6 U.S.C. § 395 — Prohibition on contracts with corporate expatriates

(a) In general: The Secretary cannot enter into any contract with a foreign incorporated entity that is treated as an "inverted domestic corporation" under (b), or with any subsidiary of such an entity. (b) Inverted domestic corporation: A foreign incorporated entity counts as an "inverted domestic corporation" if, as part of a plan or a series of related deals: the entity acquires, directly or indirectly, before, on, or after November 25, 2002, substantially all of the property held by a domestic corporation, or substantially all of the property of a domestic partnership's trade or business; after that acquisition, at least 80 percent of the entity's stock, by vote or value, ends up held by the acquired corporation's former shareholders (because they used to hold stock in it) or the acquired partnership's former partners (because they used to hold a capital or profits interest in it); and the "expanded affiliated group" that includes the entity after the acquisition does not have substantial business activity in the foreign country where the entity is created or organized, compared to that group's total business activity. (c) Definitions and special rules: When applying (b), certain stock is not counted when figuring out ownership under (b) — specifically, stock held by other members of the entity's expanded affiliated group, and stock of the entity sold in a public offering connected to the acquisition. If a foreign entity acquires substantially all the property of a domestic corporation or partnership during the 4-year period that starts 2 years before the 80 percent ownership test in (b) is met, that counts as being done "pursuant to a plan." Transfers of property or liabilities, including by contribution or distribution, are ignored if they are part of a plan whose main purpose is to get around this section. For applying (b) to a domestic partnership acquisition, all domestic partnerships under common control, as defined in section 482 of title 26, are treated as a single partnership, except as regulations may provide. The Secretary must write regulations to treat warrants, options, contracts to acquire stock, convertible debt, and similar interests as if they were stock — and, in some cases, to treat stock as if it were not stock. "Expanded affiliated group" means an affiliated group as defined in section 1504(a) of title 26, ignoring section 1504(b), except that wherever section 1504 says "at least 80 percent," this section instead uses "more than 50 percent." "Foreign incorporated entity" means any entity that is — or that, without subsection (b), would be — treated as a foreign corporation for purposes of title 26. The terms "person," "domestic," and "foreign" carry the meanings given in section 7701(a), paragraphs (1), (4), and (5), of title 26. (d) Waivers: The Secretary must waive the ban in (a) for a specific contract if the Secretary decides the waiver is needed for national security.