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 long-standing debate over whether and to what degree the federal procurement process should be used to promote socioeconomic goals that one court described as "only indirectly related to conventional procurement considerations" (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 , Â§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 114 th Congress have proposed legislation to reduce or remove opportunities for inverted domestic corporations to receive government contracts. Similar legislation was introduced in the 113 th Congress. There have also been calls by Members of both the 113 th and 114 th Congresses for the executive to take action to further restrict agencies' ability to contract with inverted domestic corporations. 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 the prohibitions upon contracting with inverted domestic corporations and other provisions of law that restrict dealings with "foreign" contractors. Many questions pertain to the current restrictions on contracting with inverted domestic corporations, including (1) the nature of the restrictions, (2) what constitutes an inverted domestic corporation for purposes of the restrictions, and (3) whether the restrictions can be waived. This section provides answers to these and other questions. Several different provisions of federal law bar government agencies from awarding "contracts" to inverted domestic corporations or their subsidiaries. (See " To what types of contracts does the proposed legislation apply? " for further discussion of what is meant by contract here.) However, each provision in current law applies to different federal agencies and/or funds. The earliest provision, and the only one that is permanent law, applies to the Department of Homeland Security (DHS). As initially enacted, Section 835 of the Homeland Security Act of 2002 ( P.L. 107-296 ) generally barred DHS from contracting with any "foreign incorporated entity" that met the definition of inverted domestic corporation given by the act. (See " Can the restrictions be waived? " for a discussion of waivers of this prohibition.) Subsequently, Section 835 was amended ( P.L. 108-334 , Â§523) to bar contracting with subsidiaries of inverted domestic corporations, as well as the corporations themselves. Subsequent measures have generally been modeled on the Homeland Security Act, although their restrictions apply only to specific funds. Initially, the measures reached funds "appropriated or otherwise made available" to specified agencies under particular acts, such as the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 ( P.L. 109-115 , Â§724). Subsequent measures, though, were "consolidated" or "omnibus" ones that generally applied government-wide, as was the case with Section 738 of the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ). These statutory restrictions are implemented through Subpart 9.1 of the Federal Acquisition Regulation (FAR) and agency FAR supplements. However, the FAR does not impose any restrictions on contracting with inverted domestic corporations that do not have a basis in statute. For purposes of these restrictions, a foreign corporation is an inverted domestic corporation if it acquires "substantially all" of the properties held by a U.S. corporation and, after the inversion, at least 80% of its stock is owned, by vote or value, by former shareholders of the U.S. corporation by reason of their holding stock in the U.S. corporation (in other words, there is not a significant change in ownership post-inversion). However, an entity is not treated as an inverted domestic corporation if, post-inversion, the foreign corporation and its expanded affiliated group (the companies connected to it by at least 50% ownership) have "substantial business activities" in its home country when compared to the group's total business activities. There are analogous rules for partnerships. This definition of "inverted domestic corporation" is based on Section 7874 of the Internal Revenue Code (IRC), which treats corporations meeting these criteria as domestic corporations for U.S. tax purposes, thus significantly limiting the tax benefits of the inversion. However, there are differences between the contracting restrictions and the IRC provision. For example, the IRC provision applies only to inversions completed after March 3, 2003, while the contracting restrictions contain no such limitation. Another key difference is that, while both have the 80% ownership threshold, the IRC provision also captures situations where the former shareholders of the U.S. corporation own between 60% and 80% of the foreign corporation after the inversion (in these cases, the entity is treated as foreign but limited in its ability to claim credits and deductions). Furthermore, the Internal Revenue Service (IRS) has promulgated regulations defining and clarifying certain terms and concepts for purposes of IRC Section 7874, which are not applicable to the contracting prohibitions. For example, IRS regulations define "substantial business activities" to mean that at least 25% of the expanded affiliate group's employees, employee compensation, assets, and income must be in or derived from the foreign country. All the restrictions on contracting with inverted domestic corporations have provided for waivers, although the circumstances in which such waivers are permitted have varied in different enactments. Initially, Section 835 of the Homeland Security Act of 2002 ( P.L. 107-296 ) provided that the prohibition "shall" be waived if the Secretary of Homeland Security determines that a waiver is required "in the interest of homeland security, or to prevent the loss of any jobs in the United States or prevent the Government from incurring any additional costs that it would otherwise not incur." However, Congress subsequently amended the waiver provisions of the Homeland Security Act in 2003-2004, first by striking the provisions about job loss and additional costs ( P.L. 108-7 , Â§101(2)) and later by changing "homeland security" to "national security" ( P.L. 108-334 , Â§523). The Homeland Security Act's waiver provisions, as amended, generally served as a model for later provisions, although Congress in 2005 ( P.L. 109-115 , Â§724(b)(2)) added a requirement that agencies waiving the prohibition on contracting with inverted domestic corporations on national security grounds report such waivers to Congress. Subsequent legislation has incorporated this requirement ( P.L. 110-161 , Â§745(b)(2); P.L. 111-8 , Â§743(b)(2); P.L. 111-117 , Â§740(b)(2); P.L. 112-74 , Â§738(b)(2); P.L. 113-76 , Â§733(b)(2)). The FAR provisions implementing the restrictions on contracting with inverted domestic corporations generally reflect the statutory provisions previously discussed. However, while the various statutory provisions state that agencies "shall" waive the prohibition when a waiver is determined to be "required in the interest of national security," the regulations codified in FAR Â§9.108-4 provide that the prohibition "may" be waived in such circumstances. The enactments to date do not directly address whether the prohibitions upon contracting with inverted domestic corporations extend to contracts for commercial items , or items (other than real property) "of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes." However, the executive branch has promulgated regulationsâcodified in FAR Â§52.212-3(n) (Offeror Representations and CertificationsâCommercial Items)âthat apply the prohibitions to such contracts. The Federal Acquisition Streamlining Act (FASA) of 1994 ( P.L. 103-355 ) established a general "preference" for the acquisition of commercial items, and provided that contracts for commercial items are to be exempted from certain generally applicable procurement laws listed in Subpart 12.5 of the FAR. Under FASA, as amended, the Federal Acquisition Regulatory Council (Council) has arguably broad discretion as to which laws to list in Subpart 12.5. However, the council has, to date, opted not to include the prohibitions on contracting with inverted domestic corporations in Subpart 12.5 on the grounds that it is not in the best interest of the federal government to exempt contracts for commercial items from these prohibitions.