American Business for American Companies Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 3802 To prohibit the award of Federal Government contracts to inverted domestic corporations, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JULY 17, 2019 Ms. DELAURO introduced the following bill; which was referred to the Com- mittee on Oversight and Reform, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speak- er, in each case for consideration of such provisions as fall within the ju- risdiction 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- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘American Business for 4 American Companies Act of 2019’’. 5 SEC. 2. PROHIBITION ON AWARDING CONTRACTS TO IN- 6 VERTED DOMESTIC CORPORATIONS. 7 (a) CIVILIAN CONTRACTS.— 8 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 2 •HR 3802 IH (1) IN GENERAL.—Chapter 47 of title 41, 1 United States Code, is amended by adding at the 2 end the following new section: 3 ‘‘§ 4714. Prohibition on awarding contracts to in- 4 verted domestic corporations 5 ‘‘(a) PROHIBITION.— 6 ‘‘(1) IN GENERAL.—The head of an executive 7 agency may not award a contract for the procure- 8 ment of property or services to— 9 ‘‘(A) any foreign incorporated entity that 10 such head has determined is an inverted domes- 11 tic corporation or any subsidiary of such entity; 12 or 13 ‘‘(B) any joint venture if more than 10 14 percent of the joint venture (by vote or value) 15 is held by a foreign incorporated entity that 16 such head has determined is an inverted domes- 17 tic corporation or any subsidiary of such entity. 18 ‘‘(2) SUBCONTRACTS.— 19 ‘‘(A) IN GENERAL.—The head of an execu- 20 tive agency shall include in each contract for 21 the procurement of property or services award- 22 ed by the executive agency with a value in ex- 23 cess of $10,000,000, other than a contract for 24 exclusively commercial items, a clause that pro- 25 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 3 •HR 3802 IH hibits the prime contractor on such contract 1 from— 2 ‘‘(i) awarding a first-tier subcontract 3 with a value greater than 10 percent of the 4 total value of the prime contract to an en- 5 tity or joint venture described in paragraph 6 (1); or 7 ‘‘(ii) structuring subcontract tiers in a 8 manner designed to avoid the limitation in 9 paragraph (1) by enabling an entity or 10 joint venture described in paragraph (1) to 11 perform more than 10 percent of the total 12 value of the prime contract as a lower-tier 13 subcontractor. 14 ‘‘(B) PENALTIES.—The contract clause in- 15 cluded in contracts pursuant to subparagraph 16 (A) shall provide that, in the event that the 17 prime contractor violates the contract clause— 18 ‘‘(i) the prime contract may be termi- 19 nated for default; and 20 ‘‘(ii) the matter may be referred to 21 the suspension or debarment official for 22 the appropriate agency and may be a basis 23 for suspension or debarment of the prime 24 contractor. 25 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 4 •HR 3802 IH ‘‘(b) INVERTED DOMESTIC CORPORATION.— 1 ‘‘(1) IN GENERAL.—For purposes of this sec- 2 tion, a foreign incorporated entity shall be treated as 3 an inverted domestic corporation if, pursuant to a 4 plan (or a series of related transactions)— 5 ‘‘(A) the entity completes on or after May 6 8, 2014, the direct or indirect acquisition of— 7 ‘‘(i) substantially all of the properties 8 held directly or indirectly by a domestic 9 corporation; or 10 ‘‘(ii) substantially all of the assets of, 11 or substantially all of the properties consti- 12 tuting a trade or business of, a domestic 13 partnership; and 14 ‘‘(B) after the acquisition, either— 15 ‘‘(i) more than 50 percent of the stock 16 (by vote or value) of the entity is held— 17 ‘‘(I) in the case of an acquisition 18 with respect to a domestic corpora- 19 tion, by former shareholders of the 20 domestic corporation by reason of 21 holding stock in the domestic corpora- 22 tion; or 23 ‘‘(II) in the case of an acquisition 24 with respect to a domestic partner- 25 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 5 •HR 3802 IH ship, by former partners of the do- 1 mestic partnership by reason of hold- 2 ing a capital or profits interest in the 3 domestic partnership; or 4 ‘‘(ii) the management and control of 5 the expanded affiliated group which in- 6 cludes the entity occurs, directly or indi- 7 rectly, primarily within the United States, 8 as determined pursuant to regulations pre- 9 scribed by the Secretary of the Treasury, 10 and such expanded affiliated group has 11 significant domestic business activities. 12 ‘‘(2) EXCEPTION FOR CORPORATIONS WITH 13 SUBSTANTIAL BUSINESS ACTIVITIES IN FOREIGN 14 COUNTRY OF ORGANIZATION.— 15 ‘‘(A) IN GENERAL.—A foreign incorporated 16 entity described in paragraph (1) shall not be 17 treated as an inverted domestic corporation if 18 after the acquisition the expanded affiliated 19 group which includes the entity has substantial 20 business activities in the foreign country in 21 which or under the law of which the entity is 22 created or organized when compared to the 23 total business activities of such expanded affili- 24 ated group. 25 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 6 •HR 3802 IH ‘‘(B) SUBSTANTIAL BUSINESS ACTIVI- 1 TIES.—The Secretary of the Treasury (or the 2 Secretary’s delegate) shall establish regulations 3 for determining whether an affiliated group has 4 substantial business activities for purposes of 5 subparagraph (A), except that such regulations 6 may not treat any group as having substantial 7 business activities if such group would not be 8 considered to have substantial business activi- 9 ties under the regulations prescribed under sec- 10 tion 7874 of the Internal Revenue Code of 11 1986, as in effect on January 18, 2017. 12 ‘‘(3) SIGNIFICANT DOMESTIC BUSINESS ACTIVI- 13 TIES.— 14 ‘‘(A) IN GENERAL.—For purposes of para- 15 graph (1)(B)(ii), an expanded affiliated group 16 has significant domestic business activities if at 17 least 25 percent of— 18 ‘‘(i) the employees of the group are 19 based in the United States; 20 ‘‘(ii) the employee compensation in- 21 curred by the group is incurred with re- 22 spect to employees based in the United 23 States; 24 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 7 •HR 3802 IH ‘‘(iii) the assets of the group are lo- 1 cated in the United States; or 2 ‘‘(iv) the income of the group is de- 3 rived in the United States. 4 ‘‘(B) DETERMINATION.—Determinations 5 pursuant to subparagraph (A) shall be made in 6 the same manner as such determinations are 7 made for purposes of determining substantial 8 business activities under regulations referred to 9 in paragraph (2) as in effect on January 18, 10 2017, but applied by treating all references in 11 such regulations to ‘foreign country’ and ‘rel- 12 evant foreign country’ as references to ‘the 13 United States’. The Secretary of the Treasury 14 (or the Secretary’s delegate) may issue regula- 15 tions decreasing the threshold percent in any of 16 the tests under such regulations for deter- 17 mining if business activities constitute signifi- 18 cant domestic business activities for purposes of 19 this paragraph. 20 ‘‘(c) WAIVER.— 21 ‘‘(1) IN GENERAL.—The head of an executive 22 agency may waive subsection (a) with respect to any 23 Federal Government contract under the authority of 24 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 8 •HR 3802 IH such head if the head determines that the waiver 1 is— 2 ‘‘(A) required in the interest of national 3 security; or 4 ‘‘(B) necessary for the efficient or effective 5 administration of Federal or federally funded— 6 ‘‘(i) programs that provide health ben- 7 efits to individuals; or 8 ‘‘(ii) public health programs. 9 ‘‘(2) REPORT TO CONGRESS.—The head of an 10 executive agency issuing a waiver under paragraph 11 (1) shall, not later than 14 days after issuing such 12 waiver, submit a written notification of the waiver to 13 the relevant authorizing committees of Congress and 14 the Committees on Appropriations of the Senate and 15 the House of Representatives. 16 ‘‘(d) APPLICABILITY.— 17 ‘‘(1) IN GENERAL.—Except as provided in para- 18 graph (2), this section shall not apply to any con- 19 tract entered into before the date of the enactment 20 of this section. 21 ‘‘(2) TASK AND DELIVERY ORDERS.—This sec- 22 tion shall apply to any task or delivery order issued 23 after the date of the enactment of this section pur- 24 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 9 •HR 3802 IH suant to a contract entered into before, on, or after 1 such date of enactment. 2 ‘‘(3) SCOPE.—This section applies only to con- 3 tracts subject to regulation under the Federal Acqui- 4 sition Regulation. 5 ‘‘(e) DEFINITIONS AND SPECIAL RULES.— 6 ‘‘(1) DEFINITIONS.—In this section, the terms 7 ‘expanded affiliated group’, ‘foreign incorporated en- 8 tity’, ‘person’, ‘domestic’, and ‘foreign’ have the 9 meaning given those terms in section 835(c) of the 10 Homeland Security Act of 2002 (6 U.S.C. 395(c)). 11 ‘‘(2) SPECIAL RULES.—In applying subsection 12 (b) of this section for purposes of subsection (a) of 13 this section, the rules described under 835(c)(1) of 14 the Homeland Security Act of 2002 (6 U.S.C. 15 395(c)(1)) shall apply.’’. 16 (2) CLERICAL AMENDMENT.—The table of sec- 17 tions at the beginning of chapter 47 of title 41, 18 United States Code, is amended by inserting after 19 the item relating to section 4713 the following new 20 item: 21 ‘‘4714. Prohibition on awarding contracts to inverted domestic corporations.’’. (b) DEFENSE CONTRACTS.— 22 (1) IN GENERAL.—Chapter 137 of title 10, 23 United States Code, is amended by adding at the 24 end the following new section: 25 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 10 •HR 3802 IH ‘‘§ 2339. Prohibition on awarding contracts to in- 1 verted domestic corporations 2 ‘‘(a) PROHIBITION.— 3 ‘‘(1) IN GENERAL.—The head of an agency may 4 not award a contract for the procurement of prop- 5 erty or services to— 6 ‘‘(A) any foreign incorporated entity that 7 such head has determined is an inverted domes- 8 tic corporation or any subsidiary of such entity; 9 or 10 ‘‘(B) any joint venture if more than 10 11 percent of the joint venture (by vote or value) 12 is owned by a foreign incorporated entity that 13 such head has determined is an inverted domes- 14 tic corporation or any subsidiary of such entity. 15 ‘‘(2) SUBCONTRACTS.— 16 ‘‘(A) IN GENERAL.—The head of an execu- 17 tive agency shall include in each contract for 18 the procurement of property or services award- 19 ed by the executive agency with a value in ex- 20 cess of $10,000,000, other than a contract for 21 exclusively commercial items, a clause that pro- 22 hibits the prime contractor on such contract 23 from— 24 ‘‘(i) awarding a first-tier subcontract 25 with a value greater than 10 percent of the 26 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 11 •HR 3802 IH total value of the prime contract to an en- 1 tity or joint venture described in paragraph 2 (1); or 3 ‘‘(ii) structuring subcontract tiers in a 4 manner designed to avoid the limitation in 5 paragraph (1) by enabling an entity or 6 joint venture described in paragraph (1) to 7 perform more than 10 percent of the total 8 value of the prime contract as a lower-tier 9 subcontractor. 10 ‘‘(B) PENALTIES.—The contract clause in- 11 cluded in contracts pursuant to subparagraph 12 (A) shall provide that, in the event that the 13 prime contractor violates the contract clause— 14 ‘‘(i) the prime contract may be termi- 15 nated for default; and 16 ‘‘(ii) the matter may be referred to 17 the suspension or debarment official for 18 the appropriate agency and may be a basis 19 for suspension or debarment of the prime 20 contractor. 21 ‘‘(b) INVERTED DOMESTIC CORPORATION.— 22 ‘‘(1) IN GENERAL.—For purposes of this sec- 23 tion, a foreign incorporated entity shall be treated as 24 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 12 •HR 3802 IH an inverted domestic corporation if, pursuant to a 1 plan (or a series of related transactions)— 2 ‘‘(A) the entity completes on or after May 3 8, 2014, the direct or indirect acquisition of— 4 ‘‘(i) substantially all of the properties 5 held directly or indirectly by a domestic 6 corporation; or 7 ‘‘(ii) substantially all of the assets of, 8 or substantially all of the properties consti- 9 tuting a trade or business of, a domestic 10 partnership; and 11 ‘‘(B) after the acquisition, either— 12 ‘‘(i) more than 50 percent of the stock 13 (by vote or value) of the entity is held— 14 ‘‘(I) in the case of an acquisition 15 with respect to a domestic corpora- 16 tion, by former shareholders of the 17 domestic corporation by reason of 18 holding stock in the domestic corpora- 19 tion; or 20 ‘‘(II) in the case of an acquisition 21 with respect to a domestic partner- 22 ship, by former partners of the do- 23 mestic partnership by reason of hold- 24 VerDate Sep 11 2014 03:41 Aug 02, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3802.IH H3802 kjohnson on DSK79L0C42 with BILLS 13 •HR 3802 IH ing a capital or profits interest in the 1 domestic partnership; or 2 ‘‘(ii) the management and control of 3 the expanded affiliated group which in- 4 cludes the entity occurs, directly or indi- 5 rectly, primarily within the United States, 6 as determined pursuant to regulations pre- 7 scribed by the Secretary of the Treasury, 8 [Text truncated for display. Full text available on Congress.gov.]