In October 2004, the US Congress enacted the American Jobs Creation Act of 2004, which added Sec. 7874 to the US Internal Revenue Code. Sec. 7874 was the culmination of a two-year effort by Congress to legislate against corporate inversions. Tax advisers were unsure what Sec. 7874 covers and how it affects the taxpayers who fall within its scope. The US Internal Revenue Service and Treasury Department have issued regulations aimed at carving out transactions that were not intended to be affected by Sec. 7874 as well as additional regulations dealing with particular avoidance techniques and interpretive issues. This article discusses the statute and the regulations.