FAR 9.108-2—Prohibition.
Plain-English Summary
FAR 9.108-2 implements the governmentwide prohibition on using appropriated or otherwise available funds to award or continue certain contracts with an inverted domestic corporation or a subsidiary of one. This section explains the core ban, identifies the statutory source and its extension through successor appropriations provisions and continuing resolutions, and states the main exception for contracts entered into before the enactment date of the applicable appropriations act and for task orders issued under those preexisting contracts. It also addresses what contracting officers should do if a contractor becomes an inverted domestic corporation, or a subsidiary of one, during contract performance, namely consult legal counsel to ensure the prohibition is applied correctly. In practice, this section is about award eligibility and continued performance risk: it helps agencies avoid obligating funds in violation of appropriations restrictions and gives contracting officers a process cue when a contractor’s corporate status changes after award. Contractors should understand that corporate restructuring can affect eligibility, and agencies must monitor for changes that could trigger the prohibition or the need to consider the waiver provision in FAR 9.108-4.
Key Rules
Governmentwide funding ban
Appropriated or otherwise available funds may not be used for contracts with an inverted domestic corporation or a subsidiary of such a corporation, unless an exception or waiver applies. The prohibition is governmentwide and is tied to the appropriations restriction, not just to a single agency program.
Applies to subsidiaries too
The restriction reaches not only the inverted domestic corporation itself but also any subsidiary of that corporation. Agencies must therefore look beyond the immediate contractor name and consider corporate relationships.
Preexisting contracts are excepted
The prohibition does not apply to Federal Government contracts entered into before the enactment date of the applicable appropriations act, and it also does not apply to task orders issued under those preexisting contracts. This preserves performance under certain existing contractual arrangements.
Successor provisions continue the rule
The statutory prohibition is not limited to the original 2008 enactment; it also applies through successor provisions in later appropriations acts and as extended by continuing resolutions. Contracting personnel must check the current appropriations language, not just the original statute.
Status changes during performance require review
If a contractor becomes an inverted domestic corporation, or a subsidiary of one, during contract performance, the contracting officer should consult legal counsel. This is a safeguard to determine how the prohibition applies to the ongoing contract and whether any corrective action is needed.
Waiver is separate
The prohibition is subject to the waiver authority in FAR 9.108-4. If an agency believes an exception or waiver may be appropriate, it must follow the waiver procedures rather than ignore the restriction.
Responsibilities
Contracting Officer
Verify whether the prospective contractor is an inverted domestic corporation or a subsidiary before award, apply the prohibition when funds would otherwise be used in violation of the rule, recognize the preexisting-contract exception, and consult legal counsel if the contractor’s status changes during performance.
Agency
Ensure procurement actions comply with the appropriations restriction governmentwide, maintain awareness of successor statutory provisions and continuing resolutions, and support contracting officers in identifying and addressing potential violations or waiver requests.
Contractor
Avoid corporate structures or transactions that would make the firm an inverted domestic corporation or a subsidiary of one if it seeks federal awards, and notify the government if a corporate change during performance could affect eligibility or contract compliance.
Legal Counsel
Advise the contracting officer on whether the prohibition applies in a particular situation, especially when a contractor’s status changes during performance or when the agency is considering whether an exception or waiver may be available.
Practical Implications
This section is a funding-eligibility screen: if the prohibition applies, the government cannot use covered funds for the contract unless an exception or waiver fits.
A common pitfall is assuming the rule only matters at award; corporate restructuring after award can create compliance issues that require immediate review.
Another frequent mistake is overlooking subsidiaries or affiliates and focusing only on the prime contractor’s legal name.
Contracting officers should check the current appropriations language and any continuing resolution extensions, because the operative restriction may come from successor provisions rather than the original 2008 act.
When in doubt, especially if a contractor becomes an inverted domestic corporation during performance, the safe practice is to involve legal counsel before taking action.
Official Regulatory Text
(a) Section 745 of Division D of the Consolidated Appropriations Act, 2008 (Pub. L. 110-161) and its successor provisions in subsequent appropriations acts (and as extended in continuing resolutions) prohibit, on a Governmentwide basis, the use of appropriated (or otherwise made available) funds for contracts with either an inverted domestic corporation, or a subsidiary of such a corporation, except as provided in paragraph (b) of this section and in 9.108-4 Waiver. (b) (1) Section 745 and its successor provisions include the following exception: This section shall not apply to any Federal Government contract entered into before the date of the enactment of this Act, or to any task order issued pursuant to such contract. (2) To ensure appropriate application of the prohibition and this exception, contracting officers should consult with legal counsel if, during the performance of a contract, a contractor becomes an inverted domestic corporation or a subsidiary of one.