[Congressional Record Volume 155, Number 43 (Wednesday, March 11, 2009)]
[Senate]
[Pages S3026-S3033]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. LEVIN (for himself, Mr. Grassley, and Mrs. McCaskill)
  S. 569. A bill to ensure that persons who form corporations in the 
United States disclose the beneficial owners of those corporations, in 
order to prevent wrongdoers from exploiting United States corporations 
for criminal gain, to assist law enforcement in detecting, preventing, 
and punishing terrorism, money laundering, and other misconduct 
involving United States corporations, and for other purposes; to the 
Committee on Homeland Security and Governmental Affairs.
  Mr. LEVIN. Mr. President, I am introducing today, with my colleagues 
Senator Grassley and Senator McCaskill, the Incorporation Transparency 
and Law Enforcement Assistance Act. This bill tackles a longstanding 
homeland security problem involving inadequate State incorporation 
practices that leave this country unnecessarily vulnerable to 
wrongdoers, hinders law enforcement, and damages the international 
stature of the United States.
  The problem is straightforward. Each year, our States allow persons 
to form nearly 2 million corporations and limited liability companies 
in this country without knowing, or even asking, who the beneficial 
owners are behind those corporations. Right now, a person forming a 
U.S. corporation or limited liability company, LLC, provides less 
information to the State than is required to open a bank account or 
obtain a driver's license. Instead, States routinely permit persons to 
form corporations and LLCs under State laws without disclosing the 
names of any of the people who will control or benefit from them.
  It is a fact that criminals are exploiting this weakness in our State 
incorporation practices. They are forming new U.S. corporations and 
LLCs, and using these entities to commit crimes ranging from drug 
trafficking, money laundering, tax evasion, financial fraud, and 
corruption.
  Law enforcement authorities investigating these crimes have 
complained loudly for years about the lack of beneficial ownership 
information. Last year, for example, the U.S. Department of the 
Treasury sent a letter to the States stating: ``the lack of 
transparency with respect to the individuals who control privately held 
for-profit legal entities created in the United States continues to 
represent a substantial vulnerability in the U.S. anti-money 
laundering/counter terrorist financing (AML/CFT) regime. . . . [T]he 
use of U.S. companies to mask the identity of criminals presents an 
ongoing and substantial problem . . . for U.S. and global law 
enforcement authorities.''
  Michael Chertoff, former Secretary of the U.S. Department of Homeland 
Security, wrote the following:

       In countless investigations, where the criminal targets 
     utilize shell corporations, the lack of law enforcement's 
     ability to gain access to true beneficial ownership 
     information slows, confuses or impedes the efforts by 
     investigators to follow criminal proceeds. This is the case 
     in financial fraud, terrorist financing and money laundering 
     investigations. . . . It is imperative that States maintain 
     beneficial ownership information while the company is active 
     and to have a set time frame for preserving those records. . 
     . . Shell companies can be sold and resold to several 
     beneficial owners in the course of a year or less. . . . By 
     maintaining records not only of the initial beneficial 
     ownership but of the subsequent beneficial owners, States 
     will provide law enforcement the tools necessary to clearly 
     identify the individuals who utilized the company at any 
     given period of time.

  These types of complaints by U.S. law enforcement, their pleas for 
assistance, and their warnings about the dangers of anonymous U.S. 
corporations operating here and abroad are catalogued in a stack of 
reports and hearing testimony from the Department of Justice, the 
Department of Homeland Security, the Financial Crimes Enforcement 
Network of the Department of the Treasury, the Internal Revenue 
Service, and others.
  To add insult to injury, our law enforcement officials have too often 
had to stand silent when asked by their counterparts in other countries 
for information about who owns a U.S. corporation committing crimes in 
their jurisdictions. The reality is that the United States can't answer 
those requests, because we don't have the information.
  Our bill would cure the problem by requiring State incorporation 
forms to include a request for the names of a corporation's beneficial 
owners. States would not be required to verify the information, but 
civil or criminal penalties would apply to persons who submitted false 
information. If law enforcement issued a subpoena or summons to obtain 
the ownership information, States would then supply the data contained 
on its forms.
  This bill has received the support of numerous law enforcement 
associations, including the Federal Law Enforcement Officers 
Association, the Fraternal Order of Police, the National Association of 
Assistant United States Attorneys, the National Narcotic Officers' 
Associations Coalition, the United States Marshals Service Association, 
and the Association of Former ATF Agents.
  The Federal Law Enforcement Officers Association, FLEOA, for example, 
which represents more than 26,000 Federal law enforcement officers, 
states that ``the unfortunate lax attitude demonstrated by certain 
states has enabled large criminal enterprises to exploit those state's 
flawed filing systems.'' FLEOA goes on:

       We regard corporate ownership in the same manner as we do 
     vehicle ownership. Requiring the driver of a vehicle to have 
     a registration and insurance card is not a violation of their 
     privacy. This information does not need to be published in a 
     Yellow Pages, but it should be available to law enforcement 
     officers who make legally authorized requests pursuant to 
     official investigations.

  The National Association of Assistant United States Attorneys, 
NAAUSA, which represents more than 1,500 Federal prosecutors, urges 
Congress to take legislative action to remedy inadequate State 
incorporation practices. NAAUSA states:

       [M]indful of the ease with which criminals establish `front 
     organizations' to assist in money laundering, terrorist 
     financing, tax

[[Page S3027]]

     evasion and other misconduct, it is shocking and unacceptable 
     that many State laws permit the creation of corporations 
     without asking for the identity of the corporation's 
     beneficial owners. Your legislation will guard against that 
     from happening, and no longer permit criminals to exploit the 
     lack of transparency in the registration of corporations.

  Our bill was also endorsed by President Obama during the last 
Congress when he was a member of the U.S. Senate and served as an 
original cosponsor of the predecessor bill, S. 2956.
  In 2006, the leading international anti-money laundering body in the 
world, the Financial Action Task Force on Money Laundering--known as 
FATF--issued a report criticizing the United States for its failure to 
comply with a FATF standard requiring countries to obtain beneficial 
ownership information for the corporations formed under their laws. 
This standard is one of 40 FATF standards that this country has 
publicly committed itself to implementing as part of its efforts to 
promote strong anti-money laundering laws around the world.
  FATF gave the United States 2 years, until July 2008, to make 
progress toward coming into compliance with the FATF standard on 
beneficial ownership information. That deadline passed long ago, and we 
have yet to make any real progress. Enacting the bill we are 
introducing today would bring the United States into compliance with 
the FATF standard by requiring the States to obtain beneficial 
ownership information for the corporations formed under their laws. It 
would ensure that the United States met its international commitment to 
comply with FATF anti-money laundering standards.
  The bill being introduced today is also the product of years of work 
by the U.S. Senate Permanent Subcommittee on Investigations, which I 
chair. As long ago as 2000, the Government Accountability Office, GAO, 
at my request, conducted an investigation and released a report 
entitled, ``Suspicious Banking Activities: Possible Money Laundering by 
U.S. Corporations Formed for Russian Entities.'' This report revealed 
that one person was able to set up more than 2,000 Delaware shell 
corporations and, without disclosing the identity of the beneficial 
owners, open U.S. bank accounts for those corporations, which then 
collectively moved about $1.4 billion through the accounts. It is one 
of the earliest government reports to give some sense of the law 
enforcement problems caused by U.S. corporations with unknown owners. 
It sounded the alarm years ago but to little avail.
  In April 2006, in response to a Subcommittee request, GAO released a 
second report entitled, ``Company Formations: Minimal Ownership 
Information Is Collected and Available,'' which reviewed the corporate 
formation laws in all 50 States. GAO disclosed that the vast majority 
of the States do not collect any information at all on the beneficial 
owners of the corporations and LLCs formed under their laws. The report 
also found that many States have established automated procedures that 
allow a person to form a new corporation or LLC within the State within 
24 hours of filing an online application without any prior review of 
that application by a State official. In exchange for a substantial 
fee, at least two States will form a corporation or LLC within one hour 
of a request. After examining these State incorporation practices, the 
GAO report described the problems that the lack of beneficial ownership 
information has caused for a range of law enforcement investigations.
  In November 2006, our subcommittee held a hearing further exploring 
this issue. At that hearing, representatives of the U.S. Department of 
Justice, DOJ, the Internal Revenue Service, IRS, and the Department of 
Treasury's Financial Crimes Enforcement Network, FinCEN, testified that 
the failure of States to collect adequate information on the beneficial 
owners of the legal entities they form has impeded Federal efforts to 
investigate and prosecute criminal acts such as terrorism, money 
laundering, securities fraud, and tax evasion. At the hearing, DOJ 
testified:

       We had allegations of corrupt foreign officials using these 
     [U.S.] shell accounts to launder money, but were unable--due 
     to lack of identifying information in the corporate records--
     to fully investigate this area.

  The IRS testified:

       Within our own borders, the laws of some states regarding 
     the formation of legal entities have significant transparency 
     gaps which may even rival the secrecy afforded in the most 
     attractive tax havens.

  FinCEN identified 768 incidents of suspicious international wire 
transfer activity involving U.S. shell companies.
  In addition, in a list of the ``Dirty Dozen'' tax scams in 2007, the 
IRS highlighted shell companies with unknown owners as number four on 
the list, as follows:

       4. Disguised Corporate Ownership: Domestic shell 
     corporations and other entities are being formed and operated 
     in certain states for the purpose of disguising the ownership 
     of the business or financial activity. Once formed, these 
     anonymous entities can be, and are being, used to facilitate 
     underreporting of income, non-filing of tax returns, listed 
     transactions, money laundering, financial crimes and possibly 
     terrorist financing. The IRS is working with state 
     authorities to identify these entities and to bring their 
     owners into compliance.

  That is not all. Dozens of Internet websites advertising corporate 
formation services highlight the fact that some of our States allow 
corporations to be formed under their laws without asking for the 
identity of the beneficial owners. These Web sites explicitly point to 
anonymous ownership as a reason to incorporate within the United 
States, and often list certain States alongside notorious offshore 
jurisdictions as preferred locations for the formation of new 
corporations, essentially providing an open invitation for wrongdoers 
to form entities within the United States.
  One Web site, for example, set up by an international incorporation 
firm, advocates setting up companies in Delaware by saying: 
``DELAWARE--An Offshore Tax Haven for Non U.S. Residents.'' It cites as 
one of Delaware's advantages that: ``Owners' names are not disclosed to 
the state.'' Another Web site, from a U.K. firm called 
``formacompanyoffshore.com,'' lists the advantages to incorporating in 
Nevada. Those advantages include: ``No I.R.S. Information Sharing 
Agreement'' and ``Stockholders are not on Public Record allowing 
complete anonymity.''

  Despite this type of advertising, years of law enforcement 
complaints, and mounting evidence of abuse, many of our States are 
reluctant to admit there is a problem with establishing U.S. 
corporations and LLCs with unknown owners. Too many of our States are 
eager to explain how quick and easy it is to set up corporations within 
their borders, without acknowledging that those same quick and easy 
procedures enable wrongdoers to utilize U.S. corporations in a variety 
of crimes and tax dodges both here and abroad.
  Since 2006, the subcommittee has worked with the States to encourage 
them to recognize the homeland security problem they have created and 
to come up with their own solution. After the subcommittee's hearing on 
this issue, for example, the National Association of Secretaries of 
State, NASS, convened a 2007 task force to examine state incorporation 
practices. At the request of NASS and several States, I delayed 
introducing legislation while they worked on a proposal to require the 
collection of beneficial ownership information. My subcommittee staff 
participated in multiple conferences, telephone calls, and meetings; 
suggested key principles; and provided comments to the task force.
  In July 2007, the NASS task force issued a proposal. Rather than cure 
the problem, however, the proposal was full of deficiencies, leading 
the Treasury Department to state in a letter that the NASS proposal 
``falls short'' and ``does not fully address the problem of legal 
entities masking the identity of criminals.''
  Among other shortcomings, the NASS proposal does not require States 
to obtain the names of the natural individuals who would be the 
beneficial owners of a U.S. corporation or LLC. Instead, it would allow 
States to obtain a list of a company's ``owners of record'' who can be, 
and often are, offshore corporations or trusts. The NASS proposal also 
doesn't require the States themselves to maintain the beneficial 
ownership information, or to supply it to law enforcement upon receipt 
of a subpoena or summons. The proposal also fails to require the 
beneficial ownership information to be updated over time. These and 
other flaws in the proposal have been identified by the

[[Page S3028]]

Treasury Department, the Department of Justice, me, and others, but 
NASS has given no indication that the flaws will be corrected.
  It is deeply disappointing that the States, despite the passage of 
more than 1 year, were unable to devise an effective proposal. Part of 
the difficulty is that the States have a wide range of practices, 
differ on the extent to which they rely on incorporation fees as a 
major source of revenue, and differ on the extent to which they attract 
non-U.S. persons as incorporators. In addition, the States are 
competing against each other to attract persons who want to set up U.S. 
corporations, and that competition creates pressure for each individual 
State to favor procedures that allow quick and easy incorporations. It 
is a classic case of competition causing a race to the bottom, making 
it difficult for any one State to do the right thing and request the 
names of beneficial owners.
  That is why we are introducing Federal legislation today. Federal 
legislation is needed to level the playing field among the States, set 
minimum standards for obtaining beneficial ownership information, put 
an end to the practice of States forming millions of legal entities 
each year without knowing who is behind them, and bring the United 
States into compliance with its international commitments.
  The bill's provisions would require the States to obtain a list of 
the beneficial owners of each corporation or LLC formed under their 
laws, to maintain this information for 5 years after the corporation is 
terminated, and to provide the information to law enforcement upon 
receipt of a subpoena or summons. If enacted, this bill would ensure, 
for the first time, that law enforcement seeking beneficial ownership 
information from a State about one of its corporations or LLCs would 
not be turned away empty-handed.
  The bill would also require corporations and LLCs to update their 
beneficial ownership information in an annual filing with the State of 
incorporation. If a State did not require an annual filing, the 
information would have to be updated each time the beneficial ownership 
changed.
  In the special case of U.S. corporations formed by non-U.S. persons, 
the bill would go farther. Following the lead of the Patriot Act which 
imposed additional due diligence requirements on certain financial 
accounts opened by non-U.S. persons, our bill would require additional 
due diligence for corporations beneficially owned by non-U.S. persons. 
This added due diligence would have to be performed--not by the 
States--but by the persons seeking to establish the corporations. These 
incorporators would have to file with the State a written certification 
from a corporate formation agent residing within the State attesting to 
the fact that the agent had verified the identity of the non-U.S. 
beneficial owners of the corporation by obtaining their names, 
addresses, and passport photographs. The formation agent would be 
required to retain this information for a specified period of time and 
produce it upon request.
  The bill would not require the States to verify the ownership 
information provided to them by a formation agent, corporation, LLC, or 
other person filing an incorporation application. Instead, the bill 
would establish Federal civil and criminal penalties for anyone who 
knowingly provided a State with false beneficial ownership information 
or intentionally failed to provide the State with the information 
requested.
  The bill would also exempt certain corporations from the disclosure 
obligation. For example, it would exempt all publicly traded 
corporations and the entities they form, since these corporations are 
already overseen by the Security and Exchange Commission. It would also 
allow the States, with the written concurrence of the Homeland Security 
Secretary and the U.S. Attorney General, to identify certain 
corporations, either individually or as a class, which would not have 
to list their beneficial owners, if requiring such ownership 
information would not serve the public interest or assist law 
enforcement in their investigations. These exemptions are expected to 
be narrowly drawn and used sparingly, but are intended to provide the 
States and Federal law enforcement added flexibility to fine-tune the 
disclosure obligation and focus it where it is most needed to stop 
crime, tax evasion, and other wrongdoing.

  Another area of flexibility in the bill involves privacy issues. The 
bill deliberately does not take a position on the issue of whether the 
States should make the beneficial ownership information they receive 
available to the public. Instead, the bill leaves it entirely up to the 
States to decide whether and under what circumstances to make 
beneficial ownership information available to the public. The bill 
explicitly permits the States to place restrictions on providing 
beneficial ownership information to persons other than government 
officials. The bill focuses instead on ensuring that law enforcement 
and Congress, provided they are equipped with a subpoena or summons, 
are given ready access to the beneficial ownership information 
collected by the States.
  To ensure that the States have the funds needed to meet the new 
beneficial ownership information requirements, the bill makes it clear 
that States can use their DHS state grant funds for this purpose. Every 
State is guaranteed a minimum amount of DHS grant funds every year and 
may receive funds substantially above that minimum. Every State will be 
able to use all or a portion of these funds to modify their 
incorporation practices to meet the requirements in the act. The bill 
also authorizes DHS to use appropriated funds to carry out its 
responsibilities under the act. These provisions will ensure that the 
States have the funds needed for the modest compliance costs involved 
with amending their incorporation forms to request the names of 
beneficial owners.
  It is common for bills establishing Federal standards to seek to 
ensure State action by making some Federal funding dependent upon a 
State's meeting the specified standards. This bill, however, states 
explicitly that nothing in the bill authorizes DHS to withhold funds 
from a State for failing to modify its incorporation practices to meet 
the beneficial ownership information requirements in the act. Instead, 
the bill simply calls for a GAO report in 2013 to identify which 
States, if any, have failed to strengthen their incorporation practices 
as required by the act. After getting this status report, a future 
Congress can decide what steps to take, including whether to reduce any 
DHS funding going to the noncompliant States.
  Finally, the bill would require the U.S. Department of the Treasury 
to issue a rule requiring formation agents to establish anti-money 
laundering programs to ensure they are not forming U.S. corporations or 
LLCs for criminals or other wrongdoers. GAO would also be asked to 
conduct a study of existing State formation procedures for partnerships 
and trusts.
  We have worked hard to craft a bill that would address, in a fair and 
reasonable way, the homeland security problem created by States 
allowing the formation of millions of U.S. corporations and LLCs with 
unknown owners. What the bill comes down to is a simple requirement 
that States change their incorporation applications to add a question 
requesting the names and addresses of the prospective beneficial 
owners. That is not too much to ask to protect this country and the 
international community from wrongdoers seeking to misuse U.S. 
corporations and to help law enforcement stop those wrongdoers.
  For those who say that, if the United States tightens its 
incorporation rules, new companies will be formed elsewhere, it is 
appropriate to ask exactly where they will go. Every country in the 
European Union is already required to get beneficial information for 
the corporations formed under their laws. Most offshore jurisdictions 
already request this information as well, including the Bahamas, Cayman 
Islands, Jersey, and the Island of Man. Our States should be asking for 
the same ownership information, but they don't, and there is no 
indication that they will any time in the near future, unless required 
to do so.
  I wish Federal legislation weren't necessary. I wish the States could 
solve this homeland security problem on their own, but ongoing 
competitive pressures make it unlikely that the States will reach 
agreement. It has been more than 2 years since our 2006 hearing with no 
real progress to show for it, despite repeated pleas from law 
enforcement.

[[Page S3029]]

  Federal legislation is necessary to reduce the vulnerability of the 
United States to wrongdoing by U.S. corporations with unknown owners, 
to protect interstate and international commerce from criminals 
misusing U.S. corporations, to strengthen the ability of law 
enforcement to investigate suspect U.S. corporations, to level the 
playing field among the States, and to bring the United States into 
compliance with its international anti-money laundering obligations.
  There is also an issue of consistency. For years, I have been 
fighting offshore corporate secrecy laws and practices that enable 
wrongdoers to secretly control offshore corporations involved in money 
laundering, tax evasion, and other misconduct. I have pointed out on 
more than one occasion that corporations were not created to hide 
ownership, but to shield owners from personal liability for corporate 
acts. Unfortunately, today, the corporate form has too often been 
corrupted into serving those wishing to conceal their identities and 
commit crimes or dodge taxes without alerting authorities. It is past 
time to stop this misuse of the corporate form. But if we want to stop 
inappropriate corporate secrecy offshore, we need to stop it here at 
home as well.
  For these reasons, I urge my colleagues to support this legislation 
and put an end to incorporation practices that promote corporate 
secrecy and render the United States and other countries vulnerable to 
abuse by U.S. corporations with unknown owners.
  As I mentioned earlier, in the 110th Congress, then-Senator Obama was 
an original cosponsor of this legislation. I look forward to working 
with President Obama to ensure this homeland security bill is enacted 
into law.
  I thank my cosponsor, Senator Grassley, who has been such a leader in 
this effort for so long, as he has in so many other good government 
initiatives. I also thank Senator McCaskill for her cosponsorship.
  Mr. President, I ask unanimous consent that the text of the bill and 
a bill summary be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 569

       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 ``Incorporation Transparency 
     and Law Enforcement Assistance Act''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Nearly 2,000,000 corporations and limited liability 
     companies are being formed under the laws of the States each 
     year.
       (2) Very few States obtain meaningful information about the 
     beneficial owners of the corporations and limited liability 
     companies formed under their laws.
       (3) A person forming a corporation or limited liability 
     company within the United States typically provides less 
     information to the State of incorporation than is needed to 
     obtain a bank account or driver's license and typically does 
     not name a single beneficial owner.
       (4) Criminals have exploited the weaknesses in State 
     formation procedures to conceal their identities when forming 
     corporations or limited liability companies in the United 
     States, and have then used the newly created entities to 
     commit crimes affecting interstate and international commerce 
     such as terrorism, drug trafficking, money laundering, tax 
     evasion, securities fraud, financial fraud, and acts of 
     foreign corruption.
       (5) Law enforcement efforts to investigate corporations and 
     limited liability companies suspected of committing crimes 
     have been impeded by the lack of available beneficial 
     ownership information, as documented in reports and testimony 
     by officials from the Department of Justice, the Department 
     of Homeland Security, the Financial Crimes Enforcement 
     Network of the Department of the Treasury, the Internal 
     Revenue Service, and the Government Accountability Office, 
     and others.
       (6) In July 2006, a leading international anti-money 
     laundering organization, the Financial Action Task Force on 
     Money Laundering (in this section referred to as the 
     ``FATF''), of which the United States is a member, issued a 
     report that criticizes the United States for failing to 
     comply with a FATF standard on the need to collect beneficial 
     ownership information and urged the United States to correct 
     this deficiency by July 2008.
       (7) In response to the FATF report, the United States has 
     repeatedly urged the States to strengthen their incorporation 
     practices by obtaining beneficial ownership information for 
     the corporations and limited liability companies formed under 
     the laws of such States.
       (8) Many States have established automated procedures that 
     allow a person to form a new corporation or limited liability 
     company within the State within 24 hours of filing an online 
     application, without any prior review of the application by a 
     State official. In exchange for a substantial fee, 2 States 
     will form a corporation within 1 hour of a request.
       (9) Dozens of Internet websites highlight the anonymity of 
     beneficial owners allowed under the incorporation practices 
     of some States, point to those practices as a reason to 
     incorporate in those States, and list those States together 
     with offshore jurisdictions as preferred locations for the 
     formation of new corporations, essentially providing an open 
     invitation to criminals and other wrongdoers to form entities 
     within the United States.
       (10) In contrast to practices in the United States, all 
     countries in the European Union are required to identify the 
     beneficial owners of the corporations they form.
       (11) To reduce the vulnerability of the United States to 
     wrongdoing by United States corporations and limited 
     liability companies with unknown owners, to protect 
     interstate and international commerce from criminals misusing 
     United States corporations and limited liability companies, 
     to strengthen law enforcement investigations of suspect 
     corporations and limited liability companies, to set minimum 
     standards for and level the playing field among State 
     incorporation practices, and to bring the United States into 
     compliance with its international anti-money laundering 
     obligations, Federal legislation is needed to require the 
     States to obtain beneficial ownership information for the 
     corporations and limited liability companies formed under the 
     laws of such States.

     SEC. 3. TRANSPARENT INCORPORATION PRACTICES.

       (a) Transparent Incorporation Practices.--
       (1) In general.--Subtitle A of title XX of the Homeland 
     Security Act of 2002 (6 U.S.C. 601 et seq.) is amended by 
     adding at the end the following:

     ``SEC. 2009. TRANSPARENT INCORPORATION PRACTICES.

       ``(a) Incorporation Systems.--
       ``(1) In general.--To protect the security of the United 
     States, each State that receives funding from the Department 
     under section 2004 shall, not later than the beginning of 
     fiscal year 2012, use an incorporation system that meets the 
     following requirements:
       ``(A) Each applicant to form a corporation or limited 
     liability company under the laws of the State is required to 
     provide to the State during the formation process a list of 
     the beneficial owners of the corporation or limited liability 
     company that--
       ``(i) identifies each beneficial owner by name and current 
     address; and
       ``(ii) if any beneficial owner exercises control over the 
     corporation or limited liability company through another 
     legal entity, such as a corporation, partnership, or trust, 
     identifies each such legal entity and each such beneficial 
     owner who will use that entity to exercise control over the 
     corporation or limited liability company.
       ``(B) Each corporation or limited liability company formed 
     under the laws of the State is required by the State to 
     update the list of the beneficial owners of the corporation 
     or limited liability company by providing the information 
     described in subparagraph (A)--
       ``(i) in an annual filing with the State; or
       ``(ii) if no annual filing is required under the law of 
     that State, each time a change is made in the beneficial 
     ownership of the corporation or limited liability company.
       ``(C) Beneficial ownership information relating to each 
     corporation or limited liability company formed under the 
     laws of the State is required to be maintained by the State 
     until the end of the 5-year period beginning on the date that 
     the corporation or limited liability company terminates under 
     the laws of the State.
       ``(D) Beneficial ownership information relating to each 
     corporation or limited liability company formed under the 
     laws of the State shall be provided by the State upon receipt 
     of--
       ``(i) a civil or criminal subpoena or summons from a State 
     agency, Federal agency, or congressional committee or 
     subcommittee requesting such information; or
       ``(ii) a written request made by a Federal agency on behalf 
     of another country under an international treaty, agreement, 
     or convention, or section 1782 of title 28, United States 
     Code.
       ``(2) Non-united states beneficial owners.--To further 
     protect the security of the United States, each State that 
     accepts funding from the Department under section 2004 shall, 
     not later than the beginning of fiscal year 2012, require 
     that, if any beneficial owner of a corporation or limited 
     liability company formed under the laws of the State is not a 
     United States citizen or a lawful permanent resident of the 
     United States, each application described in paragraph (1)(A) 
     and each update described in paragraph (1)(B) shall include a 
     written certification by a formation agent residing in the 
     State that the formation agent--
       ``(A) has verified the name, address, and identity of each 
     beneficial owner that is not a United States citizen or a 
     lawful permanent resident of the United States;

[[Page S3030]]

       ``(B) has obtained for each beneficial owner that is not a 
     United States citizen or a lawful permanent resident of the 
     United States a copy of the page of the government-issued 
     passport on which a photograph of the beneficial owner 
     appears;
       ``(C) will provide proof of the verification described in 
     subparagraph (A) and the photograph described in subparagraph 
     (B) upon request; and
       ``(D) will retain information and documents relating to the 
     verification described in subparagraph (A) and the photograph 
     described in subparagraph (B) until the end of the 5-year 
     period beginning on the date that the corporation or limited 
     liability company terminates, under the laws of the State.
       ``(b) Penalties for False Beneficial Ownership 
     Information.--In addition to any civil or criminal penalty 
     that may be imposed by a State, any person who affects 
     interstate or foreign commerce by knowingly providing, or 
     attempting to provide, false beneficial ownership information 
     to a State, by intentionally failing to provide beneficial 
     ownership information to a State upon request, or by 
     intentionally failing to provide updated beneficial ownership 
     information to a State--
       ``(1) shall be liable to the United States for a civil 
     penalty of not more than $10,000; and
       ``(2) may be fined under title 18, United States Code, 
     imprisoned for not more than 3 years, or both.
       ``(c) Funding Authorization.--To carry out this section--
       ``(1) a State may use all or a portion of the funds made 
     available to the State under section 2004; and
       ``(2) the Administrator may use funds appropriated to carry 
     out this title, including unobligated or reprogrammed funds, 
     to enable a State to obtain and manage beneficial ownership 
     information for the corporations and limited liability 
     companies formed under the laws of the State, including by 
     funding measures to assess, plan, develop, test, or implement 
     relevant policies, procedures, or system modifications.
       ``(d) State Compliance Report.--Nothing in this section 
     authorizes the Administrator to withhold from a State any 
     funding otherwise available to the State under section 2004 
     because of a failure by that State to comply with this 
     section. Not later than June 1, 2013, the Comptroller General 
     of the United States shall submit to the Committee on 
     Homeland Security and Governmental Affairs of the Senate and 
     the Committee on Homeland Security of the House of 
     Representatives a report identifying which States are in 
     compliance with this section and, for any State not in 
     compliance, what measures must be taken by that State to 
     achieve compliance with this section.
       ``(e) Definitions.--In this section:
       ``(1) Beneficial owner.--The term `beneficial owner' means 
     an individual who has a level of control over, or entitlement 
     to, the funds or assets of a corporation or limited liability 
     company that, as a practical matter, enables the individual, 
     directly or indirectly, to control, manage, or direct the 
     corporation or limited liability company.
       ``(2) Corporation; limited liability company.--The terms 
     `corporation' and `limited liability company'--
       ``(A) have the meanings given such terms under the laws of 
     the applicable State;
       ``(B) do not include any business concern that is an issuer 
     of a class of securities registered under section 12 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 781) or that is 
     required to file reports under section 15(d) of that Act (15 
     U.S.C. 78o(d)), or any corporation or limited liability 
     company formed by such a business concern;
       ``(C) do not include any business concern formed by a 
     State, a political subdivision of a State, under an 
     interstate compact between 2 or more States, by a department 
     or agency of the United States, or under the laws of the 
     United States; and
       ``(D) do not include any individual business concern or 
     class of business concerns which a State, after obtaining the 
     written concurrence of the Administrator and the Attorney 
     General of the United States, has determined in writing 
     should be exempt from the requirements of subsection (a), 
     because requiring beneficial ownership information from the 
     business concern would not serve the public interest and 
     would not assist law enforcement efforts to detect, prevent, 
     or punish terrorism, money laundering, tax evasion, or other 
     misconduct.
       ``(3) Formation agent.--The term `formation agent' means a 
     person who, for compensation, acts on behalf of another 
     person to assist in the formation of a corporation or limited 
     liability company under the laws of a State.''.
       (2) Table of contents.--The table of contents in section 1 
     of the Homeland Security Act of 2002 (6 U.S.C. 101 et seq.) 
     is amended by inserting after the item relating to section 
     2008 the following:

``Sec. 2009. Transparent incorporation practices.''.
       (b) Effect on State Law.--
       (1) In general.--This Act and the amendments made by this 
     Act do not supersede, alter, or affect any statute, 
     regulation, order, or interpretation in effect in any State, 
     except where a State has elected to receive funding from the 
     Department of Homeland Security under section 2004 of the 
     Homeland Security Act of 2002 (6 U.S.C. 605), and then only 
     to the extent that such State statute, regulation, order, or 
     interpretation is inconsistent with this Act or an amendment 
     made by this Act.
       (2) Not inconsistent.--A State statute, regulation, order, 
     or interpretation is not inconsistent with this Act or an 
     amendment made by this Act if such statute, regulation, 
     order, or interpretation--
       (A) requires additional information, more frequently 
     updated information, or additional measures to verify 
     information related to a corporation, limited liability 
     company, or beneficial owner, than is specified under this 
     Act or an amendment made by this Act; or
       (B) imposes additional limits on public access to the 
     beneficial ownership information obtained by the State than 
     is specified under this Act or an amendment made by this Act.

     SEC. 4. ANTI-MONEY LAUNDERING OBLIGATIONS OF FORMATION 
                   AGENTS.

       (a) Anti-Money Laundering Obligations of Formation 
     Agents.--Section 5312(a)(2) of title 31, United States Code, 
     is amended--
       (1) in subparagraph (Y), by striking ``or'' at the end;
       (2) by redesignating subparagraph (Z) as subparagraph (AA); 
     and
       (3) by inserting after subparagraph (Y) the following:
       ``(Z) any person involved in forming a corporation, limited 
     liability company, partnership, trust, or other legal entity; 
     or''.
       (b) Deadline for Anti-Money Laundering Rule for Formation 
     Agents.--
       (1) Proposed rule.--Not later than 90 days after the date 
     of enactment of this Act, the Secretary of the Treasury, in 
     consultation with the Attorney General of the United States, 
     the Secretary of Homeland Security, and the Commissioner of 
     the Internal Revenue Service, shall publish a proposed rule 
     in the Federal Register requiring persons described in 
     section 5312(a)(2)(Z) of title 31, United States Code, as 
     amended by this section, to establish anti-money laundering 
     programs under subsection (h) of section 5318 of that title.
       (2) Final rule.--Not later than 270 days after the date of 
     enactment of this Act, the Secretary of the Treasury shall 
     publish the rule described in this subsection in final form 
     in the Federal Register.

     SEC. 5. STUDY AND REPORT BY GOVERNMENT ACCOUNTABILITY OFFICE.

       Not later than 1 year after the date of enactment of this 
     Act, the Comptroller General of the United States shall 
     conduct a study and submit to the Committee on Homeland 
     Security and Governmental Affairs of the Senate and the 
     Committee on Homeland Security of the House of 
     Representatives a report--
       (1) identifying each State that has procedures that enable 
     persons to form or register under the laws of the State 
     partnerships, trusts, or other legal entities, and the nature 
     of those procedures;
       (2) identifying each State that requires persons seeking to 
     form or register partnerships, trusts, or other legal 
     entities under the laws of the State to provide information 
     about the beneficial owners (as that term is defined in 
     section 2009 of the Homeland Security Act of 2002, as added 
     by this Act) or beneficiaries of such entities, and the 
     nature of the required information;
       (3) evaluating whether the lack of available beneficial 
     ownership information for partnerships, trusts, or other 
     legal entities--
       (A) raises concerns about the involvement of such entities 
     in terrorism, money laundering, tax evasion, securities 
     fraud, or other misconduct; and
       (B) has impeded investigations into entities suspected of 
     such misconduct; and
       (4) evaluating whether the failure of the United States to 
     require beneficial ownership information for partnerships and 
     trusts formed or registered in the United States has elicited 
     international criticism and what steps, if any, the United 
     States has taken or is planning to take in response.
                                  ____


Summary of Levin-Grassley-McCaskill Incorporation Transparency and Law 
                       Enforcement Assistance Act

       To protect the United States from U.S. corporations being 
     misused to commit terrorism, money laundering, tax evasion, 
     or other misconduct, the Incorporation Transparency and Law 
     Enforcement Assistance Act would:
       Beneficial Ownership Information. Require the States to 
     obtain a list of the beneficial owners of each corporation or 
     limited liability company (LLC) formed under their laws, 
     ensure this information is updated annually, and provide the 
     information to civil or criminal law enforcement upon receipt 
     of a subpoena or summons.
       Non-U.S. Beneficial Owners. Require corporations and LLCs 
     with non-U.S. beneficial owners to provide a certification 
     from an in-state formation agent that the agent has verified 
     the identity of those owners.
       Penalties for False Information. Establish civil and 
     criminal penalties under federal law for persons who 
     knowingly provide false beneficial ownership information or 
     intentionally fail to provide required beneficial ownership 
     information to a State.
       Exemptions. Provide exemptions for certain corporations, 
     including publicly traded corporations and the corporations 
     and LLCs they form, since the Securities and Exchange 
     Commission already oversees them; and corporations which a 
     State has determined, with concurrence from the Homeland 
     Security and Justice Departments, should be exempt because 
     requiring beneficial ownership information from them would 
     not serve the public interest or assist law enforcement.
       Funding. Authorize States to use an existing DHS grant 
     program, and authorize DHS

[[Page S3031]]

     to use already appropriated funds, to meet the requirements 
     of this Act.
       State Compliance Report. Clarify that nothing in the Act 
     authorizes DHS to withhold funds from a State for failing to 
     comply with the beneficial ownership requirements. Require a 
     GAO report by 2013 identifying which States are not in 
     compliance so that a future Congress can determine at that 
     time what steps to take.
       Transition Period. Give the States until October 2012 to 
     require beneficial ownership information for the corporations 
     and LLCs formed under their laws.
       Anti-Money Laundering Rule. Require the Treasury Secretary 
     to issue a rule requiring formation agents to establish anti-
     money laundering programs to ensure they are not forming U.S. 
     corporations or other entities for criminals or other suspect 
     persons.
       GAO Study. Require GAO to complete a study of State 
     beneficial ownership information requirements for in-state 
     partnerships and trusts.

  Mr. GRASSLEY. Mr. President, I rise to speak on the same bill the 
Senator from Michigan spoke on, but I ought to compliment him. He is 
most known for being a leader in the area of military affairs because 
of being chairman of that committee. But for sure, for years he has 
been also a chairman of the Permanent Subcommittee on Investigations 
and so much of the work that comes out of this legislation comes out of 
his work on that committee. I think he ought to be commended for the 
work he does through investigations there as well.
  I am happy to join Senator Levin and Senator McCaskill in 
cosponsoring the Incorporation Transparency and Law Enforcement 
Assistance Act. This bill requires States to obtain corporate ownership 
information at the time of formation and help law enforcement 
investigate shell companies which are set up for the sole purpose of 
conducting illegal activities.
  Earlier this year, Senator Levin joined me when I introduced a bill 
that we entitled the Hedge Fund Transparency Act. I said then that the 
major cause of the current financial crisis is a lack of transparency 
among hedge funds. That same thing can be said about corporate 
ownership. In too many States, very little ownership information is 
needed to register a corporation, and the actual owners of that 
corporation are often hidden behind the agents and lawyers who register 
the corporation on behalf of owners.
  One example of how these criminals take advantage of this lack of 
transparency is the practice of setting up and using shell corporations 
to hide corporate ownership information. These individuals set up shell 
corporations that have the benefits of corporate registration and 
function legitimately. But these same corporations are being used to 
hide illegal activities. These activities include a variety of 
elaborate schemes to disguise money laundering, tax evasion, and 
securities fraud. Law enforcement officials from the Department of 
Justice and the Internal Revenue Service have testified before Congress 
about how the lack of corporate information has been a very significant 
impediment to their ability to conduct criminal investigations.
  For example, when a corporation is involved in illegal activities, 
the legitimate corporate owners are often hidden, making it difficult 
for law enforcement agencies to determine who is actually responsible. 
That, in turn, makes it difficult to bring the real culprits to 
justice. States differ as to what corporate information is required to 
register a corporation and how long it takes to process that paperwork. 
Most States require only the name of the company, the name and address 
of the agent, a signature, and, of course, a fee.
  In fact, the Government Accountability Office found that most States 
will take the time to verify that the fee has been paid but do not take 
the time to verify the identities of the incorporators, officers, and 
directors. Perhaps even more important, no State checks the names of 
incorporators, officers, or directors against criminal records and the 
watch lists that sometimes Federal agencies have. As a result, we have 
no way of knowing if the beneficial owners are criminals, or they could 
even be terrorists, for that matter. Many States now have introduced 
electronic registration procedures that enable a new corporation to be 
registered on line within 24 hours. States offer this expedited service 
in exchange for yet an additional fee. In fact, there are two States 
where an individual can form a corporation within 1 hour of making the 
request. The promise of quick registration and little oversight has 
proven to be a very popular revenue generator for some States. But this 
process is not necessarily in the best interest of protecting our 
financial system or our national security.
  Some States have raised concerns that if their incorporation laws are 
tightened, corporations will simply register in other States where 
there are less stringent registration requirements. This bill is to 
take care of that problem. It is designed to bring some sanity to this 
whole process. It makes the registration requirement uniform over all 
50 States, as well as the District of Columbia. This way corporations 
will simply not be able to ``shop around'' for the State with the most 
relaxed standards and simply play one State against the other. Further, 
much of the information set forth in this bill is already required by 
the European Union and many offshore jurisdictions. This bill simply 
updates our laws to match those of other nations combating the same 
problems with money laundering, tax evasion, and terrorist financing.
  The legislation I am introducing today with Senators Levin and 
McCaskill requires that States obtain a list of the beneficial owners 
of each corporation or limited liability company formed under their 
laws before the corporation is registered in that particular State. The 
bill also requires that States ensure required information is updated 
annually and that States provide the information to civil or criminal 
law enforcement agencies upon receipt of a subpoena or summons. This 
also establishes a civil penalty of up to $10,000 and a criminal 
penalty of up to 3 years in prison for providing false information.
  Additionally, the bill would exempt publicly traded companies that 
are already regulated by the Securities and Exchange Commission. 
Further, the bill requires non-U.S. beneficial owners to provide 
certification from an in-State agent that verifies the identity of the 
beneficial owner.
  Finally, this bill requires the Government Accountability Office to 
complete a study of State beneficial ownership information requirements 
for in-State partnerships and trusts and gives the States until October 
2011 to require beneficial ownership information for the corporations 
and limited liability companies formed under their laws.
  I urge colleagues to cosponsor and support this legislation as we try 
to bring greater transparency to our financial system.
                                 ______
                                 
      By Mr. WEBB (for himself, Mr. Brown, Mr. Vitter, Mr. Wicker, Mrs. 
        Boxer, Mr. Nelson of Nebraska, and Mrs. Lincoln):
  S. 572. A bill to provide for the issuance of a ``forever stamp'' to 
honor the sacrifices of the brave men and women of the armed forces who 
have been awarded the Purple Heart; to the Committee on Homeland 
Security and Governmental Affairs.
  Mr. WEBB. Madam President, I have introduced a bill that will create 
a perpetual Purple Heart stamp. I cannot think of any other stamp or 
any other area for a perpetual stamp that is more deserving than this 
award which recognizes sacrifice on the battlefield.
  The original cosponsors of this legislation are Senators Brown, 
Vitter, Wicker, Boxer, Lincoln, and Ben Nelson of Nebraska. The Purple 
Heart is the oldest continually authorized U.S. military decoration. It 
was created as a badge of military merit by George Washington in 1782.
  The original Purple Hearts were awarded to three soldiers in the 
Continental Army who had shown outstanding courage during the 
Revolutionary War. In 1931, Army Chief of Staff Douglas MacArthur 
commissioned work on a new design for the Purple Heart to coincide with 
the then upcoming 200th anniversary of President Washington's birth.
  President Hoover's War Department authorized the award for wounds 
received by Army personnel in action or for meritorious service dating 
back to World War I. On February 22, 1932, General MacArthur became its 
first recipient. In December of 1942, the Purple Heart was extended to 
all branches of service, but the criteria were then strictly limited to 
those we know

[[Page S3032]]

today; that is, to be awarded to those who are wounded or killed during 
direct combat with the enemies of the United States. More than 1.7 
million Americans of every race, color, creed and from all 50 States 
have received the Purple Heart in honor of their sacrifice on our 
Nation's battlefields.
  This is the only U.S. military decoration for which there is no 
recommendation. It is simply earned through bloodshed for our country.
  In 2003, the Postal Service honored recipients of this award by 
commissioning a first-class Purple Heart stamp in a ceremony at the 
home of George Washington in Mount Vernon, VA. The image used for this 
stamp is a photograph of one of the two Purple Hearts received by 
Marine LTC James Loftus Fowler of Alexandria, VA, which he received in 
1968 as a battalion commander near the Ben Hai River in South Vietnam. 
Since that first issuance in 2003, approximately 1.2 billion first-
class Purple Heart stamps have been sold, an average of 200 million a 
year. At the new first-class rate of 44 cents, which is taking place in 
May, that is approximately $88 million a year in revenue for the U.S. 
Government.
  This yearly sales rate is equal to or greater than the sales of even 
the most popular commemorative stamps issued during that period, stamps 
bearing such American icons as Supreme Court Justice Thurgood Marshall, 
singer Frank Sinatra, and the classic Disney characters.
  In 2007, the Postal Service created the first ``forever'' stamp, a 
stamp which, no matter when it was purchased, would be good for first-
class postage on the day it was used. The image they chose was an image 
as old and venerable and quintessentially American as the Purple 
Heart--the Liberty Bell. According to a Postal Service press release, 
since its first issuance in April of 2007, more than 6 billion forever 
Liberty Bell stamps have been sold. This is an order of magnitude 
greater than any other single stamp sold in the United States, 
generating revenue of $2 billion.
  Clearly, the volume of sales of forever stamps is a win for the 
Postal Service, which is facing a shortfall in future revenues, and a 
win in terms of the value delivered to the people who want to use them.
  In creating the first Purple Heart, General Washington said:

       Let it be known that he who wears the military order of the 
     Purple Heart has given of his blood in defense of his 
     homeland and shall forever be revered by his fellow 
     countrymen.

  George Washington intended that the Nation he helped found would 
forever revere those who wear the Purple Heart as a symbol of the 
sacrifice they have given in our Nation's defense.
  As a recipient of the Purple Heart in Vietnam as a Marine, I believe 
that making the Purple Heart stamp a forever stamp is the most 
appropriate way to honor the past and future recipients of our Nation's 
oldest military decoration.
  I hope my colleagues will join me in this legislation.
                                 ______
                                 
      By Mr. AKAKA (for himself, Mr. Voinovich, Mr. Carper, Mr. Levin, 
        Mrs. McCaskill, and Mr. Tester):
  S. 574. A bill to enhance citizen access to Government information 
and services by establishing that Government documents issued to the 
public must be written clearly, and for other purposes; to the 
Committee on Homeland Security and Governmental Affairs.
  Mr. AKAKA. Mr. President, I rise today to introduce the Plain Writing 
Act of 2009. I am pleased that Senators George Voinovich, Tom Carper 
Carl Levin, Claire McCaskill, and Jon Tester have joined as original 
co-sponsors of this legislation.
  Our bill is very similar to H.R. 946, introduced by Representative 
Bruce Braley last month.
  The Plain Writing Act has a simple purpose: it would require the 
Federal Government to write more clearly. Agencies would be required to 
write documents that are released to the public in a way that is clear, 
concise, well-organized, readily understandable.
  This bill would extend an initiative that President Bill Clinton and 
Vice President Al Gore started a decade ago as part of the Reinventing 
Government initiative. In 1998, President Clinton directed agencies to 
write in plain language. Although many agencies have made progress in 
writing more clearly, the requirement never was fully implemented. In 
recent years, the focus on plain writing has dropped. This legislation 
will renew that focus.
  There are many benefits to plain writing. First, it promotes 
transparency and accountability. It is very difficult to hold the 
Federal Government accountable for its actions if only lawyers can 
understand Government writing. As we face an economic crisis and 
unprecedented budget deficits, the American people need clear 
explanations of Government actions.
  Plain writing also improves customer service. Individuals and 
businesses waste time and money, and make unnecessary errors, because 
Government instructions, forms, and other documents are too 
complicated. Anyone who has filled out their own tax forms, 
applications for Federal financial aid or veterans' benefits, Medicare 
forms, or any number of other overly complicated Federal forms 
understands the need for plain writing.
  Government officials, in turn, spend time and money answering 
questions and addressing complaints from people frustrated with 
Government documents they cannot understand. Correcting the errors 
people make because they do not understand Government documents demands 
Government officials' time as well. Because of this, plain writing 
makes Government more efficient and effective.
  Numerous organizations have called on Congress to require the Federal 
Government to write more clearly, including the AARP, Disabled American 
Veterans, National Small Business Association, Small Business 
Legislative Council, Women Impacting Public Policy, American Nurses 
Association, American Library Association, American Association of Law 
Libraries, and several associations dedicated to promoting better 
communication. These groups support plain writing because their members 
complain about their frustration with trying to understand Government 
documents--or hiring attorneys to decipher them--and the time and money 
they waste because the Government does not write plainly.
  As a former teacher and principal, I understand that even very smart 
people must be trained to write plainly, so this bill recognizes that 
Federal Employees will need plain writing training. Each agency will 
report their plans to train employees in plain writing. Writing in 
plain, clear, concise, and easily understandable language is a skill 
that Congress and Federal agencies must foster. As Thomas Jefferson 
once said, ``The most valuable of all talents is that of never using 
two words when one will do.''
  Additionally, congressional oversight will ensure that agencies 
implement the plain language requirements. Agencies will be required to 
designate a senior official responsible for implementing plain language 
requirements and to report to Congress how it will ensure compliance 
with the plain language requirement and on its progress.
  To avoid imposing too great a burden on agencies, agencies will not 
be required to rewrite existing documents. Only new or substantially 
revised documents will be covered. Similarly, this bill does not cover 
regulations, so that agencies can focus first on improving their every 
day communications with the American people. We recognize that it will 
be more challenging to write plainly when crafting regulations, which 
often must be technical and complex.
  Requiring plain writing is an important step in improving the way the 
Federal Government communicates with the American people.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
placed in the Record, as follows:

                                 S. 574

       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 ``Plain Writing Act of 2009''.

     SEC. 2. PURPOSE.

       The purpose of this Act is to improve the effectiveness and 
     accountability of Federal agencies to the public by promoting 
     clear

[[Page S3033]]

     Government communication that the public can understand and 
     use.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Agency.--The term ``agency'' means an Executive agency, 
     as defined under section 105 of title 5, United States Code.
       (2) Covered document.--The term ``covered document'' means 
     any document (other than a regulation) issued by an agency to 
     the public, including documents and other text released in 
     electronic form.
       (3) Plain writing.--The term ``plain writing'' means 
     writing that the intended audience can readily understand and 
     use because that writing is clear, concise, well-organized, 
     and follows other best practices of plain writing.

     SEC. 4. RESPONSIBILITIES OF FEDERAL AGENCIES.

       (a) Requirement to Use Plain Writing in New Documents.--Not 
     later than 1 year after the date of enactment of this Act, 
     each agency shall use plain writing in every covered document 
     of the agency issued or substantially revised.
       (b) Guidance.--
       (1) In general.--
       (A) Development.--Not later than 6 months after the date of 
     enactment of this Act, the Office of Management and Budget 
     shall develop guidance on implementing the requirements of 
     subsection (a).
       (B) Issuance.--The Office of Management and Budget shall 
     issue the guidance developed under subpargraph (A) to 
     agencies as a circular.
       (2) Interim guidance.--Before the issuance of guidance 
     under paragraph (1), agencies may follow the guidance of--
       (A) the writing guidelines developed by the Plain Language 
     Action and Information Network; or
       (B) guidance provided by the head of the agency that is 
     consistent with the guidelines referred to under subparagraph 
     (A).

     SEC. 5. REPORTS TO CONGRESS.

       (a) Initial Report.--Not later than 6 months after the date 
     of enactment of this Act, the head of each agency shall 
     submit to the Committee on Homeland Security and Governmental 
     Affairs of the Senate and the Committee on Oversight and 
     Government Reform of the House of Representatives a report 
     that describes how the agency intends to meet the following 
     objectives:
       (1) Communicating the requirements of this Act to agency 
     employees.
       (2) Training agency employees in plain writing.
       (3) Meeting the requirement under section 4(a).
       (4) Ensuring ongoing compliance with the requirements of 
     this Act.
       (5) Designating a senior official to be responsible for 
     implementing the requirements of this Act.
       (b) Annual and Other Reports.--
       (1) Agency reports.--
       (A) In general.--The head of each agency shall submit 
     reports on compliance with this Act to the Office of 
     Management and Budget.
       (B) Submission dates.--The Office of Management and Budget 
     shall notify each agency of the date each report under 
     subparagraph (A) is required for submission to enable the 
     Office of Management and Budget to meet the requirements of 
     paragraph (2).
       (2) Reports to congress.--The Office of Management and 
     Budget shall review agency reports submitted under paragraph 
     (1) using the guidance issued under section 4(b)(1)(B) and 
     submit a report on the progress of agencies to the Committee 
     on Homeland Security and Governmental Affairs of the Senate 
     and the Committee on Oversight and Government Reform of the 
     House of Representatives--
       (A) annually for the first 2 years after the date of 
     enactment of this Act; and
       (B) once every 3 years thereafter.

                          ____________________