American Business for American Companies Act of 2026
- Bill Number
- H.R. 7424
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Government Operations and Politics
- Status
- Introduced
- Latest Action
- 2026-02-09: 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.
- Last Updated
- 2026-04-23T14:46:20Z
AI-Generated Summary
Purpose of the Legislation
This bill, titled the "American Business for American Companies Act of 2026," aims to stop the U.S. federal government from awarding contracts to "inverted domestic corporations." These are companies originally based in the U.S. that relocate their legal headquarters to a foreign country mainly to reduce U.S. taxes while keeping most operations and ownership in the U.S. The goal is to ensure federal spending supports companies that remain fully committed to the U.S. economy.
Key Provisions
- Prohibition on Contracts: Federal executive agencies (including the Department of Defense) cannot award contracts for goods or services to:
- Inverted domestic corporations (foreign-incorporated entities that meet specific criteria, explained below).
- Their subsidiaries.
- Joint ventures where such entities own more than 10% (by voting power or value).
- Subcontract Restrictions: For prime contracts worth over $10 million (excluding those for purely off-the-shelf commercial items), agencies must include clauses barring prime contractors from:
- Giving first-tier subcontracts worth more than 10% of the total contract value to inverted entities.
- Structuring lower-tier subcontracts to let inverted entities perform more than 10% of the work overall.
- Violations can lead to contract termination for default or suspension/debarment of the prime contractor.
- Definition of Inverted Domestic Corporation:
- A foreign-incorporated company that, after May 8, 2014, acquires most assets or properties of a U.S. corporation or partnership.
- After the acquisition, either:
- More than 50% of its stock is held by former U.S. owners (by vote or value).
- Or, its management and control happens mostly in the U.S., and it has "significant domestic business activities" (at least 25% of employees, compensation, assets, or income based in the U.S.).
- Exception: Does not apply if the company has "substantial business activities" (as defined by Treasury regulations) in its foreign country of incorporation.
- Waivers: Agency heads can waive the prohibition if needed for national security or to run health/public health programs efficiently. Waivers must be reported to Congress within 14 days.
- Applicability:
- Applies to contracts under the Federal Acquisition Regulation (FAR) for civilian agencies and the Defense Federal Acquisition Regulation Supplement (DFARS) for defense.
- Does not affect contracts signed before enactment but covers new task or delivery orders under existing contracts.
- Regulations: The Secretary of the Treasury must issue rules on determining U.S.-based management/control, focusing on where executive officers and senior managers (those making key strategic, financial, and operational decisions) are located.
Significant Changes to Existing Law
- Adds new sections to U.S. Code: Section 4715 in Title 41 (civilian procurement) and Section 4664 in Title 10 (defense procurement).
- Builds on tax rules in Internal Revenue Code Section 7874 (which penalizes inversions for tax purposes) by extending restrictions to government contracting—previously, inversions mainly affected taxes, not eligibility for federal contracts.
- Introduces subcontract limits and penalties not previously specified for inverted entities in procurement law.
- Ties definitions to the Homeland Security Act (6 U.S.C. 395) for terms like "expanded affiliated group" (related companies under common control) and "foreign incorporated entity."
Potential Impacts
- On Government Agencies: Could shrink the pool of eligible contractors, potentially raising costs or delaying projects; agencies may need more waivers, increasing administrative work and congressional oversight.
- On Citizens: May protect U.S. jobs and ensure taxpayer dollars (from federal contracts worth billions annually) support domestic-focused companies, reducing benefits to tax-avoiding firms.
- On International Relations: Might create tensions with foreign countries hosting inverted companies (e.g., Ireland, Netherlands), as it could be viewed as protectionist and limiting foreign investment opportunities in U.S. procurement.
Main Stakeholders Affected
- Federal Agencies: Executive branch agencies and the Department of Defense, which award most contracts and must enforce the rules.
- U.S.-Based Companies: Purely domestic firms that gain a competitive edge in bidding without inverted rivals.
- Inverted Corporations: Foreign-incorporated U.S.-origin companies (e.g., in pharmaceuticals or technology sectors like Medtronic or Accenture) that could lose access to federal work, affecting their revenue.
- Contractors and Subcontractors: Prime and lower-tier firms, who must comply with new clauses or risk penalties.
- Taxpayers and Workers: Indirectly benefit from curbing tax avoidance but could face higher contract costs passed on through government programs.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on Treasury regulations for enforcement, which could lead to disputes over classifications (e.g., what counts as "significant domestic activities"). May face lawsuits from affected companies claiming unfair discrimination against foreign entities under trade agreements like the WTO.
- Constitutional: Potential challenges on equal protection (treating similar companies differently) or due process (vague definitions of inversion), though waivers for national security align with broad executive powers.
- Political: Reinforces "Buy American" policies, appealing to efforts against corporate tax dodging, but could spark debate over business freedom and innovation; as an introduced bill (referred to committees), it signals congressional interest in closing procurement loopholes without broader tax reform.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. DeLauro, Rosa L. [D-CT-3]
Recent Actions
- 2026-02-09: 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.
- 2026-02-09: 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.
- 2026-02-09: Introduced in House
- 2026-02-09: Introduced in House
Bill Versions
- American Business for American Companies Act of 2026 — issued 2026-02-09 — PDF (18 pages)