Sen. Elizabeth Warren (D-Mass.) speaks to reporters outside the Senate chamber on March 21, 2026, in Washington, DC.
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Companies are declaring war on a provision in the must-pass defense bill that restricts Pentagon contractors from making stock buybacks and paying dividends without Pentagon approval, and are calling on Congress to repeal the provision before it reaches the president’s desk.
The U.S. Chamber of Commerce, along with 40 other business groups, sent a letter to Senate leaders Tuesday urging them to remove the measure from the bill, an annual defense policy package known as the National Defense Authorization Act. The Senate is scheduled to begin considering the bill this week.
The provision, known as Section 815, represents an unprecedented intrusion by the government into tens of thousands of companies that do business with the Department of Defense, the groups wrote. It would also be broadly applicable, without making a clear distinction between major defense contractors who manufacture missiles and food vendors.
“By prohibiting dividends, stock buybacks, and other capital distributions unless exempted by the government, Section 815 shifts responsibility for regular capital allocation decisions from corporate leadership to Washington,” the letter reads. “(We) call on the Senate to strike Section 815 and oppose any future efforts to use federal procurement policy to control legitimate corporate governance and capital.”
The push by the Chamber of Commerce and other groups, all representing Defense Department contractors, illustrates the threat this provision poses to business. The inclusion of Section 815 in a bill already approved by the Senate Armed Services Committee greatly increases the bill’s chances of becoming law and greatly reduces the likelihood that it will be stripped before a Senate vote.
The provision was pushed by Sen. Elizabeth Warren, D-Mass., and was included in the NDAA on a bipartisan basis, according to committee members who spoke to CNBC after the closed vote. Warren was leading a similar bill with Sens. Josh Hawley (R-Missouri) and Mike Lee (R-Utah).
Supporters say the bill aims to crack down on underperforming contractors and codify President Donald Trump’s January executive order banning stock buybacks and dividends for contractors who fall short of the Pentagon’s expectations. Warren said in an interview last month that the policy was aimed at “bringing some discipline to defense contractors that have been out of control for years.”
“It’s time to stop these contractors from putting Wall Street above national security,” Warren said in a statement.
“Instead of investing in our nation’s defense, giant military contractors defraud the government of billions of taxpayer dollars and line the pockets of their executives and shareholders,” she said.
When President Trump issued his executive order the month before he began war with Iran, he said he wanted to boost defense production and encourage companies to reinvest their profits.
Lawmakers have complained for decades that defense contractors are defrauding the federal government with lucrative projects that are over budget and over schedule. They argue that contractors pay themselves and their shareholders through stock buybacks and dividends before delivering to the military.
However, industry groups primarily view the legislative push as being more restrictive than the executive order. While the Executive Order is primarily perceived as a flexible behavioral intervention, Section 815 would be a stricter prohibition, subject to waivers that extend far beyond major military contractors.
“Section 815 gives the federal government an unprecedented role in the day-to-day financial decisions of businesses,” said Will Anderson, vice president of corporate governance at Business Roundtable, who signed the letter. “This proposal is far-reaching and would create new uncertainty for companies in a wide range of industries at the exact time when Congress should be removing barriers to participation in the defense industrial base, rather than creating new ones.”
Under the bill, the Department of Defense would be prohibited from entering into a contract with a contractor unless the contractor agrees in writing “not to purchase any equity securities of such entity that are listed on a national securities exchange” or “not to make any dividend payments or other capital distributions with respect to any equity securities of such entity.”
The provision is scheduled to take effect on June 15, 2027, and the Secretary of Defense may agree to waive the restrictions if the contractor provides a “qualified defense investment plan.”
That this provision was included in the basic text of a bill approved in committee with little opposition shows how far Republicans have strayed from traditional free-market traditions under President Trump. The Senate Armed Services Committee’s report on the bill indicates that the committee did not vote on Section 815 during the meeting, which approved it by an 18-9 vote, suggesting there was little disagreement.
The report includes a short note on this provision, stating that the committee “recommends a provision that would prohibit the Secretary of Defense from awarding contracts for goods or services beginning June 15, 2027, unless the contractor receives a waiver from the Secretary under a qualified defense investment program and agrees not to purchase equity securities, pay dividends, or make other capital distributions with respect to equity securities.”
However, lobbying against this provision appears to be gaining support from some members of the Senate Armed Services Committee.
Sen. Mike Rounds, R.S., speaks with reporters at the U.S. Capitol on Tuesday, March 3, 2026.
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Sen. Mike Rounds (R.S.D.) told CNBC on Monday that the provision goes “further” than he believes.
“I don’t like it when politicians inevitably tell businessmen how to build their businesses,” said Rounds, a member of the Armed Services Committee. “I think once you get to the point where you’re trying to tell companies how to do business, you end up going further than you need to.”
Rounds noted that provisions restricting capital controls could cause the United States to miss out on “the benefits of creating further investment opportunities that could be used to continue the rebuilding of needed industrial parks.”
The organizations that wrote the letter agree, arguing that “restrictions on capital distribution will therefore not generate additional investment, but only prevent capital from being allocated to its highest value uses.”
To remove the provision from the Senate bill at this time, an amendment to remove it would need to be approved by the floor. That is highly unlikely, given that lawmakers from both parties support the effort and the 60-vote threshold required for amendments.
However, differences between the Senate’s version of the NDAA and the House’s version still need to be reconciled. The House is deadlocked over the bill. That version does not include share buyback and dividend provisions, so it will be debated between both chambers.
“That means there’s a good chance it could be modified or changed,” Lowndes said.
