H.R. 7424: American Business for American Companies Act of 2026

The American Business for American Companies Act of 2026 aims to regulate federal government contracts by prohibiting them from being awarded to certain corporations known as "inverted domestic corporations." An inverted domestic corporation is generally defined as a foreign entity that has acquired a domestic company and has shifted its management and control overseas but continues to operate within the U.S. This bill introduces restrictions primarily in two areas: civilian contracts and defense contracts.

Key Provisions

1. Civilian Contracts

The bill amends federal law to stipulate:

• Contracting agencies are prohibited from awarding contracts for property or services to any foreign incorporated entity deemed an inverted domestic corporation or its subsidiaries.
• This also includes joint ventures where more than 10% of voting rights or value are held by such foreign entities.

Additionally, major contracts (valued over $10 million) must include clauses to ensure prime contractors do not award significant subcontracts to these inverted entities or structure their subcontracting in a way to bypass this limitation. Violations could lead to contract termination or sanctions against the contractor.

2. Defense Contracts

Similar rules are applied to defense contracts, with the same prohibitions regarding inverted domestic corporations. The contracts must also include similar clauses concerning subcontracting, and the penalties for violations mirror those in civilian contracts.

3. Waivers

There is a provision for waivers where the head of an agency can allow contracts to these organizations if it is necessary for national security or for certain public health programs. Any waiver granted must be reported to Congress within 14 days.

4. Applicability

These prohibitions mostly apply to contracts entered into after the legislation’s enactment, with specific exceptions for task and delivery orders related to existing contracts.

5. Definitions and Regulations

The bill outlines definitions concerning inverted domestic corporations and details the criteria that determine whether a corporation falls under this designation. It emphasizes the need for significant domestic business activities in defining these corporations, including factors such as employee residency, compensation, asset location, and source of income.

Relevant Companies

None found