6 USC 395 - Prohibition on contracts with corporate expatriates

U.S Code last checked for updates: May 16, 2024

§ 395.

Prohibition on contracts with corporate expatriates

(a)

In general

(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.

(c)

Definitions and special rules

(1)

Rules for application of subsection (b)

In applying subsection (b) for purposes of subsection (a), the following rules shall apply:

(A)

Certain stock disregarded

There shall not be taken into account in determining ownership for purposes of subsection (b)(2)—

(i)

stock held by members of the expanded affiliated group which includes the foreign incorporated entity; or

(ii)

stock of such entity which is sold in a public offering related to the acquisition described in subsection (b)(1).

(B)

Plan deemed in certain cases

(C)

Certain transfers disregarded

(D)

Special rule for related partnerships

(E)

Treatment of certain rights

The Secretary shall prescribe such regulations as may be necessary to—

(i)

treat warrants, options, contracts to acquire stock, convertible debt instruments, and other similar interests as stock; and

(ii)

treat stock as not stock.

(2)

Expanded affiliated group

(3)

Foreign incorporated entity

(4)

Other definitions

(d)

Waivers

(Pub. L. 107–296, title VIII, § 835, Nov. 25, 2002, 116 Stat. 2227; Pub. L. 108–7, div. L, § 101(2), Feb. 20, 2003, 117 Stat. 528; Pub. L. 108–334, title V, § 523, Oct. 18, 2004, 118 Stat. 1320.)

cite as: 6 USC 395