This update describes considerations arising under the OBBBA related to debt issuances to specified foreign entities that may result in the issuer’s becoming ineligible for certain U.S. federal income tax credits.~~The One Big Beautiful Bill Act (the OBBBA ),[1] which was signed into law on July 4, 2025, made significant changes to U.S. federal income tax benefits available to certain clean energy projects.[2]~~This update describes considerations arising under the OBBBA relating to debt issuances to “specified foreign entities” ( SFEs ) that may result in the issuer’s becoming ineligible for certain clean energy-related tax credits.[3]~~Executive Summary~~Issuers may become ineligible to claim tax credits.  Under the OBBBA, a borrower that has issued at least 15 percent[4] of its debt to certain foreign entities or individuals (most notably, Chinese or Chinese-controlled entities) is treated as a “foreign-influenced entity,” making the issuer ineligible to claim certain clean energy-related tax credits.[5]~~Affected credits and effective dates.  The rule denies the following credits to affected taxpayers:~~Additional Detail~~Potential Adverse Impact on Issuer~~The OBBBA introduced a rule that prevents an issuer/borrower[6] from claiming these tax credits if 15 percent or more of the issuer’s debt has been issued to one or more SFEs.  Importantly, for publicly traded debt, the test is based on the identity of the original holders.[7]~~Definition of Specified Foreign Entity~~Among other entities, an SFE includes:~~No Applicable Guidance~~The IRS and Treasury have not issued guidance regarding these rules.  In the absence of guidance, the market approach for managing the rules is still developing, with ongoing negotiation between issuers and underwriters.  Issuers subject to the rules should, at a minimum, require underwriters to:~~In addition, the issuer should document the steps that were taken to address the potential application of these rules and keep that documentation in its files.~~It is hoped that the IRS and Treasury will issue guidance (i) listing the entities and persons that are SFEs for these purposes, (ii) clarifying which debt issuances are to be included in the numerator and denominator for purposes of the 15 percent determination, and (iii) specifying whether the test is applied on an entity-by-entity or on a group-wide basis (and, if on a group-wide basis, how to determine the composition of the group).~~[1] The technical name for the OBBBA is “an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.”~~[2] The text of the OBBBA can be found here.  Our prior alert on the tax highlights of the OBBBA can be found here.  Our prior alert on the clean energy-related tax provisions of the OBBBA can be found here.~~[3] Unless indicated otherwise, all “section” references are to the Internal Revenue Code of 1986, as amended (the “ Code ”).  All references to “Treasury” are to the U.S. Department of the Treasury, and all references to “IRS” are to the U.S. Internal Revenue Service.~~[4] Section 7701(a)(51)(D)(i)(I)(dd), which is the general rule, describes this threshold as “at least 15 percent,” although we note that section 7701(a)(51)(E)(iii)(II), which is a specialized rule for entities that have publicly-traded securities or certain subsidiaries of those entities, describes this threshold as a percent “in excess of 15 percent.”~~[5] The determination as to whether an entity is a foreign-influenced entity is made as of the last day of the applicable taxable year.~~[6] It is unclear whether these rules apply on an entity-by-entity basis or on a group-wide basis (and, if the latter, how to determine the relevant group).  For example, it is unclear whether debt issued by a parent corporation could cause one or more of its corporate subsidiaries to become ineligible to claim these credits.~~[7] Section 7701(a)(51)(e)(iii)(II).  It is unclear how the 15 percent test is calculated.~~The following Gibson Dunn lawyers prepared this update: Josiah Bethards, Michael Q. Cannon, Matt Donnelly, Jennifer L. Sabin, and Eric B. Sloan.~~Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding this proposed legislation. To learn more about these issues or discuss how they might impact your business, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any member of the firm’s Tax and Tax Controversy and Litigation practice groups:~~Tax: Dora Arash – Los Angeles (+1 213.229.7134, darash@gibsondunn.com) Sandy Bhogal – Co-Chair, London (+44 20 7071 4266, sbhogal@gibsondunn.com) Michael Q. Cannon – Dallas (+1 214.698.3232, mcannon@gibsondunn.com) Jérôme Delaurière – Paris (+33 (0) 1 56 43 13 00, jdelauriere@gibsondunn.com) Anne Devereaux* – Los Angeles (+1 213.229.7616, adevereaux@gibsondunn.com) Matt Donnelly – New York/Washington, D.C. (+1 212.351.5303, mjdonnelly@gibsondunn.com) Benjamin Fryer – London (+44 20 7071 4232, bfryer@gibsondunn.com) Evan M. Gusler – New York (+1 212.351.2445, egusler@gibsondunn.com) James Jennings – New York (+1 212.351.3967, jjennings@gibsondunn.com) Kathryn A. Kelly – New York (+1 212.351.3876, kkelly@gibsondunn.com) Brian W. Kniesly – New York (+1 212.351.2379, bkniesly@gibsondunn.com) Pamela Lawrence Endreny – Co-Chair, New York (+1 212.351.2474, pendreny@gibsondunn.com) Kate Long – New York (+1 212.351.3813, klong@gibsondunn.com) Gregory V. Nelson – Houston (+1 346.718.6750, gnelson@gibsondunn.com) Benjamin Rapp – Munich/Frankfurt (+49 89 189 33-290, brapp@gibsondunn.com) Jennifer Sabin – New York (+1 212.351.5208, jsabin@gibsondunn.com) Eric B. Sloan – Co-Chair, New York/Washington, D.C. (+1 212.351.2340, esloan@gibsondunn.com) Edward S. Wei – New York (+1 212.351.3925, ewei@gibsondunn.com) Lorna Wilson – Los Angeles (+1 213.229.7547, lwilson@gibsondunn.com) Daniel A. Zygielbaum – Washington, D.C. (+1 202.887.3768, dzygielbaum@gibsondunn.com)~~Tax Controversy and Litigation: Saul Mezei – Washington, D.C. (+1 202.955.8693, smezei@gibsondunn.com) Sanford W. Stark – Chair, Washington, D.C. (+1 202.887.3650, sstark@gibsondunn.com) C. Terrell Ussing – Washington, D.C. (+1 202.887.3612, tussing@gibsondunn.com)~~*Anne Devereaux, of counsel in the firm’s Los Angeles office, is admitted to practice in Washington, D.C.~~© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.~~Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials.  The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel.  Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.~~Download PDF~~