The Representation Everyone Is Signing Anyway
The FEOC rules under the OBBBA disqualify a taxpayer from claiming or transferring credits under Sections 45X, 45Y, 48E, and others if a specified foreign entity holds enough equity, debt, or control to count as "foreign-influenced." The threshold tests look at direct and indirect ownership, board appointment rights, and debt holdings above certain percentages. On paper, this is a checklist. In practice, it assumes the company being tested can see who actually owns it. These ownership-based triggers sit alongside the sourcing and construction-timing rules covered in our breakdown of the 2026 FEOC and Direct Pay rules under Section 48E, and the two need to be checked together rather than treated as separate exercises.
Private companies can usually answer that question with a cap table. Public companies cannot. Shares trade daily, ownership sits behind custodians and nominee accounts, and a foreign holder can cross an ownership threshold without the company knowing it happened. Yet the deal documents being signed today still ask public company sellers and buyers to represent, often with recapture liability attached, that no such threshold has been crossed.
Why Ownership Tracing Breaks Down at Scale
Beneficial ownership disclosure rules were never built for this purpose. A public company can see its largest institutional holders through 13F and 13D filings, but those filings lag reality, and they don't capture aggregated foreign ownership sitting across multiple funds, brokers, or derivative positions. Debt is worse. Bonds and syndicated loans change hands in secondary markets constantly, and there is no equivalent real-time registry a company can check before signing a certification.
This creates a mismatch between what the statute demands and what any company, no matter how diligent, can actually verify. A developer selling credits to a public utility, or a public manufacturer claiming 45X credits directly, is being asked to certify a fact pattern that shifts daily and that current disclosure infrastructure cannot fully confirm at the moment of signing.
What This Means for Deals in the Transfer Market
This isn't a theoretical compliance gap. It shows up directly in how deals are being priced and papered right now. Buyers are pushing for broader indemnities and larger holdbacks specifically tied to FEOC representations, because the six-year statute of limitations on material assistance errors means this risk doesn't disappear at closing. Insurers writing tax credit policies are being asked to underwrite a risk that even the insured party can't fully quantify.
Some public companies are responding by layering in ongoing monitoring services that flag ownership changes after the fact, but that only tells you about a problem after it's already happened. Others are negotiating narrower representations, tied to actual knowledge rather than an absolute guarantee, which shifts more of the residual risk onto the buyer whether the deal documents say so explicitly or not.
Where This Leaves the Market
Treasury's guidance so far has focused on how to calculate material assistance ratios, not on how a public company is supposed to verify its own ownership structure in real time. Until that gap is addressed, every public company sitting on either side of a credit transfer is carrying a risk it cannot fully see, and every counterparty is pricing that uncertainty into the deal whether they say so out loud or not.
This uncertainty is exactly why tax credit insurance is increasingly being asked to underwrite FEOC risk directly, and why sponsors need to keep domestic content and FEOC compliance as two separate calculations rather than one.