No Federal Contracts for Corporate Deserters Act of 2014 - Prohibits an executive agency from awarding a contract (including a defense contract) to: (1) any foreign incorporated entity determined to be an inverted domestic corporation or any subsidiary of such entity, or (2) any joint venture more than 10% of which is held by such an entity or subsidiary.
Directs each agency to include in each contract awarded with a value in excess of $10 million, other than a contract for exclusively commercial items, a clause that prohibits the prime contractor from: (1) awarding a first-tier subcontract with a value greater than 10% of the total prime contract to such an entity or joint venture, or (2) structuring subcontract tiers enabling such entity or joint venture to perform more than 10% of the total value of the prime contract.
Authorizes an agency to waive such requirements for a contract in the interest of national security. Provides for termination of a contract or suspension or debarment of a contractor in violation of this Act.
Requires a foreign incorporated entity to be treated as an inverted domestic corporation if: (1) the entity acquires, on or after May 8, 2014, substantially all of the properties held by a domestic corporation or substantially all of the assets of, or substantially all of the properties constituting a trade or business of, a domestic partnership; and (2) after the acquisition, either more than 50% of the stock of the entity is held by former shareholders of the domestic corporation or former partners of the domestic partnership, or the management and control of the expanded affiliated group which includes the entity occurs primarily within the United States and such expanded affiliated group has significant domestic business activities. Sets forth an exception for an entity within an expanded affiliated group with substantial business activities in the foreign country in which the entity is created.
Requires the Secretary of the Treasury to prescribe regulations for determining cases in which the management and control of an expanded affiliated group is to be treated as occurring primarily within the United States.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5278 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 5278
To prohibit the award of Federal Government contracts to inverted
domestic corporations, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 30, 2014
Ms. DeLauro (for herself, Mr. Doggett, and Mr. Levin) introduced the
following bill; which was referred to the Committee on Oversight and
Government Reform, and in addition to the Committee on Armed Services,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction 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 Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``No Federal Contracts for Corporate
Deserters Act of 2014''.
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. 4713. Prohibition on awarding contracts to inverted domestic
corporations
``(a) Prohibition.--
``(1) In general.--The head of an executive agency may not
award a contract 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 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 before, 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 May
8, 2014.
``(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 May 8, 2014, 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 required in the interest of
national security.
``(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.
``(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 4712
the following new item:
``4713. Prohibition on awarding contracts to inverted domestic
corporations.''.
(b) Defense Contracts.--
(1) In general.--Chapter 137 of title 10, United States
Code, is amended by adding at the end the following new
section:
``Sec. 2338. Prohibition on awarding contracts to inverted domestic
corporations
``(a) Prohibition.--
``(1) In general.--The head of an agency may not award a
contract 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 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 before, 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 May
8, 2014.
``(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 May 8, 2014, 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.
``(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 the
waiver to the Committees on Armed Services and 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.
``(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 137 of title 10, United States Code, is
amended by inserting after the item relating to section 2337
the following new item:
``2338. 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
4713(b)(1)(B)(ii) of title 41, United States Code, and section
2338(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.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Oversight and Government Reform, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Oversight and Government Reform, and in addition to the Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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