Business Groups Push Back on Defense Bill Provision

A coalition of more than 40 business and trade organizations is pushing back against a provision in the must-pass annual defense policy bill that bars Pentagon contractors from executing stock buybacks or paying dividends without approval from the U.S. Defense Department.

Section 815 of the fiscal 2027 National Defense Authorization Act was approved by the Senate Armed Services Committee on a bipartisan basis.

It requires defense contractors to submit a “qualified defense investment plan” outlining efforts to expand production capacity.

Companies that fail to meet Pentagon performance requirements could face restrictions on dividends, share repurchases, and other capital distributions without a government waiver.

The provision also seeks to codify an executive order signed by President Donald Trump in January that sought to restrict buybacks, dividends, and certain executive compensation practices among contractors that fail to invest adequately in production capacity.

Unlike Trump’s original executive order, which restricted distributions only for underperforming contractors on critical programs, Section 815 applies to essentially every Pentagon contractor regardless of performance or contract size.

Letter

The U.S. Chamber of Commerce sent a letter July 14 to Senate leadership and leaders of the Armed Services Committee, joined by more than 40 other trade associations, urging lawmakers to strike the provision from the bill entirely.

The letter argues that by prohibiting dividends, share repurchases, and other capital distributions without a government waiver, Section 815 shifts responsibility for ordinary capital allocation decisions from corporate leadership to Washington.

Section 815 shifts responsibility for ordinary capital allocation decisions from corporate leadership to Washington.

The coalition urged the Senate to strike the section and to oppose future efforts to use federal procurement policy to control lawful corporate governance and capital decisions.

The letter also raises concerns about the provision’s broad scope.

The lack of a dollar threshold sweeps in companies with minimal defense business, and it will harm pass-through entities and employee stock ownership plans that rely on distributions—potentially barring entire categories of organizations, including partnerships, from doing business with the Pentagon.