I 
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 Com-
mittee on Oversight and Government Reform, and in addition to the 
Committee on Armed Services, for a period to be subsequently deter-
mined 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 Representa-
tives 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 IN-
VERTED DOMESTIC CORPORATIONS. 
(a) CIVILIAN CONTRACTS.— 
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(1) IN
GENERAL.—Chapter 47 of title 41, 
United States Code, is amended by adding at the 
end the following new section: 
‘‘§ 4715. Prohibition on awarding contracts to in-
verted domestic corporations 
‘‘(a) PROHIBITION.— 
‘‘(1) IN GENERAL.—The head of an executive 
agency may not award a contract for the procure-
ment of property or services to— 
‘‘(A) any foreign incorporated entity that 
such head has determined is an inverted domes-
tic 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 domes-
tic corporation or any subsidiary of such entity. 
‘‘(2) SUBCONTRACTS.— 
‘‘(A) IN GENERAL.—The head of an execu-
tive agency shall include in each contract for 
the procurement of property or services award-
ed by the executive agency with a value in ex-
cess of $10,000,000, other than a contract for 
exclusively commercial items, a clause that pro-
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hibits 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 en-
tity 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 in-
cluded 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 termi-
nated 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. 
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ship, by former partners of the do-
mestic partnership by reason of hold-
ing a capital or profits interest in the 
domestic partnership; or 
‘‘(ii) the management and control of 
the expanded affiliated group which in-
cludes the entity occurs, directly or indi-
rectly, primarily within the United States, 
as determined pursuant to regulations pre-
scribed 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 affili-
ated group. 
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‘‘(B) 
SUBSTANTIAL
BUSINESS
ACTIVI-
TIES.—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 activi-
ties under the regulations prescribed under sec-
tion 7874 of the Internal Revenue Code of 
1986, as in effect on January 18, 2017. 
‘‘(3) SIGNIFICANT DOMESTIC BUSINESS ACTIVI-
TIES.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (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 in-
curred by the group is incurred with re-
spect to employees based in the United 
States; 
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‘‘(iii) the assets of the group are lo-
cated in the United States; or 
‘‘(iv) the income of the group is de-
rived 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 ‘rel-
evant foreign country’ as references to ‘the 
United States’. The Secretary of the Treasury 
(or the Secretary’s delegate) may issue regula-
tions decreasing the threshold percent in any of 
the tests under such regulations for deter-
mining if business activities constitute signifi-
cant 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 
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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 ben-
efits 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 para-
graph (2), this section shall not apply to any con-
tract entered into before the date of the enactment 
of this section. 
‘‘(2) TASK AND DELIVERY ORDERS.—This sec-
tion shall apply to any task or delivery order issued 
after the date of the enactment of this section pur-
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suant to a contract entered into before, on, or after 
such date of enactment. 
‘‘(3) SCOPE.—This section applies only to con-
tracts subject to regulation under the Federal Acqui-
sition Regulation. 
‘‘(e) DEFINITIONS AND SPECIAL RULES.— 
‘‘(1) DEFINITIONS.—In this section, the terms 
‘expanded affiliated group’, ‘foreign incorporated en-
tity’, ‘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 sec-
tions 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: 
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‘‘§ 4664. Prohibition on awarding contracts to in-
verted domestic corporations 
‘‘(a) PROHIBITION.— 
‘‘(1) IN GENERAL.—The head of an agency may 
not award a contract for the procurement of prop-
erty or services to— 
‘‘(A) any foreign incorporated entity that 
such head has determined is an inverted domes-
tic 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 domes-
tic corporation or any subsidiary of such entity. 
‘‘(2) SUBCONTRACTS.— 
‘‘(A) IN GENERAL.—The head of an execu-
tive agency shall include in each contract for 
the procurement of property or services award-
ed by the executive agency with a value in ex-
cess of $10,000,000, other than a contract for 
exclusively commercial items, a clause that pro-
hibits the prime contractor on such contract 
from— 
‘‘(i) awarding a first-tier subcontract 
with a value greater than 10 percent of the 
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total value of the prime contract to an en-
tity 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 in-
cluded 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 termi-
nated 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 sec-
tion, a foreign incorporated entity shall be treated as 
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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 consti-
tuting 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 corpora-
tion, by former shareholders of the 
domestic corporation by reason of 
holding stock in the domestic corpora-
tion; or 
‘‘(II) in the case of an acquisition 
with respect to a domestic partner-
ship, by former partners of the do-
mestic partnership by reason of hold-
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ing a capital or profits interest in the 
domestic partnership; or 
‘‘(ii) the management and control of 
the expanded affiliated group which in-
cludes the entity occurs, directly or indi-
rectly, primarily within the United States, 
as determined pursuant to regulations pre-
scribed 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 affili-
ated group. 
‘‘(B) 
SUBSTANTIAL
BUSINESS
ACTIVI-
TIES.—The Secretary of the Treasury (or the 
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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 activi-
ties under the regulations prescribed under sec-
tion 7874 of the Internal Revenue Code of 
1986, as in effect on January 18, 2017. 
‘‘(3) SIGNIFICANT DOMESTIC BUSINESS ACTIVI-
TIES.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (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 in-
curred by the group is incurred with re-
spect to employees based in the United 
States; 
‘‘(iii) the assets of the group are lo-
cated in the United States; or 
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‘‘(iv) the income of the group is de-
rived 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 ‘rel-
evant foreign country’ as references to ‘the 
United States’. The Secretary of the Treasury 
(or the Secretary’s delegate) may issue regula-
tions decreasing the threshold percent in any of 
the tests under such regulations for deter-
mining if business activities constitute signifi-
cant 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 re-
quired in the interest of national security or is nec-
essary for the efficient or effective administration of 
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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 para-
graph (2), this section shall not apply to any con-
tract entered into before the date of the enactment 
of this section. 
‘‘(2) TASK AND DELIVERY ORDERS.—This sec-
tion shall apply to any task or delivery order issued 
after the date of the enactment of this section pur-
suant to a contract entered into before, on, or after 
such date of enactment. 
‘‘(3) SCOPE.—This section applies only to con-
tracts subject to regulation under the Federal Acqui-
sition 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 en-
tity’, ‘person’, ‘domestic’, and ‘foreign’ have the 
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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 sec-
tions 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 Treas-
ury (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 pur-
poses 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 
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under the preceding sentence shall apply to periods 
after May 8, 2014. 
(2) EXECUTIVE OFFICERS AND SENIOR MAN-
AGEMENT.—The regulations prescribed under para-
graph (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 ex-
panded affiliated group who exercise day-to-day re-
sponsibility 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. 
Æ 
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