HR7424-119

What This Bill Does

The bill adds parallel restrictions to title 41 and title 10. Executive agencies and defense agencies may not award covered procurement contracts to foreign-incorporated entities treated as inverted domestic corporations, their subsidiaries, or joint ventures more than 10 percent owned by them. For noncommercial contracts above $10 million, prime contractors must also avoid first-tier subcontracts above 10 percent of the prime contract value and may not structure lower-tier work to evade that limit. The bill defines inverted domestic corporations through post-May 8, 2014 acquisition tests, 50-percent former-owner tests, U.S. management-and-control tests, and 25-percent domestic business-activity measures, while allowing national-security and health/public-health waivers with congressional notice within 14 days.

Who Benefits and How

Domestic corporations that have not inverted benefit from reduced competition for federal procurement dollars. Federal taxpayers and procurement officials benefit from a clearer rule that keeps federal contracts from rewarding companies that shifted incorporation offshore while retaining substantial U.S. ownership or management. Congressional defense and appropriations committees benefit from required waiver notices.

Who Bears the Burden and How

Foreign-incorporated inverted corporations, their subsidiaries, and joint ventures lose access to covered federal contracts and large covered subcontracts unless a waiver applies. Prime contractors on covered contracts above $10 million must police first-tier and lower-tier subcontracting structures, and agencies must make inversion determinations, insert clauses, process waivers, and refer violations for default termination, suspension, or debarment.

Key Provisions

• Prohibits covered executive-agency contracts for inverted domestic corporations, subsidiaries, and joint ventures with more than 10 percent inverted-corporation ownership.
• Requires contracts above $10 million to include subcontract clauses limiting first-tier or evasion-structured subcontract work by inverted corporations to no more than 10 percent of prime contract value.
• Defines inversion status using post-May 8, 2014 acquisition transactions, former shareholder or partner ownership above 50 percent, U.S. management control, and 25 percent domestic employee, compensation, asset, or income tests.
• Allows national-security and health/public-health waivers, but requires written congressional notification within 14 days.
• Creates a parallel Defense Department procurement restriction under title 10 covering FAR and DFARS-regulated contracts and task or delivery orders issued after enactment.