FAR 52.209-10 - Prohibition on Contracting with Inverted Domestic Corporations

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Prescribed in 9.108-5(b)
Effective Date:	1 May 2012
Clause or Provision:	Clause
Provision or Clause Number:	52.209-10 - Prohibition on Contracting with Inverted Domestic Corporations
Principle Type And/Or Purpose of Contract:
Required:
Applicable:	Time and Materials/Labor Hour; Facilities; Architect-Engineering; Dismantling, Demolition or Removal of Improvements; Fixed Price, Supply; Cost Reimbursement, Supply; Communication Services; Leasing of Motor Vehicles; Time & Material/Labor Hour; Cost Reimbursement, Construction; Fixed Price, Construction; Cost Reimbursement, Service; Fixed Price, Service; Cost Reimbursement, R&D; Fixed Price, R&D; Indefinite Delivery; Transportation; Simplified Acquisition Procedures (Excludes Micro-Purchase); Utility Services; Commercial Items
Optional:
Subject:	Inverted Domestic Corporations
ProcurementType:
Contract Threshold:
Prescription Overview:	Prescription (b) Include the clause at 52.209-10, Prohibition on Contracting with Inverted Domestic Corporations, in each solicitation and contract for the acquisition of products or services (including construction).
Clause Overview:	Clause (a) Definitions As used in this clause— “Inverted domestic corporation” means a foreign incorporated entity which is treated as an inverted domestic corporation under 6 U.S.C. 395(b), i.e., a corporation that used to be incorporated in the United States, or used to be a partnership in the United States, but now is incorporated in a foreign country, or is a subsidiary whose parent corporation is incorporated in a foreign country, that meets the criteria specified in 6 U.S.C. 395(b), applied in accordance with the rules and definitions of 6 U.S.C. 395(c). An inverted domestic corporation as herein defined does not meet the definition of an inverted domestic corporation as defined by the Internal Revenue Code at 26 U.S.C. 7874. Title 6 § 395. Prohibition on contracts with corporate expatriates (a) In general The Secretary may not enter into any contract with a foreign incorporated entity which is treated as an inverted domestic corporation under subsection (b) of this section, or any subsidiary of such an entity. (b) Inverted domestic corporation For purposes of this section, a foreign incorporated entity shall be treated as an inverted domestic corporation if, pursuant to a plan (or a series of related transactions)— (1) the entity completes before, on, or after November 25, 2002, the direct or indirect acquisition of substantially all of the properties held directly or indirectly by a domestic corporation or substantially all of the properties constituting a trade or business of a domestic partnership; (2) after the acquisition at least 80 percent of the stock (by vote or value) of the entity is held— (A) in the case of an acquisition with respect to a domestic corporation, by former shareholders of the domestic corporation by reason of holding stock in the domestic corporation; or (B) in the case of an acquisition with respect to a domestic partnership, by former partners of the domestic partnership by reason of holding a capital or profits interest in the domestic partnership; and (3) the expanded affiliated group which after the acquisition includes the entity does not have substantial business activities in the foreign country in which or under the law of which the entity is created or organized when compared to the total business activities of such expanded affiliated group. You can see the entire rule @ Title 6 § 395. Prohibition on contracts with corporate expatriates (Inverted Domestic Corporations) Definitions, cont. “Subsidiary” means an entity in which more than 50 percent of the entity is owned— (1) Directly by a parent corporation; or (2) Through another subsidiary of a parent corporation. (b) If the contractor reorganizes as an inverted domestic corporation or becomes a subsidiary of an inverted domestic corporation at any time during the period of performance of this contract, the Government may be prohibited from paying for Contractor activities performed after the date when it becomes an inverted domestic corporation or subsidiary. The Government may seek any available remedies in the event the Contractor fails to perform in accordance with the terms and conditions of the contract as a result of Government action under this clause. (c) Exceptions to this prohibition are located at 9.108-2.
Important Notes/Requirements:	Christian Doctrine applies as an operation of law under Title 6.
Subcontract Threshold:
Incorporated by Reference:	Yes
Uniform Contract Format:
Editor:	Marshall

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Personal notes.

Christian Doctrine applies as an operation of law under Title 6.