SECTION 5. CERTAIN PFE

RESTRICTIONS

This section describes rules that the Treasury Department and the IRS expect to include in the forthcoming proposed regulations for determining the application of certain PFE restrictions.

.01 Application of Foreign-Influenced Entity Rules .

Effective control is determined independently under each provision of § 7701(a)(51)(D)(ii)(III)(aa)(AA) through (GG). A specified foreign entity (or an

entity related to such specified foreign entity) is determined to exercise effective control for purposes of § 7701(a) (51)(D)(i)(II) as a result of any contract, agreement, or other arrangement under § 7701(a)(51)(D)(ii)(III)(aa) that fulfills any one of § 7701(a)(51)(D)(ii)(III)(aa) (AA) through (GG). For example, under § 7701(a)(51)(D)(ii)(III)(aa)(GG), if a taxpayer makes a payment to a specified foreign entity under a licensing agreement for the provision of intellectual property with respect to a qualified facility, and such agreement was entered into or modified on or after July 4, 2025, the specified foreign entity would be exercising effective control over the taxpayer’s qualified facility and the taxpayer would be considered a foreign-influenced entity.