Internal Revenue Bulletin 2026-11 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2026–11
March 9, 2026
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Notice 2026-7, page 637.
This notice provides additional interim guidance regarding
the application of the corporate alternative minimum tax
(CAMT). The CAMT was added to title 26 of the United
States Code (Internal Revenue Code) by the Inflation Reduc-
tion Act of 2022 and generally applies to large corporations
for taxable years beginning after 2022. Specifically, this
notice provides rules for certain adjustments to adjusted
financial statement income (AFSI), rules for financially trou-
bled companies, and anti-abuse rules for certain covered
asset transactions. In addition, the notice addresses cer-
tain CAMT consequences of transactions involving intan-
gible property subject to section 367(d). This notice also
addresses applicability dates and the ability of taxpayers
to rely on the interim guidance provided in Notice 2025-49
and this notice.
AMINISTRATIVE, INCOME TAX
Notice 2026-15, page 658.
Notice 2026-15 provides guidance under §§ 45X, 45Y, and
48E of the Internal Revenue Code (Code) for determining
a qualified facility’s, energy storage technology’s, or eligi-
ble component’s material assistance cost ratio (MACR) for
purposes of determining whether there was material assis-
tance from a prohibited foreign entity (PFE). This notice also
provides limited general guidance related to the definition
of a PFE and requests comments regarding definitional,
anti-circumvention, and other issues for future guidance.
EMPLOYEE PLANS
Announcement 2026-7, page 697.
This Announcement provides that IRS and the Treasury
Department anticipate that certain portions of future final
regulations relating to required minimum distributions under
section 401(a)(9) will apply for the distribution calendar
year that begins no earlier than 6 months after the date
that final regulations are issued in the Federal Register. In
the interim, the Announcement states that taxpayers must
apply a reasonable good-faith interpretation of the statutory
provisions underlying the regulations.
Notice 2026-14, page 654.
This notice sets forth updates on the corporate bond
monthly yield curve, the corresponding spot segment rates
for January 2026 used under § 417(e)(3)(D), the 24-month
average segment rates applicable for February 2026, and
the 30-year Treasury rates, as reflected by the application
of § 430(h)(2)(C)(iv).
INCOME TAX
Notice 2026-16, page 685.
This notice announces forthcoming proposed regulations
under § 168(n) of the Internal Revenue Code, as added by
Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly
known as the One, Big, Beautiful Bill Act, that will include
rules similar to the interim guidance provided in this notice
regarding the application of the special depreciation allow-
ance for qualified production property. Specifically, the
interim guidance: (i) provides guidance addressing the defi-
nition of “qualified production property”; (ii) provides guid-
ance addressing the definition of “qualified production activ-
ity” and related terms; (iii) provides guidance addressing
relevant special rules; (iv) provides the procedures for mak-
ing an election to designate eligible property as qualified
production property; and (v) provides guidance addressing
depreciation recapture due to a change in use of qualified
production property.
Rev. Rul. 2026-6, page 635.
Federal rates; adjusted federal rates; adjusted federal long-
term rate, and the long-term tax exempt rate. For purposes
of sections 382, 1274, 1288, 7872 and other sections of
the Code, tables set forth the rates for March 2026.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
March 9, 2026 Bulletin No. 2026–11

Part I
Section 1274.—
Determination of Issue
Price in the Case of Certain
Debt Instruments Issued for
Property
(Also Sections 42, 280G, 382, 467, 468, 482, 483,
1288, 7520, 7702, 7872.)
Rev. Rul. 2026-6
This revenue ruling provides various
prescribed rates for federal income tax
purposes for March 2026 (the current
month). Table 1 contains the short-
term, mid-term, and long-term applica-
ble federal rates (AFR) for the current
month for purposes of section 1274(d)
of the Internal Revenue Code. Table 2
contains the short-term, mid-term, and
long-term adjusted applicable federal
rates (adjusted AFR) for the current
month for purposes of section 1288(b).
Table 3 sets forth the adjusted fed-
eral long-term rate and the long-term
tax-exempt rate described in section
382(f). Table 4 contains the appropri-
ate percentages for determining the
low-income housing credit described in
section 42(b)(1) for buildings placed in
service during the current month. How-
ever, under section 42(b)(2), the appli-
cable percentage for non-federally sub-
sidized new buildings placed in service
after July 30, 2008, shall not be less
than 9%. Finally, Table 5 contains the
federal rate for determining the present
value of an annuity, an interest for life
or for a term of years, or a remainder or
a reversionary interest for purposes of
section 7520.
REV. RUL. 2026-6 TABLE 1
Applicable Federal Rates (AFR) for March 2026
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term
AFR3.59%3.56%3.54%3.53%
110% AFR3.96%3.92%3.90%3.89%
120% AFR4.32%4.27%4.25%4.23%
130% AFR4.68%4.63%4.60%4.59%
Mid-term
AFR3.93%3.89%3.87%3.86%
110% AFR 4.33%4.28%4.26%4.24%
120% AFR4.72%4.67%4.64%4.63%
130% AFR5.12%5.06%5.03%5.01%
150% AFR5.93%5.84%5.80%5.77%
175% AFR6.93%6.81%6.75%6.72%
Long-term
AFR4.72%4.67%4.64%4.63%
110% AFR5.21%5.14%5.11%5.09%
120% AFR5.68%5.60%5.56%5.54%
130% AFR6.16%6.07%6.02%5.99%
REV. RUL. 2026-6 TABLE 2
Adjusted AFR for March 2026
Period for Compounding
AnnualSemiannualQuarterlyMonthly
Short-term adjusted AFR2.72%2.70%2.69%2.68%
Mid-term adjusted AFR2.97%2.95%2.94%2.93%
Long-term adjusted AFR3.58%3.55%3.53%3.52%
Bulletin No. 2026–11 635 March 9, 2026

REV. RUL. 2026-6 TABLE 3
Rates Under Section 382 for March 2026
Adjusted federal long-term rate for the current month3.58%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal
long-term rates for the current month and the prior two months.)
3.58%
REV. RUL. 2026-6 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for March 2026
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after
July 30, 2008, shall not be less than 9%.
Appropriate percentage for the 70% present value low-income housing credit8.00%
Appropriate percentage for the 30% present value low-income housing credit 3.43%
REV. RUL. 2026-6 TABLE 5
Rate Under Section 7520 for March 2026
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest
4.8%

Section 42.—Low-Income
Housing Credit
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2026. See Rev. Rul. 2026-6, page 635.
Section 280G.—Golden
Parachute Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2026. See Rev. Rul. 2026-6, page 635.
Section 382.—Limitation
on Net Operating Loss
Carryforwards and
Certain Built-In Losses
Following Ownership
Change
The adjusted applicable federal long-term rate
is set forth for the month of March 2026. See Rev.
Rul. 2026-6, page 635.
Section 467.—Certain
Payments for the Use of
Property or Services
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2026. See Rev. Rul. 2026-6, page 635.
Section 468.—Special
Rules for Mining and Solid
Waste Reclamation and
Closing Costs
The applicable federal short-term rates are set
forth for the month of March 2026. See Rev. Rul.
2026-6, page 635.
Section 482.—Allocation
of Income and Deductions
Among Taxpayers
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2026. See Rev. Rul. 2026-6, page 635.
Section 483.—Interest on
Certain Deferred Payments
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2026. See Rev. Rul. 2026-6, page 635.
Section 1288.—Treatment
of Original Issue Discount
on Tax-Exempt Obligations
The adjusted applicable federal short-term, mid-
term, and long-term rates are set forth for the month
of March 2026. See Rev. Rul. 2026-6, page 635.
Section 7520.—Valuation
Tables
The applicable federal mid-term rates are set
forth for the month of March 2026. See Rev. Rul.
2026-6, page 635.
Section 7872.—Treatment
of Loans With Below-
Market Interest Rates
The applicable federal short-term, mid-term,
and long-term rates are set forth for the month of
March 2026. See Rev. Rul. 2026-6, page 635.

March 9, 2026 636 Bulletin No. 2026–11

Bulletin No. 2026–11 637 March 9, 2026
Part III
Additional Interim Guidance
Regarding the Application
of the Corporate
Alternative Minimum Tax
Notice 2026-7
SECTION 1. OVERVIEW
This notice provides additional interim
guidance regarding the application of
the corporate alternative minimum tax
(CAMT) under §§ 55, 56A, and 59 of the
Internal Revenue Code (Code).
1
Prior to
the publication of any final regulations
relating to the CAMT, the Department
of the Treasury (Treasury Department)
and the Internal Revenue Service (IRS)
intend to issue proposed regulations
(forthcoming proposed regulations) that
are anticipated to include rules similar
to the interim guidance provided in sec-
tions 3 through 10 of this notice, Notice
2025-27, 2025-26 I.R.B. 1611 (June 23,
2025), Notice 2025-28, 2025-34 I.R.B.
316 (August 18, 2025), Notice 2025-46,
2025-43 I.R.B. 533 (October 20, 2025),
and Notice 2025-49, 2025-44 I.R.B. 627
(October 27, 2025).
Section 3 of this notice modifies the
interim guidance provided in section 4 of
Notice 2025-49 and addresses an adjust-
ment to adjusted financial statement
income (AFSI)
2
for deductible tax repairs
with respect to section 168 property. Sec-
tion 4 of this notice modifies the interim
guidance provided in section 9 of Notice
2025-49 and addresses an adjustment to
AFSI for § 197 amortization attributable
to certain intangibles. Section 5 of this
notice addresses an adjustment to AFSI
for amortization of domestic research or
experimental expenditures. Section 6 of
this notice addresses an adjustment to
AFSI for certain production costs attrib-
utable to film, television, live theatrical,
and sound recording productions. Section
7 of this notice addresses an adjustment
to AFSI for certain low acquisition cost
tangible property treated as materials and
supplies. Section 8 of this notice clarifies
and modifies the interim guidance for
financially troubled companies provided
in section 4 of Notice 2025-46. Section 9
of this notice addresses modifications to
the anti-abuse rule in proposed § 1.56A-4
of the CAMT Proposed Regulations (as
defined in section 2.03(1) of this notice)
that would apply to certain covered asset
transactions. Section 10 of this notice
addresses certain CAMT consequences
of transactions involving intangible prop-
erty subject to § 367(d). Section 11 of
this notice addresses applicability dates
and the ability of taxpayers to rely on
the interim guidance provided in Notice
2025-49 and this notice.
SECTION 2. BACKGROUND
.01 Overview of the CAMT. Section
10101 of Public Law 117-169, 136 Stat.
1818, 1818-1828 (August 16, 2022),
commonly known as the Inflation Reduc-
tion Act of 2022, amended § 55 to impose
the CAMT based on the AFSI of an appli-
cable corporation for taxable years begin-
ning after December 31, 2022. Section
59(k)(1)(A) provides that, for purposes
of §§ 55 through 59, the term “applicable
corporation” means, with respect to any
taxable year, any corporation (other than
an S corporation, a regulated investment
company, or a real estate investment
trust) that meets the average annual AFSI
test provided in § 59(k)(1)(B) for one
or more taxable years that (1) are prior
to that taxable year, and (2) end after
December 31, 2021.
.02 AFSI under § 56A.
(1) General definition of AFSI. For
purposes of §§ 55 through 59, § 56A(a)
provides that the term “AFSI” means,
with respect to any corporation for any
taxable year, the net income or loss of
the taxpayer set forth on the taxpayer’s
applicable financial statement (AFS) for
that taxable year, adjusted as provided in
§ 56A. Section 56A(c) provides general
adjustments to be made to AFSI.
(2) Provisions of § 56A relevant to the
interim guidance provided in this notice.
(a) Authority of the Secretary to pro-
vide necessary adjustments to AFSI. In
addition to the separate delegations of
authority provided to the Secretary of
the Treasury or the Secretary’s delegate
(Secretary) relating to the adjustments
to AFSI specified in paragraphs (2)(B)
through (D), (5), (10), (11), (13), and (14)
of § 56A(c), § 56A(c)(15) authorizes the
Secretary to issue regulations or other
guidance to provide for such adjustments
to AFSI as the Secretary determines nec-
essary to carry out the purposes of § 56A,
including adjustments to prevent the
omission or duplication of any item.
(b) General authority of the Secretary.
Section 56A(e) authorizes the Secretary to
provide such regulations and other guid-
ance as necessary to carry out the pur-
poses of § 56A.
.03 CAMT Proposed Regulations.
(1) In general. On September 13, 2024,
the Treasury Department and the IRS pub-
lished a notice of proposed rulemaking
(REG-112129-23) in the Federal Reg-
ister (89 F.R. 75062) that addressed the
application of the CAMT and permitted
taxpayers to rely on the proposed regula-
tions contained therein subject to certain
conditions and limitations. On December
26, 2024, the Treasury Department and
the IRS published in the Federal Register
(89 F.R. 104909) technical corrections to
the proposed regulations set forth in REG-
112129-23, which together with such pro-
posed regulations are referred to as the
“CAMT Proposed Regulations” in this
notice. Numerous comments were sub-
mitted in response to the proposed rules
in §§ 1.56A-1 through 1.56A-27, 1.59-2
through 1.59-4, 1.1502-2, 1.1502-53, and
1.1502-56A of the CAMT Proposed Reg-
ulations (proposed §§ 1.56A-1 through
1.56A-27, 1.59-2 through 1.59-4, 1.1502-
2, 1.1502-53, and 1.1502-56A), which
comments the Treasury Department and
the IRS continue to consider and study.
(2) Provisions in proposed § 1.56A-4
relevant to the interim guidance provided
1
Unless otherwise provided, all "section" or "§" references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
2
Unless otherwise specified, terms used in this notice have the same meaning as in the CAMT Proposed Regulations described in section 2.03 of this notice.

March 9, 2026 638 Bulletin No. 2026–11
in this notice. Proposed § 1.56A-4 would
provide rules concerning foreign corpo-
rations. Specifically, proposed § 1.56A-4
would provide rules under § 56A(c)(2)
(C) for determining the amount of AFSI
of a CAMT entity that results solely from
the CAMT entity’s ownership of stock of
a foreign corporation. As relevant for pur-
poses of this notice, proposed § 1.56A-4
would also provide rules under § 56A(c)
(15)(B) for determining the AFSI and
CAMT basis consequences of certain
transactions involving foreign corpora-
tions referred to as “covered asset trans-
actions” and rules for adjusting AFSI in
certain circumstances in which basis in
foreign stock received is determined under
§ 358. Proposed § 1.56A-4 would define
covered asset transactions generally as
including two categories of transactions:
(i) those involving a transfer of an asset to,
or by, a foreign corporation, and (ii) those
involving a transfer of foreign stock to, or
by, a domestic corporation. See proposed
§ 1.56A-4(b)(1)(i) and (ii).
Proposed § 1.56A-4(f) would provide
rules that apply to certain cases in which
a CAMT entity receives stock of a foreign
corporation in a covered asset transaction
and the CAMT entity’s basis in the stock
of the foreign corporation for regular tax
purposes is determined under § 358. These
proposed rules would compare the CAMT
basis in the stock of the foreign corpora-
tion (which equals its basis for regular tax
purposes under proposed § 1.56A-4(d)
(5)) with a hypothetical CAMT basis. The
hypothetical CAMT basis is computed by
substituting the CAMT basis in the rele-
vant property for the regular tax basis (see
proposed § 1.56A-4(f)(2)). The relevant
property is the property whose basis is
used to determine (in whole or in part) the
basis of the foreign stock for regular tax
purposes. To the extent a CAMT entity’s
basis in the stock of the foreign corporation
received for regular tax purposes exceeds
its hypothetical CAMT basis in that stock,
the CAMT entity would increase its AFSI
for the taxable year in which the foreign
stock is received by the amount of such
excess if either of two requirements is sat-
isfied. See proposed § 1.56A-4(f)(1).
The first requirement would be satis-
fied if a principal purpose of the covered
asset transaction is to avoid treatment
of the CAMT entity or another CAMT
entity as an applicable corporation or
to reduce or otherwise avoid a liabil-
ity under § 55(a) (proposed principal
purpose rule). The second requirement
would be satisfied if within two years of
the date the stock of the foreign corpora-
tion is received, the basis in such stock
of the foreign corporation is taken into
account, in whole or in part, in deter-
mining the AFSI of the recipient CAMT
entity or another CAMT entity (proposed
two-year rule). The principles of the pro-
posed two-year rule apply with respect to
any asset whose basis for regular tax pur-
poses is determined in whole or in part by
reference to the basis of the foreign stock
received. For example, if stock of the for-
eign corporation received is subsequently
transferred in a transaction described in
§ 351(a) to another foreign corporation
in exchange for stock of such other for-
eign corporation (or if the foreign stock
received is exchanged under § 354 for
stock in another foreign corporation),
then the proposed two-year rule applies
to both the stock of the foreign corpora-
tion received in the initial transfer as well
as the stock of the other foreign corpora-
tion received in the subsequent transfer.
With respect to the ownership of for-
eign stock generally, proposed § 1.56A-
4(c)(1) would provide for adjustments to
a CAMT entity’s AFSI as a result of direct
ownership of stock of a foreign corpora-
tion. Specifically, proposed § 1.56A-4(c)
(1)(i) would require a CAMT entity, in
calculating AFSI, to disregard any items
of income, expense, gain, and loss result-
ing from ownership of stock of the foreign
corporation, including any such items
that result from acquiring or transferring
such stock, reflected in the CAMT enti-
ty’s financial statement income (FSI).
Proposed § 1.56A-4(c)(1)(ii) generally
would require the CAMT entity to include
in AFSI any items of income, deduction,
gain, and loss for regular tax purposes
resulting from ownership of stock of the
foreign corporation, including any items
that result from acquiring or transfer-
ring such stock, other than any items of
income, deduction, gain, and loss result-
ing from the application of §§ 78, 250,
951, or 951A.
Proposed § 1.56A-4(c)(2) would pro-
vide for adjustments to a CAMT entity’s
AFSI as a result of a transfer of an asset
other than stock of a foreign corporation
in a covered asset transaction. Specifically,
proposed § 1.56A-4(c)(2)(i) would require
a CAMT entity, in calculating AFSI, to
disregard any items of income, expense,
gain, and loss with respect to the trans-
ferred asset resulting from the covered
asset transaction reflected in the CAMT
entity’s FSI. Proposed § 1.56A-4(c)(2)(ii)
would require the CAMT entity to include
any items of income, deduction, gain, and
loss for regular tax purposes with respect
to the transferred asset resulting from the
covered asset transaction; however, for
this purpose, the amount of each such
item would be computed by substituting
the CAMT entity’s CAMT basis in the
transferred asset for the CAMT entity’s
basis in the transferred asset for regular
tax purposes.
(3) Provisions in proposed § 1.56A-6
relevant to the interim guidance provided
in this notice. Proposed § 1.56A-6 would
provide rules under § 56A(c)(3) regarding
an adjustment to the AFSI of a CAMT
entity for any taxable year in which the
CAMT entity is a U.S. shareholder of one
or more controlled foreign corporations
(CFC). The amount of the adjustment gen-
erally would be determined by reference
to the CAMT entity’s pro rata share of
adjusted net income or loss of each such
CFC. Proposed § 1.56A-6(c)(1) gener-
ally would define the term “adjusted net
income or loss” with respect to any CFC,
for any taxable year of the CFC, as the FSI
of the CFC, adjusted for all AFSI adjust-
ments provided under the CAMT Pro-
posed Regulations, except as provided in
proposed § 1.56A-6(c)(2) through (5). For
this purpose, references to AFSI in other
sections of the CAMT Proposed Regu-
lations, except for references to AFSI in
proposed § 1.56A-1(b)(1) and (e) (which
would provide the general definition of
AFSI and general rules for translating
AFSI to U.S. dollars, respectively), would
be treated as references to adjusted net
income or loss.
.04 Prior interim guidance issued sub-
sequent to CAMT Proposed Regulations.
(1) Notice 2025-27 provides interim
guidance regarding an optional simplified
method for determining applicable corpo-
ration status and provides a limited waiver
of certain additions to tax under § 6655
with respect to a corporation’s CAMT lia-

Bulletin No. 2026–11 639 March 9, 2026
bility for taxable years beginning during
2025.
(2) Notice 2025-28 provides interim
guidance on determining a CAMT entity’s
AFSI with respect to an investment in a
partnership, reporting by partnerships of
information needed to compute AFSI, and
the treatment of partnership contributions
and distributions.
(3) Notice 2025-46 provides interim
guidance on the application of the CAMT
to domestic corporate transactions, finan-
cially troubled companies, tax consoli-
dated groups, acquired financial statement
net operating losses, and certain built-in
items. Section 4.03 of Notice 2025-46 pro-
vides interim guidance on the treatment of
discharge of indebtedness income, includ-
ing interim guidance addressing rules
related to attribute reduction.
(4) Notice 2025-49 provides interim
guidance on the application of the CAMT,
including adjustments to AFSI for (a) eli-
gible regulatory assets, (b) certain items
measured at fair value, (c) CAMT entities
subject to the tonnage tax regime, (d) cer-
tain embedded depreciation deductions,
(e) nonlife insurance company net operat-
ing loss carrybacks, (f) eligible goodwill
amortization, and (g) accounting principle
changes and restatements of a prior year
AFS. In addition, Notice 2025-49 provides
that, for taxable years beginning before
the date the corresponding final regulation
is published in the Federal Register, a tax-
payer may rely on a section of the CAMT
Proposed Regulations without also being
required to rely on any other sections of
the CAMT Proposed Regulations, pro-
vided the taxpayer consistently follows
that section in its entirety for all taxable
years beginning with the first taxable year
with respect to which the taxpayer relies
on that section.
Further, Notice 2025-49 provided that,
for taxable years beginning before the
date the forthcoming proposed regulations
are published in the Federal Register, a
taxpayer may rely on any section of the
CAMT Proposed Regulations, as mod-
ified by any guidance subsequently pub-
lished in the Internal Revenue Bulletin,
provided the taxpayer consistently follows
that section (as so modified) in its entirety
for all taxable years beginning with the
first taxable year with respect to which the
taxpayer relies on that section. However, a
taxpayer may rely on proposed § 1.56A-4
(AFSI adjustments and basis determina-
tions with respect to foreign corporations)
or proposed § 1.56A-6 (AFSI adjustments
with respect to CFCs of the CAMT Pro-
posed Regulations, as applicable, for
taxable years beginning before the date a
corresponding final regulation section is
published in the Federal Register only if
the taxpayer also follows certain other sec-
tions of the CAMT Proposed Regulations.
Finally, Notice 2025-49 reiterated that, for
a taxable year described in section 3.05
of Notice 2025-27, section 9 of Notice
2025-28, or section 9 of Notice 2025-
46, as applicable, a taxpayer may rely on
the guidance described in section 3.03 of
Notice 2025-27, sections 3 through 7 of
Notice 2025-28, or sections 3 through 6
of Notice 2025-46, without being required
to follow any section, or part thereof, of
the CAMT Proposed Regulations (except
to the extent required by, or incorporated
into, these notices).
.05 Comments received on the CAMT
Proposed Regulations or prior interim
guidance relevant to interim guidance
provided in this notice.
(1) Tax repair and maintenance costs
attributable to section 168 property. Nei-
ther § 56A(c) nor the CAMT Proposed
Regulations provide an adjustment to
AFSI for repair and maintenance costs
with respect to section 168 property. How-
ever, section 4 of Notice 2025-49 provides
a limited adjustment to AFSI for repair
and maintenance costs that are capitalized
and depreciated for AFS purposes under
certain GAAP rules applicable to CAMT
entities with regulated operations. Com-
ments submitted in response to the CAMT
Proposed Regulations and Notice 2025-49
recommended that an adjustment to AFSI
be provided for all CAMT entities for
repair or maintenance costs with respect
to section 168 property that are deducted
for regular tax purposes but capitalized
and depreciated for AFS purposes. Such
an adjustment to AFSI would include the
repair and maintenance costs for which
an adjustment to AFSI is permitted under
section 4 of Notice 2025-49 for CAMT
entities with regulated operations.
In addition to the comments described
in section 2.05(2) of Notice 2025-49,
commenters noted that the AFSI adjust-
ments provided for covered book COGS
depreciation and covered book deprecia-
tion expense in proposed § 1.56A-15(d)
(1)(iii) require only that a CAMT entity
adjust AFSI to disregard such amounts
with respect to section 168 property.
Accordingly, if an item of section 168
property and its related repair and main-
tenance costs are treated as a single item
of property for AFS purposes, comment-
ers noted that determining the amount
of these adjustments would require the
CAMT entity to determine the portion
of book depreciation expense in FSI that
is attributable to repair and maintenance
costs (incurred during the current taxable
year, as well as prior taxable years) with
respect to the section 168 property and to
remove such amount from book depreci-
ation expense before making the adjust-
ments to AFSI for covered book COGS
depreciation and covered book deprecia-
tion expense. Commenters noted that this
additional step would add undue complex-
ity to the calculation of AFSI by requiring
that impacted CAMT entities create sepa-
rate CAMT records for each item of AFS
property to track the portion of AFS basis
that corresponds to section 168 property
and the portion that corresponds to repair
and maintenance costs that are deducted
for regular tax purposes. Commenters
noted that one option to reduce compli-
ance burden would be to allow CAMT
entities to disregard the entire amount
of covered book COGS depreciation
and covered book depreciation expense,
including amounts attributable to tax
repair and maintenance costs deducted for
regular tax purposes; however, the com-
menters also noted that such an approach
would overstate AFSI.
Accordingly, commenters suggested
that providing an adjustment to AFSI for
repair and maintenance costs with respect
to section 168 property that are deducted
for regular tax purposes, including a cor-
responding adjustment to disregard the
book depreciation expense attributable
to the repair or maintenance cost for AFS
purposes (if applicable), would reduce
compliance burdens as it would allow
a CAMT entity to disregard the entire
amount of covered book COGS deprecia-
tion or covered book depreciation expense
in those situations in which a single item
of AFS property corresponds to capital-
ized section 168 property and deducted

March 9, 2026 640 Bulletin No. 2026–11
repair and maintenance costs for regu-
lar tax purposes. Commenters noted that
providing such an adjustment to AFSI
would eliminate the burden and expense
of separately tracking and bifurcating
book depreciation expense for an item of
AFS property, solely for CAMT purposes,
between the portion disregarded in deter-
mining AFSI (with respect to section 168
property) and the remaining portion (with
respect to repair and maintenance costs
deducted for regular tax purposes).
(2) Intangible amortization. Section 9
of Notice 2025-49 provides an adjustment
to AFSI for amortization under § 197
attributable to goodwill acquired in cer-
tain transactions announced or completed
on or before October 28, 2021. As dis-
cussed in section 2.05(7) of Notice 2025-
49, for regular tax purposes, amounts paid
to another party to acquire goodwill are
generally capitalized in the taxable year
paid or incurred and amortized ratably
over a 15-year period beginning with the
month in which the goodwill is acquired.
See § 197(a), (c), and (d)(1)(A). For AFS
purposes, such amounts are capitalized
in the year incurred but, in general, are
not recoverable through amortization but
rather are recoverable to the extent the
goodwill is impaired (in which case an
impairment loss would be recognized) or
upon disposition of the goodwill. Accord-
ingly, prior to the issuance of Notice 2025-
49, commenters had requested an adjust-
ment to AFSI for amortization deductions
under § 197 attributable to goodwill as,
to the extent the goodwill is not amortiz-
able for AFS purposes, a CAMT liability
under § 55 could arise in the taxable year
such amortization is deducted for regular
tax purposes under § 197. Commenters
observed that CAMT entities could not
have considered the consequences of the
CAMT, including the treatment of good-
will under the CAMT, in their financial
modeling for business acquisitions or
in the allocation of the purchase price
among acquired assets for acquisitions
that occurred before the CAMT was in
effect and, therefore, should be allowed an
adjustment to AFSI for the amortization
of goodwill acquired prior to that time.
In addition, commenters indicated that,
absent an AFSI adjustment, the CAMT
consequences of transactions that result in
the acquisition of goodwill could discour-
age further domestic investment.
In response to Notice 2025-49, com-
menters noted that there are other intangi-
bles subject to amortization under § 197,
the costs of which, for AFS purposes, are
(i) required to be capitalized in the year
incurred, and (ii) not permitted to be recov-
ered through amortization but instead are
recoverable only to the extent the intangi-
ble asset is impaired or upon disposition
of the asset. Accordingly, commenters
have requested an adjustment to AFSI for
amortization deductions under § 197 with
respect to these other intangibles. Neither
§ 56A(c) nor the CAMT Proposed Reg-
ulations provide an adjustment to AFSI
for amortization under § 197 with respect
to these other intangibles. Commenters
requesting this adjustment for these other
intangibles explained that, as in the case
of goodwill, because these other intangi-
bles are not amortizable for AFS purposes,
a CAMT liability under § 55 could arise
in taxable years in which amortization of
these other intangibles is deducted for reg-
ular tax purposes under § 197. In addition,
commenters argued that CAMT entities
could not have considered the conse-
quences of the treatment of other intangi-
bles subject to amortization under § 197
under the CAMT and, therefore, should
be allowed an adjustment to AFSI for the
amortization of other intangibles acquired
prior to that time. Finally, commenters
noted that the CAMT consequences of
transactions that result in the acquisition
of these other intangibles could deter fur-
ther domestic investment.
(3) Domestic research and experimen-
tal expenditures. Under GAAP, research
and experimental costs generally are
expensed in the year in which they are
incurred. See, e.g., Accounting Standards
Codification (ASC) 730-10-25. For soft-
ware developed to be sold, leased, or other-
wise externally marketed, generally costs
incurred to establish technological feasi-
bility of the software are expensed in the
year in which they are incurred. However,
costs incurred after establishing techno-
logical feasibility and before the product
is available for general release are capi-
talized and amortized. Following general
release, costs of enhancements to extend
the life or significantly improve the mar-
ketability of the software product are cap-
italized and amortized and maintenance
costs are expensed in the year in which
they are incurred. See, e.g., ASC 985-
20. For software developed for internal
use, under current GAAP guidance, costs
incurred during the application develop-
ment stage generally are capitalized and
amortized. All other costs incurred to
develop internal-use software generally
are expensed in the year in which they are
incurred. See, e.g., ASC 350-40.
3
Public Law 119-21, 139 Stat. 72 (July
4, 2025), commonly known as the One,
Big, Beautiful Bill Act (OBBBA), added
to the Code § 174A, which provides that
a deduction is allowed for any domestic
research or experimental expenditures,
including domestic software development
expenditures, that are paid or incurred by
the taxpayer in a taxable year beginning
after December 31, 2024. In addition,
§ 174A(c) allows a taxpayer to make an
election to instead charge such expendi-
tures to capital account and amortize the
expenditures ratably over a period of not
less than 60 months, beginning with the
month in which the taxpayer first realizes
benefits from such expenditures. Prior to
amendment by the OBBBA, under § 174,
as amended by Public Law 115-97, 131
Stat. 2054 (Dec. 22, 2017), commonly
known as the Tax Cuts and Jobs Act
(TCJA), specified research or experimen-
tal expenditures, including both foreign
and domestic expenditures, were required
to be charged to capital account and amor-
tized ratably over a defined period (5
years for domestic research and 15 years
for foreign research) for amounts paid or
incurred in taxable years beginning after
December 31, 2021. Accordingly, for tax-
able years beginning after December 31,
2024, the enactment of § 174A as part of
3
The FASB issued updated guidance for internal-use software in September 2025. See Accounting Standards Update No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software
(Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update to ASC 350-40 modifies the accounting for internal-use software to instead apply a
principles-based threshold. The update is effective for annual reporting periods beginning after December 15, 2027; however, early adoption is permitted as of the beginning of an annual
reporting period.

Bulletin No. 2026–11 641 March 9, 2026
the OBBBA created a transition period
during which both §§ 174 and 174A deter-
mine the treatment and timing of domes-
tic research or experimental expenditures.
During this transition period, regular tax-
able income for a taxable year will take
into account two layers of recovery for
domestic research or experimental expen-
ditures: the deduction of current year
expenditures under § 174A and the con-
tinued amortization of prior year expendi-
tures under § 174.
Neither § 56A(c) nor the CAMT Pro-
posed Regulations provide an adjustment
to AFSI for research or experimental
expenditures, including software devel-
opment expenditures. Accordingly, such
amounts would be reflected in AFSI at
the same time, and in the same amount, as
when such amounts are reflected in FSI. In
addition, neither § 56A(c) nor the CAMT
Proposed Regulations provide an adjust-
ment to AFSI to account for the transi-
tion to the § 174A regime. Commenters
requested that an adjustment to AFSI be
allowed for taxable years beginning after
December 31, 2024, equal to the amount
of amortization under § 174 attributable to
domestic expenditures taken in comput-
ing regular taxable income for such tax-
able years. Commenters noted that while
AFSI would otherwise remain unchanged
during the transition period, regular tax-
able income is decreased for the transition
period taxable years (compared to what
regular taxable income would have been
if only § 174, or only § 174A, was appli-
cable) due to the dual layers of recovery
for domestic research and experimental
expenditures resulting from the simulta-
neous application of §§ 174 and 174A.
(4) Qualified production costs under
§ 181. Commenters requested that an
adjustment to AFSI be allowed for cer-
tain production costs paid or incurred by
a CAMT entity for qualified film or televi-
sion productions, qualified live theatrical
productions, or qualified sound recordings
(collectively, eligible production prop-
erty) allowed as a deduction under § 181.
Under § 181, taxpayers may elect to treat
production costs of eligible production
property as an expense deductible for
the taxable year in which the production
costs are paid or incurred, subject to dollar
limitations that vary based on the type of
production (defined in section 6 as quali-
fied production costs). See § 181(a)(1) and
(2). Production costs of eligible produc-
tion property that exceed the dollar lim-
itation are charged to capital account and
depreciated for regular tax purposes once
the eligible production property is placed
in service (excess production costs). The
portion of basis eligible for first year
additional depreciation under § 168(k) is
depreciated under § 168 and any remain-
ing basis is depreciated under § 167. See
§§ 167, 168(k), and 168(k)(2)(A)(i)(IV),
(V), and (VI). In general, for GAAP and
IFRS purposes, both the qualified pro-
duction costs and excess production costs
attributable to an eligible production prop-
erty generally are capitalized in the year
incurred and depreciated as a single asset
over its useful life once the asset is placed
in service.
Neither § 56A(c) nor the CAMT Pro-
posed Regulations provide an adjustment
to AFSI for qualified production costs.
Accordingly, CAMT entities that elect to
deduct qualified production costs under
§ 181(a) would need to determine AFSI
by (i) including the amount of such costs
included in FSI for such taxable year (gen-
erally, the corresponding amount of book
depreciation for such year), and (ii) mak-
ing adjustments under proposed § 1.56A-
15 for any excess production costs (as
excess production costs are charged to
capital account and depreciable under
§ 168, thus constituting section 168 prop-
erty for CAMT purposes). Commenters
indicated that this bifurcated treatment
for CAMT purposes with respect to a sin-
gle eligible production property leads to
compliance burdens as impacted CAMT
entities must bifurcate the single AFS
asset attributable to the eligible produc-
tion property and (i) continue to track the
portion of AFS basis that corresponds to
the qualified production costs in order
to determine the appropriate amount of
book depreciation or other basis recovery
in FSI to include in AFSI, and (ii) track
the portion of AFS basis that corresponds
to excess production costs in order to
properly determine the amount of book
depreciation in FSI to disregard in mak-
ing the adjustments under § 56A(c)(13).
Commenters indicated that an adjustment
to AFSI that (i) reduces AFSI by the qual-
ified production costs deducted under
§ 181, and (ii) disregards the correspond-
ing depreciation or other basis recovery
included in FSI would reduce compliance
burden, resulting in consistent treatment
of the single AFS asset for CAMT pur-
poses.
(5) Materials and supplies costs.
Amounts paid or incurred to acquire or pro-
duce materials and supplies, as defined in
§ 1.162-3(c)(1), are deductible only under
§ 162 in accordance with the applicable
timing rules provided in § 1.162-3. See
generally § 1.162-3(a). The definition of
“materials and supplies” includes amounts
paid or incurred to acquire certain tangible
property that has an acquisition or produc-
tion cost of $200 or less. See § 1.162-3(c)
(1) and (c)(1)(iv). Thus, amounts paid or
incurred for such low acquisition cost tan-
gible property are deductible only under
§ 162, notwithstanding that such prop-
erty is used in the taxpayer’s business
and, absent the requirement to be treated
as materials and supplies under § 1.162-
3, would otherwise be tangible property
depreciable under § 168. For AFS pur-
poses, amounts incurred for such tangible
property may be capitalized and depreci-
ated depending on the useful life of the
property.
Neither § 56A(c) nor the CAMT Pro-
posed Regulations provide an adjustment
to AFSI for deductions under § 162 with
respect to amounts paid or incurred for
materials and supplies. Accordingly, a
CAMT entity would include in its AFSI
for a taxable year the amounts attributable
to materials and supplies that are included
in the CAMT entity’s FSI for such tax-
able year. Commenters noted that CAMT
entities in certain industries for which
a majority of the core business assets
consist of low acquisition cost materials
are required to capitalize and depreciate
the costs of such materials and supplies
for AFS and FSI purposes. Comment-
ers noted that these CAMT entities may
experience elevated AFSI compared to
other taxpayers for which the majority of
core business assets comprise section 168
property, because those other taxpayers
can adjust AFSI for the section 168 prop-
erty under § 56A(c)(13). Accordingly,
commenters requested that an adjustment
to AFSI be provided for amounts deducted
under § 162 with respect to materials and
supplies described in § 1.162-3(c)(1)(iv)
that are, for AFS purposes, capitalized in

March 9, 2026 642 Bulletin No. 2026–11
the year incurred and depreciated once the
corresponding asset is placed in service.
(6) Attribute reduction for, and income
from non-transactional bankruptcy emer-
gences of, financially troubled compa-
nies. Commenters have asked whether
the rules in § 1.1502-28 (concerning the
application of § 108 to tax consolidated
groups) would apply for purposes of
the attribute reduction interim guidance
provided in sections 4.03(4) and (5) of
Notice 2025-46. Commenters also have
inquired about the intended application
of fresh start accounting upon the emer-
gence from bankruptcy of a financially
troubled company as provided in section
4.04(2)(a) of Notice 2025-46, noting that
the approach under that section appears to
differ from the approach under proposed
§ 1.56A-21(d)(2).
(7) AFSI adjustments required under
proposed § 1.56A-4 in certain cases in
which basis in foreign stock is deter-
mined under § 358. The Treasury Depart-
ment and the IRS received a comment
with respect to the per se application of
the proposed two-year rule described
in section 2.03(2) of this notice. The
commenter noted that the proposed rule
would require a full inclusion in AFSI
of the excess of regular basis over hypo-
thetical CAMT basis if a single dollar of
basis in the stock received is “taken into
account” within two years. To address
this potential concern, the commenter
recommended converting the per se
aspect of the proposed rule into a rebutta-
ble presumption.
The Treasury Department and the IRS
also received a comment with respect to
the application of the proposed two-year
rule to taxable years before publication of
the CAMT Proposed Regulations. Specif-
ically, the commenter noted that taxpayers
could not have anticipated the proposed
rules for determining basis in assets,
including stock of foreign corporations
and, absent knowledge of the CAMT Pro-
posed Regulations, would not have had
the necessary tools to evaluate the impact
of certain transactions for purposes of
determining applicable corporation status
or CAMT liability.
(8) AFSI adjustments with respect to
transactions involving intangible property
subject to § 367(d). One commenter noted
that proposed § 1.56A-4 effectively would
incorporate the rules of § 367(d) in the
case of a transaction involving intangible
property such that there would be adjust-
ments to a U.S. transferor’s AFSI but
would be no corresponding adjustments
with respect to the adjusted net income or
loss of a transferee foreign corporation.
Accordingly, the commenter requested
that the transferee foreign corporation
in a § 367(d) transaction be permitted to
reduce its adjusted net income or loss by
the amount of the deemed royalty for reg-
ular tax purposes to eliminate the double
taxation result.
SECTION 3. AFSI ADJUSTMENT FOR
CERTAIN TAX REPAIR DEDUCTIONS
.01 Purpose. In response to comments
received on the CAMT Proposed Regu-
lations and Notice 2025-49, this section
3 modifies the interim guidance provided
in section 4 of Notice 2025-49 to allow
a CAMT entity to adjust AFSI for cer-
tain tax repair deductions. The Treasury
Department and the IRS anticipate that
the forthcoming proposed regulations
will include proposed regulations under
§ 56A(c)(15) and (e) consistent with the
guidance provided in this section 3. In
addition, the Treasury Department and
the IRS anticipate that the forthcom-
ing proposed regulations will propose a
modification to proposed § 1.59-2(c) to
provide that, for purposes of applying
the average annual AFSI test in § 59(k)
(1)(B) or proposed § 1.59-2(c), AFSI
would be determined without regard to
the AFSI adjustment provided in this
section 3.
.02 Definitions. For purposes of this
section 3:
(1) Book COGS repair depreciation.
The term book COGS repair depreciation
means any of the following items that are
taken into account as part of cost of goods
sold (or as part of the computation of gain
or loss from the sale or exchange of prop-
erty held for sale) in FSI with respect to an
eligible repair asset—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which the
complete disposition of the eligible repair
asset occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible repair
asset occurs for AFS purposes; or
(c) Impairment loss reversal.
(2) Book repair depreciation expense.
The term book repair depreciation expense
means any of the following items, other
than book COGS repair depreciation, that
are taken into account in FSI with respect
to an eligible repair asset—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which the
complete disposition of the eligible repair
asset occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible repair
asset occurs for AFS purposes; or
(c) Impairment loss reversal.
(3) Book repair inventoriable depreci-
ation. The term book repair inventoriable
depreciation means any of the following
items that are included in inventoriable
cost (or capitalized as part of the cost of
non-inventory property held for sale) in
the CAMT entity’s AFS with respect to an
eligible repair asset—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which the
complete disposition of the eligible repair
asset occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible repair
asset occurs for AFS purposes; or
(c) Impairment loss reversal.
(4) Deductible tax repair. The term
deductible tax repair means any amount
paid or incurred for regular tax purposes
for repairs and maintenance during a tax-
able year and allowed as a deduction in
computing taxable income for such tax-
able year under § 1.162-4 with respect to
an eligible repair asset, including amounts
deductible under § 1.162-4 that are capi-
talized (other than under § 263) and sub-
sequently recovered as a deduction in
computing taxable income (even if the
deduction is allowed under a provision of
the Code other than § 162, for example
under §§ 616 and 617).
(5) Eligible repair asset. The term
eligible repair asset means any cost that

Bulletin No. 2026–11 643 March 9, 2026
meets the requirements in section 3.03 of
this notice.
(6) Tax COGS repair deduction. The
term tax COGS repair deduction means—
(a) Any amount deducted under
§ 1.162-4 with respect to an eligible repair
asset that is capitalized to inventory under
§ 263A and is recovered as part of cost of
goods sold in computing gross income;
and
(b) Any amount deducted under
§ 1.162-4 with respect to an eligible repair
asset that is capitalized under § 263A to the
basis of property described in § 1221(a)
(1) that is not inventory and is recovered
as part of the computation of gain or loss
from the sale or exchange of such property
in computing taxable income.
(7) Tax repair section 481(a) adjust-
ment. The term tax repair section 481(a)
adjustment means an adjustment (or por-
tion thereof) required under § 481(a) for
a change in method of accounting (other
than a change in method of account-
ing described in section 3.02(8) of this
notice) that impacts the timing of tak-
ing into account a deductible tax repair
with respect to an eligible repair asset
in computing taxable income (for exam-
ple, a change in method of accounting
involving a change from deducting a
deductible tax repair to capitalizing such
deductible tax repair under § 263A or
another capitalization provision, or vice
versa).
(8) Tax repair capitalization method
change. The term tax repair capitalization
method change means a change in method
of accounting for regular tax purposes
involving a change from capitalizing and
depreciating a deductible tax repair under
§ 263 to deducting the deductible tax
repair under § 1.162-4 (or vice versa).
(9) Tax repair capitalization method
change AFSI adjustment.
(a) In general. The term tax repair cap-
italization method change AFSI adjust-
ment means an adjustment to AFSI that
is required under section 3.04(6) of this
notice if a CAMT entity makes a tax repair
capitalization method change and previ-
ously made an adjustment to AFSI under
section 3 of this notice in a preceding
taxable year. The tax repair capitalization
method change AFSI adjustment is com-
puted separately for each tax repair cap-
italization method change and equals the
difference between the following amounts
computed as of the beginning of the tax
year of change—
(i) The cumulative amount of adjust-
ments to AFSI under section 3.04 of this
notice with respect to the cost(s) subject
to the tax repair capitalization method
change that were made with respect to the
preceding taxable years beginning with
the first taxable year for which the CAMT
entity makes an adjustment to AFSI under
section 3 of this notice, and beginning
before the tax year of change; and
(ii) The cumulative amount of adjust-
ments to AFSI under section 3.04 of this
notice with respect to the cost(s) subject to
the tax repair capitalization method change
that would have been made with respect
to the preceding taxable years beginning
with the first taxable year for which the
CAMT entity makes an adjustment to
AFSI under section 3 of this notice, and
beginning before the tax year of change,
if the new method of accounting for the
cost(s) had been applied for regular tax
purposes in those taxable years.
(b) Coordination with proposed
§ 1.56A-15. The amount of the tax repair
capitalization method change AFSI adjust-
ment is adjusted, as necessary, to prevent
the duplication of any adjustment to AFSI
due to a tax repair capitalization method
change also constituting a tax capitaliza-
tion method change (as described in pro-
posed § 1.56A-15(b)(10)) with respect to
section 168 property.
.03 Eligible repair asset.
(1) In general. For purposes of section
3 of this notice, an eligible repair asset
means any cost that is—
(a) Attributable to repair or mainte-
nance of section 168 property (as defined
in proposed § 1.56A-15(c));
(b) Capitalized and subject to deprecia-
tion for AFS purposes;
(c) Not capitalized as section 168 prop-
erty under § 263 for regular tax purposes;
and
(d) Not capitalized to section 168 prop-
erty under § 263A or another capitaliza-
tion provision for regular tax purposes.
(2) Placed in service in any taxable
year. An eligible repair asset includes any
eligible repair asset placed in service by
the CAMT entity for AFS purposes in any
taxable year, including taxable years end-
ing on or before December 31, 2019.
.04 AFSI adjustment for eligible repair
assets. The AFSI of a CAMT entity for a
taxable year may be adjusted as follows:
(1) Reduced by the tax COGS repair
deduction with respect to eligible repair
assets, but only to the extent of the amount
taken into account—
(a) As part of cost of goods sold in
computing gross income for the taxable
year; or
(b) As part of the computation of gain or
loss from the sale or exchange of non-in-
ventory property described in § 1221(a)
(1) that is included in taxable income, or
deducted in computing taxable income,
respectively, for the taxable year;
(2) Reduced by deductible tax repairs
with respect to eligible repair assets, but
only to the extent of the amount taken as
a deduction in computing taxable income
for the taxable year;
(3) Adjusted to disregard book COGS
repair depreciation and book repair depre-
ciation expense with respect to eligible
repair assets;
(4) Reduced by any tax repair section
481(a) adjustment with respect to eligible
repair assets that is negative, but only to
the extent of the amount of the adjustment
that is taken into account in computing
taxable income for the taxable year;
(5) Increased by any tax repair section
481(a) adjustment with respect to eligible
repair assets that is positive, but only to
the extent of the amount of the adjustment
that is taken into account in computing
taxable income for the taxable year; and
(6) Increased or decreased, as appro-
priate, by any tax repair capitalization
method change AFSI adjustment in accor-
dance with section 3.06 of this notice.
.05 Determining the book COGS repair
depreciation and tax COGS repair deduc-
tion adjustments.
(1) In general. Except as provided in
section 3.05(2) of this notice, a CAMT
entity is required to—
(a) Apply the method(s) of accounting
the CAMT entity uses for AFS purposes to
determine the book COGS repair depreci-
ation adjustment under section 3.04(3) of
this notice; and
(b) Apply the method(s) of account-
ing under § 263A that the CAMT entity
uses for regular tax purposes (and, in the
case of inventory property, the method(s)
of accounting that the CAMT entity uses

March 9, 2026 644 Bulletin No. 2026–11
to identify and value inventories under
§§ 471 and 472) to determine the tax
COGS repair deduction adjustment under
section 3.04(1) of this notice.
(2) Reasonable method. A CAMT
entity is permitted to use any reasonable
method to determine book repair inven-
toriable depreciation in ending inventory
with respect to eligible repair assets for
AFS purposes, or to determine deduct-
ible tax repairs included in ending inven-
tory for regular tax purposes, or both, for
purposes of determining the book COGS
repair depreciation adjustment under sec-
tion 3.04(3) of this notice or the tax COGS
repair deduction adjustment under section
3.04(1) of this notice, provided that such
reasonable method is consistent with and
reflects the method(s) of accounting the
CAMT entity uses for AFS purposes or
regular tax purposes, respectively. A rea-
sonable method would include a method
similar to the simplifying methods pro-
vided in proposed § 1.56A-15(d)(3)(ii)(A)
through (C).
(3) Reporting requirement. If a CAMT
entity makes the AFSI adjustment pro-
vided in section 3.04 of this notice for a
taxable year, it must attach a statement to
its Federal income tax return for such tax-
able year. The statement—
(a) Must be titled “AFSI adjustment for
tax repair deductions”,
(b) Must include the CAMT entity’s
name, address, and taxpayer identification
number, and
(c) If a CAMT entity uses a reason-
able method under section 3.05(2) of
this notice, it must: include a statement
whether the CAMT entity is using such
reasonable method to determine (i) book
repair inventoriable depreciation in end-
ing inventory with respect to eligible
repair assets for purposes of determin-
ing the book COGS repair depreciation
adjustment, or (ii) deductible tax repairs
in ending inventory for purposes of deter-
mining the tax COGS repair deduction
adjustment for the taxable year, or (iii)
both; describe such reasonable method(s)
used; and certify that such reasonable
method(s) used are consistent with, and
reflect, the method(s) of accounting the
CAMT entity uses for AFS purposes or
regular tax purposes, as applicable.
.06 Adjustment period for tax repair
capitalization method change AFSI
adjustments. The adjustment period for a
tax repair capitalization method change
AFSI adjustment is determined in a man-
ner consistent with the proposed rules
provided in proposed § 1.56A-15(d)(4)
(adjustment period for tax capitalization
method change AFSI adjustments with
respect to section 168 property).
.07 Consistency requirement. If a
CAMT entity relies on section 3 of this
notice and makes the AFSI adjustment
provided in section 3 of this notice for a
taxable year, it must continue to make the
adjustment provided in section 3 of this
notice for all subsequent taxable years or
until such time as prescribed by the Trea-
sury Department and the IRS in regula-
tions or guidance published in the Internal
Revenue Bulletin.
.08 Determining applicable corpo-
ration status. For purposes of applying
the average annual AFSI test in § 59(k)
(1)(B) or proposed § 1.59-2(c), AFSI is
determined without regard to the AFSI
adjustment provided in section 3 of this
notice.
SECTION 4. AFSI ADJUSTMENT FOR
ELIGIBLE INTANGIBLES
.01 Purpose. In response to com-
ments received on Notice 2025-49, this
section 4 modifies the interim guidance
provided in section 9 of Notice 2025-
49 to allow a CAMT entity to adjust
AFSI for amortization under § 197
attributable to goodwill and certain
other intangibles. The Treasury Depart-
ment and the IRS anticipate that the
forthcoming proposed regulations will
include proposed regulations under
§ 56A(c)(15) and (e) consistent with the
guidance provided in this section 4. In
addition, the Treasury Department and
the IRS anticipate that the forthcom-
ing proposed regulations will propose
modifications to proposed § 1.59-2 to
provide that, for purposes of applying
the average annual AFSI test in § 59(k)
(1)(B) or proposed § 1.59-2(c), AFSI is
determined without regard to the AFSI
adjustments provided in sections 4.04
and 4.07 of this notice.
.02 Definitions. For purposes of this
section 4:
(1) Covered book intangible amorti-
zation expense. The term covered book
intangible amortization expense means
any of the following items, other than cov-
ered book intangible COGS amortization,
that are taken into account in FSI with
respect to an eligible intangible—
(a) Amortization expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs prior to the taxable year in which
the disposition of the eligible intangible
occurs for regular tax purposes; or
(c) Impairment loss reversal.
(2) Covered book intangible COGS
amortization. The term covered book
intangible COGS amortization means any
of the following items that are taken into
account as part of cost of goods sold (or
as part of the computation of gain or loss
from the sale or exchange of property held
for sale) in FSI with respect to an eligible
intangible—
(a) Amortization expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs prior to the taxable year in which
the disposition of the eligible intangible
occurs for regular tax purposes; or
(c) Impairment loss reversal.
(3) Covered book intangible expense.
The term covered book intangible expense
means an amount (if any), other than cov-
ered book intangible COGS amortization
and covered book intangible amortization
expense, that--
(a) Reduces FSI; and
(b) Is reflected in the basis for depre-
ciation, as defined in §§ 1.167(g)-1 and
1.197-2(f)(1)(ii) (determined without
regard to any basis adjustments described
in § 1016(a)(2) and (3)), of an eligible
intangible for regular tax purposes.
(4) Covered book inventoriable intan-
gible expense. The term covered book
inventoriable intangible expense means
any of the following items that are
included in inventoriable cost (or capital-
ized as part of the cost of non-inventory
property held for sale) in the AFS of a
CAMT entity with respect to an eligible
intangible—
(a) Amortization expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs prior to the taxable year in which
the disposition of the eligible intangible
occurs for regular tax purposes; or
(c) Impairment loss reversal.

Bulletin No. 2026–11 645 March 9, 2026
(5) Deductible intangible tax amorti-
zation. The term deductible intangible tax
amortization means eligible intangible tax
amortization, as defined in section 4.02(7)
of this notice, that is allowed as a deduc-
tion in computing taxable income.
(6) Eligible intangible. The term eli-
gible intangible means an intangible that
meets the requirements of section 4.03 of
this notice.
(7) Eligible intangible tax amorti-
zation. The term eligible intangible tax
amortization means amortization deduc-
tions allowed under § 197 with respect to
an eligible intangible.
(8) Eligible intangible tax COGS
amortization. The term eligible intangible
tax COGS amortization means:
(a) The eligible intangible tax amortiza-
tion capitalized to inventory under § 263A
and recovered as part of cost of goods sold
in computing gross income; and
(b) The eligible intangible tax amor-
tization capitalized under § 263A to the
basis of property described in § 1221(a)
(1) that is not inventory and is recovered
as part of the computation of gain or loss
from the sale or exchange of such property
in computing taxable income.
(9) Tax intangible amortization section
481(a) adjustment. The term tax intangi-
ble amortization section 481(a) adjustment
means an adjustment (or portion thereof)
required under § 481(a) for a change in
method of accounting that impacts the timing
of taking into account eligible intangible tax
amortization in computing taxable income
(for example, a change in method of account-
ing involving a change from deducting eligi-
ble tax amortization to capitalizing eligible
tax amortization under § 263A or another
capitalization provision, or vice versa).
.03 Eligible intangible.
(1) In general. For purposes of sec-
tion 4 of this notice, an eligible intangible
means an amortizable section 197 intangi-
ble under § 197(c) that is either:
(a) Goodwill, or
(b) An intangible (other than an intan-
gible described in § 56A(c)(14)(B)), the
AFS basis of which is not permitted to be
amortized or otherwise recovered for AFS
purposes other than by impairment or dis-
position.
(2) Intangibles that are not depreciable
under § 197 for regular tax purposes. Eli-
gible intangibles do not include an intan-
gible that is not subject to amortization
under § 197 for regular tax purposes.
.04 AFSI adjustment for eligible intan-
gibles.
(1) In general. The AFSI of a CAMT
entity for a taxable year may be adjusted
as follows:
(a) Reduced by eligible intangible tax
COGS amortization, but only to the extent
of the amount recovered—
(i) As part of cost of goods sold in com-
puting gross income for the taxable year;
or
(ii) As part of the computation of
gain or loss from the sale or exchange
of non-inventory property described in
§ 1221(a)(1) that is included in taxable
income, or deducted in computing taxable
income, respectively, for the taxable year;
(b) Reduced by deductible intangible
tax amortization with respect to an eligi-
ble intangible, but only to the extent of the
amount allowed as a deduction in comput-
ing taxable income for the taxable year;
(c) Adjusted to disregard covered book
intangible amortization expense, covered
book intangible COGS amortization, and
covered book intangible expense, and
amounts described in section 4.07(6)
of this notice with respect to an eligible
intangible, including an eligible intangible
placed in service for regular tax purposes
in a taxable year subsequent to the taxable
year the eligible intangible is treated as
placed in service for AFS purposes;
(d) Reduced by any tax intangible
amortization section 481(a) adjustment
that is negative, but only to the extent of
the amount of the adjustment that is taken
into account in computing taxable income
for the taxable year; and
(e) Increased by any tax intangible
amortization section 481(a) adjustment
that is positive, but only to the extent of
the amount of the adjustment that is taken
into account in computing taxable income
for the taxable year.
(2) Eligible intangibles held by a part-
nership. If an eligible intangible is held by
a partnership, the CAMT entity applies
rules similar to proposed § 1.56A-16(d)
(2). However, if the CAMT entity other-
wise applies any proposed modifications
to the CAMT Proposed Regulations in
Notice 2025-28, the CAMT entity must
apply any applicable modifications in
determining the effect of the partnership’s
eligible intangible on AFSI for the taxable
year.
.05 Consistency requirement. If a
CAMT entity relies on section 4 of this
notice and makes the adjustment to AFSI
provided in section 4.04 of this notice for
a taxable year, the CAMT entity must
make the adjustment for all eligible intan-
gibles held by the CAMT entity as of the
beginning of such taxable year. This is
the case regardless of whether the eligi-
ble intangibles are attributable to one or
multiple transactions. In addition, once a
CAMT entity makes the AFSI adjustment
provided in this section 4.04 for a taxable
year, such CAMT entity must continue
making such adjustment for all subse-
quent taxable years until all such eligible
intangibles are disposed of for regular tax
purposes or such time as prescribed by the
Treasury Department and the IRS in regu-
lations or guidance published in the Inter-
nal Revenue Bulletin.
.06 Determining eligible intangible tax
COGS amortization adjustment and cov-
ered book intangible COGS amortization
adjustment.
(1) In general. Except as provided in
section 4.06(2) of this notice, a CAMT
entity is required to—
(a) Apply the method(s) of accounting
the CAMT entity uses for AFS purposes
to determine the covered book intangible
COGS amortization adjustment under sec-
tion 4.04(1)(c) of this notice; and
(b) Apply the method(s) of account-
ing under § 263A that the CAMT entity
uses for regular tax purposes (and, in the
case of inventory property, the method(s)
of accounting that the CAMT entity uses
to identify and value inventories under
§§ 471 and 472) to determine the eligible
intangible tax COGS amortization adjust-
ment under section 4.04(1)(a) of this
notice.
(2) Reasonable method. A CAMT entity
is permitted to use any reasonable method
to determine covered book inventoriable
intangible expense in ending inventory for
AFS purposes for purposes of determin-
ing the covered book intangible COGS
amortization adjustment under section
4.04(1)(c) of this notice, or to determine
the eligible intangible tax amortization
included in ending inventory for regular
tax purposes for purposes of determining
the eligible intangible tax COGS amorti-

March 9, 2026 646 Bulletin No. 2026–11
zation adjustment under section 4.04(1)(a)
of this notice, or both, provided that such
reasonable method is consistent with and
reflects the method(s) of accounting the
CAMT entity uses for AFS purposes or
regular tax purposes, as applicable. A rea-
sonable method would include a method
similar to the simplifying methods pro-
vided in proposed § 1.56A-15(d)(3)(ii)(A)
through (C).
(3) Reporting requirement. If a CAMT
entity makes the AFSI adjustment pro-
vided in section 4.04 of this notice for a
taxable year, it must attach a statement to
its Federal income tax return for such tax-
able year. The statement—
(a) Must be titled “AFSI adjustment for
eligible intangibles”,
(b) Must include the CAMT entity’s
name, address, and taxpayer identification
number, and
(c) If a CAMT entity uses a reason-
able method under section 4.06(2) of this
notice, it must: include a statement whether
the CAMT entity is using such reasonable
method to determine (i) covered book
inventoriable intangible expense in end-
ing inventory for AFS purposes for pur-
poses of determining the covered book
intangible COGS amortization adjustment
under section 4.04(1)(c) of Notice 2026-7
for the taxable year, or (ii) eligible intan-
gible tax amortization in ending inventory
for regular tax purposes for purposes of
determining the eligible tax COGS amor-
tization adjustment under section 4.04(1)
(a) of Notice 2026-7, as applicable, for the
taxable year, or (iii) both.
.07 AFSI adjustment upon disposition
of eligible intangibles.
(1) In general. In the case of a CAMT
entity that makes the adjustment provided
in section 4.04 of this notice to determine
AFSI for any taxable year, except as oth-
erwise provided in section 4.07(7) of this
notice, if such CAMT entity disposes of
an eligible intangible for regular tax pur-
poses, the CAMT entity must adjust AFSI
for the taxable year in which the disposi-
tion occurs to redetermine any gain or loss
taken into account in the CAMT entity’s
FSI with respect to the disposition for the
taxable year (including a gain or loss of
zero) by reference to the CAMT basis (in
lieu of the AFS basis) of the eligible intan-
gible as of the date of the disposition (dis-
position date), as determined under sec-
tion 4.07(2) of this notice. To the extent
the CAMT basis of the eligible intangible
is negative (for example, because of differ-
ences between regular tax basis and AFS
basis), this negative amount is required to
be recognized as AFSI gain upon disposi-
tion of the eligible intangible.
(2) Adjustments to the AFS basis of eli-
gible intangible. For purposes of applying
section 4.07(1) of this notice, the CAMT
basis of the eligible intangible as of the
disposition date is the AFS basis of the
eligible intangible as of that date—
(a) Decreased by the full amount of
eligible intangible tax amortization with
respect to such eligible intangible as of
the disposition date (regardless of whether
any amount of eligible intangible tax
amortization was capitalized for regu-
lar tax purposes and not yet taken into
account as a reduction to AFSI through an
adjustment described in section 4.04(1)(a)
of this notice as of the disposition date);
(b) Increased by the amount of any
covered book intangible expense with
respect to the eligible intangible;
(c) Increased by the amount of any
covered book intangible amortization
expense and covered book intangible
COGS amortization that reduced the AFS
basis of such eligible intangible as of the
disposition date;
(d) Decreased by any reduction to the
CAMT basis of such eligible intangible
under proposed § 1.56A-21, taking into
account the proposed modifications to
proposed § 1.56A-21 contained in Notice
2025-46 if the CAMT entity otherwise
applies such modifications in determining
AFSI for the taxable year; and
(e) Increased or decreased, as appropri-
ate, by the amount of any adjustments to
AFS basis that are disregarded for AFSI
and CAMT basis purposes under the
CAMT Proposed Regulations with respect
to such eligible intangible, taking into
account any proposed modifications to the
CAMT Proposed Regulations contained
in Notice 2025-46 if the CAMT entity
otherwise applies such modifications in
determining AFSI for the taxable year.
(3) Adjustments to the AFS basis of eli-
gible intangibles. For purposes of deter-
mining the CAMT basis of the eligible
intangible under section 4.07(2) of this
notice, the CAMT entity applies rules
similar to proposed § 1.56A-16(e)(2)(ii).
(4) Disposition of eligible intangibles
by a partnership. If a partnership dis-
poses of an eligible intangible, the CAMT
entity applies rules similar to proposed
§ 1.56A-16(e)(3). However, if the CAMT
entity otherwise applies any proposed
modifications to the proposed CAMT reg-
ulations in Notice 2025-28, the CAMT
entity must apply any applicable modi-
fications in determining the effect of the
disposition on AFSI for the taxable year.
(5) Treatment of amounts recognized in
FSI upon the disposition of eligible intan-
gibles. Except as otherwise provided in
the CAMT Proposed Regulations (or as
otherwise provided in Notice 2025-28 or
Notice 2025-46 if the CAMT entity applies
a proposed modification to the CAMT
Proposed Regulations contained in such
notices), if a CAMT entity disposes of
an eligible intangible for regular tax pur-
poses and recognizes gain or loss from the
disposition in its FSI, the gain or loss (as
redetermined under section 4.07(1) of this
notice) is recognized for AFSI purposes in
the taxable year of disposition, regardless
of whether any gain or loss with respect
to the disposition is realized, recognized,
deferred, or otherwise taken into account
for regular tax purposes.
(6) Subsequent AFS dispositions. If an
eligible intangible is disposed of for reg-
ular tax purposes before it is treated as
disposed of for AFS purposes, any AFS
basis recovery with respect to such eligi-
ble intangible that is reflected in FSI fol-
lowing the date such eligible intangible
is disposed of for regular tax purposes is
disregarded in determining AFSI.
(7) Intercompany transactions. If a
member of a tax consolidated group dis-
poses of an eligible intangible for regular
tax purposes in an intercompany transac-
tion, the member determines its AFSI with
respect to such disposition by applying
proposed § 1.56A-16(e)(6) or, if the mem-
ber relies on the guidance provided in sec-
tion 5 of Notice 2025-46 in determining
AFSI for the taxable year, the guidance
contained in section 5 of Notice 2025-46.
.08 Determining applicable corpora-
tion status. For purposes of applying the
average annual AFSI test in § 59(k)(1)(B)
or proposed § 1.59-2(c), AFSI is deter-
mined without regard to the AFSI adjust-
ments provided in sections 4.04 and 4.07
of this notice.

Bulletin No. 2026–11 647 March 9, 2026
SECTION 5. AFSI ADJUSTMENT
FOR DOMESTIC RESEARCH
AMORTIZATION
.01 Purpose. In response to comments
received, the Treasury Department and the
IRS anticipate that forthcoming proposed
regulations will include proposed regula-
tions issued under § 56A(c)(15) and (e)
consistent with the guidance in this sec-
tion 5, which provides an adjustment to
AFSI for certain domestic research amor-
tization for taxable years beginning after
December 31, 2024. In addition, the Trea-
sury Department and the IRS anticipate
that the forthcoming proposed regulations
will propose modifications to proposed
§ 1.59-2 to provide that, for purposes of
applying the average annual AFSI test in
§ 59(k)(1)(B) or proposed § 1.59-2(c),
AFSI is determined without regard to the
AFSI adjustment provided in section 5.03
of this notice.
.02 Definitions. For purposes of this
section 5:
(1) Book research or software devel-
opment amortization. The term book
research or software development amor-
tization means amortization taken into
account in determining FSI for a taxable
year beginning after December 31, 2024,
with respect to:
(a) Amounts incurred for AFS purposes
in a taxable year beginning after Decem-
ber 31, 2021, and before January 1, 2025;
(b) That are attributable to domestic
research or experimental expenditures (as
defined in section 5.02(2) of this notice);
and
(c) That are taken into account as TCJA
domestic § 174 amortization for regular
tax purposes.
(2) Domestic research or experimen-
tal expenditures. The term domestic
research or experimental expenditures
has the meaning provided in § 174A(b).
In addition, the term domestic research or
experimental expenditures also includes
any amount paid or incurred in connec-
tion with the development of any software
that is treated as a research or experimen-
tal expenditure under § 174A(d)(3) if
such amount is not an expenditure that is
attributable to foreign research (within the
meaning of § 41(d)(4)(F)).
(3) TCJA domestic § 174 amortization.
The term TCJA domestic § 174 amorti-
zation means amortization taken under
TCJA § 174(a)(2)(B) in a taxable year
beginning after December 31, 2024, with
respect to domestic research or exper-
imental expenditures that were paid or
incurred for regular tax purposes and capi-
talized under TCJA § 174 in a taxable year
beginning after December 31, 2021, and
before January 1, 2025. TCJA domestic
§ 174 amortization also includes amorti-
zation taken under § 70302(f)(2)(A) of the
OBBBA with respect to domestic research
or experimental expenditures that were
paid or incurred for regular tax purposes
and capitalized under TCJA § 174 in a
taxable year beginning after December 31,
2021, and before January 1, 2025.
(4) TCJA § 174. The term TCJA § 174
means § 174, as in effect after amendment
by § 13206(a) of the TCJA, and prior
to amendment by § 70302(b)(1) of the
OBBBA.
(5) Tax research capitalization method
change. The term tax research capital-
ization method change means a change
in method of accounting for regular tax
purposes involving a change from capital-
izing and amortizing a cost as a domes-
tic research or experimental expendi-
ture under TCJA § 174 to capitalizing or
deducting the cost under another section
of the Code (or vice versa), or a change
in the treatment of costs that were capital-
ized and amortized as domestic research
or experimental expenditures under TCJA
§ 174 (such as a change from amortizing
such costs over a recovery period incon-
sistent with TCJA § 174(a)(2)(B) to amor-
tizing such costs over a recovery period
consistent with TCJA § 174(a)(2)(B)).
(6) Tax research capitalization method
change AFSI adjustment. The term tax
research capitalization method change
AFSI adjustment means an adjustment to
AFSI that is required under section 5.03(3)
of this notice if a CAMT entity makes a
tax research capitalization method change
for a taxable year beginning after Decem-
ber 31, 2025, and previously made an
adjustment to AFSI under section 5 of this
notice in a preceding taxable year. The
tax research capitalization method change
AFSI adjustment is computed separately
for each tax research capitalization method
change and equals the difference between
the following amounts computed as of the
beginning of the tax year of change—
(a) The cumulative amount of adjust-
ments to AFSI under section 5.03 of this
notice with respect to the cost(s) subject
to the tax research capitalization method
change that were made with respect to the
preceding taxable years beginning with
the first taxable year for which the CAMT
entity makes an adjustment to AFSI under
section 5 of this notice, and beginning
before the tax year of change; and
(b) The cumulative amount of adjust-
ments to AFSI under section 5.03 of this
notice with respect to the cost(s) subject
to the tax research capitalization method
change that would have been made with
respect to the preceding taxable years
beginning with the first taxable year for
which the CAMT entity makes an adjust-
ment to AFSI under section 5 of this
notice, and beginning before the tax year
of change, if the new method of accounting
for the cost(s) had been applied for regular
tax purposes in those taxable years.
.03 AFSI adjustment for domestic
research amortization. For taxable years
beginning after December 31, 2024, the
AFSI of a CAMT entity for a taxable year
may be adjusted as follows:
(1) Reduced by TCJA domestic § 174
amortization, but only to the extent of the
amount taken into account in computing
taxable income for the taxable year;
(2) Adjusted to disregard book research
or software development amortization;
and
(3) Increased or decreased, as appro-
priate, by any tax research capitalization
method change AFSI adjustment in accor-
dance with section 5.04 of this notice.
.04 Adjustment period for tax research
capitalization method change AFSI
adjustment. The adjustment period for a
tax research capitalization method change
AFSI adjustment is determined consis-
tent with the proposed rules provided in
proposed § 1.56A-15(d)(4) (adjustment
period for tax capitalization method
change AFSI adjustments with respect to
section 168 property).
.05 Consistency requirement. If a
CAMT entity relies on section 5 of this
notice and makes the AFSI adjustment
provided in section 5 of this notice for a
taxable year, it must continue to make the
adjustment provided in section 5 of this
notice for all relevant subsequent taxable
years or until such time as prescribed by

March 9, 2026 648 Bulletin No. 2026–11
the Treasury Department and the IRS in
regulations or guidance published in the
Internal Revenue Bulletin.
.06 Determining applicable corpo-
ration status. For purposes of applying
the average annual AFSI test in § 59(k)
(1)(B) or proposed § 1.59-2(c), AFSI is
determined without regard to the AFSI
adjustment provided in section 5.03 of
this notice.
SECTION 6. AFSI ADJUSTMENT FOR
QUALIFIED PRODUCTION COSTS
UNDER SECTION 181
.01 Purpose. In response to comments
received on the CAMT Proposed Regu-
lations, the Treasury Department and the
IRS anticipate that the forthcoming pro-
posed regulations will include proposed
regulations under § 56A(c)(15) and (e)
consistent with the guidance provided
in this section 6 to allow a CAMT entity
owner to adjust AFSI for qualified pro-
duction costs under § 181. In addition,
the Treasury Department and the IRS
anticipate that the forthcoming proposed
regulations will propose a modification to
proposed § 1.59-2(c) to provide that, for
purposes of applying the average annual
AFSI test in § 59(k)(1)(B) or proposed
§ 1.59-2(c), AFSI is determined without
regard to the AFSI adjustment provided in
this section 6.
.02 Definitions. For purposes of this
section 6:
(1) CAMT entity owner. The term
CAMT entity owner means the CAMT
entity that is the owner of a qualified pro-
duction, as defined in section 6.02(4) of
this notice, determined consistent with the
rules provided in § 1.181-1(a)(2).
(2) Deductible qualified production
costs. The term deductible qualified pro-
duction costs means the qualified produc-
tion costs, as defined in section 6.02(8) of
this notice, that are allowed as a deduction
in computing taxable income.
(3) Production costs. In the case of a
qualified film or television production, as
defined in § 1.181-3(a), the term produc-
tion costs has the same meaning as pro-
vided in § 1.181-1(a)(3). In the case of
a qualified live theatrical production, as
defined in § 181(e), and a qualified sound
recording, as defined in § 181(f), the term
production costs means the costs attribut-
able to a qualified live theatrical produc-
tion and qualified sound recordings deter-
mined consistent with the rules provided
in § 1.181-1(a)(3).
(4) Qualified production. The term
qualified production means a qualified
film or television production (as defined
in § 1.181-3(a)), a qualified live theatrical
production (as defined in § 181(e)), or a
qualified sound recording production (as
defined in § 181(f)).
(5) Qualified production book COGS
depreciation. The term qualified produc-
tion book COGS depreciation means any
of the following items that are taken into
account as part of cost of goods sold (or
as part of the computation of gain or loss
from the sale or exchange of property held
for sale) in FSI with respect to qualified
production costs—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which the
complete disposition of the asset corre-
sponding to the qualified production costs
occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the asset corre-
sponding to the qualified production costs
occurs for AFS purposes; or
(c) Impairment loss reversal.
(6) Qualified production book expense.
The term qualified production book
expense means any of the following items,
other than qualified production book
COGS depreciation, that are taken into
account in FSI with respect to qualified
production costs—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which the
complete disposition of the asset corre-
sponding to the qualified production costs
occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the asset corre-
sponding to the qualified production costs
occurs for AFS purposes; or
(c) Impairment loss reversal.
(7) Qualified production book inven-
toriable expense. The term qualified
production book inventoriable expense
means any of the following items that are
included in inventoriable cost (or capital-
ized as part of the cost of non-inventory
property held for sale) in the AFS of a
CAMT entity owner with respect to quali-
fied production costs—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which the
complete disposition of the asset corre-
sponding to the qualified production costs
occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the asset corre-
sponding to the qualified production costs
occurs for AFS purposes; or
(c) Impairment loss reversal.
(8) Qualified production costs. The
term qualified production costs means
the production costs of any qualified
production allowed as a deduction under
§ 181(a).
(9) Qualified production tax COGS.
The term qualified production tax COGS
means:
(a) The qualified production costs cap-
italized to inventory under § 263A and
recovered as part of cost of goods sold in
computing gross income; and
(b) Qualified production costs capital-
ized under § 263A to the basis of prop-
erty described in § 1221(a)(1) that is not
inventory and is recovered as part of the
computation of gain or loss from the sale
or exchange of such property in comput-
ing taxable income.
(10) Tax qualified production costs
section 481(a) adjustment. The term tax
qualified production costs section 481(a)
adjustment means an adjustment (or por-
tion thereof) required under § 481(a) for
a change in method of accounting (other
than a change in method of account-
ing described in section 6.02(11) of this
notice) that impacts the timing of taking
into account qualified production costs in
computing taxable income (for example, a
change in method of accounting involving
a change from deducting qualified produc-
tion costs to capitalizing such costs under
§ 263A or another capitalization provi-
sion, or vice versa).
(11) Tax qualified production costs cap-
italization method change. The term tax
qualified production costs capitalization
method change means a change in method

Bulletin No. 2026–11 649 March 9, 2026
of accounting for regular tax purposes
involving a change from capitalizing and
depreciating qualified production costs to
deducting such costs (or vice versa). This
term also includes a change in the treat-
ment of qualified production costs due to a
recapture event described in § 1.181-4(a)
(1) and (2).
(12) Tax qualified production costs
capitalization method change AFSI
adjustment.
(a) In general. The term tax qualified
production costs capitalization method
change AFSI adjustment means an adjust-
ment to AFSI that is required under sec-
tion 6.03(1)(f) of this notice if a CAMT
entity owner makes a tax qualified produc-
tion costs capitalization method change
and previously made an adjustment to
AFSI under section 6 of this notice in a
preceding taxable year. The tax qualified
production costs capitalization method
change AFSI adjustment is computed sep-
arately for each tax qualified production
costs capitalization method change and
equals the difference between the follow-
ing amounts computed as of the beginning
of the tax year of change:
(i) The cumulative amount of adjust-
ments to AFSI under section 6.03 of this
notice with respect to the cost(s) subject
to the tax qualified production costs capi-
talization method change that were made
with respect to the preceding taxable years
beginning with the first taxable year for
which the CAMT entity owner makes an
adjustment to AFSI under section 6 of this
notice, and beginning before the tax year
of change; and
(ii) The cumulative amount of adjust-
ments to AFSI under section 6.03 of
this notice with respect to the cost(s)
subject to the tax qualified production
costs capitalization method change that
would have been made with respect to
the preceding taxable years beginning
with the first taxable year for which the
CAMT entity owner makes an adjust-
ment to AFSI under section 6 of this
notice, and beginning before the tax year
of change, if the new method of account-
ing, or treatment, for the cost(s) had been
applied for regular tax purposes in those
taxable years.
(b) Coordination with proposed
§ 1.56A-15. The amount of the tax
qualified production costs capitaliza-
tion method change AFSI adjustment
is adjusted, as necessary, to prevent the
duplication of any adjustment to AFSI due
to the tax qualified production costs cap-
italization method change also constitut-
ing a tax capitalization method change (as
described in proposed § 1.56A-15(b)(10)).
.03 AFSI adjustment for qualified pro-
duction costs.
(1) In general. The AFSI of a CAMT
entity owner for a taxable year may be
adjusted as follows—
(a) Reduced by qualified production
tax COGS, but only to the extent of the
amount recovered—
(i) As part of cost of goods sold in com-
puting gross income for the taxable year,
or
(ii) As part of the computation of
gain or loss from the sale or exchange
of non-inventory property described in
§ 1221(a)(1) that is included in taxable
income, or deducted in computing taxable
income, respectively, for the taxable year;
(b) Reduced by the amount of deduct-
ible qualified production costs, but only
to the extent allowed as a deduction in
computing taxable income for the taxable
year; and
(c) Adjusted to disregard qualified
production book COGS depreciation and
qualified production book expense with
respect to any qualified production costs
paid or incurred in any taxable year,
including taxable years ending on or
before December 31, 2019.
(d) Reduced by any tax qualified pro-
duction costs section 481(a) adjustment
that is negative, but only to the extent of
the amount of the adjustment that is taken
into account in computing taxable income
for the taxable year;
(e) Increased by any tax qualified pro-
duction costs section 481(a) adjustment
that is positive, but only to the extent of
the amount of the adjustment that is taken
into account in computing taxable income
for the taxable year; and
(f) Increased or decreased, as appro-
priate, by any tax qualified production
costs capitalization method change AFSI
adjustment in accordance with section
6.05 of this notice.
.04 Determining qualified production
tax COGS adjustment and qualified pro-
duction book COGS depreciation adjust-
ment.
(1) In general. Except as provided in
section 6.04(2) of this notice, a CAMT
entity owner is required to—
(a) Apply the method(s) of accounting
the CAMT entity owner uses for AFS pur-
poses to determine the qualified produc-
tion book COGS depreciation adjustment
under section 6.03(1)(c) of this notice; and
(b) Apply the method(s) of accounting
under § 263A that the CAMT entity owner
uses for regular tax purposes (and, in the
case of inventory property, the method(s)
of accounting that the CAMT entity owner
uses to identify and value inventories
under §§ 471 and 472) to determine the
qualified production tax COGS adjust-
ment under section 6.03(1)(a) of this
notice.
(2) Reasonable method. A CAMT
entity owner is permitted to use any rea-
sonable method to determine qualified
production book inventoriable expense
in ending inventory for AFS purposes for
purposes of determining the qualified pro-
duction book COGS depreciation adjust-
ment under section 6.03(1)(c) of this
notice, or to determine the qualified pro-
duction costs included in ending inventory
for regular tax purposes for purposes of
determining the qualified production tax
COGS adjustment under section 6.03(1)
(a) of this notice, or both, provided that
such reasonable method is consistent with
and reflects the method(s) of accounting
the CAMT entity owner uses for AFS pur-
poses or regular tax purposes, as applica-
ble. A reasonable method would include a
method similar to the simplifying methods
provided in proposed § 1.56A-15(d)(3)(ii)
(A) through (C).
(3) Reporting requirement. If a CAMT
entity owner makes the AFSI adjustment
provided in section 6.03 of this notice for
a taxable year, it must attach a statement
to its Federal income tax return for such
taxable year. The statement—
(a) Must be titled “AFSI adjustment for
qualified production costs under § 181”,
(b) Must include the CAMT entity
owner’s name, address, and taxpayer
identification number, and
(c) If a CAMT entity owner uses a rea-
sonable method under section 6.04(2) of
this notice, it must: include a statement
whether the CAMT entity owner is using
such reasonable method to determine (i)
qualified production book inventoriable

March 9, 2026 650 Bulletin No. 2026–11
expense in ending inventory for AFS
purposes for purposes of determining the
qualified production book COGS depreci-
ation adjustment under section 6.03(1)(c)
of Notice 2026-7 for the taxable year, or
(ii) qualified production costs in ending
inventory for regular tax purposes for pur-
poses of determining the qualified produc-
tion tax COGS adjustment under section
6.03(1)(a) of Notice 2026-7 for the tax-
able year, or (iii) both; describe such rea-
sonable method(s) used; and certify that
such reasonable method(s) used are con-
sistent with, and reflect, the method(s) of
accounting the CAMT entity owner uses
for AFS purposes or regular tax purposes,
as applicable.
.05 Adjustment period for tax qualified
production costs capitalization method
change AFSI adjustment. The adjust-
ment period for a tax qualified production
costs capitalization method change AFSI
adjustment is determined consistent with
the proposed rules provided in proposed
§ 1.56A-15(d)(4) (adjustment period for
tax capitalization method change AFSI
adjustments with respect to section 168
property).
.06 Consistency requirement. If a
CAMT entity owner relies on section 6
of this notice and makes the adjustment
to AFSI provided in section 6.03 of this
notice for a taxable year, it must continue
to make the adjustment provided in sec-
tion 6.03 of this notice for all subsequent
taxable years until all AFS assets corre-
sponding to any qualified production costs
are disposed of for AFS purposes or such
time as prescribed by the Treasury Depart-
ment and the IRS in regulations or guid-
ance published in the Internal Revenue
Bulletin.
.07 Determining applicable corpo-
ration status. For purposes of applying
the average annual AFSI test in § 59(k)
(1)(B) or proposed § 1.59-2(c), AFSI is
determined without regard to the AFSI
adjustments provided in section 6.03 of
this notice.
SECTION 7. AFSI ADJUSTMENT
FOR ELIGIBLE MATERIALS AND
SUPPLIES
.01 Purpose. In response to comments
received on the CAMT Proposed Regu-
lations, the Treasury Department and the
IRS anticipate that the forthcoming pro-
posed regulations will include proposed
regulations under § 56A(c)(15) and (e)
consistent with the guidance provided
in this section 7 to allow a CAMT entity
to adjust AFSI for eligible materials
and supplies. In addition, the Treasury
Department and the IRS anticipate that
the forthcoming proposed regulations
will propose a modification to proposed
§ 1.59-2(c) to provide that, for purposes
of applying the average annual AFSI test
in § 59(k)(1)(B) or proposed § 1.59-2(c),
AFSI is determined without regard to the
AFSI adjustment provided in this section
7.
.02 Definitions. For purposes of this
section 7:
(1) Deductible eligible materials and
supplies. The term deductible eligible
materials and supplies means the eligi-
ble materials and supplies, as defined in
section 7.02(2) of this notice, that are
allowed as a deduction in computing tax-
able income.
(2) Eligible materials and supplies.
The term eligible materials and supplies
means amounts paid or incurred by a
CAMT entity—
(a) To acquire tangible property that
is described in § 1.162-3(c)(1)(iv) if such
amounts otherwise meet the definition of
materials and supplies in § 1.162-3(c)(1),
(b) That the CAMT entity treats as
deductible in accordance with the applica-
ble rules in § 1.162-3, and
(c) That are capitalized and depreciated
over the useful life of the property for AFS
purposes.
(3) Eligible materials and supplies
book COGS depreciation. The term eli-
gible materials and supplies book COGS
depreciation means any of the following
items that are taken into account as part
of cost of goods sold (or as part of the
computation of gain or loss from the sale
or exchange of property held for sale) in
FSI with respect to eligible materials and
supplies—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which
the complete disposition of the eligible
materials and supplies occurs for AFS
purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible mate-
rials and supplies occurs for AFS pur-
poses; or
(c) Impairment loss reversal.
(4) Eligible materials and supplies
book expense. The term eligible materials
and supplies book expense means any of
the following items, other than eligible
materials and supplies book COGS depre-
ciation, that are taken into account in FSI
with respect to eligible materials and sup-
plies—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which
the complete disposition of the eligible
materials and supplies occurs for AFS
purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible mate-
rials and supplies occurs for AFS pur-
poses; or
(c) Impairment loss reversal.
(5) Eligible materials and supplies
book inventoriable expense. The term eli-
gible materials and supplies book invento-
riable expense means any of the following
items that are included in inventoriable
cost (or capitalized as part of the cost of
non-inventory property held for sale) in
the AFS of a CAMT entity with respect to
eligible materials and supplies—
(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:
(i) Prior to the taxable year in which
the complete disposition of the eligible
materials and supplies occurs for AFS
purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible mate-
rials and supplies occurs for AFS pur-
poses; or
(c) Impairment loss reversal.
(6) Eligible materials and supplies tax
COGS. The term eligible materials and
supplies tax COGS means:
(a) The eligible materials and supplies
capitalized to inventory under § 263A and
recovered as part of cost of goods sold in
computing gross income; and
(b) The eligible materials and supplies
capitalized under § 263A to the basis of

Bulletin No. 2026–11 651 March 9, 2026
property described in § 1221(a)(1) that is
not inventory and is recovered as part of
the computation of gain or loss from the
sale or exchange of such property in com-
puting taxable income.
(7) Tax eligible materials and sup-
plies section 481(a) adjustment. The
term tax eligible materials and supplies
section 481(a) adjustment means an
adjustment (or portion thereof) required
under § 481(a) for a change in method of
accounting (other than a change in method
of accounting described in section 7.02(8)
of this notice) that impacts the timing of
taking eligible materials and supplies into
account in computing taxable income (for
example, a change in method of account-
ing involving a change from deducting
eligible materials and supplies to capital-
izing such costs under § 263A or another
capitalization provision, or vice versa).
(8) Tax eligible materials and supplies
capitalization method change. The term
tax eligible materials and supplies capi-
talization method change means a change
in method of accounting for regular tax
purposes involving a change in the classi-
fication of eligible materials and supplies
(for example, a change from treating eli-
gible materials and supplies as inventory
to treating the items as materials and sup-
plies under § 1.162-3, or a change from
capitalizing and depreciating eligible
materials and supplies to deducting such
eligible materials and supplies).
(9) Tax eligible materials and sup-
plies capitalization method change AFSI
adjustment.
(a) In general. The term tax eligible
materials and supplies capitalization
method change AFSI adjustment means an
adjustment to AFSI that is required under
section 7.03(6) of this notice if a CAMT
entity makes a tax eligible materials and
supplies capitalization method change and
previously made an adjustment to AFSI
under section 7 of this notice in a preced-
ing taxable year. The tax eligible materials
and supplies capitalization method change
AFSI adjustment is computed separately
for each tax eligible materials and sup-
plies capitalization method change and
equals the difference between the follow-
ing amounts computed as of the beginning
of the tax year of change:
(i) The cumulative amount of adjust-
ments to AFSI under section 7.03 of this
notice with respect to the cost(s) subject
to the tax eligible materials and supplies
capitalization method change that were
made with respect to the preceding tax-
able years beginning with the first taxable
year for which the CAMT entity makes an
adjustment to AFSI under section 7 of this
notice, and beginning before the tax year
of change; and
(ii) The cumulative amount of adjust-
ments to AFSI under section 7.03 of this
notice with respect to the cost(s) subject
to the tax eligible materials and supplies
capitalization method change that would
have been made with respect to the pre-
ceding taxable years beginning with the
first taxable year for which the CAMT
entity makes an adjustment to AFSI under
section 7 of this notice, and beginning
before the tax year of change, if the new
method of accounting for the cost(s) had
been applied for regular tax purposes in
those taxable years.
(b) Coordination with proposed
§ 1.56A-15. The amount of the tax eli-
gible materials and supplies capitaliza-
tion method change AFSI adjustment
is adjusted, as necessary, to prevent the
duplication of any adjustment to AFSI due
to the tax materials and supplies capital-
ization method change also constituting
a tax capitalization method change (as
described in proposed § 1.56A-15(b)(10)).
.03 AFSI adjustment for eligible mate-
rials and supplies costs. The AFSI of a
CAMT entity for a taxable year may be
adjusted as follows—
(1) Reduced by eligible materials and
supplies tax COGS, but only to the extent
of the amount recovered—
(a) As part of cost of goods sold in
computing gross income for the taxable
year, or
(b) As part of the computation of gain or
loss from the sale or exchange of non-in-
ventory property described in § 1221(a)
(1) that is included in taxable income, or
deducted in computing taxable income,
respectively, for the taxable year;
(2) Reduced by deductible eligible
materials and supplies, but only to the
extent of the amount allowed as a deduc-
tion in computing taxable income for the
taxable year;
(3) Adjusted to disregard eligible mate-
rials and supplies book COGS deprecia-
tion and eligible materials and supplies
book expense with respect to eligible
materials and supplies acquired in any
taxable year, including in taxable years
ending on or before December 31, 2019;
(4) Reduced by any tax eligible materi-
als and supplies section 481(a) adjustment
that is negative, but only to the extent of
the amount of the adjustment that is taken
into account in computing taxable income
for the taxable year;
(5) Increased by any tax eligible mate-
rials and supplies section 481(a) adjust-
ment that is positive, but only to the extent
of the amount of the adjustment that is
taken into account in computing taxable
income for the taxable year; and
(6) Increased or decreased, as appropri-
ate, by any tax eligible materials and sup-
plies capitalization method change AFSI
adjustment in accordance with section
7.05 of this notice.
.04 Determining eligible materials and
supplies tax COGS adjustment and eligi-
ble materials and supplies book COGS
depreciation adjustment.
(1) In general. Except as provided in
section 7.04(2) of this notice, a CAMT
entity is required to—
(a) Apply the method(s) of accounting
the CAMT entity uses for AFS purposes to
determine the eligible materials and sup-
plies book COGS depreciation adjustment
under section 7.03(3) of this notice; and
(b) Apply the method(s) of account-
ing under § 263A that the CAMT entity
uses for regular tax purposes (and, in the
case of inventory property, the method(s)
of accounting that the CAMT entity uses
to identify and value inventories under
§§ 471 and 472) to determine the eligible
materials and supplies tax COGS adjust-
ment under section 7.03(1) of this notice.
(2) Reasonable method. A CAMT
entity is permitted to use any reasonable
method to determine the eligible materials
and supplies book inventoriable expense
in ending inventory for AFS purposes for
purposes of determining the eligible mate-
rials and supplies book COGS deprecia-
tion adjustment under section 7.03(3) of
this notice, or to determine the eligible
materials and supplies included in ending
inventory for regular tax purposes for pur-
poses of determining the eligible materials
and supplies tax COGS adjustment under
section 7.03(1) of this notice, or both, pro-
vided that such reasonable method is con-

March 9, 2026 652 Bulletin No. 2026–11
sistent with and reflects the method(s) of
accounting the CAMT entity uses for AFS
purposes or regular tax purposes, as appli-
cable. A reasonable method would include
a method similar to the simplifying meth-
ods provided in proposed § 1.56A-15(d)
(3)(ii)(A) through (C).
(3) Reporting requirement. If a CAMT
entity makes the AFSI adjustment pro-
vided in section 7 of this notice for a tax-
able year, it must attach a statement to its
Federal income tax return for such taxable
year. The statement—
(a) Must be titled “AFSI adjustment for
eligible materials and supplies”,
(b) Must include the CAMT entity’s
name, address, and taxpayer identification
number, and
(c) If a CAMT entity uses a reasonable
method under section 7.04(2) of this notice,
it must: include a statement whether the
CAMT entity is using such a reasonable
method to determine (i) eligible materials
and supplies book inventoriable expense
in ending inventory for AFS purposes for
purposes of determining the eligible mate-
rials and supplies book COGS depreciation
adjustment under section 7.03(3) of Notice
2026-7 for the taxable year, or (ii) eligible
materials and supplies in ending inventory
for regular tax purposes for purposes of
determining the eligible materials and sup-
plies tax COGS adjustment under section
7.03(1) of Notice 2026-7 for the taxable
year, or (iii) both; describe such reasonable
method(s) used; and certify that such rea-
sonable method(s) used are consistent with,
and reflect, the method(s) of accounting the
CAMT entity uses for AFS purposes or
regular tax purposes, as applicable.
.05 Adjustment period for tax eligi-
ble materials and supplies capitalization
method change AFSI adjustment. The
adjustment period for a tax eligible mate-
rials and supplies capitalization method
change AFSI adjustment is determined
consistent with the proposed rules pro-
vided in proposed § 1.56A-15(d)(4)
(adjustment period for tax capitalization
method change AFSI adjustments with
respect to section 168 property).
.06 Consistency requirement. If a
CAMT entity relies on section 7 of this
notice and makes the adjustment to AFSI
provided in section 7.03 of this notice for
a taxable year, it must continue to make
the adjustment provided in section 7.03 of
this notice for all subsequent taxable years
until all eligible materials and supplies are
disposed of for AFS purposes or such time
as prescribed by the Treasury Department
and the IRS in regulations or guidance pub-
lished in the Internal Revenue Bulletin.
.07 Determining applicable corpo-
ration status. For purposes of applying
the average annual AFSI test in § 59(k)
(1)(B) or proposed § 1.59-2(c), AFSI is
determined without regard to the AFSI
adjustments provided in section 7.03 of
this notice.
SECTION 8. TROUBLED COMPANIES
.01 Purpose. In response to comments
received on Notice 2025-46, this section
8 clarifies the attribute reduction interim
guidance for financially troubled compa-
nies provided in section 4.03 of Notice
2025-46 and clarifies and modifies the
interim guidance provided in section
4.04(2)(a) of Notice 2025-46 regarding
fresh start accounting gain and loss on
non-transactional bankruptcy emergences.
The Treasury Department and the IRS
anticipate that the forthcoming proposed
regulations will include proposed regula-
tions under § 56A(c)(15) and (e) consis-
tent with the guidance provided in this
section 8.
.02 Application of § 1.1502-28. For
purposes of applying the attribute reduc-
tion interim guidance provided in sec-
tions 4.03(4) and (5) of Notice 2025-46,
§ 1.1502-28 applies.
.03 AFSI consequences resulting from
emergence from bankruptcy. Solely with
regard to the emergence from bankruptcy
of a CAMT entity, the CAMT entity deter-
mines its CAMT consequences resulting
from that emergence (and not from a
discharge of indebtedness or a domestic
covered asset transaction, as provided in
sections 4.03 and 4.04(3)(a) of Notice
2025-46, respectively) by—
(1) Disregarding any resulting gain
or loss that is reflected in the FSI of the
CAMT entity; and
(2) Determining the CAMT basis of
any assets (other than the regular tax
basis in the stock of a foreign corpora-
tion) of the CAMT entity by disregarding
any adjustment to the AFS basis of those
assets resulting from the emergence from
bankruptcy.
SECTION 9. PROPOSED COVERED
ASSET TRANSACTION SECTION 358
ANTI-AVOIDANCE RULE
.01 Purpose. The Treasury Department
and the IRS anticipate that the forthcom-
ing proposed regulations will modify
the proposed two-year rule in proposed
§ 1.56A-4(f)(1)(ii) consistent with the
guidance described in this section 9.
.02 Proposed two-year rule rebuttable
presumption. For purposes of proposed
§ 1.56A-4(f)(1), if within two years of the
date the stock of a foreign corporation is
received in a covered asset transaction, the
basis in such stock is taken into account, in
whole or in part, in determining the AFSI
of the recipient CAMT entity or another
CAMT entity, the covered asset transac-
tion would be presumed to have a principal
purpose to avoid treatment of such CAMT
entity as an applicable corporation or to
reduce or otherwise avoid a liability under
§ 55(a). The presumption described in the
preceding sentence may be rebutted by
facts and circumstances clearly establishing
that the covered asset transaction was not
undertaken with such a principal purpose.
.03 Procedure for rebutting presumption.
In order to rebut the proposed two-year rule
rebuttable presumption described in sec-
tion 9.02 of this notice, a CAMT entity that
would otherwise be required to take into
account the increase to AFSI under pro-
posed § 1.56A-4(f) for the taxable year in
which the stock of the foreign corporation
is received must attach a statement rebut-
ting the presumption to the Form 4626,
Alternative Minimum Tax – Corporations,
filed with the CAMT entity’s return for the
taxable year in which the event triggering
application of the proposed two-year rule
(as modified by this notice) occurs. The
statement must describe the facts and cir-
cumstances supporting the rebuttal and
be in accordance with any procedures set
forth in forms, instructions, or guidance
published in the Internal Revenue Bulletin.
SECTION 10. AFSI ADJUSTMENT
WITH RESPECT TO TRANSACTIONS
INVOLVING INTANGIBLE
PROPERTY SUBJECT TO SECTION
367(d)
.01 Purpose. The Treasury Department
and the IRS anticipate that the forthcom-

Bulletin No. 2026–11 653 March 9, 2026
ing proposed regulations will address cer-
tain CAMT consequences of transactions
involving intangible property subject to
§ 367(d) consistent with the guidance
described in this section 10.
.02 AFSI adjustment for transactions
involving the transfer of intangible prop-
erty subject to § 367(d).
(1) Shareholder-level adjustment. A
CAMT entity that is required to include
an amount in gross income under § 367(d)
for regular tax purposes for a taxable year
increases its AFSI for such year by such
amount. If regular tax basis is relevant in
determining an amount included in gross
income under § 367(d), CAMT basis is
substituted for regular tax basis in deter-
mining the amount included in AFSI.
This would be the case, for example, if an
election is made under § 1.367(d)-1(g)(2)
or 1.367(d)-1T(g)(2) to treat a transfer of
intangible property to a foreign corpora-
tion as a sale, or if there is a disposition
of the intangible property by the foreign
corporation described in § 1.367(d)-1(f)
(4)(i)(A).
(2) Foreign corporation-level adjust-
ment. A foreign corporation that properly
treats a deemed payment as an allowable
deduction under § 1.367(d)-1(c)(2)(ii)
or (e)(2)(ii) or reduces its gross income
under § 1.367(d)-1(f)(2)(i) for regular
tax purposes for a taxable year reduces
its adjusted net income or loss (or AFSI,
if the foreign corporation is an applicable
corporation and the deduction or reduction
reduces income described in § 882(b)) for
such year by the amount of the deemed
payment or the amount of the reduction
in gross income. The preceding sentence
applies only to the extent such amounts
increase the AFSI of a CAMT entity under
proposed § 1.56A-4 as described in this
section 10.
SECTION 11. APPLICABILITY DATES
AND RELIANCE
.01 Applicability dates. It is anticipated
that the forthcoming proposed regulations
will propose rules consistent with the
guidance described in sections 3 through
10 of this notice that will apply for tax-
able years beginning on or after the date
the final regulation addressing the AFSI
adjustment or other modification to the
CAMT Proposed Regulations described in
a respective section of this notice is pub-
lished in the Federal Register.
.02 Reliance.
(1) In general. Subject to section
11.02(2), (3), and (4) of this notice, for
all taxable years beginning before the
date such forthcoming proposed regula-
tions are published in the Federal Reg-
ister, taxpayers may rely on the guid-
ance in this notice. In addition, reliance
on section 3, 4, 5, 6 or 7 of this notice
is conditioned on the taxpayer meeting
the consistency requirement set forth in
that section. A taxpayer’s reliance on
any of the guidance in this notice for a
taxable year will not cause the taxpayer
to become subject to, or to violate, the
proposed reliance rules, including the
consistency requirements, provided in
section 3.02(1) of Notice 2025-49 for
such taxable year.
(2) Sections 9 and 10 of this notice.
(a) A taxpayer that relies on proposed
§ 1.56A-4 may rely on section 9 of this
notice for taxable years beginning before
the date the forthcoming proposed reg-
ulations are published in the Federal
Register, provided that the requirements
described in section 3.02(1)(b) of Notice
2025-49 are satisfied for all such taxable
years beginning with the first taxable year
with respect to which the taxpayer relies
on section 9 of this notice.
(b) A taxpayer that relies on proposed
§ 1.56A-4 may rely on section 10 of this
notice for taxable years beginning before
the date the forthcoming proposed reg-
ulations are published in the Federal
Register, provided that the requirements
described in section 3.02(1)(b) of Notice
2025-49 are satisfied for all such taxable
years beginning with the first taxable year
with respect to which the taxpayer relies
on section 10 of this notice. A taxpayer
that does not rely on section 10 of this
notice may continue to rely on proposed
§§ 1.56A-4 or 1.56A-6, as applicable, sub-
ject to the requirements of section 3.02(1)
of Notice 2025-49.
(3) Section 4 of Notice 2025-49. As
an alternative to relying on section 4
of Notice 2025-49 as modified by sec-
tion 3 of this notice for all taxable years
beginning before the date the forthcom-
ing proposed regulations are published
in the Federal Register, a taxpayer may
instead choose to rely on section 4 of
Notice 2025-49 as originally published
for taxable years beginning before Feb-
ruary 18, 2026, and rely on section 4 of
Notice 2025-49 as modified by section 3
of this notice for taxable years beginning
on or after February 18, 2026, and before
the date that the forthcoming proposed
regulations are published in the Federal
Register. A taxpayer who chooses to rely
on section 4 of Notice 2025-49 for taxable
years beginning on or after February 18,
2026, may do so only if the taxpayer fol-
lows such section as modified by section 3
of this notice.
(4) Section 9 of Notice 2025-49. As
an alternative to relying on section 9
of Notice 2025-49 as modified by sec-
tion 4 of this notice for all taxable years
beginning before the date the forthcom-
ing proposed regulations are published
in the Federal Register, a taxpayer may
instead choose to rely on section 9 of
Notice 2025-49 as originally published
for taxable years beginning before Feb-
ruary 18, 2026, and rely on section 9 of
Notice 2025-49 as modified by section 4
of this notice for taxable years beginning
on or after February 18, 2026, and before
the date that the forthcoming proposed
regulations are published in the Federal
Register. A taxpayer who chooses to rely
on section 9 of Notice 2025-49 for taxable
years beginning on or after February 18,
2026, may do so only if the taxpayer fol-
lows such section as modified by section 4
of this notice.
SECTION 12. EFFECT ON OTHER
DOCUMENTS
Section 4 of Notice 2025-46 is clarified
and modified. Sections 4 and 9 of Notice
2025-49 are modified.
SECTION 13. PAPERWORK
REDUCTION ACT
The Paperwork Reduction Act of 1995
(44 U.S.C. §§ 3501-3520) (PRA) requires
that a Federal agency obtain the approval
of the Office of Management and Bud-
get (OMB) before collecting information
from the public, whether such collection
of information is mandatory, voluntary, or
required to obtain or retain a benefit. An
agency may not conduct or sponsor, and a
person is not required to respond to, a col-

March 9, 2026 654 Bulletin No. 2026–11
lection of information unless the collec-
tion of information displays a valid OMB
control number.
The collections of information in this
notice are in sections 3.05(3), 4.06(3),
6.04(3), 7.04(3), and 9.03 of this notice.
Section 3.05(3) of this notice requires
a CAMT entity to file a statement with its
Federal income tax return if it makes the
AFSI adjustment provided in section 3.04
of this notice for a taxable year. The infor-
mation requested in section 3.05(3) of this
notice is required to obtain the benefit of
making the AFSI adjustment described in
section 3 of this notice. This information
will be used by the IRS to confirm com-
pliance with the guidance in section 3 of
this notice. The likely respondents are cor-
porations.
Section 4.06(3) of this notice requires
a CAMT entity to file a statement with its
Federal income tax return if it makes the
AFSI adjustment provided in section 4.04
of this notice for a taxable year. The infor-
mation requested in section 4.06(3) of this
notice is required to obtain the benefit of
making the AFSI adjustment described in
section 4 of this notice. This information
will be used by the IRS to confirm com-
pliance with the guidance in section 4 of
this notice. The likely respondents are cor-
porations.
Section 6.04(3) of this notice requires
a CAMT entity owner to file a statement
with its Federal income tax return if it
makes the AFSI adjustment provided in
section 6.03 of this notice for a taxable
year. The information requested in section
6.04(3) of this notice is required to obtain
the benefit of making the AFSI adjustment
described in section 6 of this notice. This
information will be used by the IRS to
confirm compliance with the guidance in
section 6 of this notice. The likely respon-
dents are corporations.
Section 7.04(3) of this notice requires
a CAMT entity to file a statement with its
Federal income tax return if it makes the
AFSI adjustment provided in section 7 of
this notice for a taxable year. The infor-
mation requested in section 7.04(3) of this
notice is required to obtain the benefit of
making the AFSI adjustment described in
section 7 of this notice. This information
will be used by the IRS to confirm com-
pliance with the guidance in section 7 of
this notice. The likely respondents are cor-
porations.
Section 9.03 of this notice requires a
CAMT entity to file a statement with its
Form 4626 if it chooses to rebut the two-
year rebuttable presumption described
in section 9.02 of this notice. The infor-
mation requested in section 9.03 of this
notice is required to obtain the benefit of
the two-year rebuttable presumption and
will be used by the IRS to confirm com-
pliance with the guidance in section 9 of
this notice. The likely respondents are cor-
porations.
The reporting requirements in this
notice will be included within OMB con-
trol number 1545-0123 in accordance
with the PRA procedures under 5 CFR
§ 1320.10. The recordkeeping require-
ments are considered general tax records
under § 1.6001-1(e). For PRA purposes,
general tax records are already approved
by OMB under 1545-0123 for business
filers.
Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by § 6103.
SECTION 14. EFFECTIVE DATE
This notice is effective on February 18,
2026.
SECTION 15. DRAFTING AND
CONTACT INFORMATION
The principal authors of this notice are
personnel from the Office of Associate
Chief Counsel (Income Tax & Account-
ing) and the Office of Associate Chief
Counsel (International). Other personnel
from the Treasury Department and the
IRS participated in its development. For
further information regarding this notice,
contact the Office of the Associate Chief
Counsel (Income Tax & Accounting),
Branch 7, at (202) 317-7005 (not a toll-
free number). For further information
regarding section 8 of this notice, contact
the Office of the Associate Chief Counsel
(Corporate), Branch 5, at (202) 317-5363
(not a toll-free number). For further infor-
mation regarding sections 9 and 10 of this
notice, contact the Office of Associate
Chief Counsel (International), Branch 4,
at (202) 317-6937 (not a toll-free number).
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2026-14
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month aver-
age segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the inter-
est rate on 30-year Treasury securities
under § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008 and the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer plans (except for CSEC plans
under § 414(y)) pursuant to § 412. Section
430(h)(2) specifies the interest rates that
must be used to determine a plan’s target
normal cost and funding target. Under
this provision, present value is generally
determined using three 24-month average
interest rates (“segment rates”), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.
1
However, an elec-
1
Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).

Bulletin No. 2026–11 655 March 9, 2026
tion may be made under § 430(h)(2)(D)
(ii) to use the monthly yield curve in place
of the segment rates.
Section 1.430(h)(2)-1(d) provides
rules for determining the monthly cor-
porate bond yield curve, and § 1.430(h)
(2)-1(c) provides rules for determining
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Con-
sistent with the methodology specified in
§ 1.430(h)(2)-1(d), the monthly corporate
bond yield curve derived from January
2026 data is in Table 2026-1 at the end
of this notice. The spot first, second, and
third segment rates for the month of Janu-
ary 2026 are, respectively, 4.03, 5.20, and
6.12.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percent-
ages of the corresponding 25-year aver-
age segment rates. Those percentages are
95% and 105% for plan years beginning
in 2025 and 2026. For this purpose, any
25-year average segment rate that is less
than 5% is deemed to be 5%. The 25-year
average segment rates for plan years
beginning in 2025 and 2026 were pub-
lished in Notice 2024-67, 2024-41 I.R.B.
726 and Notice 2025-47, 2025-40 I.R.B.
441, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corporate
bond segment rates applicable for Feb-
ruary 2026 without adjustment for the
25-year average segment rate limits are as
follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable Month First Segment Second Segment Third Segment
February 2026 4.54 5.26 5.78
The adjusted 24-month average seg-
ment rates set forth in the chart below
reflect § 430(h)(2)(C)(iv) of the Code. The
24-month averages applicable for Febru-
ary 2026, adjusted to be within the appli-
cable minimum and maximum percent-
ages of the corresponding 25-year average
segment rates in accordance with § 430(h)
(2)(C)(iv), are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning InApplicable MonthFirst SegmentSecond SegmentThird Segment
2025February 20264.755.265.78
2026February 20264.755.255.78
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the mini-
mum funding requirements that apply
to multiemployer plans pursuant to
§ 412. Section 431(c)(6)(B) specifies
a minimum amount for the full-fund-
ing limitation described in § 431(c)(6)
(A), based on the plan’s current liabil-
ity. Section 431(c)(6)(E)(ii)(I) provides
that the interest rate used to calculate
current liability for this purpose must
be no more than 5 percent above and
no more than 10 percent below the
weighted average of the rates of interest
on 30-year Treasury securities during
the four-year period ending on the last
day before the beginning of the plan
year. Notice 88-73, 1988-2 C.B. 383,
provides guidelines for determining the
weighted average interest rate. The rate
of interest on 30-year Treasury securi-
ties for January 2026 is 4.84 percent.
The Service determined this rate as
the average of the daily determinations
of yield on the 30-year Treasury bond
maturing in November 2055. For plan
years beginning in February 2026, the
weighted average of the rates of interest
on 30-year Treasury securities and the
permissible range of rates used to calcu-
late current liability are as follows:
Treasury Weighted Average Rates
For Plan Years Beginning In30-Year Treasury Weighted AveragePermissible Range 90% to 105%
February 20264.403.96 to 4.62

March 9, 2026 656 Bulletin No. 2026–11
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Section 1.417(e)-1(d)(3) pro-
vides guidelines for determining the min-
imum present value segment rates. Pursu-
ant to that section, the minimum present
value segment rates determined for Janu-
ary 2026 are as follows:
Minimum Present Value Segment Rates
Month First Segment Second Segment Third Segment
January 2026 4.03 5.20 6.12
DRAFTING INFORMATION
The principal author of this notice
is Tom Morgan of the Office of Associ-
ate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Tony Montanaro at
626-927-1475 (not toll-free number).

Bulletin No. 2026–11 657 March 9, 2026
Table 2026-1
Monthly Yield Curve for January 2026
Derived from January 2026 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.53.7920.55.7640.56.1660.56.2980.56.36
1.03.8421.05.7841.06.1661.06.3081.06.36
1.53.8921.55.8041.56.1761.56.3081.56.36
2.03.9422.05.8242.06.1762.06.3082.06.37
2.53.9922.55.8342.56.1862.56.3082.56.37
3.04.0523.05.8543.06.1863.06.3083.06.37
3.54.1123.55.8743.56.1963.56.3183.56.37
4.04.1724.05.8844.06.1964.06.3184.06.37
4.54.2324.55.8944.56.2064.56.3184.56.37
5.04.3025.05.9145.06.2065.06.3185.06.37
5.54.3725.55.9245.56.2065.56.3285.56.37
6.04.4426.05.9346.06.2166.06.3286.06.38
6.54.5226.55.9446.56.2166.56.3286.56.38
7.04.5927.05.9547.06.2267.06.3287.06.38
7.54.6627.55.9747.56.2267.56.3287.56.38
8.04.7328.05.9848.06.2268.06.3288.06.38
8.54.8028.55.9948.56.2368.56.3388.56.38
9.04.8729.06.0049.06.2369.06.3389.06.38
9.54.9429.56.0149.56.2369.56.3389.56.38
10.05.0030.06.0150.06.2470.06.3390.06.38
10.55.0630.56.0250.56.2470.56.3390.56.39
11.05.1131.06.0351.06.2471.06.3391.06.39
11.55.1731.56.0451.56.2571.56.3491.56.39
12.05.2232.06.0552.06.2572.06.3492.06.39
12.55.2732.56.0652.56.2572.56.3492.56.39
13.05.3133.06.0753.06.2673.06.3493.06.39
13.55.3533.56.0753.56.2673.56.3493.56.39
14.05.3934.06.0854.06.2674.06.3494.06.39
14.55.4334.56.0954.56.2674.56.3594.56.39
15.05.4735.06.0955.06.2775.06.3595.06.39
15.55.5035.56.1055.56.2775.56.3595.56.39
16.05.5436.06.1156.06.2776.06.3596.06.40
16.55.5736.56.1156.56.2776.56.3596.56.40
17.05.6037.06.1257.06.2877.06.3597.06.40
17.55.6237.56.1357.56.2877.56.3597.56.40
18.05.6538.06.1358.06.2878.06.3698.06.40
18.55.6738.56.1458.56.2878.56.3698.56.40
19.05.7039.06.1459.06.2979.06.3699.06.40
19.55.7239.56.1559.56.2979.56.3699.56.40
20.05.7440.06.1560.06.2980.06.36100.06.40

March 9, 2026 658 Bulletin No. 2026–11
Guidance to Apply
Interim Safe Harbors for
Purposes of Determining
a Taxpayer’s Material
Assistance from a
Prohibited Foreign Entity;
Other Prohibited Foreign
Entity Guidance
Notice 2026-15
SECTION 1. PURPOSE
This notice describes interim guidance
regarding restrictions to certain energy
credits under the Internal Revenue Code
(Code),
1
with respect to status as, and
sourcing from, a prohibited foreign entity
(PFE). These restrictions were enacted by
Public Law 119-21, 139 Stat. 72 (July 4,
2025), commonly known as the One, Big,
Beautiful Bill Act (OBBBA). Section 3 of
this notice describes rules addressing mate-
rial assistance from a PFE that the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) intend to include in proposed regula-
tions (forthcoming proposed regulations).
Section 4 of this notice describes interim
safe harbor guidance under §§ 45X, 45Y,
and 48E for determining a qualified facil-
ity’s, energy storage technology’s (EST),
or eligible component’s material assis-
tance cost ratio (MACR) for purposes of
determining whether there was material
assistance from a PFE. Section 5 of this
notice addresses certain PFE restrictions
that the Treasury Department and the IRS
intend to include in the forthcoming pro-
posed regulations. Sections 6, 7, and 8 of
this notice, respectively, provides a glos-
sary of certain defined terms; a request for
comments; and guidance on substantiation
and the ability of taxpayers to rely on the
guidance provided in sections 3 through 5
of this notice. The Treasury Department
and the IRS intend to issue more compre-
hensive proposed regulations and other
guidance with respect to the definitions of
a PFE and material assistance from a PFE.
SECTION 2. BACKGROUND
.01 Overview of §§ 45Y, 48E, and
45X and OBBBA Amendments Related to
PFEs.
Sections 45Y, 48E, and 45X were added
to the Code by §§ 13701(a), 13702(a),
and 13502(a), respectively, of Public
Law 117-169, 136 Stat. 1818, 1971-1997
(August 16, 2022), commonly known
as the Inflation Reduction Act of 2022
(IRA). Sections 70512(b)(1), 70513(b)
(1), and 70514(c)(1) of the OBBBA added
new §§ 45Y(b)(1)(E);
2
48E(b)(6)
3
and (c)
(3); and 45X(c)(1)(C), respectively, to the
Code to provide that the terms qualified
facility, EST, and eligible component do
not include items that include material
assistance from a PFE.
4
The OBBBA also
amended § 7701 to add the definitions of
the terms “prohibited foreign entity” and
“material assistance from a prohibited
foreign entity.”
5
In addition, the OBBBA
created § 6695B and amended §§ 45Q,
45U, 45X, 45Y, 45Z, 48E, 50, 139L, 6417,
6418, 6501, and 6662 to add provisions
relating to PFEs.
6

(1) Section 45Y: Clean Electricity Pro-
duction Credit
Section 45Y(a)(1) provides a produc-
tion credit for kilowatt hours of electricity
produced by the taxpayer at a qualified
facility and either (1) sold by the taxpayer
to an unrelated party during the taxable
year or, (2) in the case of a qualified facil-
ity equipped with a metering device which
is owned or operated by an unrelated per-
son, sold, consumed, or stored by the tax-
payer during the taxable year.
Section 45Y(b)(1)(A) generally defines
the term “qualified facility” for purposes
of § 45Y as a facility which is used for the
generation of electricity, which is placed
in service after December 31, 2024, and
for which the greenhouse gas emissions
rate is not greater than zero.
Section 45Y(b)(1)(C) provides that a
qualified facility includes a new unit or
additions of capacity placed in service
after December 31, 2024, in connection
with an existing facility used for the gen-
eration of electricity with a greenhouse
gas emissions rate not greater than zero,
which was placed in service before Janu-
ary 1, 2025, but only to the extent of the
increased amount of electricity produced
at the facility by reason of such new unit
or additions of capacity (Incremental Pro-
duction Rule).
Section 45Y(b)(1)(E), as added by the
OBBBA, provides that a qualified facility
does not include any facility for which
construction begins after December 31,
2025, if the construction of such facility
includes any material assistance from a
PFE (as defined in § 7701(a)(52)).
Sections 1.45Y-4(d)(1) provides that a
facility may qualify as originally placed
in service even if it contains some used
components of property within the unit
of qualified facility, provided the fair
market value of the used components of
the unit of qualified facility is not more
than 20 percent of the total value of the
unit of qualified facility (80/20 Rule). The
total value of the unit of qualified facility
includes the cost of the new components
of property plus the fair market value of
the used components of property within
the unit of qualified facility.
(2) Section 48E: Clean Electricity
Investment Credit
Section 48E provides an investment
credit for any taxable year in which a qual-
ified investment is made with respect to
any qualified facility and any EST under
§ 48E, determined as a percentage of the
qualified investment in any qualified facil-
ity and any EST.
Sections 48E(b)(1)(A) and (B) provide
that a taxpayer’s qualified investment with
respect to a qualified facility is the sum of
the basis of any qualified property placed
in service by the taxpayer during the tax-
able year, which is part of the qualified
facility, plus the amount of expenditures
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
2
There are two § 45Y(b)(1)(E) in the Code. All references in this notice to § 45Y(b)(1)(E) are to the subparagraph titled, “Material Assistance from Prohibited Foreign Entities.”
3
OBBBA § 70513(b)(1)(A) also redesignated former § 48E(b)(6) as § 48E(b)(7).
4
Consistent with the usage in § 7701(a)(52), this notice uses the terms qualified facility, qualified interconnection property, energy storage technology, and eligible component throughout to
mean items that are within the definitions of those terms without regard to whether the “material assistance from a PFE” rules are satisfied.
5
See OBBBA § 70512(c).
6
See OBBBA §§ 70512(k)-(l); 70522(a), (d); 70510(a)-(b); 70514(c)(2) and (f); 70512(b)(2), (l); 70521(k); 70513(b)(2), (g); 70513(b)(3)(A)(ii), (g); 70435(a)-(c); 70512(j)(2), (l); 70512(h),
(l); 70512(i), (l); and 70512(j)(1), (l).

Bulletin No. 2026–11 659 March 9, 2026
that are paid or incurred by the taxpayer
for qualified interconnection property,
properly chargeable to the capital account
of the taxpayer, in connection with a qual-
ified facility that has a maximum net out-
put of not greater than 5 megawatts (as
measured in alternating current) and is
placed in service during the taxable year.
Section 48E(b)(3)(A) defines the
term “qualified facility” for purposes of
§ 48E as a facility which is used for the
generation of electricity, which is placed
in service after December 31, 2024, and
for which the anticipated greenhouse gas
emissions rate is not greater than zero.
Sections 48E(b)(3)(B)(i) provides that
rules similar to the rules of § 45Y(b)(1)
(C) (regarding the Incremental Production
Rule) apply for purposes of § 48E(b)(3).
Section 1.48E-4(c)(1) provides that a ret-
rofitted qualified facility or EST may qual-
ify as originally placed in service even if it
contains some used components of prop-
erty within the unit of qualified facility
or unit of EST, provided the fair market
value of the used components of the unit
of qualified facility or unit of EST is not
more than 20 percent of the total value of
the unit of qualified facility (that is, the
80/20 Rule).
Section 48E(c)(2) defines the term
“energy storage technology” by reference
to § 48(c)(6), excepting the application of
§ 48(c)(6)(D) (regarding a beginning of
construction limitation). Section 48(c)(6)
defines energy storage technology as, in
general, property (other than property pri-
marily used in the transportation of goods
or individuals and not for the production
of electricity) that receives, stores, and
delivers energy for conversion to elec-
tricity (or, in the case of hydrogen, which
stores energy), and has a nameplate capac-
ity of not less than 5 kilowatt hours, and
thermal energy storage property.
7

Section 48E(b)(2) provides that the
term “qualified property” means property
which is tangible personal property, or
other tangible property (not including a
building or its structural components), but
only if such property is used as an integral
part of the qualified facility; with respect
to which depreciation (or amortization in
lieu of depreciation) is allowable; and the
construction, reconstruction, or erection
of which is completed by the taxpayer, or
which is acquired by the taxpayer, pro-
vided the original use of such property
commences with the taxpayer.
Section 48E(b)(4) defines the term
“qualified interconnection property” by
reference to § 48(a)(8)(B) to mean any
tangible property which is part of an addi-
tion, modification, or upgrade to a trans-
mission or distribution system which is
required at or beyond the point at which
the qualified facility interconnects to such
transmission or distribution system in
order to accommodate such interconnec-
tion; is either constructed, reconstructed,
or erected by the taxpayer or the cost with
respect to the construction, reconstruction,
or erection of which is paid or incurred
by such taxpayer; and the original use
of which, pursuant to an interconnection
agreement, commences with a utility. Sec-
tion 1.48E-4(a)(2) provides that qualified
interconnection property is not part of a
qualified facility.
Section 48E(b)(6), as added by the
OBBBA, provides that qualified facility
and qualified interconnection property
do not include any facility or property
the construction, reconstruction, or erec-
tion of which begins after December 31,
2025, if the construction, reconstruction,
or erection of such facility or property
includes any material assistance from a
PFE (as defined in § 7701(a)(52)).
Section 48E(c)(3), as added by the
OBBBA, provides that energy storage
technology does not include any property
the construction of which begins after
December 31, 2025, if the construction of
such property includes any material assis-
tance from a PFE (as defined in § 7701(a)
(52)).
(3) Section 45X: Advanced Manufac-
turing Production Credit
Section 45X provides a production
credit for eligible components produced
and sold by a taxpayer to an unrelated
party, as determined under § 45X(b)(1)
for the different eligible components. Sec-
tion 45X(c)(1)(A) defines the term “eligi-
ble component” to mean any solar energy
component, any wind energy component,
any inverter described in § 45X(c)(2)
(B) through (G), any qualifying battery
component, and any applicable critical
mineral. Section 1.45X-3 and 1.45X-4
define eligible components for purposes
of § 45X.
Section 45X(c)(1)(C), as added by the
OBBBA, provides that for taxable years
beginning after July 4, 2025, the date of
the OBBBA’s enactment, the term “eli-
gible component” does not include any
property which includes any material
assistance from a PFE (as defined in
§ 7701(a)(52), as applied by substituting
“used in a product sold before January 1,
2027” for “used in a product sold before
January 1, 2030” in § 7701(a)(52)(D)(iv)
(II)(bb) (relating to existing, binding writ-
ten contracts)).
.02 Overview of § 7701: Definitions.
Section 7701 was enacted as part of
the Internal Revenue Code of 1954, Pub-
lic Law 83-591, Ch. 736, 68A Stat. 3,
911 (Aug. 16, 1954), and provides defi-
nitions for terms used in the Code. Sec-
tion 70512(c) of the OBBBA added new
§§ 7701(a)(51) and (52) to the Code.
(1) Section 7701(a)(51): Prohibited
Foreign Entity.
Section 7701(a)(51) includes detailed
rules defining a PFE. Section 7701(a)(51)
(A) defines PFE as a specified foreign
entity or a foreign-influenced entity.
Section 7701(a)(51)(B) provides that
for purposes of the PFE restrictions, the
term “specified foreign entity” means (i) a
foreign entity of concern described in sub-
paragraph (A), (B), (D), or (E) of section
9901(8) of the William M. (Mac) Thorn-
berry National Defense Authorization Act
for Fiscal Year 2021 (Public Law 116-
283; 15 U.S.C. 4651) (2021 NDAA),
8
(ii)
an entity identified as a Chinese military
company operating in the United States
in accordance with section 1260H of the
2021 NDAA (10 U.S.C. 113 note), (iii) an
7
Section 48(c)(6)(B) and (C) also define energy storage technology in the case of modifications of certain property and thermal energy storage property.
8
As enacted, § 9901(6) of the 2021 NDAA defined the term “foreign entity of concern.” Section 103(a)(2) of the CHIPS Act of 2022, Public Law 117-167, 136 Stat. 1366, 1379 (August 9,
2022), amended the 2021 NDAA by redesignating § 9901(6) as § 9901(8). Accordingly, the Treasury Department and the IRS interpret § 7701(a)(51)(B)(i)’s reference to § 9901(8) of the
2021 NDAA to be to the 2021 NDAA as amended by the CHIPS Act of 2022.

March 9, 2026 660 Bulletin No. 2026–11
entity included on a list required by clause
(i), (ii), (iv), or (v) of section 2(d)(2)(B) of
Public Law 117-78 (135 Stat. 1527), (iv)
an entity specified under section 154(b) of
the National Defense Authorization Act
for Fiscal Year 2024 (Public Law 118-31;
10 U.S.C. note prec. 4651), or (v) a for-
eign-controlled entity.
9

Section 7701(a)(51)(D) provides that
for purposes of defining a PFE, a “for-
eign-influenced entity” includes two cat-
egories of entities. In the first category,
under § 7701(a)(51)(D)(i)(I), an entity is
a “foreign-influenced entity” if, during the
taxable year (aa) a specified foreign entity
has the direct authority to appoint a cov-
ered officer of such entity, (bb) a single
specified foreign entity owns at least 25
percent of such entity, (cc) one or more
specified foreign entities own in the aggre-
gate at least 40 percent of such entity, or
(dd) at least 15 percent of the debt of such
entity has been issued, in the aggregate, to
1 or more specified foreign entities. In the
second category, under § 7701(a)(51)(D)
(i)(II), an entity is a “foreign-influenced
entity” if, during the previous taxable
year, the entity made a payment to a spec-
ified foreign entity pursuant to a contract,
agreement, or other arrangement which
entitles such specified foreign entity (or
an entity related to such specified foreign
entity) to exercise effective control over
(aa) any qualified facility or EST of the
taxpayer (or any person related to the tax-
payer), or (bb) with respect to any eligible
component produced by the taxpayer (or
any person related to the taxpayer), (AA)
the extraction, processing, or recycling of
any applicable critical mineral, or (BB)
the production of an eligible component
which is not an applicable critical mineral.
For purposes of § 7701(a)(51)(D)(i)
(II), the term “effective control” is defined
generally in § 7701(a)(51)(D)(ii)(I).
However, § 7701(a)(51)(D)(ii)(II) pro-
vides that during any period prior to the
issuance of guidance by the Secretary of
the Treasury or the Secretary’s delegate
(Secretary), the term, “effective control”
means the unrestricted contractual right
of a contractual counterparty to (aa) deter-
mine the quantity or timing of production
of an eligible component produced by the
taxpayer, (bb) determine the amount or
timing of activities related to the produc-
tion of electricity undertaken at a qualified
facility of the taxpayer or the storage of
electrical energy in EST of the taxpayer,
(cc) determine which entity may purchase
or use the output of a production unit of
the taxpayer that produces eligible com-
ponents, (dd) determine which entity may
purchase or use the output of a qualified
facility of the taxpayer, (ee) restrict access
to data critical to production or storage of
energy undertaken at a qualified facility of
the taxpayer, or to the site of production or
any part of a qualified facility or EST of
the taxpayer, to the personnel or agents of
such contractual counterparty, or (ff) on an
exclusive basis, maintain, repair, or oper-
ate any plant or equipment which is nec-
essary to the production by the taxpayer of
eligible components or electricity.
Section 7701(a)(51)(D)(ii)(III)(aa)
adds that, in general, effective control
also includes, with respect to a licensing
agreement for the provision of intellectual
property (or any other contract, agreement
or other arrangement entered into with a
contractual counterparty related to such
licensing agreement) with respect to a
qualified facility, EST, or the production
of an eligible component, any of the fol-
lowing: (AA) a contractual right retained
by the contractual counterparty to specify
or otherwise direct one or more sources of
components, subcomponents, or applica-
ble critical minerals utilized in a qualified
facility, EST, or in the production of an
eligible component; (BB) a contractual
right retained by the contractual counter-
party to direct the operation of any qual-
ified facility, any EST, or any production
unit that produces an eligible component;
(CC) a contractual right retained by the
contractual counterparty to limit the tax-
payer’s utilization of intellectual property
related to the operation of a qualified facil-
ity or EST, or in the production of an eli-
gible component; (DD) a contractual right
retained by the contractual counterparty
to receive royalties under the licensing
agreement or any similar agreement (or
payments under any related agreement)
beyond the tenth year of the agreement
(including modifications or extensions
thereof); (EE) a contractual right retained
by the contractual counterparty to direct
or otherwise require the taxpayer to enter
into an agreement for the provision of ser-
vices for a duration longer than two years
(including any modifications or extensions
thereof); (FF) such contract, agreement,
or other arrangement does not provide
the licensee with all the technical data,
information, and know-how necessary to
enable the licensee to produce the eligible
component or components subject to the
contract, agreement, or other arrangement
without further involvement from the con-
tractual counterparty or a specified foreign
entity; (GG) such contract, agreement, or
other arrangement was entered into (or
modified) on or after July 4, 2025.
10

Section 7701(a)(51)(E)(i)(I) pro-
vides that § 7701(a)(51)(C)(v) (defining
a specified foreign entity as including a
foreign-controlled entity) does not apply
in the case of any entity the securities
of which are regularly traded on (aa) a
national securities exchange which is reg-
istered with the Securities and Exchange
Commission; (bb) the national market
system established pursuant to section
11A of the Securities and Exchange Act of
1934; or (cc) any other exchange or other
market which the Secretary has deter-
mined in guidance issued under § 1296(e)
(1)(A)(ii) has rules adequate to carry out
the purposes of part VI of subchapter P of
chapter 1 of subtitle A of the Code.
Section 7701(a)(51)(E)(i)(II) provides
that § 7701(a)(51)(D)(i)(I) does not apply
in the case of any entity (aa) the securities
of which are regularly traded in a man-
9
The definition of the term “foreign-controlled entity” includes an agency or instrumentality of the government (including any level of government below the national level) of a covered
nation. § 7701(a)(51)(C)(ii). Federal tax determinations of whether an entity is an agency or instrumentality of any government typically are analyzed on a facts and circumstances basis.
In determining whether an entity is an agency or instrumentality of a U.S. State for Federal tax purposes, Federal courts have applied a test similar to the six-factor test in Rev. Rul. 57-128,
1957-1 CB 311, which generally provides guidance on whether an entity is an instrumentality for purposes of the exemptions from employment taxes under §§ 3121(b)(7) and 3306(c)(7) of
the Code. See, e.g., Bernini v. Federal Reserve Bank of St. Louis, Eighth District, 420 F. Supp. 2d 1021 (E.D. Mo. 2005); Michigan v. United States, 40 F.3d 817 (6th Cir. 1994); and Rose v.
Long Island Railroad Pension Plan, 828 F.2d 910 (2d Cir. 1987), cert. denied, 485 U.S. 936 (1988). However, whether an entity is an agency or instrumentality of any government is outside
the scope of this notice.
10
Section 7701(a)(51)(D)(ii)(III)(bb) provides an exception to the general rule under § 7701(a)(51)(D)(ii)(III)(aa), in the case of a bona fide purchase or sale of intellectual property.

Bulletin No. 2026–11 661 March 9, 2026
ner described in § 7701(a)(51)(E)(i)(I);
or (bb) for which not less than 80 percent
of the equity securities of such entity are
owned directly or indirectly by an entity
which is described in § 7701(a)(51)(E)(i)
(II)(aa).
Section 7701(a)(51)(E)(iii) provides
that, in the case of an entity described
in § 7701(a)(51)(E)(i)(II), such entity is
deemed to be a foreign-influenced entity
under § 7701(a)(51)(D)(i)(I) if one of four
conditions are met. The first three con-
ditions are provided in § 7701(a)(51)(E)
(iii)(I), which provides that an entity is
deemed to be a foreign-influenced entity
if, during the taxable year: (aa) a specified
foreign entity has the authority to appoint
a covered officer of such entity; (bb) a
single specified foreign entity required to
report its beneficial ownership under Rule
13d-3 of the Securities and Exchange Act
of 1934 (or, in the case of an exchange or
market described in § 7701(a)(51)(E)(i)
(I)(cc), an equivalent rule) owns not less
than 25 percent of such entity, or; (cc) one
or more specified foreign entities that are
required to report their beneficial owner-
ship under Rule 13d-3 of the Securities
and Exchange Act of 1934 own, in the
aggregate, not less than 40 percent of such
entity. For the fourth condition, § 7701(a)
(51)(E)(iii)(II) provides that an entity is
deemed to be a foreign-influenced entity
if such entity has issued debt, as part of an
original issuance, in excess of 15 percent
of its publicly-traded debt to one or more
specified foreign entities.
Section 7701(a)(51)(J) provides that
for purposes of applying any provision
under § 7701(a)(51), the beginning of
construction with respect to any property
is determined pursuant to rules similar to
the rules under Notice 2013-29 and Notice
2018-59 (as well as any subsequently
issued guidance clarifying, modifying, or
updating either such Notice), as in effect
on January 1, 2025.
11
(2) Section 7701(a)(52): Material
assistance from a PFE.
Section 7701(a)(52) provides rules
for determining whether a qualified facil-
ity, EST, or eligible component includes
material assistance from a PFE.
Section 7701(a)(52)(A) provides that
the term “material assistance from a
prohibited foreign entity” means, with
respect to any qualified facility or EST,
a MACR which is less than the threshold
percentage applicable under § 7701(a)(52)
(B); or, with respect to any facility which
produces eligible components, a MACR
which is less than the threshold percentage
applicable under § 7701(a)(52)(C). Sec-
tion 7701(a)(52)(B) provides applicable
threshold percentages for a qualified facil-
ity and EST based on the calendar year
during which construction of the qualified
facility or EST begins. Section 7701(a)
(52)(C) provides applicable threshold per-
centages for eligible components (solar
energy component, wind energy compo-
nent, inverter, qualifying battery compo-
nent, applicable critical mineral) based on
the calendar year during which the eligi-
ble component is sold.
Section 7701(a)(52)(D) provides rules
for determining the MACR for a qualified
facility, EST, or eligible component.
Section 7701(a)(52)(D)(i) applies
to any qualified facility (as defined in
§ 7701(a)(52)(E)(iv)) or EST (as defined
in § 7701(a)(52)(E)(ii)). Section 7701(a)
(52)(D)(i) provides that for purposes of
§ 7701(a)(52)(A)(i), the term “material
assistance cost ratio” means the amount
(expressed as a percentage) equal to the
quotient of (I) an amount equal to (aa) the
total direct costs to the taxpayer attribut-
able to all manufactured products (MPs)
(including components) which are incor-
porated into the qualified facility or EST
upon completion of construction, minus
(bb) the total direct costs to the taxpayer
attributable to all MPs (including compo-
nents) which are (AA) incorporated into
the qualified facility or EST upon com-
pletion of construction, and (BB) mined,
produced, or manufactured by a PFE,
divided by (II) the amount described in
§ 7701(a)(52)(D)(i)(I)(aa) (for purposes
of this notice, the term “Clean Electricity
MACR” means the MACR for a qualified
facility or an EST).
Section 7701(a)(52)(D)(ii) applies
to any eligible component (as defined in
§ 7701(a)(52)(E)(i)). With respect to any
facility that produces eligible components
for purposes of § 7701(a)(52)(A)(ii),
§ 7701(a)(52)(D)(ii) provides that the term
“MACR” means the amount (expressed as
a percentage) equal to the quotient of (I)
an amount equal to (aa) with respect to an
eligible component, the total direct mate-
rial costs that are paid or incurred (within
the meaning of § 461 and any regulations
issued under § 263A) by the taxpayer for
production of such eligible component,
minus (bb) with respect to an eligible
component, the total direct material costs
that are paid or incurred (within the mean-
ing of § 461 and any regulations issued
under § 263A) by the taxpayer for produc-
tion of such eligible component that are
mined, produced, or manufactured by a
PFE, divided by (II) the amount described
in § 7701(a)(52)(D)(ii)(I)(aa) (for pur-
poses of this notice, the term “Eligible
Component MACR” means the MACR
for an eligible component).
Section 7701(a)(52)(D)(iii)(I) requires
the Secretary to issue safe harbor tables
(and authorizes such other guidance as
deemed necessary) no later than Decem-
ber 31, 2026, to (aa) identify the percent-
age of total direct costs of any MP which
is attributable to a PFE, (bb) identify the
percentage of total direct material costs of
any eligible component which is attribut-
able to a PFE, and (cc) provide all rules
necessary to determine the amount of a
taxpayer’s material assistance from a PFE
within the meaning of § 7701(a)(52).
Section 7701(a)(52)(D)(iii)(II) pro-
vides that, for purposes of § 7701(a)(52),
prior to the date on which the Secretary
issues the forthcoming safe harbor tables
(and other such guidance) described in
§ 7701(a)(52)(D)(iii)(I), and for con-
struction of a qualified facility or EST
which begins on or before the date which
is 60 days after the date of issuance of
such tables, a taxpayer may (aa) use the
tables included in Notice 2025-08, 2025-8
I.R.B. 800, to establish the percentage of
the total direct costs of any listed eligible
component and any MP, and (bb) rely on a
certification by the supplier of the MP, eli-
gible component, or constituent element,
material, or subcomponent of an eligible
11
Notice 2025-42 provides guidance regarding when construction of an applicable wind facility or applicable solar facility has begun for purposes of determining whether such facility is
subject to credit termination provisions added to §§ 45Y and 48E by the OBBBA. Notice 2025-42 was issued on August 15, 2025, and is not intended to address the beginning of construction
rules for the purposes of PFE restrictions under § 7701(a)(51) and (52). See Notice 2025-42, fn 3. Accordingly, the guidance in Notice 2025-42 is inapplicable for purposes of determining
whether the PFE restrictions under § 7701(a)(51) apply.

March 9, 2026 662 Bulletin No. 2026–11
component (AA) of the total direct costs
or the total direct material costs, as appli-
cable, of such product or component that
was not produced or manufactured by a
PFE, or (BB) that such product or com-
ponent was not produced or manufactured
by a PFE.
Section 7701(a)(52)(D)(iii)(III) pro-
vides that, notwithstanding § 7701(a)(52)
(D)(iii)(I) and (II), (aa) if the taxpayer
knows (or has reason to know) that an
MP or eligible component was produced
or manufactured by a PFE, the taxpayer
must treat all direct costs with respect to
such MP, or all direct material costs with
respect to such eligible component, as
attributable to a PFE, and (bb) if the tax-
payer knows (or has reason to know) that
the certification referred to in § 7701(a)
(52)(D)(iii)(II)(bb) pertaining to an MP or
eligible component is inaccurate, the tax-
payer may not rely on such certification.
Section 7701(a)(52)(D)(iii)(IV) pro-
vides that, in a manner consistent with
§ 1.45X-4(c)(4)(i) (as in effect on July
4, 2025), the certification referred to in
§ 7701(a)(52)(D)(iii)(II)(bb) must–(aa)
include (AA) the supplier’s employer
identification number, or (BB) any such
similar identification number issued by a
foreign government, (bb) be signed under
penalties of perjury, (cc) be retained by the
supplier and the taxpayer for a period of
not less than six years and must be pro-
vided to the Secretary upon request, and
(dd) be from the supplier from which the
taxpayer purchased any MP, eligible com-
ponent, or constituent elements, materials,
or subcomponents of an eligible compo-
nent, stating (AA) that such property was
not produced or manufactured by a PFE
and that the supplier does not know (or
have reason to know) that any prior sup-
plier in the chain of production of that
property is a PFE, (BB) for purposes of
§ 45X, the total direct material costs for
each component, constituent element,
material, or subcomponent that were not
produced or manufactured by a PFE, or
(CC) for purposes of § 45Y or § 48E, the
total direct costs attributable to all MPs
that were not produced or manufactured
by a PFE.
Section 7701(a)(52)(D)(iv) provides
that upon the taxpayer’s election (in such
form and manner as the Secretary desig-
nates), in the case of any MP, eligible com-
ponent, or constituent element, material,
or subcomponent of an eligible compo-
nent which is (I) acquired by the taxpayer,
or manufactured or assembled by or for
the taxpayer, pursuant to a binding writ-
ten contract which was entered into prior
to June 16, 2025, and (II) (aa) placed into
service before January 1, 2030 (or, in the
case of an applicable facility, as defined in
§ 45Y(d)(4)(B), before January 1, 2028) in
a facility the construction of which began
before August 1, 2025, or (bb) in the case
of a constituent element, material, or sub-
component, used in a product sold before
January 1, 2030,
12
the cost to the taxpayer
with respect to such product, component,
element, material, or subcomponent is not
included for purposes of determining the
MACR under § 7701(a)(52)(D).
Section 7701(a)(52)(D)(v) provides
the Secretary authority to prescribe such
regulations and guidance as may be nec-
essary or appropriate to prevent circum-
vention of the rules under § 7701(a)(52)
(D), including prevention of (I) any abuse
of the exception provided under § 7701(a)
(52)(D)(iv) through the stockpiling of any
MP, eligible component, or constituent
element, material, or subcomponent of
an eligible component during any period
prior to the application of the require-
ments under § 7701(a)(52), or (II) any
evasion with respect to the requirements
of § 7701(a)(52)(D) where the facts and
circumstances demonstrate that the begin-
ning of construction of a qualified facility
or EST has not in fact occurred.
Section 7701(a)(52)(E) provides defi-
nitions for purposes of § 7701(a)(52).
Section 7701(a)(52)(E)(i) provides that
the term “eligible component” means (I)
any property described in § 45X(c)(1), or
(II) any component which is identified by
the Secretary pursuant to regulations or
guidance issued under § 7701(a)(52)(G).
Section 7701(a)(52)(E)(ii) provides that
the term “energy storage technology” has
the same meaning given such term under
§ 48E(c)(2). Section 7701(a)(52)(E)(iii)
provides that the term “manufactured
product” means (I) an MP which is a com-
ponent of a qualified facility, as described
in § 45Y(g)(11)(B) and any guidance
issued thereunder, or (II) any product
which is identified by the Secretary pur-
suant to regulations or guidance issued
under § 7701(a)(52)(G). Section 7701(a)
(52)(E)(iv) provides that the term “quali-
fied facility” means (I) a qualified facility,
as defined in § 45Y(b)(1), (II) a qualified
facility, as defined in § 48E(b)(3), and (III)
any qualified interconnection property (as
defined in § 48E(b)(4)) which is part of
the qualified investment with respect to a
qualified facility (as described in § 48E(b)
(1)). For purposes of this notice, the terms
eligible component, energy storage tech-
nology, and qualified facility have the
same meanings, respectively, as provided
in §§ 7701(a)(52)(E)(i)(I), (ii), and (iv),
and, as authorized under § 7701(a)(52)
(E)(iii)(II), manufactured product has the
meaning provided in section 3.01(2)(a) of
this notice.
13

Section 7701(a)(52)(F) provides that
rules similar to the rules under § 7701(a)
(51)(H) and (J) (relating to determination
of ownership and beginning of construc-
tion, respectively) apply for purposes of
§ 7701(a)(52). For purposes of determin-
ing whether the material assistance rules
under § 7701(a)(52) apply, the beginning
of construction is determined pursuant
to rules similar to the rules under Notice
2013-29, 2013-20 I.R.B. 1085, and Notice
2018-59, 2018-28 I.R.B. 196 (as well as
any subsequently issued guidance clari-
fying, modifying, or updating either such
notice), as in effect on January 1, 2025.
14

Section 7701(a)(52)(G) provides the
Secretary with the authority to prescribe
such regulations and guidance as may be
necessary or appropriate to carry out the
12
In referencing § 7701(a)(52) for the definition of material assistance from a PFE, § 45X(c)(1)(C) substitutes “used in a product sold before January 1, 2027” for “used in a product sold before
January 1, 2030” in § 7701(a)(52)(D)(iv)(II)(bb) (relating to existing, binding written contracts). See section 2.01(3) of this notice for a description of § 45X(c)(1)(C).
13
As described in § 7701(a)(52)(E)(iv)(II) and (III), a qualified facility separately includes a “qualified facility, as defined in section 48E(b)(3),” and “qualified interconnection property (as
defined in section 48E(b)(4)) which is part of the qualified investment with respect to a qualified facility (as described in section 48E(b)(1)).” See sections 3.01(7)(c); 4.01(2)(f); and 4.02(2)
(b)(vi) of this notice for additional information about the application of § 7701(a)(52) to qualified interconnection property.
14
The guidance in Notice 2025-42 regarding beginning of construction is inapplicable for purposes of determining whether the material assistance rules under § 7701(a)(52) apply. See fn 11
of this notice.

Bulletin No. 2026–11 663 March 9, 2026
provisions of § 7701(a)(52), including–(i)
identification of components or products
for purposes of § 7701(a)(52)(E)(i) and
(iii), and (ii) for purposes of § 7701(a)(52)
(A)(ii), rules to address facilities which
produce more than one eligible compo-
nent.
Section 70512(l)(1) of the OBBBA
provides that the amendments made to
§ 7701(a)(52) apply to taxable years
beginning after July 4, 2025.
.03 Applicable Penalties and Statutes
of Limitations.
Section 6662 imposes accuracy-related
penalties on certain underpayments of tax.
Under § 6662(a) and (b), any portion of
an underpayment that is attributable to a
substantial understatement of income tax
is subject to a penalty amount equal to
20 percent of the portion of the applica-
ble underpayment. Section 6662(d)(1)(A)
states that, in general, there is a substan-
tial understatement of income tax for any
taxable year if the amount of the under-
statement for the taxable year exceeds
the greater of–(i) 10 percent of the tax
required to be shown on the return for the
taxable year, or (ii) $5,000.
15
Section 6662(m)(1), as added to the
Code by § 70512(j) of the OBBBA, gen-
erally provides that in the case of a dis-
allowance of an applicable energy credit,
§ 6662(d)(1) must be applied–(A) in
§ 6662(d)(1)(A) and (B), by substitut-
ing “1 percent” for “10 percent” each
place it appears, and (B) without regard
to § 6662(d)(1)(C).
16
Section 6662(m)
(2) defines the term “disallowance of an
applicable energy credit” as the disal-
lowance of a credit under § 45X, 45Y,
or 48E by reason of overstating the
MACR (as determined under § 7701(a)
(52)) with respect to any qualified facil-
ity, EST, or facility which produces eligi-
ble components. Section 70512(l)(1) of
the OBBBA generally provides that the
amendments made to § 6662 apply to tax-
able years beginning after July 4, 2025.
New § 6501(o), as added to the Code by
§ 70512(i) of the OBBBA,
17
provides that
in the case of a deficiency attributable to
an error with respect to the determination
under § 7701(a)(52) for any taxable year,
such deficiency may be assessed at any
time within six years after the return for
such year was filed.
Section 6417(d)(6)(D), as added to
the Code by section 70512(j)(2) of the
OBBBA, provides that in the case of an
applicable entity (as defined in § 6417(d)
(1)) which made an election under
§ 6417(a) with respect to an applicable
credit for which there is a disallowance
described in § 6662(m)(2), § 6417(d)(6)
(A) shall apply with respect to any exces-
sive payment resulting from such disal-
lowance.
Section 6695B, as added to the Code by
§ 70512(k) of the OBBBA, provides that
a person must pay a penalty in the amount
determined under § 6695B(b) (described
in the following paragraph) if the follow-
ing conditions are satisfied: (1) the person
(A) provides a certification described in
§ 7701(a)(52)(D)(iii)(II)(bb) with respect
to any MP, eligible component, or constit-
uent element, material, or subcomponent
of an eligible component, and (B) knows,
or reasonably should have known, that the
certification would be used in connection
with a determination under § 7701(a)(52)
(D)(iii)(II)(bb); (2) the person knows, or
reasonably should have known, that such
certification is inaccurate or false with
respect to (A) whether such property was
produced or manufactured by a PFE, or
(B) the total direct costs or total direct
material costs of such property that was
not produced or manufactured by a PFE
that were provided on such certification;
and (3) the inaccuracy or falsity described
in § 6695B(a)(2) resulted in the disallow-
ance of an applicable energy credit (as
defined in § 6662(m)(2)) and an under-
statement of income tax (within the mean-
ing of § 6662(d)(2)) for the taxable year in
an amount which exceeds the lesser of (A)
5 percent of the tax required to be shown
on the return for the taxable year, or (B)
$100,000.
Section 6695B(b) provides that
the amount of penalty imposed under
§ 6695B(a) is equal to the greater of (1) 10
percent of the amount of the underpayment
(as defined in § 6664(a)) solely attribut-
able to the inaccuracy or falsity described
in § 6695B(a)(2), or (2) $5,000. Under
§ 6695B(c), no penalty may be imposed
under § 6695B(a) if the person estab-
lishes to the satisfaction of the Secretary
that any inaccuracy or falsity described in
§ 6695B(a)(2) is due to a reasonable cause
and not willful neglect. Section 6696(d)
(1), as modified by § 70512(k)(2)(A)(iv)
of the OBBBA, provides in relevant part
that the amount of any § 6695B penalty
shall be assessed within 6 years after the
return or claim for refund with respect to
which the penalty is assessed was filed,
and no proceeding in court without assess-
ment for the collection of such tax shall be
begun after the expiration of such period.
Section 70512(l)(3) of the OBBBA pro-
vides that the penalty for substantial mis-
statements on certifications provided by
suppliers applies to certifications provided
after December 31, 2025.
.04 Domestic Content Bonus Credit
Guidance.
Sections 45(b)(9), 45Y(g)(11), 48(a)
(12), and 48E(a)(3)(B) provide an increase
to the amount of a credit determined under
§§ 45, 45Y, 48, and 48E, respectively, for
a taxpayer whose qualified facility under
§§ 45 or 45Y, energy project under § 48,
or qualified investment with respect to a
qualified facility or EST under § 48E sat-
isfies the domestic content requirement
set forth in § 45(b)(9)(B)(i) (the Domestic
Content Requirement).
(1) Notice 2023-38.
On May 12, 2023, the Treasury Depart-
ment and the IRS released Notice 2023-
38, 2023-22 I.R.B. 872, which describes
a safe harbor regarding the classification
of certain components in representative
types of qualified facilities, energy proj-
ects, or ESTs for purposes of satisfying the
Domestic Content Requirement.
Section 2.01 of Notice 2023-38 defines
the term “Applicable Project” to mean (i)
a qualified facility under §§ 45 or 45Y;
(ii) an energy project under § 48, which
may include qualified property for which
a valid irrevocable election under § 48(a)
(5) has been made to treat such qualified
property as energy property under § 48; or
(iii) a qualified investment with respect to
a qualified facility or EST under § 48E.
15
Section 6662(d)(1)(B) also defines a substantial understatement of income tax in the case of certain corporations.
16
Section 6662(d)(1)(C) provides a special rule for taxpayers claiming a deduction under § 199A.
17
OBBBA § 70512(i) redesignated former § 6501(o) as § 6501(p) and added the new § 6501(o) discussed in section 2.03 of this notice.

March 9, 2026 664 Bulletin No. 2026–11
Section 3.01(2) of Notice 2023-38 pro-
vides definitions of terms for purposes of
the Domestic Content Requirement. Sec-
tion 3.01(2)(a) defines the term “Appli-
cable Project Component” to mean any
article, material, or supply, whether man-
ufactured or unmanufactured, which is
directly incorporated into an Applicable
Project. Section 3.01(2)(c) defines the
term “Manufactured Product” to mean an
item produced as a result of the manufac-
turing process. Section 3.01(2)(d) defines
the term “Manufactured Product Compo-
nent” (MPC) to mean any article, mate-
rial, or supply, whether manufactured or
unmanufactured, which is directly incor-
porated into an Applicable Project Com-
ponent that is an MP. Section 3.01(2)(e) of
Notice 2023-38 defines “Manufacturing
Process” as the application of processes to
alter the form or function of materials or
of elements of a product in a manner add-
ing value and transforming those mate-
rials or elements so that they represent a
new item functionally different from that
which would result from mere assembly
of the elements or materials.
Section 3.04 of Notice 2023-38 pro-
vides a safe harbor for classifications of
certain Applicable Project Components.
Table 2 of section 3.04 of Notice 2023-38
provides a Categorization of Applicable
Project Components, so taxpayers can
identify whether an Applicable Project
Component is subject to rules for steel or
iron or different rules for MPs in identi-
fying whether the components meet the
Domestic Content Requirement. Table
2 identifies a list of certain Applicable
Project Components that may be found
in the following types of Applicable Proj-
ects: Utility-scale photovoltaic system;
Land-based wind facility; Offshore wind
facility; and Battery energy storage tech-
nology.
(2) Notice 2024-41.
On May 24, 2024, the Treasury Depart-
ment and the IRS released Notice 2024-
41, 2024-24 I.R.B. 1615, which, among
other things, modified the existing domes-
tic content safe harbor in Notice 2023-
38 by (i) expanding the non-exclusive
list of Applicable Projects in Table 2 to
include hydropower and pumped hydro-
power storage facilities; (ii) redesignat-
ing “Utility scale photovoltaic system” as
“Ground-mount and rooftop photovoltaic
system”; and (iii) adding certain MPCs to
previously listed Applicable Projects.
Notice 2024-41 further provides a new
elective safe harbor in Table 1 of section
4.04(1)-(3) that taxpayers may use to
classify the identified Applicable Project
Components. Table 1 also provides the
associated cost percentages for each of
the identified MPs and MPCs that may be
found in the identified Applicable Proj-
ects (Assigned Cost Percentages),
19
which
include solar photovoltaic (PV) systems,
land-based wind facilities, and battery
energy storage systems. Finally, Notice
2024-41 provides that taxpayers electing
to use the new safe harbor must follow
certain requirements, including treating
the lists of Applicable Project Components
and MPCs and the cost percentages listed
in Table 1 as exclusive and exhaustive for
purposes of determining compliance with
the Domestic Content Requirement for an
Applicable Project.
To be eligible for the safe harbor,
Notice 2024-41 explains that an Applica-
ble Project is not required to be constituted
of the full list of Applicable Project Com-
ponents in Table 1, and each Applicable
Project Component listed is not required
to be constituted of the full list of MPCs in
Table 1. However, any Applicable Product
Component or MPC listed in Table 1 that
is not utilized as an input to the Applicable
Project must be treated by the electing tax-
payer as having a zero value in calculating
whether the components meet the Domes-
tic Content Requirement.
(3) Notice 2025-08.
On January 16, 2025, the Treasury
Department and IRS released Notice
2025-08, 2025-8 I.R.B. 800. Notice
2025-08 provides an updated elective
safe harbor for the Domestic Content
Requirement that modifies the safe har-
bor provided in Notice 2024-41, including
Table 1. Section 5.05 of Notice 2025-08
provides an Updated Table for Solar PV
Ground-Mount Applicable Projects. Sec-
tions 5.07(13) and (14) provide updated
definitions for representative types of
Ground-mounted PV (fixed-tilt) and
Ground-mounted PV (tracker) facilities,
respectively. Section 5.06 of Notice 2025-
08 provides an Updated Table for Solar
PV Rooftop Applicable Projects. Sections
5.07(18) and (19) provide updated defini-
tions for representative types of Rooftop
PV (MLPE) facilities and Rooftop PV
(string inverter) facilities, respectively.
Section 6.02 of Notice 2025-08 provides
an Updated Table for Land-Based Wind
Applicable Projects. Section 6.03(2) pro-
vides an updated definition for represen-
tative types of land-based wind facilities.
Section 7.02 of Notice 2025-08 provides
an Updated Table for battery energy stor-
age systems Applicable Projects. Section
7.03(6) provides an updated definition
for representative types of battery energy
storage systems facilities. Collectively,
the tables provided in sections 5.05, 5.06,
6.02, and 7.02 of Notice 2025-08 (Notice
2025-08 Tables), section 3.02 in Notice
2024-41 for a Hydropower Facility, or a
Pumped Hydropower Storage Facility,
and section 3.04 in Notice 2023-38 for
an Offshore Wind Facility, are referred to
after this as the “2023-2025 Safe Harbor
Tables.”
Section 4 of Notice 2025-08 provides
that a taxpayer may elect to use the clas-
sifications and cost percentages in Table 1
of Notice 2024-41 or the Notice 2025-08
Tables (as applicable) to qualify for the
domestic content bonus credit amount for
Applicable Projects of the specific types
identified in Table 1 of Notice 2024-41 or
the Notice 2025-08 Tables that are eligible
for a credit under §§ 45, 45Y, 48, or 48E
by virtue of the 80/20 Rule. However, only
new property listed in Table 1 of Notice
2024-41 or the Notice 2025-08 Tables (as
applicable) is included in the calculation
of the Domestic Cost Percentage; all other
MPs or MPCs, including used property
in an Applicable Project that satisfies the
80/20 Rule, is treated as foreign-sourced
and must take a zero value consistent with
section 4.03(3) in Notice 2024-41 and sec-
tion 8.03(3) of Notice 2025-08.
.05 Substantiation.
Section 6001 provides that every per-
son liable for any tax imposed by the
Code, or for the collection thereof, must
keep such records as the Secretary may
18
The term “Assigned Cost Percentages” as used in this notice also includes the Updated Assigned Cost Percentages that are described in Notice 2025-08.

Bulletin No. 2026–11 665 March 9, 2026
from time to time prescribe. Section
1.6001-1(a) provides that any person
subject to income tax must keep such
permanent books of account or records,
including inventories, as are sufficient
to establish the amount of gross income,
deductions, credits, or other matters
required to be shown by such person in
any return of such tax. Section 1.6001-
1(e) provides that the books and records
required by § 1.6001-1 must be retained
so long as the contents thereof may
become material in the administration of
any internal revenue law.
SECTION 3. MATERIAL
ASSISTANCE FROM A PFE
This section describes provisions that
the Treasury Department and the IRS
expect to include in the forthcoming pro-
posed regulations for determining whether
a qualified facility, EST, or eligible com-
ponent includes material assistance from
a PFE. If a qualified facility, EST, or eli-
gible component includes material assis-
tance from a PFE, meaning its Clean
Electricity MACR or Eligible Component
MACR is less than the applicable thresh-
old percentage, it is ineligible for a credit
under §§ 45Y, 48E, or 45X, as applicable.
Section 3.01 describes provisions that the
Treasury Department and the IRS expect
to include in the forthcoming proposed
regulations for determining a qualified
facility’s or EST’s MACR. Section 3.02
describes provisions that the Treasury
Department and the IRS expect to include
in the forthcoming proposed regulations
for determining an eligible component’s
MACR.
.01 Clean Electricity MACR for quali-
fied facilities and ESTs.
(1) In general.
To calculate the Clean Electricity
MACR for a qualified facility or EST,
a taxpayer must: (a) identify the types
of MPs and MPCs included in the qual-
ified facility or EST; (b) of the identi-
fied types of MPs and MPCs, track the
relevant characteristics of each MP and
MPC included in the qualified facility or
EST; (c) determine the taxpayer’s direct
costs attributable to the identified MPs
(including MPCs) (Direct Costs); and (d)
determine the Direct Costs attributable
to each of the identified MPs and MPCs
that were mined, manufactured, or pro-
duced by a PFE (PFE Direct Costs).
These steps are specified in section
3.01(2) through (5) of this notice. After
completing these steps, a taxpayer will
determine the Clean Electricity MACR
by subtracting the sum of all PFE Direct
Costs (PFE Total Direct Costs) from the
sum of all Direct Costs (Total Direct
Costs) and then dividing that result by
Total Direct Costs.
For any taxable year for which a tax-
payer is determining the amount of a § 45Y
or § 48E credit, the taxpayer will calculate
a separate Clean Electricity MACR for
each qualified facility or EST. For exam-
ple, a taxpayer that places in service two
qualified facilities under § 45Y within a
taxable year would calculate two Clean
Electricity MACRs to determine whether
each facility separately meets the material
assistance rules under § 45Y(b)(1)(E) and
may qualify for the § 45Y credit.
(2) Identify MPs and MPCs for quali-
fied facilities and ESTs.
(a) In general. To identify MPs and
MPCs, a taxpayer must identify the types
of MPs and MPCs that are incorporated
into the qualified facility or EST. A type of
MP or MPC refers to a type of product or
component that performs a unique, speci-
fied function within the qualified facility
or EST. A taxpayer must identify MPs and
MPCs consistent with the meaning of the
phrase “manufactured products (includ-
ing components)” in § 45Y(g)(11)(B)(iii)
and the guidance issued under § 45Y(g)
(11) in Notice 2023-38, and at a level of
detail that is substantially similar to the
level of detail provided in the 2023-2025
Safe Harbor Tables, with respect to MPs
and MPCs. A taxpayer may rely on the
definition of an Applicable Project Com-
ponent in 3.01(2)(a), the definition of an
MP in section 3.01(2)(c), the definition
of an MPC in section 3.01(2)(d), and the
additional definitions in section 3.01(2) of
Notice 2023-38 to identify types of MPs
and MPCs. Subject to the requirements
of section 3.01(2)(b) of this notice, a tax-
payer may use the Identification Safe Har-
bor described in section 4.01 of this notice
to identify MPs and MPCs.
(b) Using Identification Safe Harbor.
A taxpayer may rely upon the Identifica-
tion Safe Harbor in section 4.01 of this
notice to identify MPs and MPCs only if
the qualified facility or EST is listed as an
Applicable Project in the 2023-2025 Safe
Harbor Tables (Listed qualified facility or
EST).
(3) Track MPs and MPCs for qualified
facilities and ESTs.
(a) In general. Except as provided by
section 3.01(3)(b) and (c) of this notice,
tracking MPs and MPCs must be com-
pleted by individually tracking each MP
or MPC and its characteristic(s) to the
specific qualified facility or EST into
which the MP or MPC is incorporated. If
not using the Cost Percentage Safe Har-
bor provided in section 4.02(2) to deter-
mine Direct Costs, the taxpayer must
track the following characteristics of MPs
and MPCs to a qualified facility or EST:
(i) the Direct Costs of each MP or MPC
incorporated into the qualified facility or
EST, as determined in the manner speci-
fied in section 3.01(4) of this notice, and
(ii) whether the MP or MPC incorporated
into the qualified facility or EST was
mined, manufactured, or produced by a
PFE (PFE Produced), as determined in
the manner specified in section 3.01(5)
of this notice. For purposes of this notice
and computing the Clean Electricity
MACR, if ownership of an MP (includ-
ing MPCs) is shared by multiple qualified
facilities or ESTs, then the owner of each
qualified facility or EST is considered to
have an undivided ownership interest in
the MP (including MPCs) incorporated
into the qualified facility or EST and
must track its Direct Costs and whether
the MP (including MPCs) was PFE Pro-
duced accordingly. If using the Cost Per-
centage Safe Harbor to determine Direct
Costs, the taxpayer must only track
whether each MP or MPC incorporated
into the qualified facility or EST was PFE
Produced.
(b) De minimis assignment-based
tracking for qualified facilities and ESTs.
(i) In general. A taxpayer may assign MPs
or MPCs of the same type (including their
characteristics) to qualified facilities or
ESTs placed in service during the same
taxable year without individually tracking
them to such facilities or ESTs, provided
that, for each qualified facility or EST, the
total Direct Costs of all MPs and MPCs so
assigned to such qualified facility or EST
represent less than 10 percent of the Total
Direct Costs of such qualified facility or

March 9, 2026 666 Bulletin No. 2026–11
EST.
19
The taxpayer must apply an assign-
ment method that is consistent with the
purposes of § 7701(a)(52).
(ii) Example. Taxpayer A constructs
and places in service three solar facili-
ties (Facilities). Using the rules in section
3.01(2) of this notice to identify MPs and
MPCs, Taxpayer A determines the Facil-
ities contain three types of MPs—a PV
Module, an Inverter, and a PV Tracker.
Taxpayer A can track the PV Modules and
Inverters to the specific facilities in which
those MPs were incorporated. None of the
MPCs included in the PV Modules and
Inverters were PFE Produced.
Taxpayer A manufactured all of the PV
Trackers incorporated among the Facili-
ties. Taxpayer A can track the PV Trackers
to a specific facility, and knows that some
of the MPCs incorporated into the PV
Trackers were PFE Produced. Taxpayer
A would like to assign MPCs to specific
facilities but must first determine whether
any of the MPCs can be assigned.
For each type of MPC included in the
PV Trackers, Taxpayer A determines that
the percentage of the Total Direct Costs
for each qualified facility is as follows:
torque tube (11.0% of Total Direct Costs),
structural fasteners (0.5% of Total Direct
Costs), drive system (1.8% of Total Direct
Costs), dampers (0.6% of Total Direct
Costs), actuator (2.7% of Total Direct
Costs), controller (0.8% of Total Direct
Costs), and rails (1.9% of Total Direct
Costs). For Taxpayer A, the percentage
of Total Direct Costs represented by each
type of MPC is the same in each Facility
because Taxpayer A paid the same amount
for each MPC and incorporated the MPCs
equally into each facility (as each has the
same number of PV Trackers). Otherwise,
the Direct Costs and percentage of Total
Direct Costs for each MPC would vary for
each facility.
Except for the torque tubes, which
exceed 10% of Total Direct Costs, Tax-
payer A is permitted to assign the MPCs
in the PV Trackers among its Facilities
because, in the aggregate, the percent-
age of Total Direct Costs (8.3%) of these
types of MPCs is less than 10 percent of
the Total Direct Costs of each of the Facil-
ities (that is, the sum cost of the MPCs that
comprise the PV Tracker, excluding the
torque tube, do not exceed the 10 percent
de minimis threshold).
While Taxpayer A paid the same
amount for each MPC within each PV
tracker, Taxpayer A’s assignment of the
MPCs among the Facilities can still affect
the Clean Electricity MACR for each of
the Facilities because some of the MPCs
in the PV Tracker were PFE Produced and
others were not PFE Produced. Taxpayer
A knows that it incorporated 99 each of
structural fasteners, drive systems, damp-
ers, and rails, evenly into Taxpayer A’s
Facilities (meaning 33 of each were incor-
porated into each facility). Thirty-three
of the structural fasteners, 66 of the drive
systems, all of the dampers, and none of
the rails were PFE Produced. Under sec-
tion 3.01(3)(b) of this notice, Taxpayer
A can assign the structural fasteners and
drive systems to the Facilities using an
assignment method that is consistent with
the purposes of § 7701(a)(52), provided
that the total Direct Costs of all MPs and
MPCs so assigned to each Facility rep-
resent less than 10 percent of the Total
Direct Costs of that Facility. For example,
all 33 of its PFE Produced structural fas-
teners may be assigned to Facility 1 (and
all 66 of its non-PFE Produced structural
fasteners to Facilities 2 and 3), and all 66
of its PFE Produced drive systems may
be assigned to Facilities 1 and 2 (and all
33 of its non-PFE Produced drive systems
to Facility 3). Because all of the damp-
ers were PFE Produced, they must be
assigned to Facilities 1, 2, and 3 equally.
Alternatively, Taxpayer A can assign the
structural fasteners and drive systems
among its Facilities in a manner that
would result in a mix of PFE Produced
units and non-PFE Produced units in each
Facility. For example, Taxpayer A could
assign 22 of its PFE Produced and 11 of
its non-PFE Produced structural fasten-
ers to Facility 1, 11 of its PFE Produced
and 22 of its non-PFE Produced struc-
tural fasteners to Facility 2, and 33 of its
non-PFE Produced structural fasteners to
Facility 3. In that case, the PFE Produced
structural fasteners assigned to Facility 1
would comprise 67% of the total struc-
tural fasteners in Facility 1 (22/33), 33%
of the total structural fasteners in Facility
2 (11/33), and 0% of the total structural
fasteners in Facility 3 (0/33). Taxpayer A
would use the percentages of structural
fasteners assigned to each facility in cal-
culating the Clean Electricity MACR for
each of Facilities 1, 2, and 3.
(c) Tracking for ESTs with capacity
under one megawatt (MW). (i) In general.
For ESTs that are (A) of the same type,
(B) each with a maximum net output of
less than 1MW measured in alternating
current, (C) placed in service during the
same taxable year, and (D) for which a
taxpayer is not using de minimis assign-
ment-based tracking described in section
3.01(3)(b) of this notice, a taxpayer may
track the characteristic(s) of each MP or
MPC incorporated in a specific EST as
specified in this section 3.01(3)(c) of this
notice.
If not using the Cost Percentage Safe
Harbor to determine Direct Costs, a tax-
payer may track (A) the Direct Costs of a
given MP or MPC by calculating the aver-
age of the Direct Costs of the MPs and
MPCs of the same type that were incor-
porated into the same type of EST that
were placed in service during the same
specified period of time (Average Costs),
as described in section 3.01(3)(c)(ii), (iii),
and (v) of this notice; and (B) whether a
given MP or MPC was PFE Produced by
calculating the percentage of the MPs and
MPCs of the same type that were PFE Pro-
duced and that were incorporated into the
same type of EST placed in service during
a specified period of time (PFE Produc-
tion Percentage), as described in section
3.01(3)(c)(ii), (iv), and (v) of this notice.
If using the Cost Percentage Safe Harbor
to determine Direct Costs, a taxpayer may
track whether a given type of MP or MPC
was PFE Produced by calculating the PFE
Production Percentage.
(ii) Identification of types of EST. A
type of EST may be identified by a shared
production line, a shared method and
capacity of energy storage, or any other
reasonable method that is consistent with
the purposes of § 7701(a)(52).
(iii) Average Costs calculation. A tax-
payer may calculate Average Costs of a
given MP or MPC by summing all Direct
19
As described in section 3.01(1) and (4) of this notice, the term “Total Direct Costs” means the sum of the Direct Costs of each MP (including MPCs).

Bulletin No. 2026–11 667 March 9, 2026
Costs of a given type of MP or MPC
incorporated into all of the same type of
EST placed in service during the specified
period of time, then dividing that sum by
the total quantity of MPs or MPCs of the
same type incorporated into the same type
of EST placed in service during that spec-
ified period of time.
(iv) PFE Production Percentage calcu-
lation. A taxpayer may calculate the PFE
Production Percentage of a given MP or
MPC by determining the quantity of PFE
Produced MPs or MPCs of the same type
that were incorporated into the same type
of EST placed in service during the spec-
ified period of time (Total Quantity
PFE-
MP&MPC
), then dividing that quantity by the
total quantity of MPs or MPCs of the same
type that were incorporated into the same
type of EST placed in service during that
specified period of time (Total Quantity
MP&MPC
). The specified period of time is as
described in section 3.01(3)(c)(v) of this
notice.
(v) Specified period of time. For the
purposes of the Clean Electricity MACR,
a specified period of time must meet the
following requirements: (A) The specified
period must be at least one calendar day
in length and may only include whole cal-
endar days, (B) the first specified period
of the taxpayer’s taxable year must start
on the first day of the taxpayer’s taxable
year, (C) specified periods shorter than a
full taxable year must be contiguous, (D)
every day of the taxpayer’s taxable year
must be covered by a specified period,
and (E) the specified period cannot be lon-
ger than the taxpayer’s taxable year. Any
specified period of time selected under
this section 3.01(3)(c)(v) must be consis-
tent with the purposes of § 7701(a)(52).
(4) Determine Direct Costs for quali-
fied facilities and ESTs.
(a) In general. To determine Direct
Costs, a taxpayer must determine the
direct costs to the taxpayer attributable
to each MP (including MPCs) incorpo-
rated into the qualified facility or EST. To
determine Total Direct Costs, a taxpayer
must aggregate all Direct Costs. For these
purposes, direct costs attributable to an
MP produced by a taxpayer include the
taxpayer’s direct material costs and direct
labor costs, as defined in § 1.263A-1(e)(2)
(i)(A)
20
and (B), respectively, which will
include the cost of any MPCs (whether
produced or acquired by the taxpayer) in
the MP. If a taxpayer acquires an MP, the
taxpayer’s Direct Costs attributable to the
MP are its acquisition costs with respect
to the MP. Direct costs, including direct
labor costs, of incorporating MPs into the
qualified facility or EST are not included
as part of direct costs attributable to an
MP.
(b) If using Cost Percentage Safe Har-
bor or Certification Safe Harbor. Not-
withstanding section 3.01(4)(a) of this
notice, a taxpayer may use the Cost Per-
centage Safe Harbor described in section
4.02(2) of this notice or the Certification
Safe Harbor described in section 4.03 of
this notice to determine Direct Costs. A
taxpayer using the Cost Percentage Safe
Harbor must determine Direct Costs using
the Assigned Cost Percentages of the MPs
and MPCs, rather than actual Direct Costs.
Section 4.02(2) of this notice describes
how the calculation of the Clean Elec-
tricity MACR is modified when using the
Assigned Cost Percentages under the Cost
Percentage Safe Harbor. Alternatively, a
taxpayer may use the Certification Safe
Harbor identified in section 4.03 of this
notice to determine Direct Costs in whole
or in part.
(5) Determine PFE Direct Costs for
qualified facilities and ESTs.
(a) In general. To determine PFE
Direct Costs, a taxpayer must determine
the Direct Costs attributable to (i) each
PFE Produced MP and (ii) each PFE
Produced MPC included in an MP. To
determine PFE Total Direct Costs, the
taxpayer must aggregate all PFE Direct
Costs. For these purposes, if the taxpayer
acquires a PFE Produced MP, but some
or all of the MPCs included in the MP
are not PFE Produced, then the taxpayer
excludes from PFE Direct Costs the por-
tion of the MP’s acquisition costs that are
attributable to the MPCs that are not PFE
Produced. If the taxpayer acquires an MP
that is not PFE Produced, but some or all
of the MPCs included in the MP are PFE
Produced, then the taxpayer includes in
PFE Direct Costs the portion of the MP’s
acquisition costs that is attributable to the
PFE Produced MPCs. If the taxpayer pro-
duces an MP that includes any acquired
PFE Produced MPCs, then the taxpayer’s
PFE Direct Costs include the acquisition
costs of the PFE Produced MPCs.
(b) Determine whether MPs and MPCs
are PFE Produced. To determine whether
MPs and MPCs are PFE Produced, a tax-
payer may use the Certification Safe Har-
bor described in section 4.03 of this notice.
If a taxpayer is unable to or chooses not
to use the safe harbor, then the taxpayer
must determine whether MPs and MPCs
are PFE Produced by applying the defini-
tion of PFE in § 7701(a)(51) to the entity
that mined, produced, or manufactured the
relevant MP or MPC.
(c) Year of determination. Whether an
MP or MPC is PFE Produced depends
on the PFE status of the relevant entities
as of the taxable year during which the
taxpayer paid or incurred Direct Costs
attributable to such MP or MPC under
the taxpayer’s method of accounting.
In the case of a taxpayer whose taxable
income is computed under an accrual
method of accounting, Direct Costs are
paid or incurred as the taxpayer produces
such MP or MPC or when the taxpayer
is provided such MP or MPC. For pur-
poses of this section, the determination
of whether an MP or MPC is PFE Pro-
duced is based on the taxable year of the
entity that mined, produced, or manufac-
tured the MP or MPC. For example, if a
taxpayer paid for an MPC in 2026, but
incorporated it into a facility placed in
service in 2027, then whether the MPC
is PFE Produced would be determined by
whether the entity that mined, produced,
or manufactured the MPC was a PFE for
such entity’s tax year that includes the
date in 2026 of payment for the MPC,
as determined under § 7701(a)(51)(A)
(ii).
21
If the entity that mined, produced,
or manufactured the MP or MPC does not
use a taxable year under § 7701(a)(23),
20
See § 1.471-3 for the elements of direct material costs.
21
Section 7701(a)(51)(A)(ii)(I) provides that an entity’s status as a PFE is determined as of the last day of its taxable year. However, for purposes of the first taxable year beginning after July
4, 2025, the determination of whether an entity is a PFE because it is a specified foreign entity described in § 7701(a)(51)(B)(i) through (iv) is made as of the first day of the first taxable year.
Section 7701(a)(51)(A)(ii)(II).

March 9, 2026 668 Bulletin No. 2026–11
then whether such entity is a PFE would
be based on the entity’s status for the
calendar year in which the taxpayer paid
or incurred the cost of the MP or MPC
(or, in the case of an accrual method tax-
payer, when the entity provided the MP
or MPC to the taxpayer).
(6) Example.
The provisions of this section 3.01 are illustrated
by the following example. Assume that the taxpayer
uses the calendar year as the taxpayer’s taxable year.
(a) In its taxable year beginning in 2026, Tax-
payer B begins construction on 50 units of EST with
a capacity of less than 1MW (EST Units) and places
them in service. Taxpayer B identifies the 50 EST
Units as being the same type of EST, because each
EST Unit meets the definition of thermal energy stor-
age property provided by § 48(c)(6)(C). In order to
qualify for the § 48E credit, § 48E(c)(3) requires that
the construction of the EST Units not include mate-
rial assistance from a PFE, meaning, in the case of
an EST which begins construction during calendar
year 2026, the Clean Electricity MACR cannot be
less than 55%. See § 7701(a)(52)(B)(ii).
(b) Each of the 50 EST Units includes 3 heat
exchangers (for a total of 150 heat exchangers in the
50 EST Units), identified by Taxpayer B as a type of
MP, as well as additional types of MPs and MPCs.
Each EST Unit contains the same types of MPs and
MPCs in identical amounts.
(c) During the first 6 months of the taxable year,
Taxpayer B places in service 25 of the 50 EST Units,
and during the second 6 months of the taxable year,
Taxpayer B places in service the remaining 25 of the
50 EST Units.
(d) Taxpayer B identifies the first 6 months of the
taxable year as a specified period (Specified Period
1), and the second 6 months of the taxable year as
another specified period (Specified Period 2).
(e) Of the 75 heat exchangers incorporated into
the EST Units placed in service in Specified Period
1, 65 of them (including MPCs) are PFE Produced
and 10 of them (including MPCs) are not PFE Pro-
duced. In Specified Period 2, Taxpayer B changes
its supply chain such that only 25 of the 75 heat
exchangers (including MPCs) incorporated into the
EST Units placed in service in Specified Period 2 are
PFE Produced and 50 of them (including MPCs) are
not PFE Produced.
(f) No additional MPs or MPCs incorporated into
the EST Units are PFE Produced.
(g) Of the 75 heat exchangers incorporated into
the EST Units placed in service in Specified Period
1, Taxpayer B acquired 25 of them for $24 each, and
50 of them for $30 each. Of the 75 heat exchangers
incorporated into the EST Units placed in service in
Specified Period 2, Taxpayer B acquired 25 of them
for $24 each, and 50 of them for $35 each. Taxpayer
B’s Direct Costs attributable to MPs and MPCs other
than the heat exchangers are $16 for each EST Unit
placed in service in Specified Period 1 and $6.01 for
each EST Unit placed in service in Specified Period
2.
(h) Because the EST Units are all of the same
type, each with a maximum net output of less than
1MW measured in alternating current, and placed
in service during the same taxable year, Taxpayer
B may track the characteristics of each MP or MPC
incorporated in a specific EST as specified in sec-
tion 3.01(3)(c) of this notice. Under Section 3.01(3)
(c) of this notice, Taxpayer B calculates the Average
Cost of each heat exchanger for Specified Period 1
by summing the Direct Costs of the heat exchang-
ers incorporated into the EST Units placed in service
during Specified Period 1, then dividing that sum by
the total quantity of heat exchangers incorporated
into the EST Units placed in service during Specified
Period 1 (((($24 × 25) + ($30 × 50)) / 75) = $28).
Based on the Average Cost of each heat exchanger,
the Direct Costs of the heat exchangers in each EST
Unit placed in service during Specified Period 1 are
$84 ($28 × 3). Accordingly, the Total Direct Costs
of each EST Unit placed in service during Specified
Period 1 is $100 ($84 + $16).
(i) Under Section 3.01(3)(c)(iv) of this notice,
Taxpayer B calculates the PFE Production Percent-
age for the heat exchangers for Specified Period 1
based on the quantity of heat exchangers incorpo-
rated into the EST Units placed in service during
Specified Period 1. The Total Quantity
PFE-MP&MPC

of heat exchangers included in such EST Units is
65, and the Total Quantity
MP&MPC
is 75. Taxpayer B
divides the heat exchangers’ Total Quantity
PFE-MP&MPC

(65) by the Total Quantity
MP&MPC
(75) to determine
its PFE Production Percentage of 86.7% (65/75) for
its heat exchangers in Specified Period 1.
(j) Taxpayer B calculates the PFE Total Direct
Costs for each EST Unit placed in service in Speci-
fied Period 1. As the heat exchangers are the only MP
or MPC that were PFE Produced, Taxpayer B multi-
plies $84 (Direct Costs related to the heat exchangers
in each EST Unit) by 86.7% (PFE Production Per-
centage) to determine the PFE Total Direct Costs of
$72.83.
(k) Taxpayer B calculates a Clean Electricity
MACR for each EST Unit placed in service in Speci-
fied Period 1 as follows: ($100 [Total Direct Costs of
each EST Unit] – $72.83 [PFE Total Direct Costs]) /
$100 [Total Direct Costs of each EST Unit] = 27.2%.
For each EST Unit placed in service in Specified
Period 1, the Clean Electricity MACR of 27.2% is
less than the applicable threshold percentage (55%).
PFE Production Percentage Based on Quantity of Heat Exchangers
Incorporated into EST Units Placed in Service During First 6 Months of
Taxable Year
Total Quantity
PFE-MP&MPC
65
Total Quantity
MP&MPC
75
PFE Production Percentage
(Total Quantity
PFE-MP&MPC
) /

(Total Quantity
MP&MPC
)
86.7%
Clean Electricity MACR for each EST Unit Placed in Service During First 6
Months of Taxable Year
Total Direct Costs$100
PFE Production Percentage 86.7%
Cost attributable to heat exchangers (based on Average
Cost)
$84
PFE Total Direct Costs
(PFE Production Percentage × Cost attributable to heat
exchangers)
$72.83
Clean Electricity MACR
(Total Direct Costs – PFE Total Direct Costs) / (Total
Direct Costs)
27.2%
(l) Taxpayer B calculates the Average Cost of
each heat exchanger for Specified Period 2 by sum-
ming the Direct Costs of the heat exchangers incor-
porated into the EST Units placed in service during
Specified Period 2, then dividing that sum by the
total quantity of heat exchangers incorporated into
the EST Units placed in service during Specified
Period 2 (((($24 × 25) + ($35 × 50)) / 75) = $31.33).
Based on the Average Cost of each heat exchanger,
the Direct Costs of the heat exchangers in each EST
Unit placed in service during Specified Period 2 are
$93.99 ($31.33 × 3). Accordingly, the Total Direct
Costs of each EST Unit placed in service during
Specified Period 2 is $100 ($93.99 + $6.01).
(m) Taxpayer B calculates a PFE Production Per-
centage for the heat exchangers for Specified Period
2 based on the quantity of heat exchangers incor-
porated into the EST Units placed in service during
Specified Period 2. The Total Quantity
PFE-MP&MPC
of
heat exchangers included in such EST Units is 25,
and the Total Quantity
MP&MPC
is 75. Taxpayer B
divides the heat exchangers’ Total Quantity
PFE-MP&MPC

(25) by the Total Quantity
MP&MPC
(75) to equal a PFE
Production Percentage of 33.3% (25/75).
(n) Taxpayer B calculates the PFE Total Direct
Costs for each EST Unit placed in service in Spec-
ified Period 2. As the heat exchangers are the only
MP or MPC that were PFE produced, Taxpayer B
multiples $93.99 (Direct Costs related to the heat
exchangers in each EST Unit) by 33.3% (PFE Pro-
duction Percentage) to determine the PFE Total
Direct Costs of $31.30.

Bulletin No. 2026–11 669 March 9, 2026
(o) Taxpayer B calculates a Clean Electricity
MACR for each EST Unit placed in service in Speci-
fied Period 2 as follows: ($100 [Total Direct Costs of
each EST Unit] – $31.30 [PFE Total Direct Costs])
/ $100 [Total Direct Costs of each EST Unit] =
68.7%. For each such EST Unit, the Clean Electric-
ity MACR of 68.7% is not less than the applicable
threshold percentage (55%).
PFE Production Percentage Based on Quantity of
Heat Exchangers Incorporated into EST Units Placed in Service During
Second 6 Months of Taxable Year
Total Quantity
PFE-MP&MPC
25
Total Quantity
MP&MPC
75
PFE Production Percentage
(Total Quantity
PFE-MP&MPC
) / (Total Quantity
MP&MPC
)
33.3%
Clean Electricity MACR for each EST Unit Placed in Service During Second
6 Months of Taxable Year
Total Direct Costs$100
PFE Production Percentage33.3%
Cost attributable to heat exchangers (based on Average
Cost)
$93.99
PFE Total Direct Costs
(PFE Production Percentage × Cost attributable to heat
exchangers)
$31.30
Clean Electricity MACR
(Total Direct Costs – PFE Total Direct Costs) / (Total
Direct Costs)
68.7%
(p) Taxpayer B’s 25 EST Units placed in service
during Specified Period 1 include material assistance
from a PFE within the meaning § 48E(b)(6), and,
therefore, Taxpayer B cannot claim the credit under
§ 48E for those EST Units. In contrast, Taxpayer
B’s 25 EST Units placed in service during Specified
Period 2 do not include material assistance from a
PFE within the meaning of § 48E(b)(6), and, there-
fore, § 48E(b)(6) does not prohibit Taxpayer B from
claiming the credit under § 48E for those EST Units.
(7) Special Cases for qualified facili-
ties and ESTs.
(a) 80/20 Rule. For purposes of this
notice, only the Direct Costs of the new
MPs and MPCs incorporated into a facil-
ity that is a qualified facility by virtue of
the 80/20 Rule are considered when calcu-
lating the Clean Electricity MACR.
(b) Treatment of steel and iron. Cal-
culation of the Clean Electricity MACR
includes only costs related to MPs (includ-
ing MPCs) as provided in § 7701(a)(52)
(D)(i). Accordingly, unless identified as
an MP or MPC under § 7701(a)(52)(E)
(iii) or (G), any steel or iron components
that meet the description of steel or iron in
section 3.02 of Notice 2023-38
22
and are
incorporated into the taxpayer’s qualified
facility or EST are not relevant in deter-
mining the Clean Electricity MACR.
(c) Qualified interconnection property.
(i) In general. As described in § 7701(a)
(52)(E)(iv)(II) and (III), the term “qualified
facility” separately includes a “qualified
facility, as defined in section 48E(b)(3),”
and “qualified interconnection property (as
defined in section 48E(b)(4)) which is part
of the qualified investment with respect
to a qualified facility (as described in sec-
tion 48E(b)(1)).” Thus, a taxpayer seeking
to claim a § 48E credit with respect to a
qualified investment in a qualified facility
(as defined in § 48E(b)(3)) without includ-
ing qualified interconnection property is
required to calculate a Clean Electricity
MACR only for the qualified facility. How-
ever, a taxpayer seeking to claim a § 48E
credit that includes qualified interconnec-
tion property (as defined in § 48E(b)(4))
which is part of the qualified investment
with respect to a qualified facility (as
described in § 48E(b)(1)) must also calcu-
late a separate Clean Electricity MACR for
the qualified interconnection property. The
requirements in this section 3.01 for a qual-
ified facility also apply to the calculation
of a Clean Electricity MACR for qualified
interconnection property.
(ii) Effect of MACR calculation for
qualified interconnection property. The
Clean Electricity MACR with respect to
qualified interconnection property does
not, on its own, affect whether a taxpayer
is allowed to claim a § 48E credit. If a
taxpayer calculates a Clean Electricity
MACR with respect to its qualified inter-
connection property that is lower than
the applicable threshold percentage (that
is, the qualified interconnection property
includes material assistance from a PFE),
or if a taxpayer is unable to calculate a
Clean Electricity MACR with respect to
its qualified interconnection property,
then the taxpayer is not precluded from
claiming a § 48E credit with respect to
the taxpayer’s qualified investment in the
qualified facility (as described in § 48E(b)
(1)) if the Clean Electricity MACR with
respect to the qualified facility (as defined
in § 48E(b)(3)) is not less than the appli-
cable threshold percentage (that is, the
qualified facility does not include material
assistance from a PFE). In this scenario,
expenditures with respect to the qualified
interconnection property are not included
in the taxpayer’s qualified investment
with respect to the qualified facility (as
described in § 48E(b)(1)).
However, even if a taxpayer calculates
a Clean Electricity MACR with respect to
its qualified interconnection property that
is not less than the applicable threshold
percentage (that is, the qualified intercon-
nection property does not include mate-
rial assistance from a PFE), the taxpayer
would not be allowed a § 48E credit with
respect to its qualified interconnection
property if the Clean Electricity MACR
with respect to the qualified facility (as
defined in § 48E(b)(3)) is less than the
applicable threshold percentage (that is,
the qualified facility includes material
assistance from a PFE).
.02 Eligible Component MACR.
(1) In general.
To calculate the Eligible Compo-
nent MACR for an eligible component,
22
Section 3.02 of Notice 2023-38 defines the Domestic Content Requirement’s Steel or Iron Requirement as applying to Applicable Project Components that are construction materials made
primarily of steel or iron and are structural in function.

March 9, 2026 670 Bulletin No. 2026–11
a taxpayer must first: (a) identify the
constituent elements, materials, or sub-
components (collectively, Constituent
Materials) incorporated into the eligible
component or consumed in production
of the eligible component, the costs of
which are considered direct material
costs of the eligible component under
§ 1.263A-1(e)(2)(i)(A) with respect to
the taxpayer’s production of the eligible
component; (b) track the relevant char-
acteristics of each Constituent Material
used to produce the eligible component;
(c) determine the taxpayer’s direct mate-
rial costs for each Constituent Material
used to produce the eligible component
(Direct Material Costs); and (d) of the
Direct Material Costs, determine the
Direct Material Costs attributable to each
PFE Sourced Constituent Material (PFE
Direct Material Costs). These steps may
be completed in the manner specified in
section 3.02(2) through (5) of this notice,
or alternatively by using the safe harbors
described in sections 4.01(3), 4.02(3),
and 4.03 of this notice.
23
After determin-
ing those items, a taxpayer determines
the Eligible Component MACR by sub-
tracting the sum of all PFE Direct Mate-
rial Costs for all PFE Sourced Constitu-
ent Materials (PFE Total Direct Material
Costs) from the sum of all Direct Material
Costs for all Constituent Materials (Total
Direct Material Costs) and then dividing
that result by Total Direct Material Costs.
For a taxable year that a taxpayer is
determining a § 45X credit, a taxpayer
calculates a separate Eligible Component
MACR for each eligible component sold
during the taxable year. Multiple eligible
components may have the same Eligi-
ble Component MACR if such compo-
nents share Constituent Materials that
are mined, produced, or manufactured
by the same entity or that are included in
the same average percentage calculation
as described in section 3.02(3)(b) of this
notice.
(2) Identify Constituent Materials for
§ 45X eligible components.
(a) In general. To identify Constituent
Materials, a taxpayer must identify each spe-
cific Constituent Material for the production
of each eligible component. Alternatively, a
taxpayer must identify the types of Constit-
uent Materials incorporated into the eligible
component if (i) using the Identification
Safe Harbor described in section 4.01(3) of
this notice or (ii) tracking Constituent Mate-
rials based on averaging as described in sec-
tion 3.02(3)(b) of this notice.
(b) Using Identification Safe Harbor.
A taxpayer may rely upon the Identifica-
tion Safe Harbor in section 4.01(3) of this
notice to identify Constituent Materials
only if the eligible component is listed as
an Applicable Project Component in the
2023-2025 Safe Harbor Tables (Listed eli-
gible component).
24
(3) Track Constituent Materials for eli-
gible components.
(a) In general. Except as provided in
section 3.02(3)(b) of this notice, tracking
Constituent Materials must be completed
by individually tracking each Constituent
Material and its characteristic(s) to the
specific eligible component into which the
Constituent Material was incorporated or
in the production of which the Constituent
Material was consumed. If not using the
Cost Percentage Safe Harbor provided in
section 4.02(3) of this notice to determine
Direct Material Costs, the taxpayer must
track the following characteristics of each
Constituent Material used to produce an
eligible component: (i) the Direct Material
Costs of the Constituent Material, as deter-
mined in the manner specified in section
3.02(4) of this notice, and (ii) whether the
Constituent Material was mined, produced,
or manufactured by a PFE (PFE Sourced),
as determined in the manner specified in
section 3.02(5)(b) and (c) of this notice. If
using the Cost Percentage Safe Harbor to
determine Direct Material Costs, the tax-
payer must track only whether each Con-
stituent Material was PFE Sourced.
(b) Track Constituent Materials based
on averaging. (i) In general. As specified
in this section 3.02(3)(b), a taxpayer may
track Constituent Materials of a given type
of Constituent Material incorporated in or
consumed in production of the same type
of eligible component produced during a
specified period of time. If not using the
Cost Percentage Safe Harbor to deter-
mine Direct Material Costs, a taxpayer
may track (A) the Direct Material Costs
of a given type of Constituent Material
by calculating the average of the Direct
Material Costs of the Constituent Mate-
rials of the same type incorporated in or
consumed in production of the same type
of eligible component produced during a
specified period of time, as specified in
section 3.02(3)(b)(ii) of this notice (Aver-
age Costs); and (B) whether a given Con-
stituent Material was PFE Sourced by cal-
culating the percentage of the Constituent
Materials of the same type that were PFE
Sourced and incorporated in or consumed
in production of the same type of eligible
component during a specified period of
time, as specified in section 3.02(3)(b)(iii)
of this notice (PFE Production Percent-
age). For purposes of determining whether
an eligible component is produced during
a specified period of time, an eligible
component is “produced” as a result of
a process conducted by the taxpayer that
substantially transforms constituent ele-
ments, materials, or subcomponents into a
complete and distinct eligible component
that is functionally different from that
which would result from minor assem-
bly or superficial modification of the ele-
ments, materials, or subcomponents. For
solar grade polysilicon, electrode active
materials, and applicable critical minerals,
consistent with § 1.45X-1(c)(2), an eligi-
ble component is “produced” as a result
of processing, converting, refining, or
purifying source materials to substantially
transform the source materials to derive a
distinct eligible component.
25
If using the
Cost Percentage Safe Harbor to determine
Direct Material Costs, a taxpayer may
track whether a given type of Constituent
Material was PFE Sourced by calculating
the PFE Production Percentage.
23
A taxpayer may identify Constituent Materials using the Identification Safe Harbor described in section 4.01(3) of this notice. A taxpayer may determine Direct Material Costs, determine
PFE Direct Material Costs, and calculate the Eligible Component MACR by using the Cost Percentage Safe Harbor described in section 4.02(3) of this notice. A taxpayer also may determine
Direct Material Costs and PFE Direct Material Costs by using the Certification Safe Harbor described in section 4.03 of this notice.
24
See section 4.01(3)(d)(i) of this notice for a chart of eligible components defined in § 45X that may be treated as a Listed eligible component, along with the Applicable Project Component
to which that eligible component must correspond to be treated as a Listed eligible component.
25
For the production process for electrode active materials and applicable critical minerals, the term “conversion” is defined in § 1.45X–3(e)(2)(iii)(A) or § 1.45X–4(c)(2)(i), respectively, as
“a chemical transformation from one species to another,” and the term purification is defined in § 1.45X–3(e)(2)(iii)(B) or § 1.45X–4(c)(2)(ii), respectively, as “increasing the mass fraction
of a certain element.”

Bulletin No. 2026–11 671 March 9, 2026
(ii) Average Costs calculation. A tax-
payer may calculate Average Costs of a
given Constituent Material by summing
all of the Direct Material Costs paid or
incurred for that type of Constituent Mate-
rial incorporated in or consumed in produc-
tion of all of the same type of eligible com-
ponent produced during a specified period
of time, then dividing that sum by the total
quantity of that type of Constituent Mate-
rial incorporated in or consumed in produc-
tion of the same type of eligible component
produced during a specified period of time.
(iii) PFE Production Percentage cal-
culation. A taxpayer may determine the
PFE Production Percentage of a given
Constituent Material for a specified period
of time by determining the total quantity
of PFE Sourced Constituent Materials of
the same type that were incorporated into
the same type of eligible component pro-
duced during a specified period of time
(Total Quantity
PFE-CM
), then dividing that
quantity by the total quantity of Constit-
uent Materials of the same type that were
incorporated into the same type of eligible
component produced during that specified
period of time (Total Quantity
CM
). The
specified period of time is as described in
section 3.02(3)(b)(v) of this notice.
(iv) Identification of types of eligi-
ble components. For purposes of section
3.02(3)(b)(ii) and (iii) of this notice, each
eligible component that is separately
described in §§ 45X(c)(2)(B) through (G),
(c)(3)(B)(i), (c)(3)(B)(ii)(I)(aa) and (bb),
(c)(3)(B)(iii) through (v), (c)(3)(B)(vii)(I)
and (II), (c)(4)(B)(i), (c)(4)(B)(ii)(I) and
(II), (c)(4)(B)(iii) through (v), (c)(5)(B)
(i) and (ii), (c)(5)(B)(iii)(I)(aa) and (bb),
(c)(6)(A) through (Z), and (c)(6)(AA)(i)
through (xxv) is considered a separate
type of eligible component.
(v) Specified period of time. For pur-
poses of the Eligible Component MACR,
a specified period of time must meet the
following requirements: (A) The specified
period must be at least one calendar day
in length and may only include whole cal-
endar days, (B) the first specified period
of the taxpayer’s taxable year must start
on the first day of the taxpayer’s taxable
year, (C) specified periods shorter than a
full taxable year must be contiguous, (D)
every day of the taxpayer’s taxable year
must be covered by a specified period and
(E) the specified period cannot be lon-
ger than the taxpayer’s taxable year. Any
specified period of time selected under
this section 3.02(3)(b)(v) must be consis-
tent with the purposes of § 7701(a)(52).
(4) Determine Direct Material Costs.
(a) In general. To determine Direct
Material Costs, the taxpayer must deter-
mine the direct material costs of the Con-
stituent Materials tracked to the eligible
component. A taxpayer not using the Cost
Percentage Safe Harbor described in sec-
tion 4.02(3) of this notice or the Certifica-
tion Safe Harbor described in section 4.03
of this notice to determine Direct Material
Costs, must determine Direct Material
Costs in the manner specified in this sec-
tion 3.02(4). Direct Material Costs are costs
that a taxpayer paid or incurred (within the
meaning of § 461 and regulations issued
under § 263A) for materials that become
an integral part of the eligible component
produced by the taxpayer and for those
materials that are consumed in the ordinary
course of production and that can be iden-
tified or associated with particular units or
groups of units of the eligible component
(within the meaning of § 1.263A-1(e)(2)
(i)(A)). See § 1.471-3 for the elements
of direct material costs. For example,
freight-in and tariffs paid or incurred by the
taxpayer generally are direct material costs.
See section 3.02(5)(b) of this notice for
guidance regarding resellers. To determine
Total Direct Material Costs, the taxpayer
must aggregate the Direct Material Costs.
(b) If using Cost Percentage Safe Har-
bor or Certification Safe Harbor.
Notwithstanding section 3.02(4)(a) of
this notice, the taxpayer may use the Cost
Percentage Safe Harbor identified in sec-
tion 4.02(3) of this notice or the Certifica-
tion Safe Harbor identified in section 4.03
of this notice to determine Direct Material
Costs. A taxpayer using the Cost Percent-
age Safe Harbor must determine Direct
Material Costs using the Assigned Cost
Percentages of the Constituent Materials,
rather than actual Direct Material Costs.
Section 4.02(3) of this notice describes
how the calculation of the Eligible Com-
ponent MACR is modified when using the
Assigned Cost Percentages under the Cost
Percentage Safe Harbor. Alternatively, a
taxpayer may use the Certification Safe
Harbor identified in section 4.03 of this
notice to determine Direct Material Costs
in whole or in part.
(c) Section 45X contract manufactur-
ing arrangements. Section 1.45X-1(c)(3)
(iii) permits parties that produce eligible
components pursuant to a contract man-
ufacturing arrangement to determine by
agreement the party that may claim the
§ 45X credit. For purposes of section 3.02
of this notice, in the case of an eligible
component produced pursuant to a contract
manufacturing arrangement, as defined in
§ 1.45X-1(c)(3)(iii), Direct Material Costs
are the direct material costs that are paid
or incurred (within the meaning of § 461
and regulations issued under § 263A) by
the party that performs the actual produc-
tion activities that bring about a substan-
tial transformation resulting in the eligible
component. If the party performing the
production activities did not incur any or
all direct materials costs within the mean-
ing of § 461 and any regulations issued
under § 263A, then Direct Material Costs
also include the direct material costs to the
taxpayer claiming a § 45X credit in such
contract manufacturing arrangement.
(5) Determine PFE Direct Material
Costs.
(a) In general. To determine PFE Direct
Material Costs, the taxpayer must deter-
mine the Direct Material Costs attributable
to each PFE Sourced Constituent Material
(that is, PFE Direct Material Costs). A tax-
payer not using the Cost Percentage Safe
Harbor described in section 4.02(3) of this
notice or the Certification Safe Harbor
described in section 4.03 of this notice to
determine PFE Direct Material Costs, must
determine PFE Direct Material Costs in the
manner specified in this section 3.02(5). To
determine PFE Total Direct Material Costs,
the taxpayer must aggregate the PFE Direct
Material Costs.
(b) Determine whether Constituent
Materials are PFE Sourced. To determine
whether Constituent Materials are PFE
Sourced, a taxpayer may use the Certifica-
tion Safe Harbor described in section 4.03
of this notice. If a taxpayer is unable to or
chooses not to use the Certification Safe
Harbor, then the taxpayer must determine
whether Constituent Materials are PFE
Sourced by applying the definition of PFE
in § 7701(a)(51) to the direct supplier of
the Constituent Material for all costs asso-
ciated with the Constituent Material pro-
cured from that supplier. If the direct sup-
plier is merely a reseller, then the taxpayer

March 9, 2026 672 Bulletin No. 2026–11
applies the definition of PFE in § 7701(a)
(51) to the entity that mined, produced, or
manufactured the Constituent Material at
issue for all costs associated with those
Constituent Materials.
(c) Year of determination. Whether
a Constituent Material is PFE Sourced
depends on the PFE status of the rele-
vant entities as of the taxable year during
which the taxpayer paid or incurred the
Direct Material Costs of such Constituent
Materials under the taxpayer’s method
of accounting. In the case of a taxpayer
whose taxable income is computed under
an accrual method of accounting, Direct
Material Costs are paid or incurred as the
taxpayer produces such Constituent Mate-
rials or when the taxpayer is provided such
Constituent Materials. For purposes of
this section, the determination of whether
a Constituent Material is PFE Sourced
is based on the taxable year of the direct
supplier of the Constituent Material, or in
the case of a reseller, the entity that mined,
produced, or manufactured the Constituent
Material, as described in section 3.02(5)
(b) and (c) of this notice. For example,
if a taxpayer paid for Constituent Mate-
rials in 2026, but incorporated them into
an eligible component sold in 2027, then
whether the Constituent Materials are PFE
Sourced would be determined by whether
the direct supplier (who is not a reseller)
was a PFE for such entity’s tax year that
includes the date in 2026 of payment for
the Constituent Materials, as determined
under § 7701(a)(51)(A)(ii).
26
If the direct
supplier, or in the case of a reseller, the
entity that mined, produced, or manufac-
tured the Constituent Materials does not
use a taxable year under § 7701(a)(23),
then whether such entity is a PFE would
be based on the entity’s status for the cal-
endar year in which the taxpayer paid or
incurred the Direct Material Costs of such
Constituent Materials (or, in the case of an
accrual method taxpayer, when the entity
provided the Constituent Materials to the
taxpayer).
(6) Example.
The provisions of this section 3.02 are illustrated
by the following example. Assume that the taxpayer
uses the calendar year as the taxpayer’s taxable year.
(a) In its taxable year beginning in 2026, Tax-
payer C produces and sells 200 photovoltaic (PV)
modules (EC Units). Taxpayer C identifies the EC
Units as being of the same type, because each unit
meets the definition of a PV module in § 45X(c)
(3)(B)(v). In order to qualify for the § 45X credit,
§ 45X(c)(1)(C) requires that the EC Units not include
material assistance from a PFE, meaning, in the case
of any solar energy component sold during calendar
year 2026, the Eligible Component MACR cannot be
less than 50%. See § 7701(a)(52)(C)(I).
(b) Each of the 200 EC Units includes 144 PV
cells (for a total of 28,800 PV cells in the 200 EC
Units) as a Constituent Material, as well as addi-
tional Constituent Materials. Each EC Unit contains
the same types of additional Constituent Materials
in identical amounts, and the Total Direct Material
Costs that are paid or incurred by Taxpayer C for the
additional Constituent Materials amount to $60 for
each of the 200 EC Units.
(c) Taxpayer C produces 160 EC Units during the
first 39 weeks of the taxable year, and another 40 EC
Units during the next 13 weeks of the taxable year.
(d) Taxpayer C identifies the first 39 weeks of the
taxable year as a specified period (Specified Period
1), and the next 13 weeks of the taxable year as
another specified period (Specified Period 2).
(e) Of the 23,040 PV cells incorporated into the
EC Units produced in Specified Period 1, 21,020
are PFE Sourced and 2,020 are not PFE Sourced.
In Specified Period 2, Taxpayer C changes its sup-
ply chain such that only 2,620 of the 5,760 PV cells
incorporated into the EC Units produced in Specified
Period 2 are PFE Sourced and 3,140 of them are not
PFE Sourced.
(f) No other Constituent Materials incorporated
into the EC Units are PFE Sourced.
(g) Of the 23,040 PV cells incorporated into the
EC Units produced in Specified Period 1, Taxpayer C
acquired 21,020 for $0.50 each and 2,020 for $1.50
each. Of the 5,760 PV cells incorporated into the EC
Units produced in Specified Period 2, Taxpayer C
acquired 2,620 for $0.50 each and 3,140 for $1.50
each.
(h) Taxpayer C calculates the Average Cost of
each PV cell for Specified Period 1 by summing the
Direct Material Costs of the PV cells incorporated
into the EC Units produced during Specified Period
1, then dividing that sum by the total quantity of PV
cells incorporated into the EC Units produced during
Specified Period 1 (((($0.50 × 21,020) + ($1.50 ×
2,020)) / 23,040) = $0.59). Based on the Average
Cost of each PV cell, the Direct Material Costs of the
PV cell in each EC Unit produced during Specified
Period 1 are $84.96 ($0.59 × 144). The Total Direct
Costs for each EC produced during Specified Period
1 is $144.96 ($84.96 + $60)
(i) Taxpayer C calculates a PFE Production Per-
centage for the PV cells for Specified Period 1 based
on the quantity of PV cells incorporated into the EC
Units produced during Specified Period 1. The Total
Quantity
PFE-CM
of PV cells included in such EC Units
is 21,020, and the Total Quantity
CM
is 23,040. Tax-
payer C divides the PV cells’ Total Quantity
PFE-CM

(21,020) by the Total Quantity
CM
(23,040) to equal a
PFE Production Percentage of 91.2% (21,020/23,040)
for its PV cells in Specified Period 1.
(j) Taxpayer C calculates the Total PFE Direct
Material Costs for each EC Unit in Specified Period
1. As PV cells are the only Constituent Material that
was PFE produced, Taxpayer C multiplies $84.96
(Direct Material Costs for the PV cells in each EC
Unit) by 91.2% (PFE Production Percentage for
Specified Period 1) to get the PFE Total Direct Mate-
rial Costs of $77.48
(k) Taxpayer C calculates an Eligible Compo-
nent MACR for each EC Unit produced in Specified
Period 1 as follows: ($144.96 [Total Direct Material
Costs of each EC Unit] – $77.48 [PFE Total Direct
Material Costs]) / $144.96 [Total Direct Material
Costs of each EC Unit] = 46.5%. For each such EC
Unit sold in Specified Period 1, the Clean Electricity
MACR of 46.5% is less than the applicable threshold
percentage (50%).
26
See fn. 19 of this notice.
PFE Production Percentage Based on Quantity of
PV Cells Incorporated into EC Units Produced
During First 39 Weeks of Taxable Year
Total Quantity
PFE-CM
21,020
Total Quantity
CM
23,040
PFE Production Percentage
(Total Quantity
PFE-CM
) / (Total Quantity
CM
)
91.2%
Eligible Component MACR for each EC Unit Produced During First 39
Weeks of Taxable Year
Total Direct Material Costs$144.96
PFE Production Percentage 91.2%
Cost attributable to PV cells
(based on Average Cost)
$84.96
PFE Total Direct Material Costs
(PFE Production Percentage × Costs attributable to PV
cells)
$77.48
Eligible Component MACR
(Total Direct Material Costs – PFE Total Direct Material
Costs) / (Total Direct Material Costs)
46.5%

Bulletin No. 2026–11 673 March 9, 2026
(l) Taxpayer C calculates the Average Cost of
each PV cell for Specified Period 2 by summing the
Direct Material Costs of the PV cells incorporated
into the EC Units produced during Specified Period
2, then dividing that sum by the total quantity of
PV Cells incorporated into the EC Units produced
during Specified Period 2 (((($0.50 × 2,620) + ($1.50
× 3,140)) / 5,760) = $1.05). Based on the Average
Cost of each PV cell, the Direct Material Costs of the
PV cells in each EC Unit produced during Specified
Period 2 are $151.20 ($1.05 × 144). The Total Direct
Costs for each EC produced during Specified Period
2 is $211.20 ($151.20 + $60)
(m) Taxpayer C calculates a PFE Production Per-
centage for the PV cells for Specified Period 2 based
on the quantity of PV cells incorporated into the EC
Units produced during Specified Period 2. The Total
Quantity
PFE-CM
of PV cells included in such EST Units
is 2,620, and the Total Quantity
CM
is 5,760. Taxpayer
C divides the PV cells’ Total Quantity
PFE-CM
(2,620) by
the Total Quantity
CM
(5,760) to equal a PFE Produc-
tion Percentage of 45.5% (2,620/5,760).
(m) Taxpayer C calculates the Total PFE Direct
Material Costs for each EC Unit in Specified Period
2. As PV cells are the only Constituent Material that
was PFE produced, Taxpayer C multiplies $151.20
(Direct Material Costs for the PV cells in each EC
Unit) by 45.5% (PFE Production Percentage for
Specified Period 2) to get the PFE Total Direct Mate-
rial Costs of $68.80.
(n) Taxpayer C calculates an Eligible Compo-
nent MACR for each EC Unit produced in Specified
Period 2 as follows: ($211.20 [Total Direct Material
Costs of each EC Unit] – $68.80 [PFE Total Direct
Material Costs]) / $211.20 [Total Direct Material
Costs of each EC Unit] = 67.4%. For each EC Unit
solid in Specified Period 2, the Eligible Component
MACR of 67.4% is not less than the applicable
threshold percentage (50%).
PFE Production Percentage Based on Quantity of PV Cells Incorporated into
EC Units Produced During Next 13 Weeks of Taxable Year
Total Quantity
PFE-CM
2,620
Total Quantity
CM
5,760
PFE Production Percentage (Total Number
PFE-CM
)

/

(Total Number
CM
)
41.5%
Eligible Component MACR for each EC Unit Produced During Next 13
Weeks of Taxable Year
Total Direct Material Costs$211.20
PFE Production Percentage 45.5%
Cost attributable to PV cells
(based on Average Cost)
$151.20
PFE Total Direct Material Costs
(PFE Production Percentage × Costs attributable to PV
cells)
$68.80
Eligible Component MACR
(Total Direct Material Costs – PFE Total Direct Material
Costs) / (Total Direct Material Costs)
67.4%
(o) Taxpayer C’s 160 EC Units produced during
the first 39 weeks of the taxable year include mate-
rial assistance from a PFE within the meaning of
§ 45X(c)(1)(C), therefore, Taxpayer C cannot claim
the credit under § 45X for such EC Units. In contrast,
Taxpayer C’s 40 EC Units produced during the next
13 weeks of the taxable year do not include mate-
rial assistance from a PFE within the meaning of
§ 45X(c)(1)(C), therefore, § 45X(c)(1)(C) does not
prohibit Taxpayer C from claiming the credit under
§ 45X for those EC Units.
SECTION 4. INTERIM SAFE
HARBORS
Section 7701(a)(52)(D)(iii)(II) pro-
vides two interim safe harbors that a tax-
payer may choose to apply when deter-
mining a Clean Electricity MACR or
Eligible Component MACR.
Section 7701(a)(52)(D)(iii)(II)(aa) per-
mits a taxpayer to use the tables included
in Notice 2025-08 to establish the percent-
age of the total direct costs of any listed
eligible component and any MP. To effec-
tuate this safe harbor, section 4.01 of this
notice describes the Identification Safe
Harbor that a taxpayer may use to identify
MPs and MPCs of a Listed qualified facil-
ity or EST or to identify Constituent Mate-
rials of a Listed eligible component, and
section 4.02 this notice describes the Cost
Percentage Safe Harbor that a taxpayer
may use to determine Direct Costs and
PFE Direct Costs for a qualified facility or
EST or to determine the Direct Material
Costs and PFE Direct Material Costs for
an eligible component,
Section 7701(a)(52)(D)(iii)(II)(bb)
permits a taxpayer to rely upon supplier
certifications for certain information. To
effectuate this safe harbor, section 4.03
of this notice describes the Certification
Safe Harbor that a taxpayer may use to
determine Direct Costs or Direct Material
Costs, PFE Direct Costs or PFE Direct
Material Costs, and whether MPs and
MPCs are PFE Produced or Constituent
Materials are PFE Sourced.
.01 Identification Safe Harbor.
(1) In general.
This section 4.01 describes the Identi-
fication Safe Harbor. A taxpayer may use
the Identification Safe Harbor to identify
MPs and MPCs of a Listed qualified facil-
ity or EST or to identify Constituent Mate-
rials of a Listed eligible component.
(2) Identification Safe Harbor require-
ments for qualified facilities or ESTs.
(a) In general. A taxpayer may rely upon
the Identification Safe Harbor to identify
the types of MPs and MPCs of a qualified
facility or EST only if the qualified facility
or EST is listed as an “Applicable Project”
in the 2023-2025 Safe Harbor Tables. For
this purpose, in the 2023-2025 Safe Harbor
Tables with cost percentages, the titles of
the tables (for example, “Updated Table for
Solar PV Ground-Mount”) or the column
titled “Applicable Project” may be con-
sidered as listing the qualified facility or
EST,

the column titled “Applicable Project
Component” or “APC” may be consid-
ered as listing the types of MPs within the
qualified facility or EST (Listed MPs), and
the column titled “Manufactured Product
Component” or “MPC” may be considered
as listing the types of MPCs within the
qualified facility or EST (Listed MPCs). In
the 2023-2025 Safe Harbor Tables without
cost percentages, the column titled “Appli-
cable Project Component” may be consid-
ered as listing the types of MPs and MPCs
within the qualified facility or EST (Listed
MPs and MPCs).
27
27
The definitions provided in Notice 2025-08 for Applicable Project, APC, or MPCs are applicable.

March 9, 2026 674 Bulletin No. 2026–11
(b) Exclusive list. Except as provided
in section 4.02(2)(b)(ii) of this notice, a
taxpayer that uses the Identification Safe
Harbor with respect to a Listed qualified
facility or EST to identify types of MPs
and MPCs must use the Listed MPs and
Listed MPCs as the exclusive and exhaus-
tive list of MPs and MPCs for that pur-
pose. Any MPs or MPCs contained in the
taxpayer’s qualified facility or EST that
are not listed in an applicable 2023-2025
Safe Harbor Table are disregarded for
purposes of using the Identification Safe
Harbor. For examples of using the Iden-
tification Safe Harbor to help calculate
a Clean Electricity MACR with unlisted
but utilized MPs or MPCs that are disre-
garded, see section 4.04(2) and (5) of this
notice. The requirements in the previous
sentence apply regardless of whether
property listed in the 2023-2025 Safe Har-
bor Tables is fully or fractionally owned
or shared.
(c) Listed but unutilized MPs or MPCs.
Any Listed MP or Listed MPC that is not
utilized as an input to the taxpayer’s quali-
fied facility or EST is disregarded for pur-
poses of using the Identification Safe Har-
bor. For examples of calculating a Clean
Electricity MACR with listed but unuti-
lized MPs or MPCs, see sections 4.04(1)
and (6) of this notice.
(d) Treatment of steel and iron. A tax-
payer using the Identification Safe Harbor
with respect to a Listed qualified facil-
ity or EST to identify types of MPs and
MPCs disregards any item that is identi-
fied in the applicable table as “Steel/Iron”
or a “Steel/Iron Product.” As described in
section 3.01(7)(b) of this notice, any steel
or iron components incorporated into the
taxpayer’s qualified facility or EST are
disregarded for purposes of calculating a
Clean Electricity MACR.
(e) 80/20 Rule.
(i) In general. A taxpayer that owns a
facility that is a qualified facility by vir-
tue of the 80/20 Rule may be unable to
determine the source of any used property
that is part of the facility. Accordingly, a
taxpayer disregards any used property for
purposes of using the Identification Safe
Harbor for any such facility.
(ii) Partially replaced property. In
applying the Identification Safe Harbor
to any facility that is a qualified facil-
ity by virtue of the 80/20 Rule, if the
facility includes a mix of new and used
property of the same type of Listed MP
or Listed MPC, the taxpayer may not
disregard the new property for purposes
of using the Identification Safe Harbor.
28

For example, if a taxpayer replaces
some, but not all, used PV modules with
new PV modules in their solar facility
that is a qualified facility by virtue of
the 80/20 rule, the taxpayer may not dis-
regard the new PV modules as a Listed
MP for purposes of using the Identifica-
tion Safe Harbor. See section 4.04(6) of
this notice for an example of using the
Identification Safe Harbor with partially
replaced property.
(f) Qualified interconnection property.
A taxpayer may not use the Identifica-
tion Safe Harbor with respect to quali-
fied interconnection property because the
2023-2025 Safe Harbor Tables list only
MPs and MPCs for qualified facilities as
defined in § 48E(b)(3), and qualified inter-
connection property is not part of a quali-
fied facility as defined in § 48E(b)(3).
(3) Identification Safe Harbor require-
ments for eligible components.
(a) In general. A taxpayer may rely
upon the Identification Safe Harbor to
identify types of Constituent Materials (as
defined in section 3.02(1) of this notice)
only if the eligible component is a Listed
eligible component in section 4.01(3)
(d) of this notice. For this purpose, in the
2023-2025 Safe Harbor Tables with cost
percentages, the column titled “Applica-
ble Project Component” or “APC” may
be considered as identifying the eligible
component, and the column titled “Man-
ufactured Product Component” or “MPC”
may be considered as identifying the type
of Constituent Materials of the Listed eli-
gible component. In the 2023-2025 Safe
Harbor Tables without cost percentages,
the column titled “Applicable Project
Component” may be considered as identi-
fying the types of Constituent Materials of
the eligible component. If an eligible com-
ponent is not listed in section 4.01(3)(d) of
this notice, then the taxpayer may not treat
the eligible component as a Listed eligi-
ble component, and therefore may not use
the Identification Safe Harbor. See section
4.04(3) of this notice for an example of
being unable to use the Identification Safe
Harbor.
(b) Exclusive list. Except as provided
in section 4.02(3)(b)(ii) of this notice,
a taxpayer that uses the Identification
Safe Harbor with respect to a Listed eli-
gible component to identify Constituent
Materials must use the Listed MPCs as
the exclusive and exhaustive list of Con-
stituent Materials. The requirements in
the previous sentence apply regardless of
whether property listed in the 2023-2025
Safe Harbor Tables is fully or fractionally
owned or shared.
(c) Listed but unutilized. Any Listed
MPC that is not utilized as an input to the
Listed eligible component is disregarded
for purposes of using the Identification
Safe Harbor. For examples of calculating
an Eligible Component MACR with listed
but unutilized MPCs, see sections 4.04(2)
and (5) of this notice.
(d) Listed eligible components and
corresponding Applicable Project Com-
ponents.
(i) In general. Subject to section 4.01(3)
(d)(ii) of this notice, the following chart
identifies the only eligible components
defined in § 45X that may be treated as a
Listed eligible component, along with the
Applicable Project Component to which
that eligible component must correspond
to be treated as a Listed eligible compo-
nent. If the eligible component is listed
in more than one of the Notice 2025-08
tables, then the taxpayer must use the
table for the Applicable Project that most
closely reflects the reasonably anticipated
use of the eligible component.
28
Except as provided in section 4.02(2)(b)(v) of this notice, for purposes of determining Total Direct Costs and Total PFE Direct Costs, only costs paid or incurred with respect to new property
will be included to compute the Clean Electricity MACR.

Bulletin No. 2026–11 675 March 9, 2026
Eligible ComponentApplicable Project Component (Listed
eligible component)
Central inverters
§ 45X(c)(2)(B)
Inverter
Commercial inverters
§ 45X(c)(2)(C)
Inverter
Distributed wind inverters
§ 45X(c)(2)(D)
Inverter
Microinverters
§ 45X(c)(2)(E)
Inverter
Residential inverters
§ 45X(c)(2)(F)
Inverter
Utility inverters
§ 45X(c)(2)(G)
Inverter
Solar module
§ 45X(c)(3)(B)(v)
PV module
Battery modules using battery cells
§ 45X(c)(5)(B)(iii)
(as described in section 4.01(3)(c)(ii) of this
notice)
Battery pack/module
(ii) Special requirements for battery
modules. Battery modules using battery
cells may be treated as a Listed eligible
component upon first meeting the require-
ments of § 45X(c)(5)(B)(iii)(I)(aa), (c)(5)
(B)(iii)(II), and (c)(5)(B)(iii)(III), notwith-
standing when this transformation occurs
in a manufacturing production chain.
However, consistent with the definition
of an Applicable Project Component in
section 3.01(2)(a) of Notice 2023-38, only
battery modules that are “directly incor-
porated” into a distributed battery energy
storage system or a grid-scale battery
energy storage system, as those facilities
are defined in section 7.03(6) and (9) of
Notice 2025-08, may be treated as Listed
eligible components under the “Updated
Table for Battery Energy Storage System”
in section 7.02 of Notice 2025-08.
.02 Cost Percentage Safe Harbor.
(1) In general.
This section 4.02 describes the Cost
Percentage Safe Harbor. A taxpayer may
use the Cost Percentage Safe Harbor to
determine Direct Costs, determine PFE
Direct Costs, and calculate the Clean Elec-
tricity MACR only if the (i) the taxpayer is
using the Identification Safe Harbor with
respect to such qualified facility or EST
and (ii) the qualified facility or EST sat-
isfies the requirements of section 4.02(2)
of this notice. A taxpayer may use the
Cost Percentage Safe Harbor to determine
Direct Material Costs, determine PFE
Direct Material Costs, and calculate the
Eligible Component MACR only if (i) the
taxpayer is using the Identification Safe
Harbor with respect to such eligible com-
ponent and (ii) the eligible component sat-
isfies the requirements of section 4.02(3)
of this notice. The Cost Percentage Safe
Harbor is not used to determine whether
an MP, MPC, or Constituent Material is
PFE Produced or PFE Sourced.
(2) Cost Percentage Safe Harbor
requirements for qualified facilities or
ESTs.
(a) In general. In lieu of determining
Direct Costs, determining PFE Direct
Costs, and calculating the Clean Elec-
tricity MACR in the manner specified in
section 3.01 of this notice, a taxpayer can
instead determine Direct Costs, determine
PFE Direct Costs, and calculate the Clean
Electricity MACR by using the Cost Per-
centage Safe Harbor as described in sec-
tion 4.02(2)(c) of this notice.
(b) Specific requirements for using
2023-2025 Safe Harbor Tables.
(i) Exclusive list. Except as provided in
section 4.02(2)(b)(ii) and (v) of this notice,
a taxpayer that uses the Cost Percentage
Safe Harbor with respect to a Listed quali-
fied facility or EST must use the Assigned
Cost Percentages of the Listed MPs and
Listed MPCs as the exclusive and exhaus-
tive set of costs for that purpose. Any
MPs or MPCs contained in the taxpay-
er’s qualified facility or EST that are not
listed in an applicable 2023-2025 Safe
Harbor Table are disregarded for purposes
of using the Cost Percentage Safe Har-
bor. For examples of using the Cost Per-
centage Safe Harbor to calculate a Clean
Electricity MACR with unlisted but uti-
lized MPs or MPCs, see sections 4.04(1)
and (6) of this notice. The requirements in
this section 4.02(2)(b) apply regardless of
whether property listed in the 2023-2025
Safe Harbor Tables is fully or fractionally
owned or shared.
(ii) Listed but unutilized MPs or MPCs.
Any Listed MP or Listed MPC that is not
utilized as an input to the taxpayer’s qual-
ified facility or EST is disregarded for
purposes of using the Cost Percentage
Safe Harbor. For examples of calculat-
ing a Clean Electricity MACR with listed
but unutilized MPs or MPCs, see sections
4.04(1) and (6) of this notice.
(iii) Treatment of steel and iron. A
taxpayer using the Cost Percentage Safe
Harbor for a Listed qualified facility or
EST may disregard any item that is iden-
tified in the applicable table as a “Steel/
Iron” or “Steel/Iron Product” for purposes
of using this safe harbor. As described in
section 3.01(7)(b) of this notice, any steel

March 9, 2026 676 Bulletin No. 2026–11
or iron components incorporated into the
taxpayer’s qualified facility or EST are
disregarded for purposes of calculating a
Clean Electricity MACR.
(iv) Incremental Production Rule.
The 2023-2025 Safe Harbor Tables are
designed to provide cost percentages for
different types of MPs and MPCs that are
included in an entirely new qualified facil-
ity. Using those tables in the context of
a facility which is a qualified facility by
virtue of the Incremental Production Rule,
which may consist of only a small fraction
of the components that are included in an
entire new qualified facility, can generate
results inconsistent with the purpose of the
material assistance rules under § 7701(a)
(52). Accordingly, a taxpayer may not use
the Cost Percentage Safe Harbor for any
such facility.
(v) 80/20 Rule.
(A) In general. A taxpayer that owns a
facility that is a qualified facility by vir-
tue of the 80/20 Rule may be unable to
determine the source of any used property
which is part of the facility. Accordingly,
a taxpayer disregards any used property
for purposes of using the Cost Percentage
Safe Harbor for any such facility.
(B) Partially replaced property. In
applying the Cost Percentage Safe Harbor
to any facility that is a qualified facility by
virtue of the 80/20 Rule, a taxpayer must
use the entire Assigned Cost Percentages
for Listed MPs and Listed MPCs for any
new property which is part of the facility.
For example, if a taxpayer were to replace
only 5 out of 9 Blades in a land-based
wind facility that is a qualified facility
by virtue of the 80/20 Rule, the taxpayer
must use the 31.2% Assigned Cost Per-
centage attributable to Blades, without
adjustment based on partial replacement
of the Blades, for purposes of using the
Cost Percentage Safe Harbor. See section
4.04(6) of this notice for an example of
using the Cost Percentage Safe Harbor
with partially replaced property.
(vi) Qualified interconnection prop-
erty. As described in section 4.01(2)(e)
of this notice, a taxpayer may not use the
Identification Safe Harbor with respect
to qualified interconnection property. To
use the Cost Percentage Safe Harbor, a
taxpayer must also use the Identification
Safe Harbor. Accordingly, a taxpayer may
not use the Cost Percentage Safe Harbor
with respect to qualified interconnection
property.
(c) Application of Cost Percentage Safe
Harbor to qualified facilities and ESTs. A
taxpayer using the Cost Percentage Safe
Harbor will calculate a Clean Electricity
MACR using the following steps. For an
example of using the Cost Percentage Safe
Harbor to calculate a Clean Electricity
MACR, see section 4.04(1) of this notice.
(i) Step one: Identify MPs and MPCs
using the Identification Safe Harbor. To
determine the Clean Electricity MACR
using the Cost Percentage Safe Harbor,
a taxpayer must first identify MPs and
MPCs using the Identification Safe Har-
bor, as described in section 4.01(2) of this
notice.
(ii) Step two: Track MPs and MPCs.
To determine the Clean Electricity MACR
using the Cost Percentage Safe Harbor,
a taxpayer must track only whether each
MP or MPC incorporated into the quali-
fied facility or EST was PFE Produced, as
described in section 3.01(3) of this notice.
(iii) Step three: determine Total Per-
centage. Next, in lieu of determining
Direct Costs and Total Direct Costs in the
manner described in section 3.01(4)(a)
of this notice, a taxpayer using the Cost
Percentage Safe Harbor determines Total
Direct Costs by summing the Assigned
Cost Percentages for each Listed MPC
and the Assigned Cost Percentages for
Production of each Listed MP within the
Applicable Project (Total Percentage).
The Assigned Cost Percentages for MPs
and MPCs listed in the 2023-2025 Safe
Harbor Tables will sum to a Total Percent-
age of 100% unless the taxpayer has listed
but unutilized MPs or MPCs or the 80/20
Rule applies.
29
(iv) Step four: determine Total PFE
Percentage. Then, in lieu of determining
PFE Direct Costs and PFE Total Direct
Costs in the manner described in section
3.01(5) of this notice, a taxpayer using the
Cost Percentage Safe Harbor determines
PFE Total Direct Costs by summing the
Assigned Cost Percentages for each Listed
MPC that is PFE Produced and Assigned
Cost Percentages for Production of each
Listed MP that is PFE Produced within the
Applicable Project (Total PFE Percent-
age). If an MP is PFE Produced, but some
or all of the MPCs included in the MP
are not PFE Produced, then the taxpayer
includes in the Total PFE Percentage the
Assigned Cost Percentages for Production
of the MP plus the Assigned Cost Percent-
ages for each PFE Produced MPC. If an
MP is not PFE Produced, but some or all
of the MPCs included in the MP are PFE
Produced, then the taxpayer only includes
in the Total PFE Percentage the Assigned
Cost Percentages for the PFE Produced
MPCs.
(v) Step five: determine Clean Elec-
tricity MACR. After determining the
Total Percentage and Total PFE Percent-
age, a taxpayer using the Cost Percentage
Safe Harbor determines the Clean Elec-
tricity MACR by subtracting the Total
PFE Percentage from the Total Percent-
age and then dividing that result by the
Total Percentage. If the Clean Electricity
MACR is less than the applicable thresh-
old percentage, then the qualified facility
or EST includes material assistance from
a PFE.
(3) Cost Percentage Safe Harbor
requirements for eligible components.
(a) In general. In lieu of determining
Direct Material Costs, determining PFE
Direct Material Costs, and calculating the
Eligible Component MACR in the man-
ner specified in section 3.02 of this notice,
a taxpayer can instead determine Direct
Material Costs, determine PFE Direct
Material Costs, and calculate the Eligible
Component MACR by using the Cost Per-
centage Safe Harbor described in section
4.02(3)(b) and (c) of this notice.
(b) Specific requirements for using
2023-2025 Safe Harbor Tables for § 45X
eligible components.
29
As described in section 4.02(2)(b)(ii) of this notice, the Assigned Cost Percentages for listed but unutilized MPs or MPCs are disregarded from the determination of a Clean Electricity
MACR. See sections 4.04(1) and (6) of this notice for an example of using the Cost Percentage Safe Harbor to calculate a Clean Electricity MACR for a facility with listed but unutilized
MPs or MPCs. Additionally, as described in section 4.02(2)(b)(v) of this notice, any used property in a facility that is a qualified facility by virtue of the 80/20 Rule is disregarded from the
determination of a Clean Electricity MACR. See section 4.04(6) of this notice for an example of using the Cost Percentage Safe Harbor to calculate a Clean Electricity MACR for a facility
that is a qualified facility by virtue of the 80/20 rule.

Bulletin No. 2026–11 677 March 9, 2026
(i) Exclusive list. Except as provided in
section 4.02(3)(b)(ii) of this notice, a tax-
payer that uses the Cost Percentage Safe
Harbor with respect to a Listed eligible
component to determine Direct Material
Costs must use the Listed MPCs as the
exclusive and exhaustive set of Constitu-
ent Materials for that purpose. Any Con-
stituent Material contained in the taxpay-
er’s eligible component which is not listed
as an MPC in the applicable 2023-2025
Safe Harbor Table is disregarded for pur-
poses of using the Cost Percentage Safe
Harbor. For examples of using the Cost
Percentage Safe Harbor to calculate an
Eligible Component MACR with unlisted
but utilized MPCs, see sections 4.04(2)
and (5) of this notice.
(ii) Listed but unutilized MPCs. Any
Listed MPC that is not utilized as an input
to the Listed eligible component is disre-
garded for purposes of using the Cost Per-
centage Safe Harbor. For examples of cal-
culating an Eligible Component MACR
with listed but unutilized MPCs, see sec-
tions 4.04(2) and (5) of this notice.
(c) Application of Cost Percentage
Safe Harbor to eligible components. A
taxpayer using the Cost Percentage Safe
Harbor will calculate an Eligible Compo-
nent MACR using the following steps.
(i) Step one: Identify Constituent Mate-
rials using the Identification Safe Harbor.
To determine the Eligible Component
MACR using the Cost Percentage Safe
Harbor, a taxpayer must first identify
types of Constituent Materials included in
the Listed Eligible Component using the
Identification Safe Harbor, as described in
section 4.01(3) of this notice.
(ii) Step two: Track Constituent Mate-
rials. To determine the Eligible Compo-
nent MACR using the Cost Percentage
Safe Harbor, a taxpayer must only track
whether each Constituent Material incor-
porated into the eligible component was
PFE Sourced, as described in section
3.02(5) of this notice.
(iii) Step three: determine Total Per-
centage. Next, in lieu of determining
Direct Material Costs and Total Direct
Material Costs in the manner described
in section 3.02(4)(a) of this notice, a
taxpayer using the Cost Percentage Safe
Harbor determines Total Direct Material
Costs by summing the Assigned Cost Per-
centages for each Listed MPC included in

the Listed eligible component (Total Per-
centage).
(iv) Step four: determine Total PFE
Percentage. Then, in lieu of determin-
ing PFE Direct Material Costs and PFE
Total Direct Material Costs in the manner
described in section 3.02(5) of this notice,
a taxpayer using the Cost Percentage
Safe Harbor determines PFE Total Direct
Material Costs by summing the Assigned
Cost Percentages for each Listed MPC
that is PFE Sourced and included in the
Listed eligible component (Total PFE Per-
centage).
(v) Step five: determine Eligible Com-
ponent MACR. After determining the Total
Percentage and Total PFE Percentage, the
taxpayer will determine the Eligible Com-
ponent MACR by subtracting the Total
PFE Percentage from the Total Percentage
and then dividing that result by the Total
Percentage. If the Eligible Component
MACR is less than the applicable thresh-
old percentage, then the eligible compo-
nent includes material assistance from a
PFE.
.03 Certification Safe Harbor.
(1) In general.
This section 4.03 describes the Certifi-
cation Safe Harbor. In lieu of determining
Direct Costs or Direct Material Costs and
PFE Direct Costs or PFE Direct Material
Costs in the manners specified in sections
3.01(4)(a), 3.02(4)(a), 3.01(5)(a) and (c),
and 3.02(5)(a) and (c) of this notice, a
taxpayer can instead determine Direct
Costs or Direct Material Costs by using
the Certification Safe Harbor as described
in section 4.03(2) of this notice. In addi-
tion, in lieu of determining whether MPs
and MPCs are PFE Produced or Constit-
uent Materials are PFE Sourced in the
manners specified in sections 3.01(5)(b)
and 3.02(5)(b) of this notice, a taxpayer
can instead determine whether MPs and
MPCs are PFE Produced or Constituent
Materials are PFE Sourced by using the
Certification Safe Harbor as described in
section 4.03(2) of this notice.
(2) Requirements to be a valid certifi-
cation.
(a) In general. The certifications
described in section 4.03(2)(b) of this
notice must be prepared in a manner con-
sistent with § 1.45X-4(c)(4)(i), meaning
that any certifications must be attached to
Form 7211, Clean Electricity Production

Credit; Form 3468, Investment Credit;
Form 7207, Advanced Manufacturing
Production Credit; or any other applicable
form for claiming a § 45Y, 48E, or 45X
credit filed with the taxpayer’s annual
return submitted to the IRS for the first
taxable year in which the taxpayer claims
a credit for a qualified facility, EST, or
eligible component. See section 2.05 of
this notice for rules regarding substanti-
ation under § 6001. Additionally, under
§ 7701(a)(52)(D)(iii)(IV), any certifica-
tion, must (aa) include (AA) the supplier’s
employer identification number, or (BB)
any such similar identification number
issued by a foreign government, (bb) be
signed under penalties of perjury, (cc) be
retained by the supplier and the taxpayer
for a period of not less than six years and
must be provided to the Secretary upon
request, and (dd) be from the supplier
from which the taxpayer purchased any
MP, eligible component, or constituent
elements, materials, or subcomponents of
an eligible component, stating–(AA) that
such property was not produced or man-
ufactured by a PFE and that the supplier
does not know (or have reason to know)
that any prior supplier in the chain of pro-
duction of that property is a PFE, (BB) for
purposes of § 45X, the total direct mate-
rial costs for each component, constituent
element, material, or subcomponent that
were not produced or manufactured by
a PFE, or (CC) for purposes of § 45Y or
§ 48E, the total direct costs attributable to
all MPs that were not produced or manu-
factured by a PFE.
(b) Requirements for Certification Safe
Harbor. The direct supplier may certify
either (1) the total direct costs to the tax-
payer or the total direct material costs paid
or incurred by the taxpayer, as applicable,
of such MP, MPC, eligible component,
or Constituent Material that was not PFE
Produced or PFE Sourced, as applicable,
or (2) that such MP, MPC, eligible compo-
nent, or Constituent Material was not PFE
Produced or PFE Sourced, as applicable.
See sections 4.04(4) and (5) of this notice
for examples applying the Certification
Safe Harbor.
(c) Inaccurate certifications. A tax-
payer may rely on a certification described
in section 4.03(2)(b) for the purposes
described in section 4.03(1) of this notice
unless the taxpayer knows or has reason to

March 9, 2026 678 Bulletin No. 2026–11
know that such certification is inaccurate.
Where the taxpayer knows (or has rea-
son to know) that an MP, MPC, eligible
component, or Constituent Material was
PFE Produced or PFE Sourced the tax-
payer must treat all direct costs or direct
material costs, as applicable, with respect
to such property as PFE Produced or PFE
Sourced.
.04 Examples.
The provisions of this section are illustrated by
the following examples. In each example, assume
that the taxpayer uses the calendar year as the tax-
payer’s taxable year.
(1) Example 1: calculating Clean Electricity
MACR using the Identification Safe Harbor and Cost
Percentage Safe Harbor.
(a) In taxable year 2026, Taxpayer D purchases
a 50-megawatt direct current ground-mounted PV
(tracker) (Facility) and places the Facility in ser-
vice. Construction of the Facility began in calendar
year 2026. Under § 7701(a)(52)(B)(i)(I), the Facil-
ity includes material assistance from a PFE if the
Clean Electricity MACR with respect to the Facility

is less than 40%. Taxpayer D would like to use the
Identification Safe Harbor and the Cost Percentage
Safe Harbor to calculate a Clean Electricity MACR
and determine whether its Facility includes material
assistance from a PFE.
(b) Taxpayer D first uses the identification Safe
Harbor to identify MPs and MPCs. Taxpayer D iden-
tifies the Applicable Project in the Notice 2025-08
Table for “Updated Table for Solar PV Ground-
Mount,” that corresponds to the Facility. Taxpayer
D disregards the table rows for Steel pile or Steel
ground screw and Steel or Iron reinforcing products
in foundation and identifies 3 MPs in the column for
Ground-mount (Tracking): PV modules (65.8%),
Inverters (5.5%), and PV trackers (28.7%). The
Facility’s PV modules do not include Bypass Diodes
(0.4%) (that is, listed but unutilized), but do include
heat sensors (that is, unlisted but utilized).
(c) Taxpayer D next tracks whether each Listed
MP or Listed MPC identified in the previous step
was PFE Produced. With respect to the PV modules’
MPCs, Taxpayer D knows that only the cells were
PFE Produced; no additional Listed MPCs incorpo-
rated into the PV Modules were PFE Produced. With
respect to the PV modules as an MP, Taxpayer D also
knows that the PV modules were not PFE Produced.

Additionally, Taxpayer D knows that the inverters
and PV trackers, including each of the Listed MPCs
within the inverters and PV trackers that were incor-
porated into the inverters and PV trackers, were not
PFE Produced.
(d) Taxpayer D then uses the Cost Percentage
Safe Harbor to aggregate the Assigned Cost Percent-
ages and determine a Total Percentage. Taxpayer
D sums the Assigned Cost Percentages for each of
the identified MPs, disregarding Bypass Diodes, to
determine a Total Percentage of 99.6% (65.8% +
5.5% + 28.7% - 0.4%) (Total Percentage).
(e) Taxpayer D next uses the Cost Percentage
Safe Harbor to aggregate the Assigned Cost Per-
centages attributable to PFE Produced MPs and
MPCs and determines a Total PFE Percentage. The
Assigned Cost Percentage for the only PFE Pro-
duced MP or MPC is 38.0% for the PFE Produced
Cells (Total PFE Percentage).
(f) Taxpayer D calculates the Clean Electricity
MACR of the Facility, disregarding Bypass Diodes
and heat sensors, as follows: (99.6% [Total Percent-
age] – 38.0% [Total PFE Percentage]) / 99.6% [Total
Percentage] = 61.8%. The Clean Electricity MACR
of 61.8% is not less than the applicable threshold
percentage (40%).
Clean Electricity MACR
Total Percentage99.6%
Total PFE Percentage38.0%
Eligible Component MACR
61.8%

99.6% - 38.0%
= 61.8%
99.6%

Total Percentage - Total PFE Percentage

Total Percentage
= Eligible Component MACR

34

(1) Example 1: calculating Clean Electricity MACR using the Identification Safe Harbor and Cost Percentage Safe Harbor.
(a) In taxable year 2026, Taxpayer D purchases a 50-megawatt direct current ground-mounted PV (tracker) (Facility) and places the
Facility in service. Construction of the Facility began in calendar year 2026. Under § 7701(a)(52)(B)(i)(I), the Facility includes material
assistance from a PFE if the Clean Electricity MACR with respect to the Facility is less than 40%. Taxpayer D would like to use the
Identification Safe Harbor and the Cost Percentage Safe Harbor to calculate a Clean Electricity MACR and determine whether its Facility
includes material assistance from a PFE.
(b) Taxpayer D first uses the identification Safe Harbor to identify MPs and MPCs. Taxpayer D identifies the Applicable Project in the
Notice 2025-08 Table for “Updated Table for Solar PV Ground-Mount,” that corresponds to the Facility. Taxpayer D disregards the table rows
for Steel pile or Steel ground screw and Steel or Iron reinforcing products in foundation and identifies 3 MPs in the column for Ground-mount
(Tracking): PV modules (65.8%), Inverters (5.5%), and PV trackers (28.7%). The Facility’s PV modules do not include Bypass Diodes (0.4%)
(that is, listed but unutilized), but do include heat sensors (that is, unlisted but utilized).
(c) Taxpayer D next tracks whether each Listed MP or Listed MPC identified in the previous step was PFE Produced. With respect to the
PV modules’ MPCs, Taxpayer D knows that only the cells were PFE Produced; no additional Listed MPCs incorporated into the PV Modules
were PFE Produced. With respect to the PV modules as an MP, Taxpayer D also knows that the PV modules were not PFE Produced.
Additionally, Taxpayer D knows that the inverters and PV trackers, including each of the Listed MPCs within the inverters and PV trackers that
were incorporated into the inverters and PV trackers, were not PFE Produced.
(d) Taxpayer D then uses the Cost Percentage Safe Harbor to aggregate the Assigned Cost Percentages and determine a Total Percentage.
Taxpayer D sums the Assigned Cost Percentages for each of the identified MPs, disregarding Bypass Diodes, to determine a Total Percentage of
99.6% (65.8% + 5.5% + 28.7% - 0.4%) (Total Percentage).
(e) Taxpayer D next uses the Cost Percentage Safe Harbor to aggregate the Assigned Cost Percentages attributable to PFE Produced MPs
and MPCs and determines a Total PFE Percentage. The Assigned Cost Percentage for the only PFE Produced MP or MPC is 38.0% for the PFE
Produced Cells (Total PFE Percentage).
(f) Taxpayer D calculates the Clean Electricity MACR of the Facility, disregarding Bypass Diodes and heat sensors, as follows: (99.6%
[Total Percentage] – 38.0% [Total PFE Percentage]) / 99.6% [Total Percentage] = 61.8%. The Clean Electricity MACR of 61.8% is not less than
the applicable threshold percentage (40%).
Clean Electricity MACR
Total Percentage

99.6%
Total PFE Percentage 38.0%
Eligible Component MACR 61.8%
(g) Taxpayer D’s Facility does not include material assistance from a PFE and, therefore, § 48E(b)(6) does not prohibit Taxpayer D from
claiming the credit under § 48E for the Facility.
(g) Taxpayer D’s Facility does not include mate-
rial assistance from a PFE and, therefore, § 48E(b)
(6) does not prohibit Taxpayer D from claiming the
credit under § 48E for the Facility.
(2) Example 2: calculating Eligible Component
MACR using the Identification Safe Harbor and the
Cost Percentage Safe Harbor.
(a) In taxable year 2026, Taxpayer E produces
and sells 100 solar modules (within the meaning of
§ 45X(c)(3)(B)(v)) (Solar Modules) to an unrelated
person. Under § 7701(a)(52)(C)(i)(I)(aa), the Solar
Modules include material assistance from a PFE if
the Eligible Component MACR with respect to the
Solar Modules is less than 50%. Taxpayer E would
like to use the Identification Safe Harbor and the
Cost Percentage Safe Harbor to calculate an Eligible
Component MACR and determine whether its Solar
Modules include material assistance from a PFE.
(b) Taxpayer E determines the Solar Modules
may be treated as a Listed eligible component by
relying on section 4.01(3)(d)(i) of this notice, which
identifies solar modules as defined in § 45X(c)(3)
(B)(v) as a Listed eligible component. As a result,
Taxpayer E may use the Identification Safe Har-
bor to identify Constituent Materials and use the

Assigned Cost Percentages of the MPCs listed for
PV module to determine Total Direct Material Costs.
Taxpayer E finds that PV module is a Listed eligible
component in two separate Notice 2025-08 tables:
“Updated Table for Solar PV Ground-Mount” and
the “Updated Table for Solar PV Rooftop”. Tax-
payer E knows that the Solar Modules do not have
domestic c-Si PV Cells or domestic wafers and will
be used in a Solar PV Ground-mount (Tracking) and
so must use the column “Ground-mount (Tracking)”
to identify Assigned Cost Percentages for the Solar
Modules. A PV module identified in the “Ground-
mount (Tracking)” column of the “Updated Table
for Solar PV Ground-Mount” consists of 10 MPCs:
Cells (38.0%), Frame/Backrail (6.0%), Front Glass
(6.0%), Encapsulant (3.8%), Backsheet/Backglass
(3.8%), Junction Box (1.0%), Edge Seals (0.3%),
Pottants (0.3%), Bus Ribbons (1.5%), and Bypass
Diodes (0.4%). The Solar Modules do not include
Bypass Diodes (that is, listed but unutilized), but do
include heat sensors (that is, unlisted but utilized). In
addition to these MPCs and Assigned Cost Percent-
ages, the Ground-mount (Tracking) column provides
that Production of a PV module for such an Applica-
ble Project has an Assigned Cost Percentage of 4.7%.
(c) Taxpayer E next tracks whether each Listed
MPC identified in the previous step was PFE
Sourced. Taxpayer E knows that 800 out of 1000
Cells incorporated in each Solar Module were PFE
Sourced and that no additional Constituent Materials
incorporated into the Solar Modules and listed as an
MPC in the “Updated Table for Solar PV Ground-
Mount” for a PV module were PFE Sourced.
(d) Taxpayer E then uses the Cost Percentage
Safe Harbor to aggregate Assigned Cost Percent-
ages and determine a Total Percentage and Total
PFE Percentage. Taxpayer E sums the Assigned Cost
Percentages for each of the MPCs listed within the
PV Module, plus Production of the PV Module, dis-
regarding Bypass Diodes and heat sensors, to deter-
mine a Total Percentage of 65.4% (38.0% + 6.0% +
6.0% + 3.8% + 3.8% + 1.0% + 0.3% + 0.3% + 1.5%
+ 0.4% + 4.7% - 0.4%).
(e) To determine Total PFE Percentage, Taxpayer
E determines the Assigned Cost Percentage attrib-
utable to the PFE Sourced Cells by multiplying the
Assigned Cost Percentage for Cells (38.0%) by the
percentage of such Cells that were PFE Sourced (800
out of 1000 = 80%), which equals 30.4% (Total PFE
Percentage).

Bulletin No. 2026–11 679 March 9, 2026
(f) Taxpayer E calculates the Eligible Compo-
nent MACR as follows: (65.4% [Total Percentage]
– 30.4% [Total PFE Percentage]) / 65.4% [Total
PFE Percentage] = 53.5%. The Eligible Compo-
nent MACR of 54.0% is not less than the applicable
threshold percentage (50%).
Eligible Component MACR
Total Percentage65.4%
Total PFE Percentage30.4%
Eligible Component MACR
36

Eligible Component MACR
Total Percentage

65.4%
Total PFE Percentage 30.4%
Eligible Component MACR

65.4% - 30.4%
65.4%
= 53.5%

Total Percentage – Total PFE Percentage
Total Percentage
= Eligible Component MACR

53.5%
(g) Taxpayer E’s Solar Modules do not include material assistance from a PFE, and thus satisfy the requirements of § 45X(c)(1)(C),
therefore, § 45X(c)(1)(C) does not prohibit Taxpayer E from claiming the credit under § 45X for the Solar Modules.
(3) Example 3: unable to rely on the Cost Percentage Safe Harbor.
(a) In taxable year 2026, Taxpayer F produces and sells 100 PV cells to an unrelated person (PV Cells). Under § 7701(a)(52)(C)(i)(I)(aa),
the PV Cells include material assistance from a PFE if the Eligible Component MACR with respect to the PV Cells is less than 50%. Taxpayer F
would like to use the Identification Safe Harbor and the Cost Percentage Safe Harbor to calculate an Eligible Component MACR and determine
whether its PV Cells include material assistance from a PFE.
(b) Taxpayer F first uses the Identification Safe Harbor to identify Constituent Materials. To determine whether a PV cell may be treated
as a Listed eligible component, Taxpayer F determines whether a PV cell that is an eligible component under § 45X(c)(3)(A)(ii) may be treated as
a Listed eligible component under section 4.01(3)(d)(i) of this notice. A PV cell that qualifies as an eligible component under § 45X(c)(3)(A)(ii)
is not listed in section 4.01(3)(d)(i) of this notice, and so Taxpayer F may not treat the PV Cells as a Listed eligible component. Because a PV
Cell may not be treated as a Listed eligible component, Taxpayer F is unable to rely on the Identification Safe Harbor to identify Constituent
Materials or the Cost Percentage Safe Harbor to calculate an Eligible Component MACR for the PV Cells and determine whether its PV Cells
include material assistance from a PFE.
(c) Taxpayer F may still rely on the Certification Safe Harbor or the guidance provided in section 3.02 of this notice to calculate the
Eligible Component MACR.
(4) Example 4: calculating Clean Electricity MACR using the Identification Safe Harbor and the Certification Safe Harbor.
(a) Assume the same facts provided in Example 1, except that Taxpayer D decides to rely on the Identification Safe Harbor and the
Certification Safe Harbor, instead of the Cost Percentage Safe Harbor, to calculate a Clean Electricity MACR and determine whether its Facility
includes material assistance from a PFE.
(b) Taxpayer D first identifies the Facility as an Applicable Project in the Notice 2025-08 Table for “Updated Table for Solar PV Ground-
Mount”. The Facility’s PV modules do not include Bypass Diodes (that is, listed but unutilized), but do include heat sensors (that is, unlisted but
utilized). Taxpayer D disregards the table rows for Applicable Project Components categorized as Steel/Iron, disregards Bypass Diodes and heat
sensors, and identifies the following MPs for the Applicable Project Solar PV Ground-mount (Tracking): PV tracker, PV module (which includes
the following MPCs: Cells, Frame/Backrail, Front Glass, Encapsulant, Backsheet/Backglass, Junction Box, Edge Seals, Pottants, and Bus
Ribbons), and Inverter.
(c) Disregarding the costs associated with the Bypass Diodes and heat sensors, the sum of Taxpayer D’s Direct Costs attributable to the
53.5%
(g) Taxpayer E’s Solar Modules do not include
material assistance from a PFE, and thus satisfy the
requirements of § 45X(c)(1)(C), therefore, § 45X(c)
(1)(C) does not prohibit Taxpayer E from claiming
the credit under § 45X for the Solar Modules.
(3) Example 3: unable to rely on the Cost Per-
centage Safe Harbor.
(a) In taxable year 2026, Taxpayer F produces
and sells 100 PV cells to an unrelated person (PV
Cells). Under § 7701(a)(52)(C)(i)(I)(aa), the PV
Cells include material assistance from a PFE if the
Eligible Component MACR with respect to the PV
Cells is less than 50%. Taxpayer F would like to use
the Identification Safe Harbor and the Cost Percent-
age Safe Harbor to calculate an Eligible Component
MACR and determine whether its PV Cells include
material assistance from a PFE.
(b) Taxpayer F first uses the Identification Safe
Harbor to identify Constituent Materials. To determine
whether a PV cell may be treated as a Listed eligible
component, Taxpayer F determines whether a PV cell
that is an eligible component under § 45X(c)(3)(A)(ii)
may be treated as a Listed eligible component under
section 4.01(3)(d)(i) of this notice. A PV cell that qual-
ifies as an eligible component under § 45X(c)(3)(A)
(ii) is not listed in section 4.01(3)(d)(i) of this notice,
and so Taxpayer F may not treat the PV Cells as a
Listed eligible component. Because a PV Cell may not
be treated as a Listed eligible component, Taxpayer
F is unable to rely on the Identification Safe Harbor
to identify Constituent Materials or the Cost Percent-
age Safe Harbor to calculate an Eligible Component
MACR for the PV Cells and determine whether its PV
Cells include material assistance from a PFE.
(c) Taxpayer F may still rely on the Certification
Safe Harbor or the guidance provided in section 3.02
of this notice to calculate the Eligible Component
MACR.
(4) Example 4: calculating Clean Electricity
MACR using the Identification Safe Harbor and the
Certification Safe Harbor.
(a) Assume the same facts provided in Example
1, except that Taxpayer D decides to rely on the Iden-
tification Safe Harbor and the Certification Safe Har-
bor, instead of the Cost Percentage Safe Harbor, to
calculate a Clean Electricity MACR and determine
whether its Facility includes material assistance from
a PFE.
(b) Taxpayer D first identifies the Facility as
an Applicable Project in the Notice 2025-08 Table
for “Updated Table for Solar PV Ground-Mount”.
The Facility’s PV modules do not include Bypass
Diodes (that is, listed but unutilized), but do include
heat sensors (that is, unlisted but utilized). Taxpayer
D disregards the table rows for Applicable Project
Components categorized as Steel/Iron, disregards
Bypass Diodes and heat sensors, and identifies the
following MPs for the Applicable Project Solar PV
Ground-mount (Tracking): PV tracker, PV module
(which includes the following MPCs: Cells, Frame/
Backrail, Front Glass, Encapsulant, Backsheet/Back-
glass, Junction Box, Edge Seals, Pottants, and Bus
Ribbons), and Inverter.
(c) Disregarding the costs associated with the
Bypass Diodes and heat sensors, the sum of Tax-
payer D’s Direct Costs attributable to the MPs iden-
tified is $3,000 (Total Direct Costs). Of the $3,000 in
Total Direct Costs, $2,400 is attributable to the PV
modules, and the PV tracker and inverter account for
the remaining $600 of the Total Direct Costs.
(d) Taxpayer D obtains a certification from each
supplier of the Facility’s identified MPs. Taxpayer D
does not know or have reason to know that any of the
certifications are inaccurate.
(e) The supplier of the PV modules certifies that
Taxpayer D’s Direct Costs for such PV modules,
including MPCs, that were not produced or manu-
factured by a PFE, is $1,320. Accordingly, Taxpayer
D treats $1,080 of its Total Direct Costs for the PV
modules as attributable to production by a PFE
($2,400 - $1,320).
(f) The supplier of the inverters and the supplier
of the PV trackers each certify that such MPs were
not produced or manufactured by a PFE and that the
supplier does not know (or have reason to know) that
a prior supplier of any MPC in the chain of produc-
tion of such MPs is a PFE. Accordingly, Taxpayer D
treats $0 of its Direct Costs for the PV tracker and
inverter as attributable to production by a PFE ($600
- $600). Taxpayer D determines PFE Total Direct
Costs of $1,080 by adding its Direct Costs for the PV
modules that are attributable to production by a PFE
and its Direct Costs for the PV tracker and inverter
that are attributable to production by a PFE ($1,080
+ $0).
(g) Taxpayer D calculates the Clean Electric-
ity MACR as follows: ($3,000 [Total Direct Costs]
- $1,080 [PFE Total Direct Costs]) / $3,000 [Total
Direct Costs] = 64%. The Clean Electricity MACR
of 64% is not less than the applicable threshold per-
centage (40%).
Clean Electricity MACR
Total Direct Costs$3,000
PFE Total Direct Costs$1,080
Clean Electricity MACR
37

MPs identified is $3,000 (Total Direct Costs). Of the $3,000 in Total Direct Costs, $2,400 is attributable to the PV modules, and the PV tracker
and inverter account for the remaining $600 of the Total Direct Costs.
(d) Taxpayer D obtains a certification from each supplier of the Facility’s identified MPs. Taxpayer D does not know or have reason to
know that any of the certifications are inaccurate.
(e) The supplier of the PV modules certifies that Taxpayer D’s Direct Costs for such PV modules, including MPCs, that were not produced
or manufactured by a PFE, is $1,320. Accordingly, Taxpayer D treats $1,080 of its Total Direct Costs for the PV modules as attributable to
production by a PFE ($2,400 - $1,320).
(f) The supplier of the inverters and the supplier of the PV trackers each certify that such MPs were not produced or manufactured by a
PFE and that the supplier does not know (or have reason to know) that a prior supplier of any MPC in the chain of production of such MPs is a
PFE. Accordingly, Taxpayer D treats $0 of its Direct Costs for the PV tracker and inverter as attributable to production by a PFE ($600 - $600).
Taxpayer D determines PFE Total Direct Costs of $1,080 by adding its Direct Costs for the PV modules that are attributable to production by a
PFE and its Direct Costs for the PV tracker and inverter that are attributable to production by a PFE ($1,080 + $0).
(g) Taxpayer D calculates the Clean Electricity MACR as follows: ($3,000 [Total Direct Costs] - $1,080 [PFE Total Direct Costs]) / $3,000
[Total Direct Costs] = 64%. The Clean Electricity MACR of 64% is not less than the applicable threshold percentage (40%).
Clean Electricity MACR
Total Direct Costs

$3,000
PFE Total Direct Costs $1,080
Clean Electricity MACR

$3,000 - $1,080
$3,000
= 64.0%

Total Direct Costs - Total PFE Direct Costs
Total Direct Costs
= Clean Electricity MACR

64%
(h) Taxpayer D’s Facility does not include material assistance from a PFE and thus satisfies the requirements of § 48E(b)(6), therefore, §
48E(b)(6) does not prohibit Taxpayer D from claiming the credit under § 48E for the Facility.
(5) Example 5: calculating Eligible Component MACR using the Identification Safe Harbor and the Certification Safe Harbor.
(a) Assume the same facts provided in Example 2, except that Taxpayer E decides to rely on the Identification Safe Harbor and the
Certification Safe Harbor, instead of the Cost Percentage Safe Harbor, to calculate an Eligible Component MACR and determine whether its
Solar Modules include material assistance from a PFE.
(b) Taxpayer E uses the Notice 2025-08 Table for “Updated Table for Solar PV Ground-Mount” to identify the Constituent Materials of the
Listed eligible component. The Solar Modules do not include Bypass Diodes (that is, listed but unutilized), but do include heat sensors (that is,
unlisted but utilized). Taxpayer E disregards Bypass Diodes and heat sensors. Taxpayer E identifies the following Constituent Materials: Cells,
Frame/Backrail, Front Glass, Encapsulant, Backsheet/Backglass, Junction Box, Edge Seals, Pottants, and Bus Ribbons.
(c) Disregarding the costs associated with the heat sensors, the sum of Taxpayer E’s Direct Material Costs attributable to the identified
Constituent Materials is $2,000 (Total Direct Material Costs).
(d) Taxpayer E obtains certifications from each direct supplier of the identified Constituent Materials. Taxpayer E does not know or have
64%

March 9, 2026 680 Bulletin No. 2026–11
(h) Taxpayer D’s Facility does not include mate-
rial assistance from a PFE and thus satisfies the
requirements of § 48E(b)(6), therefore, § 48E(b)
(6) does not prohibit Taxpayer D from claiming the
credit under § 48E for the Facility.
(5) Example 5: calculating Eligible Component
MACR using the Identification Safe Harbor and the
Certification Safe Harbor.
(a) Assume the same facts provided in Example
2, except that Taxpayer E decides to rely on the Iden-
tification Safe Harbor and the Certification Safe Har-
bor, instead of the Cost Percentage Safe Harbor, to
calculate an Eligible Component MACR and deter-
mine whether its Solar Modules include material
assistance from a PFE.
(b) Taxpayer E uses the Notice 2025-08 Table
for “Updated Table for Solar PV Ground-Mount” to
identify the Constituent Materials of the Listed eli-
gible component. The Solar Modules do not include
Bypass Diodes (that is, listed but unutilized), but do
include heat sensors (that is, unlisted but utilized).
Taxpayer E disregards Bypass Diodes and heat sen-
sors. Taxpayer E identifies the following Constitu-
ent Materials: Cells, Frame/Backrail, Front Glass,
Encapsulant, Backsheet/Backglass, Junction Box,
Edge Seals, Pottants, and Bus Ribbons.
(c) Disregarding the costs associated with the
heat sensors, the sum of Taxpayer E’s Direct Mate-
rial Costs attributable to the identified Constituent
Materials is $2,000 (Total Direct Material Costs).
(d) Taxpayer E obtains certifications from each
direct supplier of the identified Constituent Mate-
rials. Taxpayer E does not know or have reason to
know that the certifications are inaccurate.
(e) The direct suppliers of the Constituent Mate-
rials certify that Taxpayer E’s total direct material
costs for such Constituent Materials that were not
produced or manufactured by a PFE is $900. Accord-
ingly, Taxpayer E treats $1,100 of its Total Direct
Material Costs as attributable to Constituent Materi-
als that are PFE Sourced ($2,000 - $900) (PFE Total
Direct Material Costs).
(f) Taxpayer E calculates the Eligible Component
MACR as follows: ($2,000 [Total Direct Material
Costs] – $1,100 [PFE Total Direct Material Costs])
/ $2,000 [Total Direct Material Costs] = 45%. The
Eligible Component MACR of 45% is less than the
applicable threshold percentage (50%).
Eligible Component MACR
Total Direct Material Costs$2,000
PFE Total Direct Material Costs$1,100
Eligible Component MACR
38

reason to know that the certifications are inaccurate.
(e) The direct suppliers of the Constituent Materials certify that Taxpayer E’s total direct material costs for such Constituent Materials that
were not produced or manufactured by a PFE is $900. Accordingly, Taxpayer E treats $1,100 of its Total Direct Material Costs as attributable to
Constituent Materials that are PFE Sourced ($2,000 - $900) (PFE Total Direct Material Costs).
(f) Taxpayer E calculates the Eligible Component MACR as follows: ($2,000 [Total Direct Material Costs] – $1,100 [PFE Total Direct
Material Costs]) / $2,000 [Total Direct Material Costs] = 45%. The Eligible Component MACR of 45% is less than the applicable threshold
percentage (50%).

Eligible Component MACR
Total Direct Material Costs

$2,000
PFE Total Direct Material Costs $1,100
Eligible Component MACR

$2,000 - $1,100
$2,000
= 45.0%

Total Direct
Material Costs
-

PFE Total
Direct Material Costs

Total Direct Material Costs
= Eligible Component MACR

45%
(g) Taxpayer E’s Solar Modules include material assistance from a PFE and thus do not satisfy the requirements of § 45X(c)(1)(C),
therefore, § 45X(c)(1)(C) prohibits Taxpayer E from claiming the credit under § 45X for the Solar Modules.
(6) Example 6: calculating Clean Electricity MACR using the Identification Safe Harbor and the Cost Percentage Safe Harbor for a qualified
facility that meets the 80/20 Rule.
(a) In taxable year 2026, Taxpayer G partially replaced the PV modules in an existing 100-megawatt direct current ground-mounted PV
(tracking) and installed new corresponding PV trackers (Facility). Taxpayer G retained the existing inverters and PV trackers and PV modules
that were not replaced. The fair market value of the used property is not more than 20 percent of the Facility’s total value (calculated by adding
the cost of the new property to the value of the used property). Taxpayer G placed the Facility into service in 2026. Under § 7701(a)(52)(B)(i)(I),
the Facility includes material assistance from a PFE if the Clean Electricity MACR with respect to the Facility is less than 40%. Taxpayer G
would like to use the Identification Safe Harbor and the Cost Percentage Safe Harbor to calculate a Clean Electricity MACR and determine
whether its Facility includes material assistance from a PFE.
(b) Taxpayer G first uses the Identification Safe Harbor to identify MPs and MPCs. Taxpayer G identifies the Facility as an Applicable
Project in the Notice 2025-08 Table for “Updated Table for Solar PV Ground-Mount.” Taxpayer G disregards the table rows for Steel pile or
Steel ground screw and Steel or Iron reinforcing products in foundation and identifies 3 MPs in the column for Ground-mount (Tracking): PV
45%
(g) Taxpayer E’s Solar Modules include material
assistance from a PFE and thus do not satisfy the
requirements of § 45X(c)(1)(C), therefore, § 45X(c)
(1)(C) prohibits Taxpayer E from claiming the credit
under § 45X for the Solar Modules.
(6) Example 6: calculating Clean Electricity
MACR using the Identification Safe Harbor and the
Cost Percentage Safe Harbor for a qualified facility
that meets the 80/20 Rule.
(a) In taxable year 2026, Taxpayer G partially
replaced the PV modules in an existing 100-mega-
watt direct current ground-mounted PV (tracking)
and installed new corresponding PV trackers (Facil-
ity). Taxpayer G retained the existing inverters and
PV trackers and PV modules that were not replaced.
The fair market value of the used property is not
more than 20 percent of the Facility’s total value
(calculated by adding the cost of the new prop-
erty to the value of the used property). Taxpayer
G placed the Facility into service in 2026. Under
§ 7701(a)(52)(B)(i)(I), the Facility includes mate-
rial assistance from a PFE if the Clean Electricity
MACR with respect to the Facility is less than 40%.
Taxpayer G would like to use the Identification Safe
Harbor and the Cost Percentage Safe Harbor to cal-
culate a Clean Electricity MACR and determine
whether its Facility includes material assistance
from a PFE.
(b) Taxpayer G first uses the Identification Safe
Harbor to identify MPs and MPCs. Taxpayer G
identifies the Facility as an Applicable Project in the
Notice 2025-08 Table for “Updated Table for Solar
PV Ground-Mount.” Taxpayer G disregards the
table rows for Steel pile or Steel ground screw and
Steel or Iron reinforcing products in foundation and
identifies 3 MPs in the column for Ground-mount
(Tracking): PV modules (65.8%), Inverters (5.5%),
and PV trackers (28.7%). The “Updated Table for
Solar PV Ground-Mount” identifies a PV module as
consisting of 10 MPCs, identified in the column for
Ground-mount (Tracking): Cells (38.0%), Frame/
Backrail (6.0%), Front Glass (6.0%), Encapsulant
(3.8%), Backsheet/Backglass (3.8%), Junction Box
(1.0%), Edge Seals (0.3%), Pottants (0.3%), Bus
Ribbons (1.5%), and Bypass Diodes (0.4%). The
same table identifies a PV Tracker as consisting of
7 MPCs, identified in the column for Ground-mount
(Tracking): Torque tube (11.0%), Structural Fasten-
ers (0.4%), Drive System (1.9%), Dampers (0.5%),
Actuator (2.8%), Controller (0.7%), and Rails
(2.0%). In addition to these MPCs and Assigned Cost
Percentages, the Ground-mount (Tracking) column
provides that Production of a PV module for such an
Applicable Project has an Assigned Cost Percentage
of 4.7% and that Production of a PV Tracker has an
Assigned Cost Percentage of 9.4%.
(c) Taxpayer G next tracks whether each Listed
MP or Listed MPC identified in the previous step
was PFE Produced. Multiple new PV modules were
incorporated into the Facility. Taxpayer G knows that
during taxable year 2026, 6 out of 10 new PV mod-
ules (and all of their constituent MPCs) were PFE
produced, and that the remaining 4 out of 10 new PV
modules (and all of their constituent MPCs) were not
PFE produced. Additionally, Taxpayer G knows that
the new PV trackers were PFE Produced, and that, of
the identified MPCs for a PV tracker, only the new
Rails were PFE Produced.
(d) Taxpayer G next uses the Cost Percent-
age Safe Harbor to aggregate the Assigned Cost
Percentages and determine a Total Percentage.
Even though Taxpayer G only partially replaced
the Facility’s PV Modules and accompanying PV
Trackers, because the Facility is a qualified facil-
ity by virtue of the 80/20 rule, Taxpayer G uses the
Assigned Cost Percentages without adjustment to
determine a Total Percentage and Total PFE Per-
centage. Taxpayer G sums the Assigned Cost Per-
centages for each of the identified MPs, disregard-
ing the Inverters (which are entirely used property),
to determine a Total Percentage of 94.5% (65.8% +
28.7% + 5.5% - 5.5%).
(e) Taxpayer G next uses the Cost Percentage
Safe Harbor to aggregate the Assigned Cost Percent-
ages attributable to PFE Produced MPs and MPCs
and determine a Total PFE Percentage. To deter-
mine Total PFE Percentage, Taxpayer G determines
the Assigned Cost Percentage attributable to the
PFE Produced new PV modules by multiplying the
Assigned Cost Percentage for PV modules (65.8%)
by the percentage of such PV modules, including
MPCs, that were PFE Produced (6 out of 10 = 60%),
which equals 39.5%. Taxpayer G adds the Assigned
Cost Percentage attributable to the PFE Produced
new PV modules (39.5%) to the Assigned Cost Per-
centages attributable to production of the new PV
Trackers by a PFE (9.4%) and the PFE Produced
new Rails (2.0%) to equal a Total PFE Percentage of
50.9% (39.5% + 9.4% + 2.0%).
(f) Taxpayer G calculates the Clean Electricity
MACR of the Facility as follows: (94.5% [Total Per-
centage] - 50.9% [Total PFE Percentage]) / 94.5%
[Total Percentage] = 46.1%. The Clean Electric-
ity MACR of 46.1% is not less than the applicable
threshold percentage (40%).

Bulletin No. 2026–11 681 March 9, 2026
Clean Electricity MACR
Total Percentage94.5%
Total PFE Percentage50.9%
Clean Electricity MACR
39

modules (65.8%), Inverters (5.5%), and PV trackers (28.7%). The “Updated Table for Solar PV Ground-Mount” identifies a PV module as
consisting of 10 MPCs, identified in the column for Ground-mount (Tracking): Cells (38.0%), Frame/Backrail (6.0%), Front Glass (6.0%),
Encapsulant (3.8%), Backsheet/Backglass (3.8%), Junction Box (1.0%), Edge Seals (0.3%), Pottants (0.3%), Bus Ribbons (1.5%), and Bypass
Diodes (0.4%). The same table identifies a PV Tracker as consisting of 7 MPCs, identified in the column for Ground-mount (Tracking): Torque
tube (11.0%), Structural Fasteners (0.4%), Drive System (1.9%), Dampers (0.5%), Actuator (2.8%), Controller (0.7%), and Rails (2.0%). In
addition to these MPCs and Assigned Cost Percentages, the Ground-mount (Tracking) column provides that Production of a PV module for such
an Applicable Project has an Assigned Cost Percentage of 4.7% and that Production of a PV Tracker has an Assigned Cost Percentage of 9.4%.
(c) Taxpayer G next tracks whether each Listed MP or Listed MPC identified in the previous step was PFE Produced. Multiple new PV
modules were incorporated into the Facility. Taxpayer G knows that during taxable year 2026, 6 out of 10 new PV modules (and all of their
constituent MPCs) were PFE produced, and that the remaining 4 out of 10 new PV modules (and all of their constituent MPCs) were not PFE
produced. Additionally, Taxpayer G knows that the new PV trackers were PFE Produced, and that, of the identified MPCs for a PV tracker, only
the new Rails were PFE Produced.
(d) Taxpayer G next uses the Cost Percentage Safe Harbor to aggregate the Assigned Cost Percentages and determine a Total Percentage.
Even though Taxpayer G only partially replaced the Facility’s PV Modules and accompanying PV Trackers, because the Facility is a qualified
facility by virtue of the 80/20 rule, Taxpayer G uses the Assigned Cost Percentages without adjustment to determine a Total Percentage and Total
PFE Percentage. Taxpayer G sums the Assigned Cost Percentages for each of the identified MPs, disregarding the Inverters (which are entirely
used property), to determine a Total Percentage of 94.5% (65.8% + 28.7% + 5.5% - 5.5%).
(e) Taxpayer G next uses the Cost Percentage Safe Harbor to aggregate the Assigned Cost Percentages attributable to PFE Produced MPs
and MPCs and determine a Total PFE Percentage. To determine Total PFE Percentage, Taxpayer G determines the Assigned Cost Percentage
attributable to the PFE Produced new PV modules by multiplying the Assigned Cost Percentage for PV modules (65.8%) by the percentage of
such PV modules, including MPCs, that were PFE Produced (6 out of 10 = 60%), which equals 39.5%. Taxpayer G adds the Assigned Cost
Percentage attributable to the PFE Produced new PV modules (39.5%) to the Assigned Cost Percentages attributable to production of the new PV
Trackers by a PFE (9.4%) and the PFE Produced new Rails (2.0%) to equal a Total PFE Percentage of 50.9% (39.5% + 9.4% + 2.0%).
(f) Taxpayer G calculates the Clean Electricity MACR of the Facility as follows: (94.5% [Total Percentage] - 50.9% [Total PFE
Percentage]) / 94.5% [Total Percentage] = 46.1%. The Clean Electricity MACR of 46.1% is not less than the applicable threshold percentage
(40%).
Clean Electricity MACR
Total Percentage

94.5%
Total PFE Percentage 50.9%
Clean Electricity MACR

94.5% - 50.9%
94.5%
= 46.1%

Total Percentage – Total PFE Percentage
Total Percentage

= Clean Electricity MACR

46.1%
(g) Taxpayer G’s Facility does not include material assistance from a PFE and thus satisfies the requirements of § 48E(b)(6), therefore, §
46.1%
(g) Taxpayer G’s Facility does not include mate-
rial assistance from a PFE and thus satisfies the
requirements of § 48E(b)(6), therefore, § 48E(b)
(6) does not prohibit Taxpayer G from claiming the
credit under § 48E for the Facility.
SECTION 5. CERTAIN PFE
RESTRICTIONS
This section describes rules that the
Treasury Department and the IRS expect
to include in the forthcoming proposed
regulations for determining the applica-
tion of certain PFE restrictions.
.01 Application of Foreign-Influenced
Entity Rules.
Effective control is determined inde-
pendently under each provision of
§ 7701(a)(51)(D)(ii)(III)(aa)(AA) through
(GG). A specified foreign entity (or an
entity related to such specified foreign
entity) is determined to exercise effec-
tive control for purposes of § 7701(a)
(51)(D)(i)(II) as a result of any contract,
agreement, or other arrangement under
§ 7701(a)(51)(D)(ii)(III)(aa) that fulfills
any one of § 7701(a)(51)(D)(ii)(III)(aa)
(AA) through (GG). For example, under
§ 7701(a)(51)(D)(ii)(III)(aa)(GG), if a
taxpayer makes a payment to a specified
foreign entity under a licensing agreement
for the provision of intellectual property
with respect to a qualified facility, and
such agreement was entered into or modi-
fied on or after July 4, 2025, the specified
foreign entity would be exercising effec-
tive control over the taxpayer’s qualified
facility and the taxpayer would be consid-
ered a foreign-influenced entity.
.02 Establishment of rules to prevent
entities from evading, circumventing,
or abusing the application of the PFE
restrictions.
Pursuant to the grants of authority pro-
vided to the Secretary under § 7701(a)
(51)(D) and (K), the Treasury Depart-
ment and the IRS intend to propose reg-
ulations to prevent entities from evading,
circumventing, or abusing the application
of restrictions with respect to PFEs under
§ 7701(a)(51), including rules to prevent
such evasion, circumvention, or abuse
through transfers or alterations of rights,
property, or both, including transfers or
alterations resulting in lapses of restricted
foreign ownership or control that are tem-
porary in nature.
SECTION 6. GLOSSARY OF CERTAIN TERMS USED IN THIS NOTICE
TermDefinition
2023-2025 Safe Harbor TablesCollectively, the tables provided in sections 5.05, 5.06, 6.02, and 7.02 of Notice 2025-08
(Notice 2025-08 Tables), section 3.02 in Notice 2024-41 for a Hydropower Facility, or a
Pumped Hydropower Storage Facility, and section 3.04 in Notice 2023-38 for an Offshore
Wind Facility.
80/20 RuleSections 1.45Y-4(d)(1) and 1.48E-4(c)(1) provide that a qualified facility or EST, as
applicable, may qualify as originally placed in service even if it contains some used
components of property within the unit of qualified facility, provided the fair market value of
the used components of the unit of qualified facility or EST is not more than 20 percent of the
total value of the unit of qualified facility (that is, the cost of the new components of property
plus the fair market value of the used components of property within the unit of qualified
facility).
Assigned Cost PercentagesThe associated cost percentages for each of the identified MPs and MPCs that may be found in
the identified Applicable Projects.
Average CostsThe average of the Direct Costs of MPs and MPCs of the same type that were incorporated
into ESTs that were placed in service, or the average of the Direct Material Costs of
Constituent Materials incorporated in or consumed in the production of eligible components
produced in the same specified period of time.

March 9, 2026 682 Bulletin No. 2026–11
TermDefinition
Clean Electricity MACRThe amount (expressed as a percentage) equal to the quotient of–(I) an amount equal to–(aa)
the total direct costs to the taxpayer attributable to all manufactured products (including
components) which are incorporated into the qualified facility or EST upon completion of
construction, minus (bb) the total direct costs to the taxpayer attributable to all manufactured
products (including components) which are–(AA) incorporated into the qualified facility or
EST upon completion of construction, and (BB) mined, produced, or manufactured by a PFE,
divided by (II) the amount described in (aa).
Constituent MaterialsConstituent elements, materials, or subcomponents of the eligible component that are
considered direct materials costs under § 1.263A-1(e)(2)(i)(A).
Direct CostsThe taxpayer’s direct costs attributable to the MPs (including MPCs) included in the qualified
facility or EST.
Direct Material CostsThe total costs of a Constituent Material that is paid or incurred (within the meaning of § 461
and any regulations issued under § 263A) by the taxpayer for the production of an eligible
component.
Domestic Content RequirementSections 45(b)(9), 45Y(g)(11), 48(a)(12), and 48E(a)(3)(B) provide an increase to the amount
of a credit determined under §§ 45, 45Y, 48, and 48E, respectively, for a taxpayer whose
qualified facility under §§ 45 or 45Y, energy project under § 48, or qualified investment with
respect to a qualified facility or EST under § 48E satisfies the domestic content requirement
set forth in § 45(b)(9)(B)(i).
Eligible Component MACRThe amount (expressed as a percentage) equal to the quotient of–(I) an amount equal to–(aa)
with respect to an eligible component, the total direct material costs that are paid or incurred
(within the meaning of § 461 and any regulations issued under § 263A) by the taxpayer for
production of such eligible component, minus (bb) with respect to an eligible component,
the total direct material costs that are paid or incurred (within the meaning of § 461 and any
regulations issued under § 263A) by the taxpayer for production of such eligible component
that are mined, produced, or manufactured by a PFE, divided by (II) the amount described in
(aa).
ESTEnergy storage technology.
Incremental Production RuleSection 45Y(b)(1)(C) provides that the term “qualified facility” includes a new unit or
additions of capacity placed in service after December 31, 2024, in connection with an
existing facility used for the generation of electricity with a greenhouse gas emissions rate
not greater than zero that was placed in service before January 1, 2025, but only to the extent
of the increased amount of electricity produced at the facility by reason of such new unit or
additions of capacity.
Listed eligible component An eligible component listed as an Applicable Project Component in the 2023-2025 Safe
Harbor Tables.
Listed MPs
In the 2023-2025 Safe Harbor Tables with cost percentages, the column titled “Applicable
Project Component” or “APC” may be considered as identifying the types of MPs within the
qualified facility or EST.
Listed MPCs
In the 2023-2025 Safe Harbor Tables with cost percentages, the column titled “Manufactured
Product Component” or “MPC” may be considered as identifying the types of MPCs within
the qualified facility or EST.
Listed MPs and MPCs
In the 2023-2025 Safe Harbor Tables without cost percentages, the column titled “Applicable
Project Component” may be considered as identifying the types of MPs and MPCs within the
qualified facility or EST
Listed qualified facility or ESTA qualified facility or EST listed as an Applicable Project in the 2023-2025 Safe Harbor
Tables.
MACRMaterial assistance cost ratio.
MPManufactured product.
MPCManufactured product component.
PFEProhibited foreign entity.

Bulletin No. 2026–11 683 March 9, 2026
TermDefinition
PFE Direct CostsThe Direct Costs attributable to the each of the identified MPs and MPCs that were PFE
Produced.
PFE Direct Material CostsThe Direct Material Costs attributable to each PFE Sourced Constituent Material.
PFE ProducedAn MP or MPC mined, manufactured, or produced by a PFE.
PFE Production PercentageThe percentage of the MPs and MPCs of the same type that were PFE Produced or PFE
Sourced and that were, as applicable, incorporated into the same type of ESTs placed in
service during a specified period of time or the percentage of the Constituent Materials
incorporated in or consumed to produce the same type of eligible components during a
specified period of time.
PFE SourcedConstituent Material supplied by a PFE.
PFE Total Direct Material CostsThe aggregate amount of the PFE Direct Material Costs attributable to any PFE Sourced
Constituent Materials.
PFE Total Direct CostsThe aggregate amount of direct costs attributable to (A) any PFE Produced MP, and (B) any
PFE Produced MPC included in any MP.
Total Direct CostsThe total direct costs to the taxpayer attributable to all MPs (including MPCs) which are
incorporated into the qualified facility or EST upon completion of construction.
Total Direct Material CostsThe total direct material costs for all Constituent Materials that are paid or incurred (within the
meaning of § 461 and any regulations issued under § 263A) by the taxpayer for the production
of the eligible component.
Total PercentageFor purposes of calculating the Clean Electricity MACR, the sum of the Assigned Cost
Percentages for each Listed MPC and the Assigned Cost Percentages for Production of each
Listed MP within the Applicable Project.
For purposes of calculating the Eligible Component MACR, the sum of the Assigned Cost
Percentages for each Listed MPC within the Listed eligible component and the Assigned Cost
Percentage for Production of the Listed eligible component.
Total PFE PercentageFor purposes of calculating the Clean Electricity MACR, the sum of the Assigned Cost
Percentages of the PFE Produced MPCs and the Assigned Cost Percentages for Production of
each PFE Produced MP.
For purposes of calculating the Eligible Component MACR, the sum of the Assigned Cost
Percentages of the PFE Sourced MPCs within the Listed eligible component.
Total Quantity
CM
The total quantity of Constituent Materials of the same type that were incorporated into the
same type of eligible component produced during a specified period of time.
Total Quantity
MP&MPC
The total quantity of MPs or MPCs of the same type that were incorporated into the same type
of EST placed in service during a specified period of time.
Total Quantity
PFE-CM
The total quantity of PFE Sourced Constituent Materials of the same type that were
incorporated into the same type of eligible component produced during a specified period of
time.
Total Quantity
PFE-MP&MPC
The quantity of PFE Produced MPs or MPCs of the same type that were incorporated into the
same type of EST placed in service during a specified period of time.
SECTION 7. REQUEST FOR
COMMENTS
.01 Specific questions.
In addition to general comments
regarding PFE and material assistance
issues, the Treasury Department and the
IRS request comments with respect to the
following specific questions:
(1) With respect to determining the
Total Direct Costs to the taxpayer attrib-
utable to all MPs (including MPCs) that
are incorporated in the qualified facility
or EST upon completion of construction
under § 7701(a)(52)(D)(i)(I)(aa), is any
further guidance needed to clarify how to
determine “Total Direct Costs”?
(2) If guidance is needed to clarify how
to determine Total Direct Costs:
(a) What would be the best standard
to apply with respect to qualified facil-
ities and ESTs under §§ 45Y and 48E?
For example, does the standard that is
based on a taxpayer’s direct costs under
§ 1.263A-1(e)(2)(i)(A) and (B) (that is,
direct material and direct labor costs that
are paid or incurred by the taxpayer within
the meaning of § 461) capture the appro-
priate costs?
(b) Should the rules for computing
Total Direct Costs applicable to a taxpayer
that purchases an MP or MPC be differ-
ent than the rules for computing Total

March 9, 2026 684 Bulletin No. 2026–11
Direct Costs applicable to a taxpayer that
mines, produces, or manufactures an MP
or MPC?
(3) What rules are necessary to prevent
the circumvention of the rules and restric-
tions with respect to PFEs consistent with
the purposes of the PFE and material
assistance rules added by the OBBBA?
(4) What substantiation and documen-
tation, in addition to the records required
under § 6001, should be required to sup-
port compliance with the anti-circumven-
tion rules under § 7701(a)(52)(D)(v)(II),
such as to demonstrate that beginning of
construction of a qualified facility or EST
has occurred for purposes of the PFE and
material assistance rules added by the
OBBBA?
.02 Deadline for Submission.
Written comments should be submitted
by March 30, 2026. However, consider-
ation will be given to any written com-
ments submitted after March 30, 2026, if
such consideration will not delay the issu-
ance of future published guidance.
.03 Form and Manner.
The subject line for the comments
should include a reference to Notice 2026-
15. All stakeholders are strongly encour-
aged to submit comments electronically.
Comments may be submitted in one of
two ways:
(1) Electronically via the Federal
eRulemaking Portal at https://www.reg-
ulations.gov (type IRS-2026-0166 in the
search field on the https://www.regula-
tions.gov homepage to find this notice and
submit comments).
(2) By mail to: Internal Revenue Ser-
vice, CC:PA:LPD:PR (Notice 2026-15),
Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
.04 Publication of Comments.
The Treasury Department and the IRS
will publish for public availability any
comment submitted electronically or on
paper to the IRS’s public docket on https://
www.regulations.gov.
SECTION 8. RELIANCE ON
NOTICE AND SUBSTANTIATION
OF SAFE HARBOR USE
.01 In General.
A taxpayer may rely on the guidance
provided in section 3 and 5.01 of this notice
to calculate the Clean Electricity MACR
for any § 45Y qualified facility or § 48E
qualified facility or EST the construction
of which, or, under § 48E, the construc-
tion, reconstruction, or erection of which,
begins after December 31, 2025, and on
or before the date that is 60 days after the
publication of the forthcoming proposed
regulations in the Federal Register. A tax-
payer may rely on the guidance provided
in sections 3 and 5.01 of this notice to cal-
culate an Eligible Component MACR for
§ 45X eligible components sold in taxable
years beginning after July 4, 2025, and on
or before the date that is 60 days after the
publication of the forthcoming proposed
regulations in the Federal Register.
A taxpayer may rely on the guidance
provided in section 4 of this notice to
calculate the Clean Electricity MACR
for any § 45Y qualified facility or § 48E
qualified facility or EST the construction
of which, or, under § 48E, the construc-
tion, reconstruction, or erection of which,
begins after December 31, 2025, and on
or before the date that is 60 days after
the publication of the forthcoming safe
harbor tables (and other guidance) under
§ 7701(a)(52)(D)(iii)(I). A taxpayer may
rely on the guidance provided in section
4 of this notice to calculate an Eligible
Component MACR for § 45X eligible
components sold in taxable years begin-
ning after July 4, 2025, and on or before
the date that safe harbor tables (and other
guidance) under § 7701(a)(52)(D)(iii)(I)
are published. A taxpayer using the guid-
ance provided in this notice must apply
the guidance in a manner that is consis-
tent with the purposes of § 7701(a)(51)
and (52).
.02 Substantiation and Certification.
Taxpayers choosing to use any of the
safe harbors provided in section 4 of this
notice must provide the IRS with a state-
ment identifying the specific safe harbor,
including, if applicable, the specific 2023-
2025 Safe Harbor Table, and the taxpay-
er’s application of the safe harbor (that is,
to identify MPs and MPCs, to determine
Direct Costs, etc.). This statement must
be attached to Form 7211, Clean Elec-
tricity Production Credit; Form 3468,
Investment Credit; Form 7207, Advanced
Manufacturing Production Credit; or
any other applicable form for claiming a
§ 45Y, 48E, or 45X credit filed with the
taxpayer’s annual return submitted to the
IRS for the first taxable year in which the
taxpayer claims a credit for a qualified
facility, EST, or eligible component. See
section 2.05 of this notice for rules regard-
ing substantiation under § 6001.
SECTION 9. PAPERWORK
REDUCTION ACT
The Paperwork Reduction Act of 1995
(44 USC 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management and
Budget (OMB) before collecting infor-
mation from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control number
assigned by OMB.
This notice mentions collection require-
ments for taxpayers to keep records to
substantiate their tax credit claims. These
records are considered general tax records
under 26 CFR 1.6001-1. Additionally, tax-
payers report the credits using Form 7211,
Form 3468, and Form 7207 which are
already approved by OMB for tax-exempt
organizations and governmental entities,
individuals, estates and trusts, and busi-
ness taxpayers under OMB control num-
bers 1545-0047, 1545-0074, 1545-0092,
and 1545-0123.
The reporting requirements from sec-
tion 4.03(2)(a), for taxpayers choosing to
use the Certification Safe Harbor, and sec-
tion 8.02 of this notice are associated with
Form 7211, Form 3468, and Form 7207
that were approved, and will continue to
be approved, under OMB control num-
bers 1545-0047, 1545-0074, 1545-0092,
and 1545-0123. This notice does not alter
any previously approved information col-
lection requirements already approved by
OMB.
SECTION 10. DRAFTING
INFORMATION
The principal author of this notice is
the Office of Associate Chief Counsel
(Energy, Credits, and Excise Tax); how-
ever, other personnel from the Treasury
Department and the IRS participated in
its development. For further information

Bulletin No. 2026–11 685 March 9, 2026
regarding this notice contact (202) 317-
6853 (not a toll-free number).
Interim Guidance on
Special Depreciation
Allowance for Qualified
Production Property
Notice 2026-16
SECTION 1. PURPOSE
This notice announces that the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) intend to issue proposed regula-
tions (forthcoming proposed regulations)
addressing the special depreciation allow-
ance for qualified production property
under § 168(n) of the Internal Revenue
Code (Code),
1
as added by § 70307 of
Public Law 119-21, 139 Stat. 72 (July 4,
2025), commonly known as the One, Big,
Beautiful Bill Act (OBBBA). The Trea-
sury Department and IRS expect the forth-
coming proposed regulations to be consis-
tent with the interim guidance provided in
sections 3 through 8 of this notice. Section
3 of this notice provides general defini-
tions for purposes of the notice. Section
4 of this notice addresses the definition
of qualified production property. Section
5 of this notice addresses the definition
of qualified production activity and other
related terms. Section 6 of this notice
addresses special rules. Section 7 of this
notice addresses the time and manner for
making an election to designate property
as qualified production property. Section
8 of this notice addresses depreciation
recapture due to a change in use of quali-
fied production property. Section 9 of this
notice addresses the expected applicabil-
ity date of the forthcoming proposed regu-
lations and the ability of taxpayers to rely
on the guidance in this notice.
SECTION 2. BACKGROUND
.01 In general. Section 167(a) allows
as a deduction a reasonable allowance for
the exhaustion, wear and tear, and obso-
lescence of property used in a trade or
business or of property held for the pro-
duction of income (depreciation deduc-
tion). The depreciation deduction allow-
able for tangible depreciable property
placed in service after 1986 generally is
determined under the Modified Acceler-
ated Cost Recovery System (MACRS)
provided by § 168.
Section 70307 of the OBBBA amended
§ 168 to add § 168(n) to provide a tem-
porary special depreciation allowance for
qualified production property placed in
service after July 4, 2025. Section 168(n)
(1)(A) provides that, for any qualified
production property for which an elec-
tion is made, the depreciation deduction
provided by § 167(a) for the taxable year
such property is placed in service includes
an allowance equal to 100 percent of the
adjusted basis of the qualified production
property. Section 168(n)(1)(B) provides
that the adjusted basis of the qualified pro-
duction property is reduced by the amount
of the deduction under § 168(n)(1)(A)
before computing the amount otherwise
allowable as a depreciation deduction for
such taxable year and any subsequent tax-
able year.
.02 Definition of qualified production
property.
(1) In general. Section 168(n)(2)(A)
defines the term qualified production
property as that portion of any nonresi-
dential real property:
(a) to which § 168 applies,
(b) that is used by the taxpayer as an
integral part of a qualified production
activity (as defined in § 168(n)(2)(D)),
(c) that is placed in service in the United
States or any territory of the United States,
(d) the original use of which com-
mences with the taxpayer,
(e) the construction of which begins
after January 19, 2025, and before Janu-
ary 1, 2029,
(f) that is designated by the taxpayer in
an election under § 168(n), and
(g) that is placed in service after July 4,
2025, and before January 1, 2031.
(2) Leased property. Under § 168(n)(2)
(A), for purposes of determining whether
property is used by the taxpayer as an inte-
gral part of a qualified production activ-
ity, in the case of property with respect to
which the taxpayer is a lessor, property
used by a lessee is not considered to be
used by the taxpayer as part of a qualified
production activity.
(3) Special rule for certain property
not previously used in qualified produc-
tion activities.
(a) In general. Section 168(n)(2)
(B) provides special rules for determin-
ing whether certain used property may
be qualified production property. Under
§ 168(n)(2)(B)(i), a taxpayer that acquires
used property after January 19, 2025,
and before January 1, 2029, is treated as
the original user of the property and the
construction of the property is treated as
having begun after January 19, 2025, and
before January 1, 2029, if:
(i) the property was not used in a qual-
ified production activity (determined
without regard to whether such activity
resulted in a substantial transformation
of the property comprising the qualified
product) by any person at any time during
the period beginning on January 1, 2021,
and ending on May 12, 2025,
(ii) the property was not used by the
taxpayer at any time prior to such acqui-
sition, and
(iii) the acquisition of the property
meets the requirements of § 179(d)(2) and
(3) (that is, the property is not acquired
from a related party or by a member of a
controlled group from another member of
the same group, and the taxpayer’s basis
in the property is not determined by refer-
ence to its basis in the hands of the trans-
feror).
(b) When property is acquired. Sec-
tion 168(n)(2)(B)(ii)(I) provides that, for
purposes of determining whether used
property is acquired before the period
that begins after January 19, 2025, and
ends before January 1, 2029, the property
is treated as acquired not later than the
date on which the taxpayer enters into a
written binding contract for such acquisi-
tion. Section 168(n)(2)(B)(ii)(II) provides
that used property is treated as acquired
not earlier than such date for purposes of
determining whether it is acquired after
such period.
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

March 9, 2026 686 Bulletin No. 2026–11
(4) Exclusion of office space, etc. Sec-
tion 168(n)(2)(C) provides that qualified
production property does not include any
portion of nonresidential real property that
is used for offices, administrative services,
lodging, parking, sales activities, research
activities, software development or engi-
neering activities, or other functions unre-
lated to the manufacturing, production, or
refining of tangible personal property.
(5) Definition of qualified production
activity. Section 168(n)(2)(D) defines
qualified production activity as the man-
ufacturing, production, or refining of a
qualified product that results in a substan-
tial transformation of the property com-
prising the qualified product.
(6) Definition of production. Section
168(n)(2)(E) provides that production
does not include activities other than agri-
cultural and chemical production.
(7) Definition of qualified product.
Section 168(n)(2)(F) defines a qualified
product as any tangible personal property,
other than a food or beverage prepared in
the same building as a retail establishment
in which it is sold.
(8) Other rules.
(a) Syndication. Section 168(n)(2)(G)
provides that, for purposes of § 168(n)
(2)(A)(iv), which requires that property
must be originally used by a taxpayer to
be qualified production property in that
taxpayer’s hands, rules similar to § 168(k)
(2)(E)(iii) apply.
(b) Extension of time for satisfying
placed-in-service-date requirement under
certain circumstances. Under § 168(n)(2)
(H), in the case of a taxpayer prevented
from placing in service property that
would otherwise be qualified produc-
tion property before January 1, 2031, the
Secretary of the Treasury Department or
the Secretary’s delegate (Secretary) may
extend the time for satisfying the placed-
in-service-date requirement if the Secre-
tary determines that such taxpayer was
prevented from placing the property in
service before January 1, 2031, due to an
act of God (as defined in the Comprehen-
sive Environmental Response, Compensa-
tion, and Liability Act of 1980, § 101(1),
42 U.S.C. 9601).
(c) Alternative minimum tax. Section
168(n)(3) provides that, in determining
alternative minimum taxable income
under § 55, the deduction under § 167
for qualified production property is deter-
mined under § 168 without regard to any
adjustment under § 56.
.03 Coordination with certain other
provisions.
(1) Other special depreciation allow-
ances. Section 168(n)(4)(A) provides
that, for purposes of § 168(k)(7) (election
out of the special depreciation allowance
for qualified property), § 168(l)(3)(D)
(election out of the special depreciation
allowance for qualified second generation
biofuel plant property), and § 168(m)(2)
(B)(iii) (election out of the special depre-
ciation allowance for qualified reuse and
recycling property), qualified production
property is treated as a separate class
of property, and the taxpayer is treated
as having made an election under such
subsections with respect to such class if
the taxpayer elects to treat the property
as qualified production property under
§ 168(n).
(2) Alternative depreciation prop-
erty. Section 168(n)(4)(B) provides that
qualified production property does not
include any property to which the alter-
native depreciation system (ADS) under
§ 168(g) applies. For purposes of the elec-
tion to use ADS under § 168(g)(7)(A),
qualified production property is treated as
separate nonresidential real property.
.04 Recapture. Section 168(n)(5)(A)
provides that if, at any time during the
10-year period beginning on the date that
qualified production property is placed
in service by the taxpayer, the property
ceases to be used as an integral part of a
qualified production activity and is used in
another productive use, § 1245 is applied
by (1) treating the property as having been
disposed of when first used in a productive
use that is not a qualified production activ-
ity, and (2) treating as ordinary income
the excess of the property’s recomputed
basis, as defined in § 1245(a)(2), over its
adjusted basis. In addition, § 168(n)(5)(B)
provides that the taxpayer’s basis in the
property and allowance for depreciation
with respect to such property is appro-
priately adjusted to take into account the
ordinary income recognized by reason of
§ 168(n)(5)(A).
.05 Election to apply § 168(n). Section
168(n)(6)(A) provides that an election
under § 168(n)(6) for any taxable year (1)
must specify the nonresidential real prop-
erty subject to the election and the portion
of such property designated as qualified
production property under § 168(n)(2)(A)
(vi), and (2) except as otherwise provided
by the Secretary, is made on the taxpayer’s
Federal income tax return for the taxable
year. Further, such election is made in such
manner as the Secretary may prescribe by
regulations or other guidance. Section
168(n)(6)(B) provides that any election
made under § 168(n)(6), and any specifi-
cation contained in any such election, may
not be revoked except with the consent of
the Secretary (and the Secretary may pro-
vide such consent only in extraordinary
circumstances).
.06 Authority to prescribe regulations
and other guidance. Section 168(n)(7)
directs the Secretary to issue regulations
or other guidance as may be necessary or
appropriate to carry out the purposes of
§ 168(n), including regulations or other
guidance providing rules (1) for what
constitutes substantial transformation of
property that are consistent with guidance
provided under § 954(d), and (2) for the
application of the depreciation recap-
ture rule in § 168(n)(5) with respect to a
change in use by a transferee following a
fully or partially tax-free transfer of quali-
fied production property.
SECTION 3. GENERAL DEFINITIONS
For purposes of this notice, the fol-
lowing general definitions apply, but see
section 5.02 of this notice for definitions
specifically applicable to defining a quali-
fied production activity:
.01 Property. The term property means
a single unit of property, as determined
under section 4.03 of this notice.
.02 Eligible property. The term eligible
property refers to property, or the collec-
tive portions thereof, meeting the require-
ments in section 4.01 of this notice (other
than the requirement in section 4.01(6) of
this notice).
.03 Ineligible property. The term inel-
igible property refers to any property, or
any portion thereof, that is not eligible
property.
.04 Building. The term building has the
same meaning as in § 1.48-1(e)(1).
.05 Structural components. The term
structural components has the same
meaning as in § 1.48-1(e)(2).

Bulletin No. 2026–11 687 March 9, 2026
.06 MACRS property. The term
MACRS property has the same meaning as
in § 1.168(b)-1(a)(2).
.07 Placed in service. The term
placed in service has the same meaning
as the term “first placed in service” in
§ 1.167(a)-11(e)(1).
.08 United States. The term United
States has the same meaning as in
§ 7701(a)(9).
.09 Territory of the United States. The
term territory of the United States means
one of the following territories of the
United States: American Samoa, Guam,
the Northern Mariana Islands, the Virgin
Islands, and the Commonwealth of Puerto
Rico (see § 7701(d)).
.10 Unadjusted depreciable basis. The
term unadjusted depreciable basis has the
same meaning as in § 1.168(b)-1(a)(3).
SECTION 4. QUALIFIED
PRODUCTION PROPERTY
.01 In general. Except as otherwise
provided in section 4.06 of this notice, the
term qualified production property (QPP)
means property, or a portion thereof, that
is nonresidential real property and—
(1) That is MACRS property;
(2) That is used by the taxpayer, or
will be used by the taxpayer once placed
in service, as an integral part of a quali-
fied production activity (QPA), as defined
in section 5 of this notice (integral part
requirement);
(3) That is placed in service in the
United States or any territory of the United
States;
(4) The original use of which com-
mences with the taxpayer (original use
requirement);
(5) The construction of which begins
after January 19, 2025, and before January
1, 2029, as determined under section 4.05
of this notice (beginning of construction
requirement);
(6) That the taxpayer designates as
QPP under section 4.09 of this notice in
an election made in the time and manner
provided in section 7 of this notice;
(7) That is placed in service after July 4,
2025, and before January 1, 2031 (placed-
in-service-date requirement);
(8) That is not property to which the
alternative depreciation system (ADS)
under § 168(g) applies; and
(9) That is not ineligible property
described in section 4.07 of this notice.
.02 Integral part requirement.
(1) In general. Property, or a portion
thereof, is used as an integral part of a
QPA and satisfies the integral part require-
ment if a QPA is conducted in, or takes
place within, the physical space of such
property or within a portion of the phys-
ical space thereof. If a QPA is conducted
in, or takes place within, only a portion of
the physical space of a property, only such
portion satisfies the integral part require-
ment. Each unit of property, as determined
under section 4.03(1) of this notice, must
satisfy the integral part requirement on its
own; however, see section 4.03(2) for a
special rule for integrated facilities.
(2) De minimis rule. If 95 percent or
more of the physical space of a property
satisfies the integral part requirement at
the time the property is placed in service,
the taxpayer may elect to treat the entire
property as satisfying the integral part
requirement. Such election is made by
including a declaration in the taxpayer’s
election statement under section 7 of this
notice.
(3) Property used by a lessee.
(a) In general. Except as provided in
section 4.02(3)(b) and (c) of this notice, in
the case of property with respect to which
the taxpayer is a lessor, property used by a
lessee engaged in a QPA is not treated as
used by the taxpayer as an integral part of
a QPA and the taxpayer does not satisfy
the integral part requirement. See § 168(n)
(2)(A).
(b) Exception for consolidated groups.
If a member (S) of a consolidated group
(each as defined in § 1.1502-1) owns and
leases property to another member (B)
of the group (intercompany lease), then
for purposes of section 4.02(3)(a) of this
notice, S is not treated as a lessor with
respect to the property, and for purposes
of section 4.02(1) of this notice, the con-
solidated group is treated as a single tax-
payer. Accordingly, S determines whether
the leased property subject to the inter-
company lease with B satisfies the integral
part requirement by reference to the trade
or business activities of B conducted in,
or taking place within, the leased property.
(c) Exception for commonly controlled
pass-through entities. If a partnership or
an S corporation, referred to as a lessor
pass-through entity in this notice, or an
individual leases property to a commonly
controlled person, then for purposes of
section 4.02(3)(a) of this notice, the lessor
pass-through entity or lessor individual
is not treated as a lessor with respect to
the property, and for purposes of section
4.02(1) of this notice, the lessor pass-
through entity or lessor individual deter-
mines whether the property meets the
integral part requirement by reference to
the commonly controlled person’s trade or
business activities conducted in, or taking
place within, the leased property. The term
commonly controlled person means either:
(i) a sole proprietorship, partnership, or
corporation of which 50 percent or more
is owned, directly or by attribution under
§ 267(b) or § 707(b), by the same person
or group of persons that own, directly or
by attribution under § 267(b) or § 707(b),
50 percent or more of the lessor pass-
through entity for a majority of the taxable
year in which the property is placed in
service, including on the last day of such
year, or
(ii) a sole proprietorship, partnership,
or corporation of which 50 percent or
more is owned, directly or by attribution
under § 267(b) or § 707(b), by the les-
sor individual or the lessor pass-through
entity for a majority of the taxable year in
which the property is placed in service,
including on the last day of such year.
.03 Unit-of-property determination.
(1) In general. Except as provided in
section 4.03(2) of this notice, the term unit
of property means the asset as determined
using the rules under § 1.168(i)-8(c)(4).
Accordingly:
(a) Each building, including its struc-
tural components, is a single unit of prop-
erty; and
(b) If the taxpayer places in service an
improvement or addition to an asset after
the taxpayer placed the asset in service,
the improvement or addition, including
any of its structural components, is a sep-
arate unit of property.
(2) Special rule for integrated facil-
ities. Solely for purposes of satisfying
the integral part requirement, in the case
of multiple properties that operate as an
integrated facility (as evidenced by their
actual operation) and that are physically
located or co-located on the same piece or
contiguous pieces of land, all properties

March 9, 2026 688 Bulletin No. 2026–11
comprising the integrated facility may be
treated as a single unit of property. A prop-
erty that is comprised solely of ineligible
property (as described in section 4.07 of
this notice) may not be treated as oper-
ating as an integrated facility with other
properties and may not be treated as a sin-
gle unit of property with other properties
that comprise an integrated facility.
.04 Original use commences with the
taxpayer. For purposes of determining
whether property satisfies the original
use requirement, a taxpayer applies rules
consistent with § 1.168(k)-2(b)(3)(ii)(A)
through (C).
.05 Determination of when con-
struction begins. For purposes of deter-
mining whether property satisfies the
beginning of construction requirement,
a taxpayer applies rules consistent with
§ 1.168(k)-2(b)(5)(iv)(B), including the
safe harbor provided in § 1.168(k)-2(b)(5)
(iv)(B)(2).
.06 Special rule for certain property
not previously used in a QPA.
(1) In general. In the case of used prop-
erty acquired by a taxpayer after January
19, 2025, and before January 1, 2029, the
original use requirement and beginning
of construction requirement are treated
as met if the following requirements are
satisfied:
(a) Such property was not used in a QPA
(determined without regard to whether
such activity resulted in a substantial
transformation of the property comprising
a qualified product) by any person at any
time during the period beginning on Janu-
ary 1, 2021, and ending on May 12, 2025;
(b) Such property was not used by the
taxpayer at any time prior to such acqui-
sition;
(c) The acquisition of such property
meets the requirements of § 179(d)(2)(A),
(B), and (C), and § 1.179–4(c)(1)(ii), (iii),
and (iv); or § 1.179–4(c)(2) (property is
acquired by purchase); and
(d) The acquisition of such property
meets the requirements of § 179(d)(3) and
§ 1.179–4(d) (cost of property).
(2) Property was not used by the tax-
payer at any time prior to acquisition.
For purposes of determining whether
used property meets the requirement in
section 4.06(1)(b) of this notice, a tax-
payer applies rules consistent with the
used property acquisition requirements in
§§ 1.168(k)-2(b)(3)(iii)(B), 1.168(k)-2(b)
(3)(iv)(D)(1)(i), and 1.1502-68(b).
(3) Section 179 requirements. For
purposes of determining whether used
property meets the requirements in sec-
tion 4.06(1)(c) and (d) of this notice, a
taxpayer applies rules consistent with
the special rules in §§ 1.168(k)-2(b)(3)
(iii)(C), 1.168(k)-2(b)(3)(iv)(D)(1)(ii),
1.168(k)-2(b)(3)(iv)(D)(2), and 1.1502-
68(c).
(4) Determining used property acqui-
sition date. For purposes of determining
whether used property is acquired after
January 19, 2025, and before January 1,
2029, a taxpayer applies rules consistent
with § 1.168(k)-2(b)(5).
.07 Ineligible property.
(1) In general. Ineligible property
includes any portion of property used for
offices, administrative services, lodging,
parking, sales activities, research activi-
ties, software development or engineering
activities, or other functions unrelated to
a QPA. See § 168(n)(2)(C) and (4)(B).
Additionally, any portion of property used
to store finished products and certain other
items is not used as an integral part of a
QPA and is thus ineligible property (see
section 5.01(2)(b)(ii) of this notice).
(2) Property used for other ineligi-
ble activities. Ineligible property also
includes any property, or a portion thereof,
that contains a manufacturing, production,
or refining activity, or any other activity,
that is not within the scope of section 5.01
of this notice. For example, a property that
exclusively contains activities described
in section 5.01(3) of this notice is ineligi-
ble property.
.08 Allocation of basis to eligible prop-
erty.
(1) In general. A taxpayer may use any
reasonable method to allocate a property’s
unadjusted depreciable basis between eli-
gible property and ineligible property. For
this purpose, the use of square footage,
cost segregation data, architectural or engi-
neering plans, process diagrams, or con-
struction invoices to allocate unadjusted
depreciable basis to eligible property may
be a reasonable method. For example,
assume that a taxpayer constructs prop-
erty and 50 percent of the square footage
of the property is eligible property. The
taxpayer may determine the unadjusted
depreciable basis of the eligible property
by multiplying the unadjusted depreciable
basis of the property by 50 percent. A tax-
payer may use more than one reasonable
allocation method for a property if using a
single allocation method would not prop-
erly allocate unadjusted depreciable basis
between eligible and ineligible property.
Each allocation method must be applied
consistently and reflect the property’s
facts and circumstances. Using employee
headcount or employee time spent on QPA
activities is not a reasonable method to
allocate unadjusted depreciable basis to
eligible property.
(2) Dual-use infrastructure. In the case
of property or a portion thereof which con-
tains infrastructure that serves both eligible
property and ineligible property (such as a
central air conditioning system or a sprin-
kler system), a taxpayer may allocate the
basis of such property between eligible
property and ineligible property using any
reasonable method. For this purpose, the
use of architectural or engineering plans,
blueprints, process diagrams, product spec-
ifications, or a combination thereof, to allo-
cate unadjusted depreciable basis to eligi-
ble property may be a reasonable method if
the resulting allocation takes into account
the actual or planned usage of the dual-use
infrastructure. A taxpayer may also use
the same allocation method from section
4.08(1) of this notice if such allocation
takes into account the actual or planned
usage of the dual-use infrastructure.
.09 Designating the amount of QPP. A
taxpayer designates the dollar amount of
eligible property that the taxpayer intends
to treat as QPP on a property-by-property
basis. A taxpayer designates the dollar
amount of eligible property by either des-
ignating the entire unadjusted depreciable
basis of eligible property as QPP or des-
ignating a specific dollar amount (not to
exceed the unadjusted depreciable basis of
the eligible property) as QPP. The amount
of the unadjusted depreciable basis of eli-
gible property designated as QPP must be
included in the taxpayer’s election state-
ment under section 7 of this notice. An
election statement made under section
7 of this notice that does not designate
a specific dollar amount of the eligible
property’s unadjusted depreciable basis
as QPP will be treated as designating the
entire unadjusted depreciable basis of eli-
gible property as QPP.

Bulletin No. 2026–11 689 March 9, 2026
.10 Elections out of other special
depreciation allowances. For purposes of
the elections out of § 168(k), (l), and (m)
under § 168(k)(7), (l)(3)(D), and (m)(2)
(B)(iii), respectively, QPP is treated as a
separate class of property and a taxpayer
is treated as having made the applicable
election(s) out of §§ 168(k), (l), and (m)
with respect to any QPP as part of making
the election under section 7 of this notice
to designate all or a portion of eligible
property as QPP. See § 168(n)(4)(A).
.11 Automatic extension of placed-in-
service-date requirement under certain
circumstances. An automatic one-year
extension of the placed-in-service-date
requirement is granted for any property
that is located in a disaster area (as defined
in § 165(i)(5)(B)) at any time during
2030 (affected property). Accordingly,
for affected property, the requirement to
place property in service before January 1,
2031, is automatically extended to Janu-
ary 1, 2032. If a taxpayer applies the auto-
matic extension of the placed-in-service-
date requirement provided in this section
4.11, the taxpayer must include a declara-
tion to that effect on the election statement
required under section 7 of this notice.
.12 Examples. The following examples
illustrate the rules set forth in this notice:
(1) Example 1.
(a) Facts. In 2026, Company A, a calendar-year
taxpayer, begins construction on a 200,000-square-
foot building (Factory A) located in the United States
that Company A will use in its trade or business to
conduct a manufacturing activity that is a QPA (as
defined in section 5 of this notice). By applying rules
consistent with § 1.168(k)-2(b)(5)(iv)(B), Company
A determines that construction of Factory A began
in February 2026. Construction of Factory A was
completed in November 2027, and Factory A was
placed in service in December 2027. Upon comple-
tion, Factory A has an unadjusted depreciable basis
of $60,000,000. No activities are conducted in, or
take place within, Factory A except for Company A’s
manufacturing activity and Factory A does not con-
tain any space that is ineligible property under sec-
tion 4.07 of this notice. Factory A is not subject to the
alternative depreciation system under § 168(g). On
Company A’s timely filed original Federal income
tax return for its taxable year ending December 31,
2027, Company A designates $50,000,000 of Fac-
tory A’s $60,000,000 unadjusted depreciable basis as
QPP in an election statement that is consistent with
the requirements in section 7 of this notice.
(b) Analysis. Factory A’s entire unadjusted depre-
ciable basis of $60,000,000 is allocable to eligible
property because (i) Factory A is nonresidential real
property, (ii) Factory A is MACRS property, (iii) all
of Factory A is used as an integral part of a QPA, (iv)
Factory A’s original use commenced with Company
A, (v) Factory A’s construction began after January
19, 2025, and before January 1, 2029, (vi) Factory
A is placed in service after July 4, 2025, and before
January 1, 2031, (vii) Factory A is not ADS prop-
erty, and (viii) Factory A is not ineligible property.
Accordingly, Company A has QPP of $50,000,000,
equal to the amount of eligible property designated
as QPP by Company A on the election statement
filed with its timely filed original Federal income tax
return.
(2) Example 2.
(a) Facts. The facts are the same as in Example
1, except that Factory A contains 6,000 square feet
of office space and 4,000 square feet of other space
not used as an integral part of a QPA, and Com-
pany A makes an election to use the de minimis rule
described in section 4.02(2) of this notice.
(b) Analysis. Out of Factory A’s total square foot-
age of 200,000 square feet, only 190,000 square feet
satisfies the integral part requirement as Factory A
also contains 6,000 square feet of office space and
4,000 square feet of other space that is not used as an
integral part of a QPA. As the square footage that sat-
isfies the integral part requirement is 95% (190,000
square feet / 200,000 square feet) of Factory A’s total
square footage, and Company A made an election to
use the de minimis rule described in section 4.02(2)
of this notice, Factory A satisfies the de minimis rule
described in section 4.02(2) of this notice and Com-
pany A may treat the entire square footage of Factory
A as satisfying the integral part requirement.
Therefore, Factory A’s entire unadjusted depre-
ciable basis of $60,000,000 is allocable to eligible
property because (i) Factory A is nonresidential real
property, (ii) Factory A is MACRS property, (iii)
the entire square footage of Factory A is treated as
used by Company A as an integral part of a QPA due
to the application of the de minimis rule in section
4.02(2) of this notice, (iv) Factory A’s original use
commenced with Company A, (v) Factory A’s con-
struction began after January 19, 2025, and before
January 1, 2029, (vi) Factory A is placed in service
after July 4, 2025, and before January 1, 2031, (vii)
Factory A is not ADS property, and (viii) Factory A is
not ineligible property. Accordingly, Company A has
QPP of $50,000,000, equal to the amount of eligible
property designated as QPP by Company A on the
election statement filed with its timely filed original
Federal income tax return.
(3) Example 3.
(a) Facts. Company A, a calendar-year taxpayer,
previously placed in service a building (Factory B)
during its taxable year ended December 31, 2023,
and has since used Factory B to conduct manufactur-
ing activities which constitute a QPA (as defined in
section 5 of this notice). No activities are conducted
in, or take place within, Factory B except for Com-
pany A’s manufacturing activities and Factory B
does not contain any space that is ineligible property
under section 4.07 of this notice.
In May 2028, Company A begins construction of
an upgrade to Factory B’s power distribution system
(Electrical System Upgrade) and places the Electrical
System Upgrade in service in June 2028. The cost of
the Electrical System Upgrade is $2,000,000, which
Company A capitalizes pursuant to § 1.263(a)-3. The
Electrical System Upgrade is qualified improvement
property under § 168(e)(6).
(b) Analysis. Under section 4.03(1)(b) of this
notice, Factory B and the Electrical System Upgrade
are treated as separate units of property. How-
ever, because Factory B and the Electrical System
Upgrade operate as an integrated facility and are
physically located on the same piece of land, Factory
B and the Electrical System Upgrade may be treated
as a single unit of property under section 4.03(2) of
this notice for purposes of satisfying the integral part
requirement. Accordingly, whether the Electrical
System Upgrade satisfies the integral part require-
ment, either in whole or in part, is determined by
reference to whether Factory B satisfies the integral
part requirement, either in whole or in part.
The entire unadjusted basis of the Electrical Sys-
tem Upgrade of $2,000,000 is allocable to eligible
property because (i) the Electrical System Upgrade
is nonresidential real property, (ii) the Electrical
System Upgrade is MACRS property, (iii) all of Fac-
tory B is used by Company A as an integral part of
a QPA, (iv) the Electrical System Upgrade’s original
use commenced with Company A, (v) the Electrical
System Upgrade’s construction began after Janu-
ary 19, 2025, and before January 1, 2029, (vi) the
Electrical System Upgrade is placed in service after
July 4, 2025, and before January 1, 2031, (vii) the
Electrical System Upgrade is not ADS property, and
(viii) the Electrical System Upgrade is not ineligible
property. Accordingly, Company A may designate up
to $2,000,000 of the eligible property as QPP if it
does so in the manner provided in section 4.09 of
this notice in an election made in the time and man-
ner provided in section 7 of this notice. In addition,
Company A is treated as having made an election
under § 168(k)(7) not to deduct the additional first
year depreciation under § 168(k) with respect to any
portion of the unadjusted depreciable basis of the
Electrical System Upgrade which Company A des-
ignates as QPP in an election under section 7 of this
notice.
(4) Example 4.
(a) Facts. The facts are the same as in Example
3. In December 2028, Company A performs routine
maintenance on Factory B’s electrical system at
a cost of $100,000. Company A elects to treat the
maintenance cost as an amount paid or incurred to
improve the electrical system and capitalizes such
cost under § 1.263(a)-3(n). The capitalized main-
tenance costs are qualified improvement property
under § 168(e)(6).
(b) Analysis. Under section 4.03(1)(b) of this
notice, Factory B and the capitalized maintenance
costs are treated as separate units of property. How-
ever, because Factory B and the capitalized mainte-
nance costs operate as an integrated facility and are
physically located on the same piece of land, Fac-
tory B and the capitalized maintenance costs may
be treated as a single unit of property under section
4.03(2) of this notice for purposes of satisfying the
integral part requirement. Accordingly, whether
the capitalized maintenance costs satisfy the inte-
gral part requirement is determined by reference to
whether Factory B, either in whole or in part, satis-
fies the integral part requirement.
The entire unadjusted depreciable basis of the
capitalized maintenance costs of $100,000 is allo-
cable to eligible property because (i) the capitalized
maintenance costs are nonresidential real property,

March 9, 2026 690 Bulletin No. 2026–11
(ii) the capitalized maintenance costs are MACRS
property, (iii) all of Factory B is used by Company
A as an integral part of a QPA, (iv) the capitalized
maintenance costs’ original use commenced with
Company A, (v) the capitalized maintenance costs’
construction began after January 19, 2025, and
before January 1, 2029, (vi) the capitalized mainte-
nance costs are placed in service after July 4, 2025,
and before January 1, 2031, (vii) the capitalized
maintenance costs are not ADS property, and (viii)
the capitalized maintenance costs are not ineligible
property. Accordingly, Company A may designate
up to $100,000 of the eligible property as QPP if it
does so in the manner provided in section 4.09 of
this notice in an election made in the time and man-
ner provided in section 7 of this notice. In addition,
Company A is treated as having made an election
under § 168(k)(7) not to deduct the additional first
year depreciation under § 168(k) with respect to any
portion of the unadjusted depreciable basis of the
capitalized maintenance costs which Company A
designates as QPP in an election under section 7 of
this notice.
(5) Example 5.
(a) Facts. Company A, a calendar-year taxpayer,
previously placed in service two buildings (Fac-
tory B and Factory C) during its taxable year ended
December 31, 2023, on a single piece of land located
in in the United States and has since used Factory
B and Factory C to conduct manufacturing activities
which constitute a QPA (as defined in section 5 of
this notice). No activities are conducted in, or take
place within, Factory B and Factory C except for
Company A’s manufacturing activities and Factory
B and Factory C do not contain any space that is
ineligible property under section 4.07 of this notice.
In 2026, Company A, begins construction on
a new building (Building A) which is located on a
contiguous piece of land to Factory B and Factory
C. Building A will be used to store raw materials
and other manufacturing inputs used or consumed
during the manufacturing activities taking place
within Factory B and Factory C. By applying rules
consistent with § 1.168(k)-2(b)(5)(iv)(B), Company
A determines that construction of Building A began
in May 2026. Construction of Building A was com-
pleted in March 2027, and Building A was placed in
service in April 2027. Upon completion, Building A
has an unadjusted depreciable basis of $20,000,000.
No activities are conducted in, or take place within,
Building A except for Company A’s storage of raw
materials and other manufacturing inputs and Build-
ing A does not contain any space that is ineligible
property under section 4.07 of this notice. Building
A is not subject to the alternative depreciation system
under § 168(g).
(b) Analysis. Under section 4.03(1)(a) of this
notice, Building A, Factory B, and Factory C are
each treated as a separate unit of property. However,
as Building A, Factory B, and Factory C operate as
an integrated facility (as evidenced by their actual
operation) and are physically located on contiguous
pieces of land, under section 4.03(2) of this notice,
Company A may treat all three buildings as a single
unit of property for purposes of satisfying the inte-
gral part requirement. Accordingly, Building A sat-
isfies the integral part requirement because, when its
activities are combined with the activities of Factory
B and Factory C, Building A is used as in integral
part of a QPA (as defined in section 5 of this notice).
Building A’s entire unadjusted depreciable basis
of $20,000,000 is allocable to eligible property
because (i) Building A is nonresidential real property,
(ii) Building A is MACRS property, (iii) Building A
is used by Company A as an integral part of a QPA
because Building A, Factory B, and Factory C are an
integrated facility, (iv) Building A’s original use com-
menced with Company A, (v) Building A’s construc-
tion began after January 19, 2025, and before January
1, 2029, (vi) Building A is placed in service after July
4, 2025, and before January 1, 2031, (vii) Building A
is not ADS property, and (viii) Building A is not inel-
igible property. Accordingly, Company A may desig-
nate all or any portion of the eligible property as QPP
if it does so in the time and manner provided in section
4.09 of this notice in an election made in the manner
provided in section 7 of this notice.
(6) Example 6.
(a) Facts. In 2027, Company C, a calendar-year
taxpayer, begins constructing a building (Factory D),
in the United States which Company C will use in its
trade or business as an automobile plant. Company C
will use Factory D to assemble and combine engines,
transmissions, chassis, and other produced subcompo-
nents and purchased inputs into a finished automobile
using various processes, including molding, welding,
stamping, and other similar activities, that materially
change the form or function of the input materials and
components such that they are distinguishable from,
and cannot be readily returned to, their original state.
By applying rules consistent with § 1.168(k)-2(b)(5)
(iv)(B), Company C determines that construction of
Factory D began in August 2027. Construction of Fac-
tory D was completed in September 2029, and Fac-
tory D was placed in service in October 2029. Upon
completion, Factory D has an unadjusted depreciable
basis of $60,000,000. No portion of Factory D is used
to perform activities described in section 4.07 of this
notice. Factory D is not subject to the alternative
depreciation system under § 168(g).
(b) Analysis. Company C’s trade or business
activity conducted in Factory D is manufacturing,
as defined in section 5.02(5) of this notice, and con-
stitutes a QPA under section 5.01(1) of this notice.
Factory D is eligible property because (i) it is nonres-
idential real property, (ii) it is MACRS property, (iii)
all of Factory D is used by Company C as an integral
part of a QPA, (iv) its original use commenced with
Company C, (v) its construction began after January
19, 2025, and before January 1, 2029, (vi) it is placed
in service after July 4, 2025, and before January 1,
2031, (vii) it is not ADS property, and (viii) it is not
ineligible property. Accordingly, Company C may
designate up to $60,000,000 of the eligible proper-
ty’s unadjusted depreciable basis as QPP provided it
does so in the manner provided in section 4.09 of this
notice in an election made in the time and manner
provided in section 7 of this notice.
SECTION 5. QUALIFIED
PRODUCTION ACTIVITY
.01 Qualified production activity.
(1) In general. The term qualified pro-
duction activity (QPA) means the man-
ufacturing, production, or refining of
a qualified product. A trade or business
activity of a taxpayer does not constitute
manufacturing, production, or refining
of a qualified product unless the trade or
business activity of such taxpayer results
in a substantial transformation of the
property comprising the qualified prod-
uct (as defined in section 5.02(9) of this
notice). A manufacturing, production, or
refining activity (for example, a manu-
facturing or production subprocess), or a
related activity, that does not itself give
rise to a substantial transformation of the
property comprising a qualified product
may nevertheless be included in a QPA,
or will not cause a taxpayer to fail to have
a QPA, if such activity meets the require-
ments of section 5.01(2) or (3) of this
notice.
(2) Essential activities.
(a) In general. A QPA includes any
manufacturing, production, or refining
activity that does not result in a substantial
transformation of the property comprising
a qualified product if the activity is essen-
tial to the completion of the QPA. A man-
ufacturing, production, or refining activity
is essential to the completion of a QPA if:
(i) the activity occurs within the same
property, or within the same integrated
facility (as determined under section
4.03(2) of this notice), in which the sub-
stantial transformation of the property
comprising the qualified product occurs;
(ii) the activity does not occur within
ineligible property described in section
4.07(1) of this notice; and
(iii) without the activity, the substantial
transformation of the property comprising
the qualified product:
(A) cannot occur,
(B) would result in an end product that
is different in quality than the intended
qualified product, or
(C) would result in a quantity of qual-
ified product that is different from the
intended quantity.
(b) Treatment of storage space and
loading bays.
(i) Storage of raw materials. The
receiving and storage of raw materials
or other inputs to be used or consumed
during a QPA are activities essential to
the QPA if they are conducted in, or take
place within, the same property, or within
the same integrated facility (as determined

Bulletin No. 2026–11 691 March 9, 2026
under section 4.03(2) of this notice), as the
QPA.
(ii) Storage of other items. Any other
storage activity not described in section
5.01(2)(b)(i) of this notice, such as the
storage of finished products, is not an
activity essential to a QPA.
(3) Related activities.
(a) In general. A taxpayer’s trade or
business activity will not fail to be a QPA
if the individuals performing or super-
vising the manufacturing, production,
or refining activities described in either
section 5.01(1), (2)(a), or (2)(b)(i) of
this notice also perform, or are otherwise
involved in, activities related to the QPA
if: (i) the related activity occurs within the
same property, or within the same inte-
grated facility (as determined under sec-
tion 4.03(2) of this notice) in which the
substantial transformation of the property
comprising the qualified product occurs
and (ii) the related activity does not occur
within ineligible property described in
section 4.07(1) of this notice. The follow-
ing activities are examples of other trade
or business activities that may be related
to a QPA:
(i) Oversight and direction of the man-
ufacturing, production, or refining activ-
ities that result in the substantial trans-
formation of the property comprising a
qualified product;
(ii) Material selection, vendor selec-
tion, or control of the raw materials or
work-in-process that are substantially
transformed into a qualified product;
(iii) Management of manufacturing,
production, or refining costs or capacities
attributable to the manufacturing, produc-
tion, or refining activities that result in a
substantial transformation of the property
comprising a qualified product (for exam-
ple, cost reduction or efficiency initiatives
associated with the manufacturing, pro-
duction, or refining activities that result in
a substantial transformation of the prop-
erty comprising a qualified product); or
(iv) Developing, or directing the use
or development of, product design and
design specifications, as well as trade
secrets, technology, or other intellectual
property used in conducting a manufac-
turing, production, or refining activity
that results in a substantial transformation
of the property comprising the qualified
product.
(b) No substantial transformation. If a
taxpayer’s trade or business activity within
a property or portion thereof includes only
activities described in section 5.01(3)(a)
(i)-(iv) of this notice, the taxpayer’s trade
or business activity that takes place within
that property or portion thereof does not
result in substantial transformation of the
property comprising a qualified product.
Accordingly, the taxpayer’s trade or busi-
ness activity within that property or por-
tion thereof will not be a QPA.
(4) Ownership of the qualified prod-
uct. For purposes of determining whether
a taxpayer’s trade or business activity is
a QPA, whether the taxpayer is the tax
owner of the qualified product resulting
from the QPA is not taken into account to
determine whether the taxpayer’s trade or
business activity is a QPA. For example,
a trade or business activity conducted by
a taxpayer in which it enters into contract
manufacturing arrangements to manufac-
ture, produce, or refine a qualified product
for its customers, but under which the tax-
payer does not own the resulting qualified
product, constitutes a QPA if such activity
otherwise meets the definitions and rules
provided in this section 5.
.02 Defined terms. For purposes of this
notice:
(1) Production. The term production
means either agricultural production or
chemical production.
(2) Qualified product. The term quali-
fied product means any tangible personal
property, except any food or beverage
prepared in the same building as a retail
establishment in which such property is
sold.
(3) Tangible personal property. The
term tangible personal property has the
same meaning as in § 1.48-1(c).
(4) Retail establishment. The term
retail establishment means a retail sales
facility as defined in § 1.263A-3(c)(5)(ii)
(B).
(5) Manufacturing. The term man-
ufacturing means to materially change
the form or function of tangible personal
property, including parts and components,
to create a new item of tangible personal
property that is held for rent, lease, or sale
to customers in the ordinary course of a
trade or business. The form or function of
the raw materials, elements, parts, compo-
nents, or other tangible personal property
used as inputs is considered to be materi-
ally changed if, at the completion of the
processes giving rise to the new item of
tangible personal property, the materi-
als, elements, parts, components or other
inputs have been transformed such that
they are distinguishable from, and can-
not readily be returned to, their original
state. In no event will a change in form or
function resulting solely from packaging,
repackaging, labeling, minor assembly
operations, or a combination thereof, be
considered a material change to the form
or function of tangible personal property.
(6) Refining. The term refining means
to purify a substance into a useful and
higher-value product. Examples of refin-
ing include—
(a) Removing free fatty acids and other
impurities from animal fats by degum-
ming, decolorization, deacidification, and
deodorization;
(b) Processing petroleum, liquid hydro-
carbons and other products from crude oil
by using fractionation, straight distillation
of crude oil, and/or cracking;
(c) Purifying nonferrous metals (except
aluminum) by electrolytic methods or
other processes;
(d) Processing vegetable oils from
plant material by removing free fatty
acids, phospholipids, pigments, off-fla-
vors, and other impurities;
(e) Processing vegetable, oilseed, and
tree nut oils from purchased oils, such as
by degumming and neutralization;
(f) Wet corn milling;
(g) Processing cane or beet sugar from
raw cane or beet sugar;
(h) Removing remaining impurities
and moisture from animal fat, bones, and
meat scraps through techniques like filtra-
tion and bleaching;
(i) Processing tar paving, roofing, and
saturated materials from crude petroleum
and manufacturing asphalt;
(j) Extracting alumina (aluminum
oxide) generally from bauxite ore;
(k) Processing liquified natural gas or
chemical feedstocks from natural gas;
(l) Recovering copper or copper alloys
from scrap; and
(m) Recovering nonferrous metals
(except copper and aluminum) from scrap.
(7) Agricultural production.
(a) In general. The term agricultural
production means the process of cultivat-

March 9, 2026 692 Bulletin No. 2026–11
ing the ground, typically in fields or large
acreage, and includes:
(i) Preparing the soil;
(ii) Planting seeds;
(iii) Raising, cultivating, irrigating, and
harvesting crops for sale, rent, or lease to
customers; and
(iv) Breeding, rearing, feeding, and
managing livestock for sale, rent, or lease
to customers.
(b) Exclusions. The term agricultural
production does not include—
(i) The raising of animals that are not
livestock; or
(ii) Activities that benefit persons
engaged in agriculture when these activ-
ities are not agricultural production, such
as food marketing.
(c) Livestock. The term livestock
includes cattle, hogs, horses, mules, don-
keys, sheep, goats, captive fur-bearing
animals, chickens, turkeys, pigeons, and
other poultry.
(8) Chemical production. The term
chemical production means a chemical pro-
cess whereby a product is formulated from
organic and inorganic raw materials, includ-
ing preparing raw materials for reaction,
combining materials in a reactor to form a
new substance, isolating the final product
from byproducts, intermediates, and other
substances, and purifying the final product.
Examples of chemical production include—
(a) Basic inorganic chemical manufac-
turing, such as petrochemical manufac-
turing, industrial gas manufacturing, and
synthetic dye and pigment manufacturing;
(b) Basic organic chemical manufac-
turing, such as ethyl alcohol manufactur-
ing and cyclic crude, intermediate, and
gum and wood chemical manufacturing;
(c) Manufacturing synthetic resins,
plastics materials, and non-vulcanizable
elastomers and mixing and blending res-
ins on a custom basis;
(d) Manufacturing nitrogenous or
phosphatic materials and mixing with
other ingredients into fertilizers;
(e) Manufacturing pharmaceutical
products intended for internal and external
consumption in such forms as ampoules,
tablets, capsules, vials, ointments, pow-
ders, solutions, and suspensions;
(f) Manufacturing adhesives, glues,
and caulking compounds; and
(g) Manufacturing soaps, detergents,
polishes, surface active agents, textile and
leather finishing agents, and other sanita-
tion goods.
(9) Substantial transformation of the
property comprising a qualified product.
(a) In general. The term substantial
transformation of the property compris-
ing a qualified product means the further
manufacturing, production, or refining of
the constituent elements, raw materials,
inputs, or subcomponents into a final,
complete, and distinct item of property
in the hands of the taxpayer that is fun-
damentally different from the original
constituent elements, materials, inputs, or
subcomponents.
(b) Examples of substantial trans-
formation of the property comprising a
qualified product. Examples of substantial
transformation of the property comprising
a qualified product include the conversion
of wood pulp to paper, steel rods to screws
and bolts, and freshly caught tuna fish to
canned tuna.
(c) Example of an activity that does not
result in a substantial transformation of
the property comprising a qualified prod-
uct. An example of an activity that does
not result in a substantial transformation
of the property comprising a qualified
product is the grouping and packaging of
multiple finished goods for sale as a sin-
gle item, such as gift baskets, subscription
boxes, and bundled electronics.
(d) No application to other provisions.
The definition of the term substantial
transformation of the property compris-
ing a qualified product set forth in section
5.02(9)(a) of this notice, and the illustra-
tive examples contained in this notice, are
limited to determinations under § 168(n),
and do not apply with respect to determi-
nations of whether property has been sub-
stantially transformed for any other pur-
pose, including for purposes of any other
provision of the Code or the regulations
thereunder.
.03 Safe harbor for property placed in
service during 2025.
(1) In general. Notwithstanding the
definitions in section 5.02(5), (6), (7), and
(8) of this notice, for property placed in
service after July 4, 2025, and on or before
December 31, 2025, the taxpayer’s trade
or business activity conducted in, or taking
place within, the property will be treated
as a QPA under section 5.01 of this notice
if (a) the principal business activity code
that the taxpayer, or the relevant trade or
business of the taxpayer, used on its most
recently filed Federal income tax return
(for example, 2024 Form 1040, Schedule
C, line B; 2024 Form 1065, Item A; 2024
Form 851, Part II, or 2024 Form 1120,
Schedule K, line 2a), filed before Febru-
ary 19, 2026, is an applicable NAICS code
listed in section 5.03(2) of this notice and
(b) such activity results in, or is otherwise
essential to (as determined under 5.01(2)
of this notice), the substantial transforma-
tion of the property comprising a qualified
product (as defined in section 5.02(9) of
this notice). For a taxpayer that does not
have such a filed Federal income tax return
because it is filing its first Federal income
tax return on or after February 19, 2026,
the taxpayer must reasonably determine
that its principal business activity code is
an applicable NAICS code on its first Fed-
eral income tax return to be eligible for the
safe harbor provided in this section 5.03.
(2) Applicable NAICS code. An appli-
cable NAICS code means any of the
NAICS codes listed under sectors 31, 32,
or 33, or under subsectors 111 or 112, that
appear in the North American Industry
Classification System (NAICS), United
States, 2022, published by the Office of
Management and Budget (OMB), Execu-
tive Office of the President.
2

.04 Example. The following example
illustrates the rules set forth in section 5
of this notice:
(1) Facts. Company B owns Factory B, a build-
ing, and uses Factory B to process tomatoes, onions,
garlic, and other ingredients (collectively the sauce
ingredients) into jarred tomato sauce for sale in
grocery stores (jarred sauce). The jarred sauce is
a qualified product, and the sauce ingredients are
the property comprising the qualified product. The
physical space of Factory B exclusively contains the
following: a loading bay used to receive the sauce
ingredients (ingredient receiving); a section used
to store the sauce ingredients received at the load-
ing bay (ingredient storage); a section used to, as
applicable to each ingredient, inspect, sort, clean,
blanch, peel, chop, mince, and/or otherwise prepare
the sauce ingredients for further processing (ingredi-
ent preparation); a manufacturing space in which the
prepared ingredients are combined, blended, cooked,
cooled, preserved, and sealed in labeled jars (sauce
processing and sauce jarring); and a section used to
2
https://www.census.gov/naics/reference_files_tools/2022_NAICS_Manual.pdf.

Bulletin No. 2026–11 693 March 9, 2026
store the jarred sauce prior to shipping to customers
(sauce storage).
(a) Ingredient receiving and ingredient storage.
Individuals working in the ingredient receiving and
storage sections of Factory B exclusively engage in
receiving and storage related activities. The form or
function of any sauce ingredient is not materially
changed from its original state into a new item of
tangible personal property through the activities
conducted in the loading bay and ingredient storage
sections of Factory B.
(b) Ingredient preparation. During the ingredi-
ent preparation stage, the forms of the sauce ingre-
dients are materially changed from their original
state such that new items of tangible personal prop-
erty result (prepared ingredients), but further pro-
cessing is required beyond the ingredient prepara-
tion stage to arrive at a final, complete, and distinct
item of property (jarred sauce) that is fundamen-
tally different from the original inputs. However,
without this ingredient preparation stage, the sauce
processing stage would result in an end product that
is different in quality or quantity from the intended
qualified product. In addition to performing the
inspecting, sorting, cleaning, blanching, peeling,
chopping, mincing, and other preparation activities,
the individuals working in ingredient preparation
also perform tests to ensure that the prepared ingre-
dients are of the appropriate quality before they are
further processed as a part of the sauce processing
and jarring activities.
(c) Sauce processing and sauce jarring. During
the sauce processing and sauce jarring stage, the
forms of the prepared ingredients are further mate-
rially changed into the final, complete, and distinct
item of property (jarred sauce). The individuals
working in sauce processing and sauce jarring also
perform oversight activities to ensure the manufac-
turing process occurs as intended.
(d) Sauce storage. Individuals working in this
section of Factory B exclusively engage in storage
related activities of the jarred sauce. The form or
function of the jarred sauce is not further materially
changed through the activities conducted in this sec-
tion of Factory B.
(2) Analysis.
(a) Existence of a manufacturing activity in Fac-
tory B. The ingredient preparation, sauce process-
ing, and sauce jarring activities are manufacturing
as defined in section 5.02(5) of this notice as the
forms of the ingredients and the prepared ingredients
(during the ingredient preparation activities and the
sauce processing and sauce jarring activities, respec-
tively) are materially changed into a new item of
tangible personal property (the jarred sauce), which
Company B sells to customers in the ordinary course
of its trade or business. Company B’s other activi-
ties conducted in Factory B (the ingredient receiv-
ing, ingredient storage, and sauce storage activities)
are not manufacturing under section 5.02(5) of this
notice as the forms or functions of the sauce ingredi-
ents and the jarred sauce are not materially changed
during such activities.
(b) Existence of a QPA in Factory B. While both
the ingredient preparation and sauce processing and
jarring stages are manufacturing, a substantial trans-
formation of the property comprising a qualified
product occurs only during the sauce processing and
sauce jarring stage because only in this stage are the
constituent inputs (the prepared ingredients) further
manufactured into a final, complete, and distinct item
of property (jarred sauce) that is fundamentally dif-
ferent from the original constituent inputs (the sauce
ingredients). Under section 5.01(1) of this notice,
Company B’s sauce processing and jarring activity
conducted in Factory B is a QPA.
(c) Scope of Factory B’s QPA.
(i) Ingredient preparation. The material change
occurring in the ingredient preparation stage is not
sufficient to constitute a substantial transformation
of the sauce ingredients because the prepared ingre-
dients do not represent a final, complete, and dis-
tinct item of property that is fundamentally different
from the sauce ingredients. However, the ingredient
preparation stage is an essential activity under sec-
tion 5.01(2) of this notice as (A) it is a manufacturing
activity that occurs within the same property (Factory
B) as the substantial transformation of the property,
(B) it does not occur in ineligible property described
in section 4.07(1) of this notice, and (C) without the
ingredient preparation stage, the sauce processing
and jarring stage would result in an end product that
is different in quality or quantity from the intended
end product. Accordingly, under section 5.01(2)(a)
of this notice, the ingredient preparation activities
are essential activities, and thus are included in Com-
pany B’s QPA conducted in Factory B.
(ii) Loading bay and ingredient storage activi-
ties. The ingredient receiving activities at the load-
ing bay and the ingredient storage activities relate to
raw materials to be consumed in the QPA (the sauce
ingredients) and are conducted in the same property
as the QPA (Factory B). Accordingly, the ingredient
receiving and ingredient storage activities are essen-
tial activities under section 5.01(2)(b) of this notice
and thus are included in Company B’s QPA con-
ducted in Factory B.
(iii) Related activities. In addition to the core
activities conducted in the ingredient preparation
and sauce processing and sauce jarring stages, the
individuals working in those sections of Factory B
also perform quality testing and oversight activities.
As the quality testing and oversight activities occur
within the same property in which the substantial
transformation of property comprising the quali-
fied product occurs (Factory B) and do not occur
within ineligible property under section 4.07(1) of
this notice, the quality testing and oversight activi-
ties will not cause Company B to fail to have a QPA
under section 5.01(3)(a) of this notice.
(iv) Ineligible property. Under section 5.01(2)
(b)(ii) of this notice, storage of finished products is
not an essential activity, and under section 4.07(2) of
this notice, any property, or a portion thereof, used
to conduct storage activities described in section
5.01(2)(b)(ii) of this notice is ineligible property.
Accordingly, the portion of Factory B used to con-
duct the sauce storage is ineligible property.
(v) Summary of Factory B’s QPA. The scope of
the QPA conducted in, or taking place within, Fac-
tory B thus includes the ingredient receiving and
storage stage, the ingredient preparation stage, and
the sauce processing and jarring stages, including
the quality testing and oversight activities performed
by individuals working in those sections or stages of
Factory B.
SECTION 6. SPECIAL RULES
.01 Property placed in service and
disposed of in the same taxable year.
If property is placed in service and dis-
posed of during the same taxable year,
a taxpayer applies rules consistent with
§ 1.168(k)-2(g)(1).
.02 Redetermination of basis. If the
unadjusted depreciable basis of QPP is
redetermined before January 1, 2031 (for
example, due to a contingent purchase
price or discharge of indebtedness), the
deduction determined under § 168 is
redetermined under rules consistent with
§ 1.168(k)-2(g)(2)(i)-(iii).
.03 Like-kind exchanges and involun-
tary conversions. For replacement MACRS
property (as defined in § 1.168(i)-6(b)(1))
that is QPP at the time of replacement and
the time of replacement of which is after
January 19, 2025, and before January 1,
2029, a taxpayer applies rules consistent
with § 1.168(k)-2(g)(5).
SECTION 7. TIME AND MANNER OF
MAKING ELECTION
.01 Time for making election and des-
ignation. A taxpayer designates, under
section 4.09 of this notice, and elects to
treat property as QPP by making the elec-
tion under this section 7 by the due date,
including extensions, of the taxpayer’s
original Federal income tax return for the
taxable year in which the eligible property
is placed in service by the taxpayer.
.02 Manner of making election and
designation. A taxpayer makes a desig-
nation and an election under this section
7 by attaching a statement to its Federal
income tax return for the taxable year in
which the eligible property is placed in
service. The designation and election are
made separately by each person owning
the eligible property (for example, for
each member of a consolidated group
by the agent for the group (within the
meaning of § 1.1502-77(a) and (c)). The
statement, entitled “STATEMENT PUR-
SUANT TO SECTION 7 OF NOTICE
2026-16”, must include the following
information—
(1) The name and taxpayer identifica-
tion number of the taxpayer making the
election;

March 9, 2026 694 Bulletin No. 2026–11
(2) For each property placed in service
in the taxable year for which an election
under this section 7 is being made:
(a) The street address, city, state, zip
code, and a description of the property;
(b) The total unadjusted depreciable
basis of the property;
(c) If the eligible property is less than
the entire property, the dollar amount of
unadjusted depreciable basis allocable to
the eligible property, and a description
that identifies the eligible property; and
(d) The dollar amount of the unadjusted
depreciable basis of eligible property the
taxpayer is designating as QPP (or a state-
ment that the taxpayer is designating the
entire unadjusted depreciable basis of the
eligible property as QPP);
(3) If the taxpayer is applying the de
minimis rule described in section 4.02(2)
of this notice to an eligible property, a
declaration that the taxpayer is applying
the de minimis rule described in section
4.02(2) of Notice 2026-16 and identifica-
tion of each eligible property to which the
de minimis rule is applied; and
(4) If the taxpayer is using the auto-
matic one-year extension of the placed-in-
service-date requirement in section 4.11
of this notice—
(a) A declaration that—
(i) The taxpayer is using the automatic
one-year extension of the placed-in-ser-
vice-date requirement in section 4.11 of
Notice 2026-16; and
(ii) Each property for which the tax-
payer is using the automatic one-year
extension was located in a disaster area
for all or a portion of 2030; and
(b) Identification of each eligible prop-
erty listed under section 7.02(2) of this
notice for which the taxpayer is using
the automatic one-year extension of the
placed-in-service-date requirement in
section 4.11 of this notice, and identifica-
tion of the federally declared disaster (as
defined in § 165(i)(5)) that established the
disaster area applicable to each eligible
property.
.03 Revocation. Any election made
under section 7 of this notice, and any
designation under section 4.09 of this
notice contained in such election, may be
revoked only by filing a request for a pri-
vate letter ruling and obtaining the written
consent of the Secretary. The Secretary
will provide consent only in extraordinary
circumstances. See § 168(n)(6)(B). If the
request for revocation would allow a tax-
payer to use hindsight, the extraordinary
circumstances standard is not met.
SECTION 8. DEPRECIATION
RECAPTURE
.01 Defined terms. For purposes of this
notice:
(1) QPP change in use.
(a) In general. A QPP change in use
occurs if, at any time within the 10-cal-
endar-year period beginning on the date
a taxpayer places QPP in service, the
QPP (i) ceases to satisfy the integral
part requirement, and (ii) is used by the
taxpayer in another productive use that
results in the property that was previ-
ously QPP constituting disqualified prop-
erty (as defined in section 8.01(2) of this
notice). Accordingly, a QPP change in
use has not occurred when a taxpayer
ceases to use QPP as an integral part of
one QPA and begins to use it as an inte-
gral part of another QPA, provided the
QPP was not used in another productive
use not described in section 5.01 of this
notice in the interim. If only a portion of
QPP undergoes a QPP change in use, this
section 8 applies only to the portion that
underwent a change in use, provided that
the other portion(s) of the QPP continue
to meet the requirements of section 4.01
of this notice.
(b) Special rule for consolidated
groups. For QPP subject to an intercom-
pany lease described in section 4.02(3)(b)
of this notice, if B ceases to have a QPA
that is conducted in, or takes place within,
the QPP, or if S or B leaves the consoli-
dated group, then S has a QPP change in
use.
(c) Leases to commonly controlled per-
sons. For QPP subject to a lease agreement
between a lessor pass-through entity and a
commonly controlled person, or between
a lessor individual and a commonly con-
trolled person, if the commonly controlled
person leasing the QPP ceases to have a
QPA that is conducted in, or takes place
within, the QPP, or if the commonly con-
trolled person is no longer described in
section 4.02(3)(c) of this notice for any
taxable year, the lessor pass-through
entity or lessor individual, as applicable,
has a QPP change in use.
(d) Temporarily idle property. A prop-
erty that has been placed in service but is
temporarily idle does not cease to satisfy
the integral part requirement and does not
have a QPP change in use. For this pur-
pose, property is temporarily idle when the
taxpayer takes it out of service for a finite
period with the expectation of resuming a
QPA in the near future (for example, prop-
erty taken out of service while upgrading
a production line or performing facili-
ty-wide maintenance).
(2) Disqualified property. The term
disqualified property refers to QPP that
underwent a QPP change in use and is
no longer QPP. Disqualified property
includes only the portion of the QPP that
underwent a QPP change in use.
(3) Year of change. The term year of
change refers to the taxable year in which
a QPP change in use occurs.
.02 Application of § 1245(a)(1) upon
a QPP change in use. Disqualified prop-
erty is subject to § 1245(a)(1) and is
treated as having been disposed of by the
taxpayer as of the first time the property
had a QPP change in use. Upon such QPP
change in use, the excess of the recom-
puted basis (as defined in § 1245(a)(2))
of the disqualified property over the
adjusted basis (as defined in § 1011(a))
of the disqualified property is treated as
ordinary income in the year of change.
To determine the recomputed basis of
disqualified property, see section 8.05 of
this notice.
.03 Adjustment to basis of property
for gain recognized upon a change in
use. The taxpayer’s basis in disqualified
property is increased by the amount of
gain recognized under section 8.02 of this
notice. Solely for purposes of determining
the depreciation allowance for disquali-
fied property after a QPP change in use,
the adjustment to basis in this section 8.03
is treated as having occurred on the first
day of the year of change.
.04 Determination of depreciation
allowance for disqualified property. The
depreciation allowance for disqualified
property in the year of change and all
subsequent taxable years is determined
as though the disqualified property was
placed in service by the taxpayer as a new
separate asset on the first day of the year
of change, taking into account the applica-
ble convention.

Bulletin No. 2026–11 695 March 9, 2026
.05 Determination of recomputed basis
of disqualified property.
(1) In general. For purposes of apply-
ing § 1245(a)(1), the recomputed basis of
disqualified property shall be determined
by multiplying the eligible property’s
unadjusted depreciable basis designated
as QPP by the percentage of the eligible
property that underwent a change in use
(as determined under section 8.05(2) of
this notice). For example, assume that the
entire eligible property had an unadjusted
depreciable basis of $100, and the tax-
payer elected to designate $80 of it as QPP.
If 50% of the eligible property undergoes
a change in use, the recomputed basis of
the disqualified property under § 1245(a)
(2) equals $40 (50% of $80).
(2) Determination of percentage of eli-
gible property that underwent change in
use. A taxpayer may determine the por-
tion of the eligible property (expressed
as a percentage) that underwent a change
in use using any reasonable method that
takes into account the data and criteria
described in section 4.08 of this notice.
A taxpayer must use the same method
of determining the portion of eligible
property that underwent a change in use
consistently for any subsequent partial
changes in use with respect to the same
eligible property.
(3) Unit-of-property determination
after a partial change in use. Solely for
purposes of determining whether the
remaining eligible property continues to
be used as an integral part of a QPA and
has not experienced a QPP change in use,
the rules in section 4.03 of this notice are
applied by disregarding the eligible prop-
erty that underwent a change in use.
.06 Ineligibility for certain elections.
Disqualified property is not eligible in the
year of change for the election provided
under § 179, the additional first year depre-
ciation deduction provided in § 168(k), or
the special depreciation allowances under
§§ 168(l) and 168(m).
.07 Examples. The following examples
illustrate the rules set forth in section 8 of
this notice:
(1) Example 1.
(a) Facts. Company A, a calendar-year taxpayer,
places a 50,000 square-foot factory (Factory A) con-
sisting entirely of eligible property in service on Jan-
uary 1, 2027, and elects under section 7 of this notice
to designate the entire $10,000,000 unadjusted
depreciable basis of Factory A as QPP. Company A’s
special depreciation allowance under § 168(n) for
the 2027 taxable year is $10,000,000, and Company
A’s adjusted basis in the QPP is $0 as of January 1,
2028. From January 1, 2027, to December 19, 2032,
Company A uses the QPP as an integral part of a
QPA. However, during the remaining portion of the
taxable year ending December 31, 2032 (the 2032
taxable year), Company A ceases using the property
as an integral part of a QPA and begins using the
property in another productive use that is not a QPA.
(b) Analysis. Under section 8.01(1)(a) of this
notice, Company A’s QPP underwent a QPP change
in use in the 2032 taxable year and became disqual-
ified property when Company A ceased using the
QPP as an integral part of a QPA and began using
the property in another productive use. Under section
8.02 of this notice, Company A is treated as dispos-
ing of the QPP and recognizes a gain of $10,000,000
in the 2032 taxable year which is treated as ordinary
income. Under section 8.03 of this notice, Company
A’s adjusted basis of $0 in the disqualified property
is increased by $10,000,000 as of January 1, 2032,
for purposes of determining the depreciation allow-
ance for the disqualified property starting in the 2032
taxable year.
Under section 8.04 of this notice, Company
A determines its depreciation allowance for the
disqualified property in the year of change and all
subsequent taxable years by treating the disquali-
fied property as a new separate asset placed in ser-
vice on the first day of the year of change, taking
into account the applicable convention. As the dis-
qualified property is nonresidential real property,
the depreciation allowance is determined using the
straight line method under § 168(b)(3) and the mid-
month convention under § 168(d)(2). Accordingly,
for the 2032 taxable year, Company A has a depreci-
ation allowance of $245,726, equal to the unadjusted
basis of $10,000,000 divided by 39 years, times 11.5
divided by 12 months.
(2) Example 2.
(a) Facts. The facts are the same as in Example 1,
except (i) Company A only designated $8,000,000 of
Factory A’s unadjusted depreciable basis as QPP, and
(ii) during the remaining portion of the 2032 taxable
year, only 25,000 square feet of Factory A underwent
a change in use. Assume Company A’s determination
that only 25,000 square feet of Factory A underwent
a change in use was made in accordance with section
8.05(2) of this notice, and that the remaining 25,000
square feet of Factory A continue to meet the require-
ments of section 4.01 of this notice without regard
to the 25,000 square feet that underwent a change
in use.
(b) Analysis.
(i) Section 1245 gain. Under section 8.05(1) of
this notice, for purposes of applying § 1245(a)(1),
the recomputed basis of Factory A’s disqualified
property equals $4,000,000 (the $8,000,000 of the
eligible property’s unadjusted depreciable basis des-
ignated as QPP by Factory A, multiplied by 50 per-
cent, which is the percentage of the eligible property
that underwent a change in use, calculated based on
Company A’s reasonable determination that 25,000
square feet of Factory A underwent a change in
use). Under section 8.02 of this notice, Company A
is treated as disposing of the portion of Factory A
that is disqualified property and recognizes a gain of
$4,000,000 in the 2032 taxable year which is treated
as ordinary income.
(ii) Basis of disqualified property. Under sec-
tion 8.03 of this notice, the disqualified property in
Factory A is treated as a new, separate asset, and
Company A’s adjusted basis of $0 in the disqualified
property is increased by $4,000,000 as of January 1,
2032, for purposes of determining the depreciation
allowance for the disqualified property starting in the
2032 taxable year.
(iii) Depreciation allowances for disqualified
property. Under section 8.04 of this notice, Com-
pany A determines its depreciation allowance for the
disqualified property in the year of change and all
subsequent taxable years by treating the disqualified
property as placed in service on the first day of the
year of change, taking into account the applicable
convention. As the disqualified property is nonres-
idential real property, the depreciation allowance
is determined using the straight line method under
§ 168(b)(3) and the mid-month convention under
§ 168(d)(2). Accordingly, for the 2032 taxable year,
Company A has a depreciation allowance of $98,291,
equal to the unadjusted basis of $4,000,000 divided
by 39 years, times 11.5 divided by 12 months.
(iv) Depreciation allowances for portion(s)
of property not designated as QPP. Under section
8.01(1)(a) of this notice, the rules in section 8 of
this notice do not apply to the portion(s) of Factory
A not designated as QPP (undesignated property).
Therefore, the undesignated property is not treated
as undergoing a QPP change in use, even though
Company A began using part or all of the undesig-
nated property in another productive use. Instead, the
undesignated property continues to be depreciated
using the applicable depreciation method, recovery
period, and convention.
.08 Change in use by a transferee fol-
lowing a fully or partially tax-free trans-
fer of QPP. For purposes of applying this
section 8 to a change in use by a trans-
feree following a fully or partially tax-free
transfer of QPP, a taxpayer applies rules
consistent with §§ 1.1245-2(a)(4) and (c)
(2), and 1.1245-4(c).
SECTION 9. APPLICABILITY DATE
AND RELIANCE
It is anticipated that the forthcoming
proposed regulations will provide that
rules consistent with the interim guidance
provided in sections 3 through 8 of this
notice apply to property the construction
of which begins after January 19, 2025
(or, in the case of property described in
section 4.06 of this notice, that is acquired
after January 19, 2025), and which is
placed in service in a taxable year begin-
ning on or after the date the final § 168(n)
regulations are published in the Federal
Register. For property the construction of
which begins after January 19, 2025 (or,

March 9, 2026 696 Bulletin No. 2026–11
in the case of property described in sec-
tion 4.06 of this notice, that is acquired
after January 19, 2025), and is placed
in service in a taxable year beginning
before the date the forthcoming proposed
regulations are published in the Federal
Register or other published guidance is
issued, a taxpayer may rely on the guid-
ance provided in sections 3 through 8 of
this notice, provided that the taxpayer fol-
lows the guidance provided in sections 3
through 8 of this notice in its entirety for
all QPP placed in service in such taxable
years, beginning with the first taxable
year with respect to which the taxpayer
relies on the guidance provided in sec-
tions 3 through 8 of this notice.
SECTION 10. REQUEST FOR
COMMENTS
.01 Comments regarding guidance pro-
vided in this notice. The Treasury Depart-
ment and the IRS request comments on
questions arising from the interim guid-
ance set forth in this notice. Commenters
are encouraged to specify the issues on
which additional guidance is needed in
the forthcoming proposed regulations. In
addition to general comments regarding
the provisions of this notice, the Treasury
Department and the IRS request com-
ments to address the following specific
questions:
(1) Allocation of basis to eligible prop-
erty (section 4.08 of this notice). What are
some other examples of reasonable meth-
ods to allocate a property’s basis between
eligible property and ineligible property?
(2) Manufacturing, chemical produc-
tion, agricultural production, or refining
(section 5 of this notice). Are the defini-
tions for manufacturing, chemical pro-
duction, agricultural production, and
refining representative of their respective
industries? Should the definitions, or the
examples, in section 5 of this notice be
expanded to include additional activities
or examples, and if so, which activities or
examples?
(3) Examples of substantial transfor-
mation of property (section 5.02(9) of this
notice). What other examples of activities
that are, or are not, manufacturing, pro-
duction, or refining that result in substan-
tial transformation of property comprising
a qualified product would be helpful to
include in the forthcoming proposed reg-
ulations?
.02 Procedures for submitting com-
ments.
(1) Deadline. Written comments should
be submitted by April 20, 2026. Consid-
eration will be given, however, to any
written comment submitted after April 20,
2026, if such consideration will not delay
the issuance of forthcoming proposed reg-
ulations.
(2) Form and manner. The subject line
for the comments should include a refer-
ence to Notice 2026-16. All commenters
are strongly encouraged to submit com-
ments electronically. However, comments
may be submitted in one of two ways:
(a) Electronically via the Federal
eRulemaking Portal at www.regulations.
gov (type IRS-2026-0016 in the search
field on the regulations.gov homepage to
find this notice and submit comments); or
(b) By mail to: Internal Revenue Ser-
vice, CC:PA:LPD:PR (Notice 2026-16),
Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, D.C., 20044.
(3) Publication of comments. The Trea-
sury Department and the IRS will publish
for public availability any comment sub-
mitted electronically and on paper to its
public docket on regulations.gov.
SECTION 11. PAPERWORK
REDUCTION ACT
The Paperwork Reduction Act of
1995 (44 U.S.C. 3501-3520) (PRA)
generally requires that a Federal agency
obtain the approval of the Office of
Management and Budget (OMB) before
collecting information from the public,
whether such collection of information
is mandatory, voluntary, or required to
obtain or retain a benefit. An agency
may not conduct or sponsor, and a per-
son is not required to respond to, a col-
lection of information unless it displays
a valid control number assigned by the
OMB.
The collections of information in
this revenue procedure are in section
7. These collections of information
include recordkeeping requirements that
are necessary to determine whether a
taxpayer properly elected to claim the
special depreciation allowance for QPP
under § 168(n), properly designated the
property subject to the election, and the
amount of the allowance. These collec-
tions will be used by the IRS for tax
compliance purposes and by taxpayers
to calculate their deduction.
These collection requirements will be
included in the OMB Control Number
1545-0074 for individual filers, 1545-
0123 for business filers, 1545-0092 for
trust and estate filers, and 1545-0047 for
tax-exempt filers, in accordance with the
PRA (44 U.S.C. 3507).
SECTION 12. DRAFTING AND
CONTACT INFORMATION
The principal author of this notice is
Jeremy Pfeifer of the Office of the Asso-
ciate Chief Counsel (Income Tax and
Accounting). However, additional person-
nel in the Office of Chief Counsel and at
the Treasury Department participated in
the development of this notice. For further
information, please contact the Office of
Associate Chief Counsel (Income Tax and
Accounting), Branch 7, at (202) 317-7005
(not a toll-free number).

Bulletin No. 2026–11 697 March 9, 2026
Part IV
Anticipated Applicability
Date for Future Final
Regulations Relating
to Required Minimum
Distributions
Announcement 2026-7
I. PURPOSE
This announcement provides that
the Department of the Treasury (Trea-
sury Department) and the Internal Reve-
nue Service (IRS) anticipate that certain
portions of final regulations relating to
required minimum distributions (RMDs)
under section 401(a)(9) of the Internal
Revenue Code (Code) will apply for the
distribution calendar year that begins no
earlier than 6 months after the date that
final regulations are issued in the Federal
Register.
II. BACKGROUND
Section 401(a)(9) of the Code requires
a stock bonus, pension, or profit-sharing
plan described in section 401(a) (or an
annuity contract described in section
403(a)) to make minimum distributions
starting by the required beginning date
(as well as minimum distributions to
beneficiaries if the employee dies before
the required beginning date). Individ-
ual retirement accounts and individual
retirement annuities described in sec-
tion 408(a) and (b), respectively, annu-
ity contracts, custodial accounts, and
retirement income accounts described
in section 403(b), and eligible deferred
compensation plans under section 457(b)
are also subject to the rules of section
401(a)(9) pursuant to sections 408(a)(6)
and (b)(3), 403(b)(10), and 457(d)(2),
respectively, and the regulations under
those sections.
The Treasury Department and the IRS
published proposed regulations regard-
ing RMDs under section 401(a)(9) and
related provisions in the Federal Regis-
ter on February 24, 2022 (87 FR 10504).
The 2022 proposed regulations reflected
changes made by the Setting Every Com-
munity Up for Retirement Enhancement
Act of 2019 (SECURE Act), enacted on
December 20, 2019, as Division O of
the Further Consolidated Appropriations
Act, 2020, Pub. L. 116-94, 133 Stat. 2534
(2019), and also included a comprehen-
sive update and restatement of the regula-
tions under section 401(a)(9).
After the 2022 proposed regulations
were issued, the SECURE 2.0 Act of 2022
(SECURE 2.0 Act) was enacted as Divi-
sion T of the Consolidated Appropriations
Act, 2023, Pub. L. 117-328, 136 Stat. 4459
(2022). The SECURE 2.0 Act included a
number of provisions relating to RMDs.
After considering the comments received
in response to the 2022 proposed regula-
tions and reviewing the changes made in
the SECURE 2.0 Act, the Treasury Depart-
ment and the IRS determined that certain
of those changes could be included in final
regulations, but that other changes should
be addressed in new proposed regulations.
Accordingly, on July 19, 2024, the Trea-
sury Department and the IRS published
final regulations regarding RMDs under
section 401(a)(9) and related provisions in
the Federal Register (89 FR 58886) and
also published proposed regulations under
section 401(a)(9) and related provisions
(89 FR 58644).
With the exception of proposed
§ 1.401(a)(9)-5(a)(5)(v) (relating to the
valuation of an annuity contract under the
partial annuitization option provided for in
section 204 of the SECURE 2.0 Act), the
provisions of the 2024 proposed regula-
tions were proposed to apply for purposes
of determining RMDs for calendar years
beginning on or after January 1, 2025 (so
that they would begin to apply at the same
time as the 2024 final regulations). In writ-
ten comments and at the public hearing
held on September 25, 2024, commenters
raised issues regarding some of the pro-
visions of the proposed regulations. Com-
menters were also concerned that it would
be difficult to implement many of the
provisions of the future final regulations
in a timely manner if the January 1, 2025,
applicability date set forth in the 2024
proposed regulations were to be retained
in the final regulations. Commenters said
that this difficulty arises from the expected
timing of the future final regulations along
with the uncertainty regarding the resolu-
tion of issues commenters raised. Com-
menters expressed specific concerns with
the challenges of implementing the final
regulations to be adopted pursuant to the
proposed amendments to §§ 1.401(a)(9)-
4, 1.401(a)(9)-5, and 1.401(a)(9)-6.
In response to comments received
on the proposed regulations, the Trea-
sury Department and the IRS issued
Announcement 2025-2, 2025-2 IRB 305,
which provides that the final regulations
amending §§ 1.401(a)(9)-4, 1.401(a)(9)-5,
and 1.401(a)(9)-6 are anticipated to apply
no earlier than the 2026 distribution cal-
endar year. In the interim, the Announce-
ment states that taxpayers must apply a
reasonable, good-faith interpretation of
the statutory provisions underlying the
amendments.
III. ANTICIPATED APPLICABILITY
DATE OF FUTURE FINAL
REGULATIONS
Final regulations amending §§ 1.401(a)
(9)-4, 1.401(a)(9)-5, and 1.401(a)(9)-6,
issued pursuant to the 2024 proposed reg-
ulations, are anticipated to apply for pur-
poses of determining required minimum
distributions for the distribution calendar
year that begins no earlier than 6 months
after the date that final regulations are
issued in the Federal Register. For peri-
ods before the applicability date of these
regulations, taxpayers must continue to
apply a reasonable, good-faith interpreta-
tion of the statutory provisions underlying
the regulations.
IV. DRAFTING INFORMATION
The principal author of this announce-
ment is Arslan Malik of the Office of Asso-
ciate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). For further information regarding
this announcement, contact Mr. Malik at
202-317-5151 (not a toll-free number).

Bulletin No. 2026–11 i March 9, 2026
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

March 9, 2026 ii Bulletin No. 2026–11
Numerical Finding List
1
Bulletin 2026–11
Announcements:
2026-1, 2026-04 I.R.B. 402
2026-2, 2026-05 I.R.B. 447
2026-3, 2026-06 I.R.B. 518
2026-4, 2026-06 I.R.B. 533
2026-5, 2026-07 I.R.B. 540
2026-6, 2026-10 I.R.B. 634
2026-7, 2026-11 I.R.B. 697
Notices:
2026-2, 2026-02 I.R.B. 304
2026-3, 2026-02 I.R.B. 307
2026-5, 2026-02 I.R.B. 309
2026-6, 2026-02 I.R.B. 313
2026-1, 2026-04 I.R.B. 365
2026-8, 2026-04 I.R.B. 368
2026-10, 2026-04 I.R.B. 378
2026-11, 2026-06 I.R.B. 491
2026-12, 2026-06 I.R.B. 496
2026-13, 2026-06 I.R.B. 499
2026-9, 2026-07 I.R.B. 534
2026-7, 2026-11 I.R.B. 637
2026-14, 2026-11 I.R.B. 654
2026-15, 2026-11 I.R.B. 658
2026-16, 2026-11 I.R.B. 685
Proposed Regulations:
REG-101952-24, 2026-03 I.R.B. 345
REG-110519-25, 2026-03 I.R.B. 353
REG-132251-11; REG-134219-08,
2026-03 I.R.B. 358
REG-103430-24, 2026-05 I.R.B. 447
REG-112829-25, 2026-05 I.R.B. 452
REG-113515-25, 2026-05 I.R.B. 455
REG-121244-23, 2026-09 I.R.B. 579
Revenue Procedures:
2026-1, 2026-01 I.R.B. 1
2026-2, 2026-01 I.R.B. 119
2026-3, 2026-01 I.R.B. 143
2026-4, 2026-01 I.R.B. 160
2026-5, 2026-01 I.R.B. 258
2026-6, 2026-02 I.R.B. 314
2026-7, 2026-02 I.R.B. 316
2026-8, 2026-04 I.R.B. 380
2026-9, 2026-04 I.R.B. 393
2026-10, 2026-04 I.R.B. 394
2026-12, 2026-07 I.R.B. 535
2026-13, 2026-09 I.R.B. 563
Revenue Rulings:
2026-1, 2026-02 I.R.B. 299
2026-2, 2026-03 I.R.B. 342
2026-3, 2026-06 I.R.B. 485
2026-4, 2026-06 I.R.B. 487
2026-5, 2026-08 I.R.B. 542
2026-6, 2026-11 I.R.B. 635
Treasury Decisions:
10042, 2026-03 I.R.B. 320
10041, 2026-04 I.R.B. 360
10039, 2026-05 I.R.B. 403
10040, 2026-05 I.R.B. 416
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin
2024–52, dated December 22, 2024.

Bulletin No. 2026–11 iii March 9, 2026
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2026–11
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin
2024–52, dated December 22, 2024.

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