[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4547 Introduced in Senate (IS)]
<DOC>
118th CONGRESS
2d Session
S. 4547
To prohibit the award of Federal Government contracts to inverted
domestic corporations, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 13, 2024
Mr. Durbin (for himself, Mr. Reed, Ms. Duckworth, Mr. Sanders, and Mr.
Whitehouse) introduced the following bill; which was read twice and
referred to the Committee on Homeland Security and Governmental Affairs
_______________________________________________________________________
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 2024''.
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. 4663. 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)