[Congressional Record Volume 170, Number 100 (Thursday, June 13, 2024)]
[Senate]
[Pages S4086-S4088]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. DURBIN (for himself, Mr. Reed, Ms. Duckworth, Mr. Sanders,
and Mr. Whitehouse):
S. 4547. A bill to prohibit the award of Federal Government contracts
to inverted domestic corporations, and for other purposes; to the
Committee on Homeland Security and Governmental Affairs.
Mr. DURBIN. Madam President, I ask unanimous consent that the text of
the bill be printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 4547
Be it enacted by the Senate and House of Representatives 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 2024''.
SEC. 2. PROHIBITION ON AWARDING CONTRACTS TO INVERTED
DOMESTIC CORPORATIONS.
(a) Civilian Contracts.--
(1) In general.--Chapter 47 of title 41, United States
Code, is amended by adding at the end the following new
section:
``Sec. 4715. Prohibition on awarding contracts to inverted
domestic corporations
``(a) Prohibition.--
``(1) In general.--The head of an executive agency may not
award a contract for the procurement of property or services
to--
``(A) any foreign incorporated entity that such head has
determined is an inverted domestic 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 domestic corporation or any subsidiary of such
entity.
``(2) Subcontracts.--
``(A) In general.--The head of an executive agency shall
include in each contract for the procurement of property or
services awarded by the executive agency with a value in
excess of $10,000,000, other than a contract for exclusively
commercial items, a clause that prohibits 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 entity 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 included 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 terminated 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 section, a foreign
incorporated entity shall be treated as 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 constituting 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 corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation; or
``(II) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership; or
``(ii) the management and control of the expanded
affiliated group which includes the entity occurs, directly
or indirectly, primarily within the United States, as
determined pursuant to regulations prescribed 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
[[Page S4087]]
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 affiliated group.
``(B) Substantial business activities.--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 activities
under the regulations prescribed under section 7874 of the
Internal Revenue Code of 1986, as in effect on January 18,
2017.
``(3) Significant domestic business activities.--
``(A) In general.--For purposes of paragraph (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 incurred by the group is
incurred with respect to employees based in the United
States;
``(iii) the assets of the group are located in the United
States; or
``(iv) the income of the group is derived 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 `relevant foreign country' as
references to `the United States'. The Secretary of the
Treasury (or the Secretary's delegate) may issue regulations
decreasing the threshold percent in any of the tests under
such regulations for determining if business activities
constitute significant 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 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 benefits 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 paragraph (2),
this section shall not apply to any contract entered into
before the date of the enactment of this section.
``(2) Task and delivery orders.--This section shall apply
to any task or delivery order issued after the date of the
enactment of this section pursuant to a contract entered into
before, on, or after such date of enactment.
``(3) Scope.--This section applies only to contracts
subject to regulation under the Federal Acquisition
Regulation.
``(e) Definitions and Special Rules.--
``(1) Definitions.--In this section, the terms `expanded
affiliated group', `foreign incorporated entity', `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 sections 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:
``Sec. 4663. Prohibition on awarding contracts to inverted
domestic corporations
``(a) Prohibition.--
``(1) In general.--The head of an agency may not award a
contract for the procurement of property or services to--
``(A) any foreign incorporated entity that such head has
determined is an inverted domestic 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 domestic corporation or any subsidiary of such
entity.
``(2) Subcontracts.--
``(A) In general.--The head of an executive agency shall
include in each contract for the procurement of property or
services awarded by the executive agency with a value in
excess of $10,000,000, other than a contract for exclusively
commercial items, a clause that prohibits 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 entity 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 included 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 terminated 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 section, a foreign
incorporated entity shall be treated as 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 constituting 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 corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation; or
``(II) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership; or
``(ii) the management and control of the expanded
affiliated group which includes the entity occurs, directly
or indirectly, primarily within the United States, as
determined pursuant to regulations prescribed 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 affiliated
group.
``(B) Substantial business activities.--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 activities
under the regulations prescribed under section 7874 of the
Internal Revenue Code of 1986, as in effect on January 18,
2017.
``(3) Significant domestic business activities.--
``(A) In general.--For purposes of paragraph (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 incurred by the group is
incurred with respect to employees based in the United
States;
``(iii) the assets of the group are located in the United
States; or
``(iv) the income of the group is derived 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 `relevant foreign country' as
references to `the United States'. The Secretary of the
Treasury (or the Secretary's delegate) may issue regulations
decreasing the threshold percent in any of the tests under
such regulations for determining if business activities
constitute significant 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 required in the interest of
national security or is necessary for the efficient or
effective administration of 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
[[Page S4088]]
the waiver to the congressional defense committees.
``(d) Applicability.--
``(1) In general.--Except as provided in paragraph (2),
this section shall not apply to any contract entered into
before the date of the enactment of this section.
``(2) Task and delivery orders.--This section shall apply
to any task or delivery order issued after the date of the
enactment of this section pursuant to a contract entered into
before, on, or after such date of enactment.
``(3) Scope.--This section applies only to contracts
subject to regulation under the Federal Acquisition
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 entity', `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 sections at the
beginning of chapter 363 of title 10, United States Code, is
amended by inserting after the item relating to section 4662
the following new item:
``4663. Prohibition on awarding contracts to inverted domestic
corporations.''.
(c) Regulations Regarding Management and Control.--
(1) In general.--The Secretary of the Treasury (or the
Secretary's delegate) shall, for purposes of section
4714(b)(1)(B)(ii) of title 41, United States Code, and
section 4663(b)(1)(B)(ii) of title 10, United States Code, as
added by subsections (a) and (b), respectively, prescribe
regulations for purposes 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 under
the preceding sentence shall apply to periods after May 8,
2014.
(2) Executive officers and senior management.--The
regulations prescribed under paragraph (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 expanded
affiliated group who exercise day-to-day responsibility 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.
____________________