H.R. 7424

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7424 Introduced in House (IH)]

<DOC>

119th CONGRESS
2d Session
H. R. 7424

To prohibit the award of Federal Government contracts to inverted 
domestic corporations, and for other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

February 9, 2026

Ms. DeLauro introduced the following bill; which was referred to the 
Committee on Oversight and Government Reform, and in addition to the 
Committee on Armed Services, for a period to be subsequently determined 
by the Speaker, in each case for consideration of such provisions as 
fall within the jurisdiction of the committee concerned

_______________________________________________________________________

A BILL

To prohibit the award of Federal Government contracts to inverted 
domestic corporations, and for other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``American Business for American 
Companies Act of 2026''.

SEC. 2. PROHIBITION ON AWARDING CONTRACTS TO INVERTED DOMESTIC 
CORPORATIONS.

(a) Civilian Contracts.--
(1) In general.--Chapter 47 of title 41, United States 
Code, is amended by adding at the end the following new 
section:
``Sec. 4715. Prohibition on awarding contracts to inverted domestic 
corporations
``(a) Prohibition.--
``(1) In general.--The head of an executive agency may not 
award a contract for the procurement of property or services 
to--
``(A) any foreign incorporated entity that such 
head has determined is an inverted domestic corporation 
or any subsidiary of such entity; or
``(B) any joint venture if more than 10 percent of 
the joint venture (by vote or value) is held by a 
foreign incorporated entity that such head has 
determined is an inverted domestic corporation or any 
subsidiary of such entity.
``(2) Subcontracts.--
``(A) In general.--The head of an executive agency 
shall include in each contract for the procurement of 
property or services awarded by the executive agency 
with a value in excess of $10,000,000, other than a 
contract for exclusively commercial items, a clause 
that prohibits the prime contractor on such contract 
from--
``(i) awarding a first-tier subcontract 
with a value greater than 10 percent of the 
total value of the prime contract to an entity 
or joint venture described in paragraph (1); or
``(ii) structuring subcontract tiers in a 
manner designed to avoid the limitation in 
paragraph (1) by enabling an entity or joint 
venture described in paragraph (1) to perform 
more than 10 percent of the total value of the 
prime contract as a lower-tier subcontractor.
``(B) Penalties.--The contract clause included in 
contracts pursuant to subparagraph (A) shall provide 
that, in the event that the prime contractor violates 
the contract clause--
``(i) the prime contract may be terminated 
for default; and
``(ii) the matter may be referred to the 
suspension or debarment official for the 
appropriate agency and may be a basis for 
suspension or debarment of the prime 
contractor.
``(b) Inverted Domestic Corporation.--
``(1) In general.--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)--
``(A) the entity completes on or after May 8, 2014, 
the direct or indirect acquisition of--
``(i) substantially all of the properties 
held directly or indirectly by a domestic 
corporation; or
``(ii) substantially all of the assets of, 
or substantially all of the properties 
constituting a trade or business of, a domestic 
partnership; and
``(B) after the acquisition, either--
``(i) more than 50 percent of the stock (by 
vote or value) of the entity is held--
``(I) 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
``(II) 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; or
``(ii) the management and control of the 
expanded affiliated group which includes the 
entity occurs, directly or indirectly, 
primarily within the United States, as 
determined pursuant to regulations prescribed 
by the Secretary of the Treasury, and such 
expanded affiliated group has significant 
domestic business activities.
``(2) Exception for corporations with substantial business 
activities in foreign country of organization.--
``(A) In general.--A foreign incorporated entity 
described in paragraph (1) shall not be treated as an 
inverted domestic corporation if after the acquisition 
the expanded affiliated group which includes the entity 
has 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.
``(B) Substantial business activities.--The 
Secretary of the Treasury (or the Secretary's delegate) 
shall establish regulations for determining whether an 
affiliated group has substantial business activities 
for purposes of subparagraph (A), except that such 
regulations may not treat any group as having 
substantial business activities if such group would not 
be considered to have substantial business activities 
under the regulations prescribed under section 7874 of 
the Internal Revenue Code of 1986, as in effect on 
January 18, 2017.
``(3) Significant domestic business activities.--
``(A) In general.--For purposes of paragraph 
(1)(B)(ii), an expanded affiliated group has 
significant domestic business activities if at least 25 
percent of--
``(i) the employees of the group are based 
in the United States;
``(ii) the employee compensation incurred 
by the group is incurred with respect to 
employees based in the United States;
``(iii) the assets of the group are located 
in the United States; or
``(iv) the income of the group is derived 
in the United States.
``(B) Determination.--Determinations pursuant to 
subparagraph (A) shall be made in the same manner as 
such determinations are made for purposes of 
determining substantial business activities under 
regulations referred to in paragraph (2) as in effect 
on January 18, 2017, but applied by treating all 
references in such regulations to `foreign country' and 
`relevant foreign country' as references to `the United 
States'. The Secretary of the Treasury (or the 
Secretary's delegate) may issue regulations decreasing 
the threshold percent in any of the tests under such 
regulations for determining if business activities 
constitute significant domestic business activities for 
purposes of this paragraph.
``(c) Waiver.--
``(1) In general.--The head of an executive agency may 
waive subsection (a) with respect to any Federal Government 
contract under the authority of such head if the head 
determines that the waiver is--
``(A) required in the interest of national 
security; or
``(B) necessary for the efficient or effective 
administration of Federal or federally funded--
``(i) programs that provide health benefits 
to individuals; or
``(ii) public health programs.
``(2) Report to congress.--The head of an executive agency 
issuing a waiver under paragraph (1) shall, not later than 14 
days after issuing such waiver, submit a written notification 
of the waiver to the relevant authorizing committees of 
Congress and the Committees on Appropriations of the Senate and 
the House of Representatives.
``(d) Applicability.--
``(1) In general.--Except as provided in paragraph (2), 
this section shall not apply to any contract entered into 
before the date of the enactment of this section.
``(2) Task and delivery orders.--This section shall apply 
to any task or delivery order issued after the date of the 
enactment of this section pursuant to a contract entered into 
before, on, or after such date of enactment.
``(3) Scope.--This section applies only to contracts 
subject to regulation under the Federal Acquisition Regulation.
``(e) Definitions and Special Rules.--
``(1) Definitions.--In this section, the terms `expanded 
affiliated group', `foreign incorporated entity', `person', 
`domestic', and `foreign' have the meaning given those terms in 
section 835(c) of the Homeland Security Act of 2002 (6 U.S.C. 
395(c)).
``(2) Special rules.--In applying subsection (b) of this 
section for purposes of subsection (a) of this section, the 
rules described under 835(c)(1) of the Homeland Security Act of 
2002 (6 U.S.C. 395(c)(1)) shall apply.''.
(2) Clerical amendment.--The table of sections at the 
beginning of chapter 47 of title 41, United States Code, is 
amended by inserting after the item relating to section 4714 
the following new item:

``4715. Prohibition on awarding contracts to inverted domestic 
corporations.''.
(b) Defense Contracts.--
(1) In general.--Chapter 363 of title 10, United States 
Code, is amended by adding at the end the following new 
section:
``Sec. 4664. Prohibition on awarding contracts to inverted domestic 
corporations
``(a) Prohibition.--
``(1) In general.--The head of an agency may not award a 
contract for the procurement of property or services to--
``(A) any foreign incorporated entity that such 
head has determined is an inverted domestic corporation 
or any subsidiary of such entity; or
``(B) any joint venture if more than 10 percent of 
the joint venture (by vote or value) is owned by a 
foreign incorporated entity that such head has 
determined is an inverted domestic corporation or any 
subsidiary of such entity.
``(2) Subcontracts.--
``(A) In general.--The head of an executive agency 
shall include in each contract for the procurement of 
property or services awarded by the executive agency 
with a value in excess of $10,000,000, other than a 
contract for exclusively commercial items, a clause 
that prohibits the prime contractor on such contract 
from--
``(i) awarding a first-tier subcontract 
with a value greater than 10 percent of the 
total value of the prime contract to an entity 
or joint venture described in paragraph (1); or
``(ii) structuring subcontract tiers in a 
manner designed to avoid the limitation in 
paragraph (1) by enabling an entity or joint 
venture described in paragraph (1) to perform 
more than 10 percent of the total value of the 
prime contract as a lower-tier subcontractor.
``(B) Penalties.--The contract clause included in 
contracts pursuant to subparagraph (A) shall provide 
that, in the event that the prime contractor violates 
the contract clause--
``(i) the prime contract may be terminated 
for default; and
``(ii) the matter may be referred to the 
suspension or debarment official for the 
appropriate agency and may be a basis for 
suspension or debarment of the prime 
contractor.
``(b) Inverted Domestic Corporation.--
``(1) In general.--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)--
``(A) the entity completes on or after May 8, 2014, 
the direct or indirect acquisition of--
``(i) substantially all of the properties 
held directly or indirectly by a domestic 
corporation; or
``(ii) substantially all of the assets of, 
or substantially all of the properties 
constituting a trade or business of, a domestic 
partnership; and
``(B) after the acquisition, either--
``(i) more than 50 percent of the stock (by 
vote or value) of the entity is held--
``(I) 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
``(II) 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; or
``(ii) the management and control of the 
expanded affiliated group which includes the 
entity occurs, directly or indirectly, 
primarily within the United States, as 
determined pursuant to regulations prescribed 
by the Secretary of the Treasury, and such 
expanded affiliated group has significant 
domestic business activities.
``(2) Exception for corporations with substantial business 
activities in foreign country of organization.--
``(A) In general.--A foreign incorporated entity 
described in paragraph (1) shall not be treated as an 
inverted domestic corporation if after the acquisition 
the expanded affiliated group which includes the entity 
has 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.
``(B) Substantial business activities.--The 
Secretary of the Treasury (or the Secretary's delegate) 
shall establish regulations for determining whether an 
affiliated group has substantial business activities 
for purposes of subparagraph (A), except that such 
regulations may not treat any group as having 
substantial business activities if such group would not 
be considered to have substantial business activities 
under the regulations prescribed under section 7874 of 
the Internal Revenue Code of 1986, as in effect on 
January 18, 2017.
``(3) Significant domestic business activities.--
``(A) In general.--For purposes of paragraph 
(1)(B)(ii), an expanded affiliated group has 
significant domestic business activities if at least 25 
percent of--
``(i) the employees of the group are based 
in the United States;
``(ii) the employee compensation incurred 
by the group is incurred with respect to 
employees based in the United States;
``(iii) the assets of the group are located 
in the United States; or
``(iv) the income of the group is derived 
in the United States.
``(B) Determination.--Determinations pursuant to 
subparagraph (A) shall be made in the same manner as 
such determinations are made for purposes of 
determining substantial business activities under 
regulations referred to in paragraph (2) as in effect 
on January 18, 2017, but applied by treating all 
references in such regulations to `foreign country' and 
`relevant foreign country' as references to `the United 
States'. The Secretary of the Treasury (or the 
Secretary's delegate) may issue regulations decreasing 
the threshold percent in any of the tests under such 
regulations for determining if business activities 
constitute significant domestic business activities for 
purposes of this paragraph.
``(c) Waiver.--
``(1) In general.--The head of an agency may waive 
subsection (a) with respect to any Federal Government contract 
under the authority of such head if the head determines that 
the waiver is required in the interest of national security or 
is necessary for the efficient or effective administration of 
Federal or federally funded programs that provide health 
benefits to individuals.
``(2) Report to congress.--The head of an agency issuing a 
waiver under paragraph (1) shall, not later than 14 days after 
issuing such waiver, submit a written notification of the 
waiver to the congressional defense committees.
``(d) Applicability.--
``(1) In general.--Except as provided in paragraph (2), 
this section shall not apply to any contract entered into 
before the date of the enactment of this section.
``(2) Task and delivery orders.--This section shall apply 
to any task or delivery order issued after the date of the 
enactment of this section pursuant to a contract entered into 
before, on, or after such date of enactment.
``(3) Scope.--This section applies only to contracts 
subject to regulation under the Federal Acquisition Regulation 
and the Defense Supplement to the Federal Acquisition 
Regulation.
``(e) Definitions and Special Rules.--
``(1) Definitions.--In this section, the terms `expanded 
affiliated group', `foreign incorporated entity', `person', 
`domestic', and `foreign' have the meaning given those terms in 
section 835(c) of the Homeland Security Act of 2002 (6 U.S.C. 
395(c)).
``(2) Special rules.--In applying subsection (b) of this 
section for purposes of subsection (a) of this section, the 
rules described under 835(c)(1) of the Homeland Security Act of 
2002 (6 U.S.C. 395(c)(1)) shall apply.''.
(2) Clerical amendment.--The table of sections at the 
beginning of chapter 363 of title 10, United States Code, is 
amended by inserting after the item relating to section 4663 
the following new item:

``4664. Prohibition on awarding contracts to inverted domestic 
corporations.''.
(c) Regulations Regarding Management and Control.--
(1) In general.--The Secretary of the Treasury (or the 
Secretary's delegate) shall, for purposes of section 
4715(b)(1)(B)(ii) of title 41, United States Code, and section 
4664(b)(1)(B)(ii) of title 10, United States Code, as added by 
subsections (a) and (b), respectively, prescribe regulations 
for purposes of determining cases in which the management and 
control of an expanded affiliated group is to be treated as 
occurring, directly or indirectly, primarily within the United 
States. The regulations prescribed under the preceding sentence 
shall apply to periods after May 8, 2014.
(2) Executive officers and senior management.--The 
regulations prescribed under paragraph (1) shall provide that 
the management and control of an expanded affiliated group 
shall be treated as occurring, directly or indirectly, 
primarily within the United States if substantially all of the 
executive officers and senior management of the expanded 
affiliated group who exercise day-to-day responsibility for 
making decisions involving strategic, financial, and 
operational policies of the expanded affiliated group are based 
or primarily located within the United States. Individuals who 
in fact exercise such day-to-day responsibilities shall be 
treated as executive officers and senior management regardless 
of their title.
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