The IRS has quietly escalated its enforcement on green energy credits for the 2026 filing season. Under new guidance released this week (Notice 2026-15), the agency is strictly enforcing “Foreign Entity of Concern” (FEOC) regulations that could invalidate thousands of tax credits claimed in 2025.
For taxpayers who received an upfront $7,500 discount at the dealership, the stakes are immediate. If your vehicle’s battery supply chain fails to meet the new 2025 standards, or if you purchased after the OBBBA sunset date, the IRS will demand that money back.
This is not a future proposal. It is a recapture event happening on tax returns filed right now.
The EV Trap: Critical Minerals & The Sept 30 Cutoff
Two major regulatory cliffs hit the Section 30D (New Clean Vehicle) credit in 2025.
1. The “Critical Minerals” Ban
While the ban on foreign battery components began in 2024, the 2025 tax year introduced a stricter prohibition: Critical Minerals. If any applicable critical minerals (lithium, cobalt, nickel) in your battery were extracted, processed, or recycled by a Foreign Entity of Concern (China, Russia, Iran, North Korea), the vehicle is completely ineligible.
2. The OBBBA Sunset Date
Crucially, the One Big Beautiful Bill Act (OBBBA) terminated the federal EV credit for most vehicles purchased after September 30, 2025.
- The Trap: Many buyers who purchased cars in October, November, or December 2025 may have received a dealer discount they were no longer legally entitled to.
- The Clawback: If you took the credit after the expiration date, the IRS views that $7,500 as an invalid “advance payment.” You are legally responsible for repaying the full amount to the Treasury.
Home Energy Credits: The “PIN” Trap
Contrary to widespread rumors, the Energy Efficient Home Improvement Credit (25C) for heat pumps and windows does not have a foreign sourcing ban. You can buy imported equipment.
The real danger for 2025 claims is the new Qualified Manufacturer PIN requirement.
For the first time, you cannot simply list “Heat Pump” and the cost on Form 5695. You must report a specific Product Identification Number (PIN) assigned by the manufacturer.
- The Audit Trigger: If you installed a “budget” system that lacks an IRS-registered PIN, your claim will be rejected automatically.
- Compliance Check: Verify that your contractor provided the PIN on the invoice. Without it, the 30% credit (up to $3,200) disappears.
Are You at Risk of Recapture?
The IRS is cross-referencing VINs and income levels in real-time. You face a high risk of a “clawback” bill if you fall into these categories:
- Income Mismatch: You took the $7,500 dealer discount, but your 2025 Modified Adjusted Gross Income (MAGI) exceeded $150,000 (Single) or $300,000 (Joint).
- Invalid VIN: You bought a vehicle that was later removed from the eligibility list due to FEOC sourcing violations.
- Late Purchase: You purchased your vehicle after September 30, 2025, missing the OBBBA cutoff.
2026 Compliance Data
Verify your credit eligibility against the finalized 2025 standards.
| Credit Type | Max Amount | Critical 2025 Requirement | Audit Risk |
| New Clean Vehicle (30D) | $7,500 | Purchased before Sept 30, 2025 | Critical (Recapture) |
| Used EV Credit (25E) | $4,000 | Sale Price Cap $25,000 | Moderate |
| Home Energy (25C) | $3,200 | Manufacturer PIN Required | High (Auto-Rejection) |
Strategic Action
If you receive a CP12 Notice adjusting your refund, do not ignore it. This indicates the IRS computer system flagged a PIN mismatch or income limit breach.
Review your Form 8936 (for EVs) and Form 5695 (for home energy) immediately. If you owe recapture, it will appear as an additional tax liability on Line 16 of your Form 1040. Ignoring this debt will trigger penalties and interest starting April 15.
Disclaimer: This article covers IRS guidance for the 2025 tax year filed in early 2026. Always verify details at IRS.gov or consult a certified tax professional.
Official Source: IRS Clean Vehicle Credits & FEOC Guidance
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