Senator Elizabeth Warren, D-Mass., speaks to reporters outside the Senate chamber in Washington, DC, on March 21, 2026.
Tasos Catopodis | getty images
Business is declaring war on a provision included in a must-pass defense bill that would prohibit Pentagon contractors from executing stock buybacks and paying dividends unless they have Defense Department approval, and is asking Congress to eliminate the provision before it reaches the President’s desk.
The US Chamber of Commerce, along with 40 other business groups, sent a letter On Tuesday, Senate leaders urged him to remove the measure from the bill — an annual defense policy package called the National Defense Authorization Act. The Senate is scheduled to begin consideration of the measure this week.
The groups wrote that this provision, known as Section 815, would be an unprecedented intrusion by the government into the thousands of companies doing business with the Pentagon. This would also be broadly applicable, with no clear distinction between a major defense contractor making missiles and a food seller.
“By prohibiting dividends, share repurchases, and other capital distributions in the absence of a government waiver, Section 815 would shift responsibility for general capital allocation decisions from corporate leadership to Washington,” the letter reads. “(W)e urge the Senate to strike down Section 815 and to oppose future efforts to use federal procurement policy to curtail otherwise legitimate corporate governance and capital.”
Pressure from the Chamber and other groups representing Pentagon contractors exemplifies the threat to business posed by this provision. Including Section 815 in the bill, which has already been approved by the Senate Armed Services Committee, significantly increases its chances of becoming law and significantly reduces the chances of it being removed before a Senate vote.
According to committee members who spoke to CNBC after the closed-door vote, the provision was pushed by Senator Elizabeth Warren, D-Mass., and included in the NDAA on a bipartisan basis. Warren had similar leadership Bill With Sens. Josh Hawley, R-Mo., and Mike Lee, R-Utah.
Supporters say it is intended to crack down on poorly performing contractors and codify President Donald Trump’s January executive order barring buybacks and dividends for contractors performing below DOD expectations. Warren described the policy in an interview last month, saying it was intended to “bring a small amount of discipline to these defense contractors who have been running wild for years.”
“It’s time to stop these contractors from putting Wall Street above our national security,” Warren said in a statement.
He said, “Giant military contractors are siphoning billions of taxpayer dollars from our government and lining the pockets of their executives and shareholders instead of investing in our national defense.”
Trump issued the executive order a month before launching the war against Iran, saying he wanted to boost defense production and encourage companies to reinvest earnings.
lawmakers have stuck for decades Defense contractors have pressured the federal government on lucrative projects that are over budget and over schedule. They argue that contractors are paying themselves and their shareholders through stock buybacks and dividends before delivery to the military.
Industry groups largely face legislative pressure to be more restrictive executive OrderHowever. While the executive order was largely conceived as a flexible behavioral intervention, there will be a strict prohibition on Section 815 waivers that reaches far beyond major military contractors.
“Section 815 would give the federal government an unprecedented role in companies’ routine financial decisions,” said Will Anderson, vice president of corporate governance at the Business Roundtable, who signed the letter. “The proposal is far-reaching and will create new uncertainty for companies in a wide range of industries, at exactly the time when Congress should be removing barriers to participation in the defense industrial base – not creating new ones.”
Under the bill, the Pentagon would be prohibited from entering into contracts with contractors unless the contractor agrees in writing “not to purchase an equity security of such entity, or any parent unit of such entity, that is listed on a national securities exchange” or “pay dividends or make any other capital distribution with respect to equity securities of the entity.”
The provision will be effective from June 15, 2027. The Secretary of Defense may agree to waive the limit if the contractor provides a “qualified defense investment plan.”
That this provision made it into the base text of the committee-approved bill, if not a dissent, reflects how far Republicans have been pushed away from their traditional free-market conservatism under the Trump presidency. Senate Armed Services Committee report The bill shows that the panel did not vote on Section 815 during the meeting, where it was approved by an 18-9 vote, meaning there was little disagreement.
The report includes a brief note on the provision, stating that the Committee “recommends a provision that, beginning June 15, 2027, would prohibit the Secretary of Defense from entering into a contract for goods or services unless the contractor agrees not to purchase equity securities, pay dividends, or make any other capital distribution with respect to the equity securities, unless the contractor receives a waiver from the Secretary of Defense based on a qualified defense investment plan.”
But lobbying pressure against the provision appears to be winning over some members of the Senate Armed Services Committee.
Senator Mike Rounds, R-S.D., speaks to reporters at the U.S. Capitol on Tuesday, March 3, 2026.
Tom Williams | CQ-Roll Call, Inc. | getty images
Sen. Mike Rounds, R-S.D. told CNBC on Monday that the provision “goes further” than he is comfortable with.
“I don’t like it when politicians are telling businessmen how to build their businesses,” said Rounds, a member of the Armed Services Committee. “Anytime you start trying to tell businesses how to do business, I think you’re going further than you should.”
Rounds noted that the provision restricting capital management could cause the US to “miss out on the benefits that they see in creating opportunities for more investment that we can use to continue to rebuild the industrial complex that we need.”
The groups that wrote the letter agree that “(r)limiting capital distribution does not create additional investment; it simply prevents capital from being allocated to its highest-value use.”
Removing the provision from the Senate bill at this point would require that an amendment to remove it be approved in the House. This is highly unlikely, given that members of both parties support the effort and an amendment would be subject to a 60-vote threshold.
But differences between the Senate NDAA version would still need to be reconciled with the House version. The House is stuck in a deadlock over the bill. Its version does not include buyback and dividend provisions, meaning it will be subject to debate between the two Houses.
“That means there’s a good chance it has either been modified or changed,” Rounds said.