Why projection-based WF-in-DFT cannot be exact, even with the exact exchange-correlation functional. Formal and...

We establish theoretical foundations for embedding a correlated wavefunction in an environment formed by Kohn-Sham orbitals. We show that introducing an approximation that equates two, in principle, distinct kinetic-energy functionals yields an embedding functional identical to the projection-based wavefunction-in-density functional theory (DFT) formulation of Miller and co-workers. We demonstrate that this functional is inherently nonvariational: its minimum is not guaranteed to coincide with the exact ground-state energy and remains bounded from above by it. Building on this formal framework, we analyze the dominant sources of error in projection-based density matrix renormalization group-in-DFT embedding with approximate exchange-correlation (xc) functionals. Using molecules with dissociating covalent bonds as a diagnostic example, we demonstrate that the primary source of error is the nonadditive exchange-correlation energy describing the nonclassical coupling between the active subsystem and its environment. Eliminating the fractional-spin error by employing a pair-density xc functional (pair-density functional theory) instead of a semilocal generalized gradient approximation (GGA) does not remedy this deficiency, because the inaccuracy stems from self-interaction effects at the subsystem-environment interface.