates discussed below.

Look-through rules require tracing manufactured product components within acquired manufactured products. If a non-PFE supplier incorporates PFE-sourced subcomponents, the PFE portion of acquisition costs must be attributed accordingly. Contract manufacturing arrangements assign direct material costs to the party performing substantial transformation.

The IP/licensing provision confirms that any arrangement with a PFE entered into or modified after July 4, 2025 can independently trigger the "effective control" restriction. The Notice reads the statutory list as disjunctive: any single qualifying arrangement suffices. Full anti-abuse rules authorized under Section 7701(a)(51)(D) and (K) are deferred.

Three interim safe harbors are provided: Identification, Cost Percentage, and Certification. Battery cells are not listed as eligible for the Identification or Cost Percentage safe harbors. Cell manufacturers claiming 45X must use the general MACR calculation rules without safe harbor relief.

MACR thresholds by compliance year

The minimum non-PFE material cost share for battery cells and modules claiming 45X:

Compliance Year	Min. Non-PFE Share	Max. PFE-Sourced Direct Material Costs
2026	60%	40%
2027	65%	35%
2028	70%	30%
2029	75%	25%
2030	85%	15%

PFE determination is based on the supplier's taxable year in which the taxpayer paid or incurred costs, not the year the facility is placed in service. Procurement timing is a compliance variable.

Transition relief

Costs incurred under binding written contracts entered before June 16, 2025 may be excluded from the MACR calculation, provided the relevant items are placed in service before January 1, 2030 in facilities where construction began before August 1, 2025, or, for 45X components, used in products sold before January 1, 2027. The August 1, 2025 construction commencement date applies specifically to this transition relief provision and should not be confused with the December 31, 2025 cutoff that triggers MACR applicability for new 45Y/48E qualified facilities.

Explicitly deferred

The Notice does not address the PFE definition itself. Per Novogradac's analysis, the 25% single-owner and 40% aggregate ownership thresholds, the 15% debt attribution test, governance and veto rights, licensing and IP arrangements including the 10-year royalty rule, and the broader scope of "effective control" in commercial contracts all remain unresolved. Foley Hoag confirmed on March 30, 2026 that the MACR guidance is "largely silent on other PFE requirements in the OBBBA, including what it means to be a PFE in the first place as well as the 10-year recapture rules."

For Section 48E specifically, utility-scale storage developers can calculate whether their project's manufactured product costs meet the facility-level MACR threshold, but the recapture mechanics for PFE violations discovered after a project is placed in service are entirely unresolved. Given that 48E projects involve long-duration capital commitments and multi-year construction timelines, the absence of recapture rules creates a compliance uncertainty that cannot be modeled.

Comments on Notice 2026-15 were due March 30, 2026. No public Treasury or IRS response has been published as of May 19, 2026. No proposed regulations addressing the deferred PFE definition issues have been released.

Reliance period. Taxpayers may rely on Notice 2026-15 for 45X purposes for eligible components sold in taxable years beginning after July 4, 2025, until other guidance is published. For 45Y/48E, reliance extends until 60 days after publication of proposed regulations.

Graphite — Exemption Expiring, Primary Compliance Pathway Invalidated

Statute. The IRA exempted graphite and other applicable critical minerals from FEOC sourcing restrictions for Section 30D purposes through December 31, 2026, reflecting China's dominance of graphite anode material processing and the absence of qualified alternative supply at commercial scale. Guidance. No Treasury, DOE, or Congressional guidance extending the exemption has been identified as of May 19, 2026. Enforcement posture. The exemption remains operative; FEOC restrictions on graphite for 30D purposes take effect January 1, 2027. Under the OBBBA's expansion of PFE rules into 45X and 48E, the MACR thresholds already apply to battery components sold in taxable years beginning after July 4, 2025, meaning graphite-related PFE costs are already relevant to the MACR calculation for manufacturers claiming those credits.

Industry compliance planning for post-exemption sourcing centered on BTR New Material Group Co., Ltd., which was developing graphite anode material production in Indonesia and Morocco to serve US battery manufacturers requiring non-FEOC supply. That pathway collapsed when DOE classified BTR as a foreign entity of concern, a designation reinforced by a December 18, 2025 Commerce Department finding that BTR is controlled by the Government of China and the CCP. Commerce determined that China Baoan Group, BTR's parent holding 66.86% of shares, is CCP-controlled. The FEOC designation extends to BTR's overseas subsidiaries, including the 80,000 tpy Indonesia facility currently ramping and Morocco operations under development.

The BTR designation landed where it hurt most. BTR was the supplier that the largest share of US battery manufacturers had identified as their post-exemption graphite solution.

Alternative suppliers as of May 2026

Supplier	Location	Nameplate Capacity	Status (May 2026)	Confirmed Offtake
Syrah Technologies	Vidalia, LA	11,250 tpy	Ramp-up (entered 2024); targeting 80% utilization within 6 months, full output within 18 months	Tesla (reported; qualification status unconfirmed in public filings)
NOVONIX	Chattanooga, TN	~$200M invested; expansion plans to 50,000 tpy	Four graphitization furnaces installed; first commercial-grade synthetic graphite sample delivered 2025	Battery-grade anode for Panasonic targeted H2 2027. Not currently producing battery-qualified material.
Westwater Resources	Kellyton, AL	Under construction	Sample qualification ongoing; no confirmed commercial customer	SK On terminated its Products Procurement Agreement on March 31, 2026 (8-K filed April 1, 2026). No replacement announced.

AD/CVD outcome

The trade case that might have provided tariff protection for domestic producers ended without relief. Commerce issued final determinations on February 11, 2026 with combined duties exceeding 160% on Chinese active anode material. On March 12, 2026, the ITC ruled that Chinese imports were not materially injuring or threatening the establishment of a US domestic industry. AD/CVD orders were not issued. The ITC's finding that the domestic industry was not yet "established" simultaneously describes the structural problem and forecloses the trade remedy the petitioners (Anovion, Syrah Technologies, NOVONIX, Epsilon Advanced Materials, and SKI US) sought to address it.

Tariffs and Safe Harbor Tables

The tariff stack on Chinese battery materials is in active legal flux. Section 301 tariffs (25% on lithium-ion batteries effective January 1, 2026; 25% on natural graphite effective January 1, 2026) remain operative with no statutory expiration. The IEEPA tariff regime was terminated February 24, 2026 following the Supreme Court's decision in Learning Resources, Inc. v. Trump (February 20, 2026), which held that IEEPA does not grant tariff authority.

Section 122 global tariff (10%) replaced IEEPA tariffs effective February 24, 2026 but faces its own legal challenge. On May 7, 2026, the CIT struck down Section 122 invocation in a 2–1 decision, entering a permanent injunction against three named plaintiffs. The Federal Circuit entered an administrative stay on May 12, 2026. Section 122 duties continue to be collected from importers not covered by the injunction. The statute expires July 24, 2026 absent Congressional action.

On active anode material specifically: the operative tariff layers as of publication are Section 301 (25%) plus Section 122 (10%, subject to litigation and expiration), totaling approximately 35%. The widely cited ~220% combined rate from pre-March trade press included AD/CVD duties that were never imposed following the ITC's negative ruling.

China's graphite export restrictions remain suspended until November 27, 2026, per the Trump-Xi agreement reached October 30, 2025.

Safe harbor tables. The OBBBA directs Treasury and IRS to issue PFE/MACR safe harbor tables by December 31, 2026. No draft or final tables have been released or circulated for public comment as of May 19, 2026. The IRS Notice 2025-08 domestic content tables remain the operative interim tool, designed for the domestic content bonus context rather than PFE/MACR compliance. How these tables apply to eligible components under 45X is unclear. The statutory deadline is seven months away with no visible public drafting process.

Named Open Questions as of May 19, 2026

PFE definition. The 25% single-owner and 40% aggregate ownership thresholds, 15% debt attribution test, governance and veto rights, and full scope of "effective control" remain unaddressed in published guidance. No proposed regulations released. No timeline given.

10-year recapture. Section 48E recapture mechanics for PFE violations are entirely unresolved.

Post-comment response. No public Treasury or IRS response to the March 30, 2026 comment period on Notice 2026-15 has been published.

Safe harbor tables. December 31, 2026 statutory deadline. No draft circulated. No public process visible.

45X claim data. No facility-level registry exists. No IRS or Treasury publication of claim data beyond individual company disclosures.

Graphite exemption extension. No signal from any agency or Congressional source.

Westwater offtake replacement. SK On terminated March 31, 2026. No replacement announced. Kellyton facility has no confirmed commercial customer.

Section 122 replacement authority. Statute expires July 24, 2026. CIT ruling under appeal. No replacement tariff mechanism proposed.

The gap between statutory ambition and implementation reality across all three domains is not closing on any visible timeline. The public record as of this date does not support the assumption that deferred definitions, forthcoming guidance, or alternative supplier qualification will resolve before the relevant deadlines. What has been published is mapped above. What has been promised remains outstanding.