A prohibited foreign entity is defined and tested at year end
What the document says“The term `prohibited foreign entity' means a specified foreign entity or a foreign-influenced entity.”
The section adds a new paragraph (51) to section 7701(a) of the Internal Revenue Code of 1986 defining a prohibited foreign entity as a specified foreign entity or a foreign-influenced entity, tested as of the last day of the taxable year, except that for the first taxable year after enactment certain specified foreign entities are tested as of the first day. A specified foreign entity includes a foreign entity of concern under named subparagraphs of section 9901(8) of the National Defense Authorization Act for Fiscal Year 2021, an entity identified as a Chinese military company operating in the United States, and others the paragraph lists.
What the document actually says“The term `prohibited foreign entity' means a specified foreign entity or a foreign-influenced entity.”
The term covers two kinds of body. One is a named foreign body. The other is a body under foreign sway.
The test is run on the last day of the tax year. In the first year some are tested on the first day. The named bodies come from a defense law.
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