American Business for American Companies Act of 2026
- Bill Number
- S. 3811
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 2
- Policy Area
- Government Operations and Politics
- Status
- Introduced
- Latest Action
- 2026-02-09: Read twice and referred to the Committee on Homeland Security and Governmental Affairs. (text: CR S535-537)
- Last Updated
- 2026-04-23T14:46:21Z
AI-Generated Summary
Purpose
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 have restructured (or "inverted") to be legally incorporated in a foreign country, often to avoid U.S. taxes, while keeping most operations and control in the U.S. The goal is to ensure federal funds support companies that remain fully domestic.
Key Provisions
- Definition of Inverted Domestic Corporation: A foreign-incorporated company qualifies if, after May 8, 2014, it acquires most assets or properties of a U.S. corporation or partnership, and either:
- More than 50% of its stock (by vote or value) is held by the original U.S. owners.
- Its management and control happens mostly in the U.S., with at least 25% of employees, compensation, assets, or income based in the U.S. (Treasury Department sets detailed rules for this).
- Exception: Does not apply if the company has "substantial business activities" (as defined by Treasury regulations based on pre-2017 tax rules) in its foreign country of incorporation.
- Prohibition on Contracts:
- Federal executive agencies (civilian and defense) cannot award contracts for goods or services to inverted corporations, their subsidiaries, or joint ventures where they own more than 10% (by vote or value).
- For prime contracts over $10 million (excluding fully commercial items), a clause must ban prime contractors from giving first-tier subcontracts worth more than 10% of the total contract value to inverted entities. It also prevents structuring lower-tier subcontracts to dodge this limit.
- Penalties for Violations: Prime contracts can be terminated for default, and violators may face suspension or debarment (barring them from future federal contracts).
- Waivers: Agency heads can waive the ban for national security reasons or for efficient administration of health or public health programs. Waivers must be reported to Congress within 14 days.
- Applicability: Applies to new contracts after enactment and all task/delivery orders under any contract. Covers only contracts under the Federal Acquisition Regulation (FAR) for civilian agencies and the Defense FAR Supplement (DFARS) for defense.
- Regulations: The Treasury Secretary must issue rules on determining U.S.-based management/control, applying from after May 8, 2014. Terms like "expanded affiliated group" (related companies under common control) and "foreign incorporated entity" draw from existing Homeland Security Act definitions.
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 inversion rules in Internal Revenue Code Section 7874 but extends them to federal contracting, which was not previously restricted this way for post-2014 inversions.
- Introduces subcontract limits and anti-avoidance measures not in prior laws, plus specific waiver processes and Treasury rulemaking authority tailored to contracting.
Potential Impacts
- Government Agencies: Could shrink the pool of eligible contractors, potentially raising costs, delaying projects, or requiring more vetting during procurement. Defense and civilian agencies may need updated guidance and training.
- Citizens and Taxpayers: May protect U.S. jobs and tax revenue by favoring truly domestic firms, ensuring federal spending supports American economic interests.
- International Relations: Might create tensions with foreign countries hosting inverted companies (e.g., Ireland, Netherlands), as it could be viewed as protectionist or discriminatory against non-U.S. entities.
Main Stakeholders Affected
- Federal Agencies: Executive branch agencies (e.g., Department of Defense, Health and Human Services) responsible for procurement.
- U.S.-Based Companies: Domestic firms benefit from reduced competition; small businesses may gain more opportunities.
- Inverted Corporations: Multinational firms (e.g., those in tech, pharma) that inverted post-2014 face exclusion from federal contracts, impacting revenue.
- Contractors and Subcontractors: Prime contractors must comply with new clauses; joint ventures with inverted entities could be disrupted.
- Taxpayers and Workers: Indirectly affected through preserved tax base and potential job protection in U.S. operations.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies heavily on Treasury regulations for enforcement, which could lead to disputes over classifications (e.g., what counts as "significant domestic activities"). Builds on existing tax law but may invite lawsuits from excluded companies claiming unfair treatment.
- Constitutional: Potential challenges under the Commerce Clause (regulating interstate/foreign commerce) or equal protection principles, as it distinguishes based on corporate structure rather than nationality. Waivers tied to national security could raise due process questions if applied inconsistently.
- Political: Aligns with efforts to curb corporate tax avoidance, appealing to views favoring U.S. economic sovereignty. Introduced by Senators Durbin, Reed, Duckworth, and Sanders, it reflects bipartisan support for anti-inversion measures but could spark debate on government overreach in business decisions. Referred to the Senate Committee on Homeland Security and Governmental Affairs for review.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Sen. Durbin, Richard J. [D-IL]
Cosponsors (4)
Sen. Reed, Jack [D-RI], Sen. Duckworth, Tammy [D-IL], Sen. Sanders, Bernard [I-VT], Sen. Whitehouse, Sheldon [D-RI]
Recent Actions
- 2026-02-09: Read twice and referred to the Committee on Homeland Security and Governmental Affairs. (text: CR S535-537)
- 2026-02-09: Introduced in Senate
Bill Versions
- American Business for American Companies Act of 2026 — issued 2026-02-09 — PDF (18 pages)