9.108
Prohibition on contracting with inverted domestic corporations
Federal contracts cannot be awarded to inverted domestic corporations, and offerors must certify their status to ensure compliance with this prohibition.
Overview
FAR 9.108 establishes a government-wide prohibition on contracting with inverted domestic corporations, which are companies that have moved their legal domicile outside the United States to reduce tax liability but retain substantial business operations in the U.S. This section defines key terms, outlines the prohibition, requires offerors to represent their status, provides for limited waivers, and prescribes the necessary solicitation provision and contract clause. The regulation aims to prevent federal funds from supporting companies that have inverted for tax avoidance purposes.
Key Rules
- Definitions (9.108-1)
- Clarifies what constitutes an inverted domestic corporation and related terms.
- Prohibition (9.108-2)
- Federal agencies are prohibited from awarding contracts to inverted domestic corporations or their subsidiaries, except under specific circumstances.
- Representation by the Offeror (9.108-3)
- Offerors must certify whether they are or are not an inverted domestic corporation as part of their proposal.
- Waiver (9.108-4)
- The prohibition may be waived by the head of an agency in the interest of national security, subject to notification and reporting requirements.
- Solicitation Provision and Contract Clause (9.108-5)
- Requires inclusion of specific FAR provisions and clauses in solicitations and contracts to ensure compliance.
Responsibilities
- Contracting Officers: Must ensure compliance by including required provisions/clauses and verifying offeror representations.
- Contractors: Must accurately represent their corporate status and comply with the prohibition.
- Agencies: May grant waivers only under strict conditions and must report such actions.
Practical Implications
- This rule prevents federal contracts from being awarded to companies that have inverted for tax reasons, promoting tax fairness and compliance. Contractors must be diligent in their representations, and contracting officers must ensure all required documentation is in place. Failure to comply can result in ineligibility for federal contracts and potential legal consequences.