II 

110TH CONGRESS 

1ST SESSION S. 1004 

To make ineligible for Federal contract awards any expatriated corporations 

and any companies that do business with, or own foreign subsidiaries 

that do business with, state sponsors of terrorism or foreign terrorist 

organizations. 

IN THE SENATE OF THE UNITED STATES 

MARCH 28, 2007 

Mr. BROWN (for himself and Mr. DORGAN) introduced the following bill; which 

was read twice and referred to the Committee on Homeland Security and 

Governmental Affairs 

A BILL 

To make ineligible for Federal contract awards any expatriated corporations and any companies that do business 

with, or own foreign subsidiaries that do business with, 

state sponsors of terrorism or foreign terrorist organizations. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Restoring Integrity 

5 in Contracting Act of 2007’’. 


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1 SEC. 2. DEFINITIONS. 

2 (a) CORPORATE EXPATRIATION TRANSACTION DE3 FINED.— 

4 (1) IN GENERAL.—In this Act, the term ‘‘cor5 porate expatriation transaction’’— 

6 (A) means any transaction in which— 

7 (i) a foreign corporation (referred to 

8 in this section as the ‘‘acquiring corpora9 tion’’) acquires, as a result of such trans10 action, directly or indirectly substantially 

11 all of the properties held directly or indi12 rectly by a domestic corporation; and 

13 (ii) immediately after the transaction, 

14 more than 80 percent of the stock (by vote 

15 or value) of the acquiring corporation is 

16 held by former shareholders of the domes17 tic corporation by reason of holding stock 

18 in the domestic corporation; and 

19 (B) includes any transaction in which— 

20 (i) a foreign corporation acquires, as a 

21 result of such transaction, directly or indi22 rectly properties constituting a trade or 

23 business of a domestic partnership; and 

24 (ii) immediately after the transaction, 

25 more than 80 percent of the stock (by vote 

26 or value) of the acquiring corporation is 


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1 held by former partners of the domestic 

2 partnership or related foreign partnership 

3 (determined without regard to stock of the 

4 acquiring corporation which is sold in a 

5 public offering related to the transaction). 

6 (2) LOWER STOCK OWNERSHIP THRESHOLD

7 FOR CERTAIN ACQUIRING CORPORATIONS.—Clause 

8 (ii) of paragraph (1)(A) shall be applied by sub9 stituting ‘‘50 percent’’ for ‘‘80 percent’’ with respect 

10 to any foreign corporation if— 

11 (A) such corporation does not have sub12 stantial business activities (when compared to 

13 the total business activities of the expanded af14 filiated group) in the foreign country in which 

15 or under the law of which the corporation is 

16 created or organized; and 

17 (B) the stock of the corporation is publicly 

18 traded and the principal market for the public 

19 trading of such stock is in the United States. 

20 (3) RULES FOR DETERMINING OWNERSHIP AND

21 SCOPE OF TRANSACTION.—For purposes of this sub22 section— 

23 (A) a series of related transactions shall be 

24 treated as 1 transaction; and 


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1 (B) stock held by members of the ex2 panded affiliated group which includes the ac3 quiring corporation shall not be taken into ac4 count in determining ownership. 

5 (b) OTHER DEFINITIONS.—In this Act: 

6 (1) DOMESTIC.—The term ‘‘domestic’’ means 

7 created or organized in the United States or under 

8 the law of the United States or of any State. 

9 (2) EXECUTIVE AGENCY.—The term ‘‘executive 

10 agency’’ has the meaning given the term in section 

11 102 of title 31, United States Code. 

12 (3) EXPANDED AFFILIATED GROUP.—The term 

13 ‘‘expanded affiliated group’’ means an affiliated 

14 group as defined in section 1504(a) of the Internal 

15 Revenue Code of 1986, without regard to section 

16 1504(b) of such Code. 

17 (4) FOREIGN SUBSIDIARY.—The term ‘‘foreign 

18 subsidiary’’ means any foreign entity owned or con19 trolled (directly or indirectly) by a potential con20 tractor. 

21 (5) STATE SPONSOR OF TERRORISM.—The term 

22 ‘‘state sponsor of terrorism’’ means any government 

23 which the Secretary of State has determined, for 

24 purposes of section 6(j) of the Export Administra25 tion Act of 1979 (50 U.S.C. App. 2405(j)), section 


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1 620A of the Foreign Assistance Act of 1961 (22 

2 U.S.C. 2371), section 40 of the Arms Export Con3 trol Act (22 U.S.C. 2780), or any other provision of 

4 law, to be a government that has provided support 

5 for acts of international terrorism. 

6 (6) FOREIGN TERRORIST ORGANIZATION.—The 

7 term ‘‘foreign terrorist organization’’ means a for8 eign terrorist organization designated under section 

9 219 of the Immigration and Nationality Act (8 

10 U.S.C. 1189). 

11 SEC. 3. INELIGIBILITY OF EXPATRIATED CORPORATIONS 

12 FOR FEDERAL CONTRACT AWARDS. 

13 (a) IN GENERAL.—No acquiring corporation or any 

14 subsidiary of such a corporation that enters into a cor15 porate expatriation transaction after the date of the enact16 ment of this Act shall be eligible to be awarded a Federal 

17 contract for the 5-year period beginning on the date that 

18 a disclosure regarding such transaction is made under sec19 tion 5. 

20 (b) PENALTIES FOR FAILURE TO DISCLOSE.—In the 

21 event that the Administrator for Federal Procurement 

22 Policy determines that an entity is ineligible for a Federal 

23 contract under subsection (a) as a result of a corporate 

24 expatriation transaction that the entity fails to disclose 

25 under section 5(a), the period of ineligibility— 


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1 (1) shall begin on the date that the Adminis2 trator makes such determination; and 

3 (2) may be extended by the Administrator for 

4 a period that is longer than the period otherwise ap5 plicable under subsection (a) as a penalty for such 

6 failure to disclose. 

7 (c) WAIVER.— 

8 (1) IN GENERAL.—Subject to paragraph (2), 

9 the President may waive this section with respect to 

10 any specific contract if the President certifies to 

11 Congress that the waiver is required in the interest 

12 of national security. 

13 (2) REPORT.—The President may not carry out 

14 a waiver under paragraph (1) until a period of 30 

15 days has expired after the President submits to Con16 gress a report containing the certification described 

17 in paragraph (1) and setting forth the rationale for 

18 the waiver. 

19 SEC. 4. INELIGIBILITY FOR FEDERAL CONTRACT AWARDS 

20 OF COMPANIES DOING BUSINESS WITH, AND 

21 COMPANIES WITH FOREIGN SUBSIDIARIES 

22 DOING BUSINESS WITH, STATE SPONSORS OF 

23 TERRORISM OR FOREIGN TERRORIST ORGA24 NIZATIONS. 

25 (a) INELIGIBILITY.— 


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1 (1) IN GENERAL.—Except as provided under 

2 paragraph (2), any entity doing business with, or 

3 having a parent or subsidiary doing business with, a 

4 state sponsor of terrorism or foreign terrorist orga5 nization after the date of the enactment of this Act 

6 shall be ineligible to be awarded a Federal contract 

7 for the period described in subsection (b). 

8 (2) EXCEPTION FOR ENTITIES DOING BUSINESS

9 IN COMPLIANCE WITH THE TRADE SANCTIONS RE10 FORM AND EXPORT ENHANCEMENT ACT OF 2000.— 

11 (A) AUTHORITY UNAFFECTED.—Nothing 

12 in this section shall be construed to prohibit or 

13 restrict an entity from selling food, agricultural 

14 commodities, medicine, or medical products to a 

15 state sponsor of terrorism or foreign terrorist 

16 organization pursuant to section 906 of the 

17 Trade Sanctions Reform and Export Enhance18 ment Act of 2000 (22 U.S.C. 7205). 

19 (B) ELIGIBILITY FOR CONTRACTS UNAF20 FECTED.—No entity selling food, agricultural 

21 commodities, medicine, or medical products to a 

22 state sponsor of terrorism or foreign terrorist 

23 organization in full compliance with the require24 ments of section 906 of the Trade Sanctions 

25 Reform and Export Enhancement Act of 2000 


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1 (22 U.S.C. 7205), or any parent or subsidiary 

2 of such entity, shall be deemed ineligible to be 

3 awarded a Federal contract under subsection 

4 (a) as a result of conducting such business. 

5 (b) PERIOD OF INELIGIBILITY.— 

6 (1) DURATION.—The period of ineligibility re7 ferred to in subsection (a)(1), as determined by the 

8 Administrator for Federal Procurement Policy, in 

9 cooperation with the Secretary of State, shall be— 

10 (A) 5 years for a first offense; 

11 (B) 10 years for a second offense; and 

12 (C) 15 years for any offense after a second 

13 offense. 

14 (2) COMMENCEMENT.—The period of ineligi15 bility under this subsection shall begin on the date 

16 that a contractor makes a disclosure under section 

17 5 that, according to the criteria under such section, 

18 the contractor is doing or has done business with, or 

19 has a subsidiary that is doing or has done business 

20 with, a state sponsor of terrorism or foreign terrorist 

21 organization. 

22 (3) PENALTIES FOR FAILURE TO DISCLOSE.— 

23 In the event that the Administrator for Federal Pro24 curement Policy determines that an entity is ineli25 gible for a Federal contract under subsection (a) as 


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1 a result of a transaction or activity that the entity 

2 fails to disclose under section 5(a), the period of in3 eligibility— 

4 (A) shall begin on the date that the Ad5 ministrator makes such determination; and 

6 (B) may be extended by the Administrator 

7 for a period longer than the period otherwise 

8 applicable under paragraph (1) as a penalty for 

9 such failure to disclose. 

10 (c) COMPLAINTS.— 

11 (1) IN GENERAL.—Any United States citizen 

12 may file a complaint with an executive agency re13 garding a Federal contractor that has committed an 

14 offense under this section. 

15 (2) REPORT.—The head of each executive agen16 cy shall submit to Congress an annual report on the 

17 complaints received by citizens under this sub18 section, including the nature of the complaint and 

19 the manner in which the agency handled the com20 plaint. 

21 SEC. 5. DISCLOSURE REQUIREMENTS. 

22 (a) CERTIFICATION.—Not later than 180 days after 

23 the date of the enactment of this Act, the Federal Acquisi24 tion Regulation issued pursuant to section 25 of the Office 

25 of Federal Procurement Policy Act (41 U.S.C. 421) shall 


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1 be revised to require that every contractor that submits 

2 a bid for a government contract shall be required to sub3 mit with such bid a certification describing— 

4 (1) whether the contractor or the contractor’s 

5 parent company has entered into a corporate expa6 triation transaction after the date of the enactment 

7 of this Act; and 

8 (2) whether the contractor, the contractor’s do9 mestic parent company, or any other domestic sub10 sidiaries of the domestic parent company are doing 

11 business, or own a foreign subsidiary that is doing 

12 business, or has done business since the date of the 

13 enactment of this Act, with a state sponsor of ter14 rorism or a foreign terrorist organization. 

15 (b) INFORMATION SHARING.—The head of each exec16 utive agency shall regularly transmit information disclosed 

17 pursuant to subsection (a) to the Administrator for Fed18 eral Procurement Policy. 

19 (c) DATABASE.—The Office of Federal Procurement 

20 Policy Act (41 U.S.C. 403 et seq.) is amended by adding 

21 at the end the following new section: 


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1 ‘‘SEC. 43. DATABASE OF CORPORATE EXPATRIATION 

2 TRANSACTIONS AND TRANSACTIONS WITH 

3 STATE SPONSORS OF TERRORISM OR FOR4 EIGN TERRORIST ORGANIZATIONS. 

5 ‘‘(a) DATABASE.—The Administrator for Federal 

6 Procurement Policy shall establish and maintain a data7 base listing each contractor that, after the date of the en8 actment of the Restoring Integrity in Contracting Act of 

9 2007— 

10 ‘‘(1) has entered into a corporate expatriation 

11 transaction, or has a parent company that has en12 tered into such a transaction; or 

13 ‘‘(2) has done business with, or owns a foreign 

14 subsidiary that has done business with, a state spon15 sor of terrorism or a foreign terrorist organization, 

16 or has a domestic parent company that has done, or 

17 has any other domestic subsidiaries that have done, 

18 such business. 

19 ‘‘(b) COLLECTION OF INFORMATION.—The Adminis20 trator shall establish and maintain the database under 

21 subsection (a) using information compiled from certifi22 cations submitted by contractors pursuant to section 5(a) 

23 of the Restoring Integrity in Contracting Act of 2007. 

24 ‘‘(c) CORPORATE EXPATRIATION TRANSACTION DE25 FINED.— 


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1 ‘‘(1) IN GENERAL.—In this section, the term 

2 ‘corporate expatriation transaction’— 

3 ‘‘(A) means any transaction in which— 

4 ‘‘(i) a foreign corporation (referred to 

5 in this section as the ‘acquiring corpora6 tion’) acquires, as a result of such trans7 action, directly or indirectly substantially 

8 all of the properties held directly or indi9 rectly by a domestic corporation; and 

10 ‘‘(ii) immediately after the trans11 action, more than 80 percent of the stock 

12 (by vote or value) of the acquiring corpora13 tion is held by former shareholders of the 

14 domestic corporation by reason of holding 

15 stock in the domestic corporation; and 

16 ‘‘(B) includes any transaction in which— 

17 ‘‘(i) a foreign corporation acquires, as 

18 a result of such transaction, directly or in19 directly properties constituting a trade or 

20 business of a domestic partnership; and 

21 ‘‘(ii) immediately after the trans22 action, more than 80 percent of the stock 

23 (by vote or value) of the acquiring corpora24 tion is held by former partners of the do25 mestic partnership or related foreign partVerDate Aug 31 2005 22:47 Mar 30, 2007 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1004.IS S1004

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1 nership (determined without regard to 

2 stock of the acquiring corporation which is 

3 sold in a public offering related to the 

4 transaction). 

5 ‘‘(2) LOWER STOCK OWNERSHIP THRESHOLD

6 FOR CERTAIN ACQUIRING CORPORATIONS.—Clause 

7 (ii) of paragraph (1)(A) shall be applied by sub8 stituting ‘50 percent’ for ‘80 percent’ with respect to 

9 any foreign corporation if— 

10 ‘‘(A) such corporation does not have sub11 stantial business activities (when compared to 

12 the total business activities of the expanded af13 filiated group) in the foreign country in which 

14 or under the law of which the corporation is 

15 created or organized; and 

16 ‘‘(B) the stock of the corporation is pub17 licly traded and the principal market for the 

18 public trading of such stock is in the United 

19 States. 

20 ‘‘(3) RULES FOR DETERMINING OWNERSHIP

21 AND SCOPE OF TRANSACTION.—For purposes of this 

22 subsection— 

23 ‘‘(A) a series of related transactions shall 

24 be treated as 1 transaction; and 


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1 ‘‘(B) stock held by members of the ex2 panded affiliated group which includes the ac3 quiring corporation shall not be taken into ac4 count in determining ownership. 

5 ‘‘(d) OTHER DEFINITIONS.—In this section: 

6 ‘‘(1) DOMESTIC.—The term ‘domestic’ means 

7 created or organized in the United States or under 

8 the law of the United States or of any State. 

9 ‘‘(2) EXPANDED AFFILIATED GROUP.—The 

10 term ‘expanded affiliated group’ means an affiliated 

11 group as defined in section 1504(a) of the Internal 

12 Revenue Code of 1986, without regard to section 

13 1504(b) of such Code. 

14 ‘‘(3) FOREIGN SUBSIDIARY.—The term ‘foreign 

15 subsidiary’ means any foreign entity owned or con16 trolled (directly or indirectly) by a potential con17 tractor. 

18 ‘‘(4) STATE SPONSOR OF TERRORISM.—The 

19 term ‘state sponsor of terrorism’ means any govern20 ment which the Secretary of State has determined, 

21 for purposes of section 6(j) of the Export Adminis22 tration Act of 1979 (50 U.S.C. App. 2405(j)), sec23 tion 620A of the Foreign Assistance Act of 1961 (22 

24 U.S.C. 2371), section 40 of the Arms Export Con25 trol Act (22 U.S.C. 2780), or any other provision of 


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1 law, to be a government that has provided support 

2 for acts of international terrorism. 

3 ‘‘(5) FOREIGN TERRORIST ORGANIZATION.— 

4 The term ‘foreign terrorist organization’ means a 

5 foreign terrorist organization designated under sec6 tion 219 of the Immigration and Nationality Act (8 

7 U.S.C. 1189).’’. 

Æ 


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