If you’ve been shopping solar in the last few weeks, you’ve probably heard something like this from a salesperson: “Don’t worry about the tax credit changes. With a lease or PPA, you still get the savings passed through to you.” And that’s technically true. But there’s a second half to that sentence that most installers aren’t finishing out loud, and it has everything to do with where your panels were made.

Here’s the situation as of right now, July 2026. The One Big Beautiful Bill, signed on July 4, 2025, ended the residential solar tax credit (Section 25D) for any system installed after December 31, 2025. That means if you’re a homeowner buying or financing your own panels this year, the 30% federal credit is gone. Leases and power purchase agreements are now the only way you can still benefit from a federal incentive, because installers offering those products can tap the commercial Section 48E credit through the end of 2027 and pass the savings to you in the form of lower monthly rates. That’s real money. But a new rule called FEOC, Foreign Entity of Concern, just changed the conditions under which that credit applies, and the July 4, 2026 construction safe harbor deadline passed just days ago. If you’re signing or comparing lease contracts right now, this is exactly the moment to understand what you’re agreeing to.

What FEOC Actually Means for Your Panels

FEOC stands for Foreign Entity of Concern, a classification that covers companies with significant ties to countries like China, Russia, North Korea, and Iran. The rule, as it applies to solar through IRS Notice 2026-15, creates a threshold system: for projects beginning construction in 2026, at least 40% of total equipment costs must come from non-FEOC manufacturers. That threshold climbs 5% per year after that. If you’re adding a battery, the bar is even higher. Storage projects face a 55% non-FEOC threshold starting right now in 2026, according to the framework outlined by Solar.com’s analysis of the One Big Beautiful Bill rules.

The problem is that China dominates the upstream solar supply chain, handling the vast majority of global polysilicon production, wafer manufacturing, and cell fabrication. A panel assembled in an American factory can still fail a FEOC test if its cells or wafers originated from a Chinese company with the right ownership or government ties. The A1 Solar Store analysis from February 2026 put it bluntly: truly FEOC-compliant panels are “almost a myth” for most of the market, because the compliance requirement traces all the way up the supply chain, not just to final assembly.

The manufacturers that can credibly claim compliance are a short list. First Solar, which makes its thin-film modules in Ohio, Alabama, and Louisiana, uses a fundamentally different supply chain than conventional silicon-based panels. Qcells operates a cell and module factory in Dalton, Georgia. Silfab produces panels in Washington state and New York. Mission Solar is based in San Antonio, Texas. These are real options, but they’re a small slice of the total panel market, and they carry a cost premium that installers pass along somewhere.

How This Flows Down to Your Monthly Payment

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You might be wondering: if I’m signing a lease, why does any of this affect me? The installer handles the equipment. You’re right that you don’t pick the panels. But here’s what I tell people sitting across from me: the economics of your lease or PPA are built on a set of assumptions your installer made about the Section 48E tax credit they’ll claim. If their equipment clears FEOC compliance, they claim the full credit, and they can offer you a competitive rate. If their supply chain fails a FEOC audit, or if compliant supply runs short and they have to reprice, those savings either shrink or disappear, and the contract terms you were quoted may not reflect that.

The table below shows how the FEOC thresholds stack up across the current and near-term period, so you can see what your installer’s equipment is being measured against.

Project Type2026 Non-FEOC Threshold2027 Non-FEOC Threshold
Solar only40% of equipment costs45% of equipment costs
Solar + storage55% of equipment costs60% of equipment costs
Storage only55% of equipment costs60% of equipment costs

The thresholds rise every year, which means the compliance pressure on installers gets tighter, not looser, as we move toward the Section 48E expiration at the end of 2027.

The Audit Risk Nobody Is Talking About

IRS Notice 2026-15 introduced the material assistance cost ratio, or MACR, as the calculation method installers use to certify compliance. The GreenLancer supplier checklist from July 2026 notes that many “compliant” claims from suppliers don’t hold up when you actually apply the MACR methodology rigorously. The documentation chain has to trace component origins all the way back through the supply relationship, and a lot of smaller installers are relying on supplier self-certification that hasn’t been independently verified.

This matters for you because an audit doesn’t happen before your system goes in. It can happen after. If an installer’s tax credit claim is disallowed because their documentation falls apart, the financial model underpinning your lease doesn’t just cause the installer a headache. It potentially affects the lessor company that owns your system and holds your contract. This is a new enough risk that most standard lease agreements don’t address it clearly, and homeowners have little recourse.

Questions to Ask Before You Sign

You can’t pick your panels in a lease, but you can ask specific questions and get specific answers in writing. The EnergySage lease guide from February 2026 recommends asking for the exact panel manufacturer and model before signing, not after. Here’s what to add to that: ask your installer which specific manufacturer they’re using to meet FEOC thresholds, ask how they calculated their MACR, and ask whether their Section 48E credit claim has been reviewed by a tax professional rather than simply certified by the panel supplier. If the salesperson can’t answer the first question clearly, treat that as meaningful information.

Also ask what happens to your monthly rate if the tax credit is reduced or disallowed. Some lease agreements include escalator clauses or rate adjustment provisions tied to the lessor’s financing assumptions. You want to know whether those provisions could be triggered by a compliance problem, and you want that answer from the contract language, not from a verbal assurance.

The safe harbor deadline of July 4, 2026 has passed, which means any system that began construction before that date may have locked in more favorable terms under earlier guidance, as NuWatt Energy explained in their February 2026 analysis. New contracts signed now are operating under the full 2026 FEOC rules with no grandfathering available. That’s not a reason to walk away from a lease. It is a reason to ask harder questions than you would have six months ago.

Leases and PPAs remain a genuinely good option for many homeowners in 2026, especially if you’re in a high-rate state, you don’t have a large tax liability to offset anyway, or you want to avoid upfront cost and maintenance responsibility. The federal incentive pathway through Section 48E is real and still meaningful. But the FEOC rules add a layer of supply chain risk that flows directly to you through your contract, even though you never touch the procurement process. A lease that looks like a great deal on paper is only as solid as the compliance work behind it.

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