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

This section codifies in new 41 U.S.C. §4715, for civilian executive agency procurement, a prohibition—previously applicable only to Department of Homeland Security contracts—on awarding contracts for property or services to foreign-incorporated entities determined to be inverted domestic corporations (i.e., entities that acquire a U.S. corporation or partnership and retain substantial U.S. ownership or operations, typically to avoid U.S. taxes) or their subsidiaries, or to joint ventures more than 10% owned (by vote or value) by such entities. The section further requires inclusion of a clause in prime contracts exceeding $10 million (other than for exclusively commercial items) prohibiting first-tier subcontracts exceeding 10% of the prime contract's total value to such entities or joint ventures, or structuring lower-tier subcontracts to enable them to perform more than 10% of the total value; violations may result in prime contract termination for default and referral for suspension or debarment. The section updates the definition of inverted domestic corporation from current law by (1) limiting qualifying acquisitions to those completed on or after May 8, 2014 (from before, on, or after November 25, 2002); (2) lowering the ownership threshold to more than 50% of stock (by vote or value) held by former U.S. owners (from at least 80%); (3) adding an alternative test where the entity's expanded affiliated group is primarily managed and controlled in the U.S. with significant domestic business activities (i.e., at least 25% of employees, compensation, assets, or income based in the U.S.); and (4) providing an exception where the group has substantial business activities in the entity's foreign country of organization, as determined under Treasury regulations no more lenient than those under IRC §7874 as of January 18, 2017 (Thus, the changes align more closely with current tax inversion rules and capture additional entities with significant U.S. ties.) Agency heads may waive the prohibition for national security or the efficient administration of federal health benefits or public health programs.