Contracting with Inverted Domestic Corporations: Answers to Frequently asked Questions. November 7, 2014.

摘要

Recent reports that certain entities continued to receive federal government contracts after reincorporating overseas have prompted questions about current and proposed restrictions on contracting with “inverted domestic corporations.” These questions are shaped, in part, by the broader debate over whether such corporations are to be seen as “deserters,” who change their corporate citizenship to avoid paying U.S. taxes, or as evidencing systemic problems in the U.S. tax code. However, they also reflect a long-standing debate over whether the federal procurement process should be used to promote particular socioeconomic goals which some assert are tangential to the primary purpose of the procurement process (i.e., acquiring the supplies and services that best meet the government’s needs at the lowest price). Congress has sought to discourage corporate inversions by barring certain contracts with inverted domestic corporations ever since it enacted the Homeland Security Act of 2002 (P.L. 107-296, §835). As amended, this act prohibits the Department of Homeland Security from awarding a contract to an inverted domestic corporation, or a subsidiary thereof, unless the Secretary of Homeland Security determines that a waiver is necessary in the interest of national security. The act also establishes its own definition of inverted domestic corporation, which is different from that in the Internal Revenue Code. Subsequent legislation imposed similar prohibitions upon other agencies, although only as to funds appropriated or otherwise made available under specific acts of Congress. However, some commentators have argued that inverted domestic corporations have continued to receive federal contracts because of “loopholes” or “gaps” in these measures. Thus, some Members of the 113th Congress have proposed legislation—or requested executive action—to reduce or remove opportunities for inverted domestic corporations to receive government contracts. This report provides the answers to 14 frequently asked questions regarding the current restrictions on contracting with inverted domestic corporations, proposed amendments thereto, and the relationship between prohibitions upon contracting with inverted domestic corporations and other provisions of law that restrict dealings with “foreign” contractors.