How to Calculate FEOC MACR Under Notice 2026-15

Quick Answer

The Formula, and Why the Formula Isn't the Hard Part

MACR is calculated as: (Total Direct Costs − PFE Direct Costs) ÷ Total Direct Costs.

The result has to clear a statutory threshold that varies by credit and year. For most 45Y and 48E projects beginning construction in 2026, the threshold is 40%. For solar components claimed under the 45X advanced manufacturing credit and sold in 2026, it's 50%. These percentages climb annually, so a project's actual margin above the threshold matters, not just whether it currently clears the bar.

The formula itself is simple arithmetic. The actual work is identifying which manufactured products and components (MPs and MPCs) belong in the calculation, and getting accurate, defensible cost data for each one.

The Five-Step Process Notice 2026-15 Actually Lays Out

• Step 1: Identify the manufactured products and components. This has to be consistent with the definition of "manufactured products (including components)" already established in Notice 2023-38, the same framework used for the domestic content bonus. This isn't a new taxonomy to learn from scratch if a project has already gone through domestic content certification.
• Step 2: Determine which of those components are PFE-produced or PFE-sourced. This is where supplier documentation does the real work, discussed below.
• Step 3: Assign direct costs to each component, either through actual cost accounting or, more commonly, through one of the three interim safe harbors.
• Step 4: Calculate the ratio. Sum the PFE-attributable direct costs, subtract from total direct costs, divide by total direct costs.
• Step 5: Compare against the applicable threshold for the credit type, technology, and construction-start or sale year.

The Three Interim Safe Harbors, and Which One Most Projects Will Actually Use

1. Identification Safe Harbor.

Lets a taxpayer use the existing domestic content safe harbor tables (from Notice 2025-08) simply to identify which MPs and MPCs are present in a facility, without needing to independently build that list from scratch.

2. Cost Percentage Safe Harbor.

Goes further, letting a taxpayer use the assigned cost percentages already published in those same domestic content tables to determine direct costs, instead of tracking actual supplier invoices and cost data for every component. Given this project's own multiple firms describe this as the one most solar, wind, and battery projects are expected to actually use, it's worth understanding with a real number attached.

• Worked example, battery storage:
  For a facility where the only PFE-sourced input is battery pack and module production, and that production represents $8 out of every $100 in total direct costs, the calculation is (100 − 8) ÷ 100 = 92% MACR. That clears the 55% threshold that applies to energy storage technology beginning construction in 2026 with real room to spare. The takeaway isn't the specific number, it's that a single, correctly-identified PFE cost line can be enough to run the full calculation with confidence, when the rest of the supply chain is clean.
• Worked example, a Section 45X eligible component:
  A different case shows how sensitive the ratio is to modest sourcing changes. For a component with $1,000 in total manufactured-product cost, sourcing $375 of that from a PFE gives (1,000 − 375) ÷ 1,000 = **62.5% MACR**, below the 80% threshold that applies to eligible components in 2029. Cut the PFE-sourced amount to $125 instead, same $1,000 total, and the same formula gives (1,000 − 125) ÷ 1,000 = **87.5%**, comfortably above that same 80% threshold. The two examples together make the real point: with a single dominant PFE cost line, as in the storage example above, the calculation is close to a pass/fail formality. With several smaller components each carrying some PFE exposure, the outcome is genuinely sensitive to sourcing decisions, and a supplier swap that looks minor on a bill of materials can be the difference between clearing a threshold and missing it.

3. Certification Safe Harbor.

Lets a taxpayer rely on supplier-provided certifications for PFE status and cost attribution, rather than independently verifying every upstream cost. Baker Tilly's read of the Notice is that this reliance is reasonable "unless they know or have reason to know the certification is inaccurate," a standard that puts real weight on actually reading what a supplier certifies, not just filing it.

Taxpayers aren't required to pick one method for an entire project. McGuireWoods' analysis confirms a taxpayer can use the direct cost method with no safe harbor at all, the direct cost method combined with the Identification Safe Harbor, or the full safe harbor method built on the Notice 2025-08 tables, whichever combination fits the actual data available for a given facility.

Why Cell Sourcing Specifically Decides BESS Outcomes

For grid-scale battery storage specifically, the assigned cost tables in the safe harbor framework weight battery cells unusually heavily, up to 52% of total direct cost in certain configurations, according to one detailed BESS-focused analysis. That means a single sourcing decision, which factory the cells come from, can single-handedly determine whether a storage project clears its MACR threshold or fails it, independent of how clean every other component in the system is. For any EPC quoting solar-plus-storage, cell origin deserves its own line of scrutiny in the compliance file, not a footnote alongside modules and inverters.

The Reliance Window: This Isn't Permanent

These interim safe harbors have a real expiration mechanism. Under Section 7701(a)(52)(D)(iii)(I) of the Code, Treasury has to publish the final, statutory safe harbor tables no later than December 31, 2026. Once that happens, taxpayers can keep relying on the interim methods in Notice 2026-15 only until 60 days after that publication date, for facilities and energy storage technology that begin construction before that cutoff, or for eligible components sold in a tax year beginning on or before it.

Practically: a project calculating its MACR today under the interim rules should expect that calculation to need re-checking once the final tables land, not assume today's number is locked in permanently.

What EPC Teams Should Do Now

Common Mistakes to Avoid

• Assuming the MACR threshold is a single, fixed number. It varies by credit type (45Y/48E versus 45X) and rises by construction-start or sale year.
• Waiting for the final safe harbor tables before calculating MACR at all. The interim safe harbors are usable now, and most projects will still be relying on them when construction starts.
• Treating a supplier certification as sufficient without reading it. Reasonable reliance requires not knowing or having reason to know it's inaccurate, an unread certificate doesn't meet that standard.
• Underweighting cell sourcing on battery storage projects specifically, given how much of total direct cost the safe harbor tables assign to that single component category.
• Assuming an interim MACR calculation is final once the official safe harbor tables publish.

Where Reslink Fits In This Conversation

A MACR calculation is only as good as the component and cost data behind it, and that data usually already exists inside the design and procurement record, it just isn't organized around this specific test. Reslink keeps a project's bill of materials and supplier documentation attached to the design from day one, so when it's time to run the MACR calculation, the manufactured-product list and supplier certifications are already there instead of needing to be reconstructed after the fact.

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Frequently Asked Questions

Q1. What exactly is MACR and why does it matter?

The Material Assistance Cost Ratio measures the share of a project's direct manufactured-product costs that don't trace back to a prohibited foreign entity. It has to clear a statutory threshold, which varies by credit and year, or the project loses eligibility for the 45Y, 48E, or 45X credit entirely, not just a reduced amount.

Q2. Do I have to wait until the final safe harbor tables are published to calculate MACR?

No. Notice 2026-15, issued February 12, 2026, provides three interim safe harbors, Identification, Cost Percentage, and Certification, usable right now. The final statutory tables aren't due until no later than December 31, 2026.

Q3. Which safe harbor should most solar or storage projects use?

The Cost Percentage Safe Harbor is expected to be the most widely used, since it lets a taxpayer rely on the existing domestic-content cost tables rather than independently tracking actual supplier costs for every component.

Q4. How much does battery cell sourcing actually matter for storage projects

A significant amount. The assigned cost tables allocate up to roughly 52% of total direct cost to cells in certain grid-scale configurations, meaning cell origin alone can determine whether a storage project clears its MACR threshold.

Q5. What happens when the final safe harbor tables are published?

Reliance on the current interim safe harbors continues only until 60 days after that publication date, for projects beginning construction, or components sold, before that cutoff. After that, the final tables govern, and prior interim calculations may need to be reconfirmed.

Q6. Can I rely on a supplier's certification instead of verifying costs myself

Yes, under the Certification Safe Harbor, but only if the taxpayer doesn't know or have reason to know the certification is inaccurate. That standard requires actually reviewing what's certified, not just filing the document.

Sources

• IRS (Primary), irs.gov, Notice 2026-15 official release and summary, PFE definition and MACR calculation intent
• BakerHostetler, bakerlaw.com, the five-step MACR calculation process and Notice 2023-38 cross-reference for manufactured product identification
• Foley Hoag LLP, foleyhoag.com, the three named interim safe harbors and the worked battery storage MACR example (92% calculation)
• Troutman Pepper Locke, troutman.com, the 60-day post-publication reliance window under Section 7701(a)(52)(D)(iii)(I)
• McGuireWoods, mcguirewoods.com, the three calculation-method options and the December 31, 2026 statutory deadline for final tables
• Baker Tilly, bakertilly.com, the MACR formula and the reasonable-reliance standard for supplier certifications
• Morgan Lewis, morganlewis.com, threshold percentages by credit type and technology (40% for 45Y/48E, 50% for 45X solar components in 2026)
• EticaAG, eticaag.com, the battery cell cost-weighting detail (up to 52% of direct cost) in the safe harbor tables
• Climate Solutions Law, climatesolutionslaw.com, the Section 45X eligible-component worked example illustrating threshold sensitivity at $1,000 total cost