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Title II — Other measures To combat tax haven abuses

S. 1533 · 113th Congress · Sep 19, 2013 · Lineage

II Other measures To combat tax haven abuses

Sec. 201 Country-by-country reporting

(a)
Country-by-Country reporting— Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the following new subsection:

“(s) Disclosure of financial performance on a country-by-Country basis

“(1) Definitions—In this subsection—

“(A) the term issuer group means the issuer, each subsidiary of the issuer, and each entity under the control of the issuer; and

“(B) the term country of operation means each country in which a member of the issuer group is incorporated, organized, maintains employees, or conducts significant business activities.

“(2) Rules required—The Commission shall issue rules that require each issuer to include in an annual report filed by the issuer with the Commission information on a country-by-country basis during the covered period, consisting of—

“(A) a list of each country of operation and the name of each entity of the issuer group domiciled in each country of operation;

“(B) the number of employees physically working in each country of operation;

“(C) the total pre-tax gross revenues of each member of the issuer group in each country of operation;

“(D) the total amount of payments made to governments by each member of the issuer group in each country of operation, without exception, including, and set forth according to—

“(i) total Federal, regional, local, and other tax assessed against each member of the issuer group with respect to each country of operation during the covered period; and

“(ii) after any tax deductions, tax credits, tax forgiveness, or other tax benefits or waivers, the total amount of tax paid from the treasury of each member of the issuer group to the government of each country of operation during the covered period; and

“(E) such other financial information as the Commission may determine is necessary or appropriate in the public interest or for the protection of investors.”

(b)
Rulemaking—
(1)
Deadlines— The Securities and Exchange Commission (in this section referred to as the Commission) shall—
(A)
not later than 270 days after the date of enactment of this Act, issue a proposed rule to carry out this section and the amendment made by this section; and
(B)
not later than 1 year after the date of enactment of this Act, issue a final rule to carry out this section and the amendment made by this section.
(2)
Data format— The information required to be provided by this section shall be provided by the issuer in a report in a format prescribed by the Commission, and such report shall be made available to the public online, in such format as the Commission shall prescribe.
(3)
Effective date— Subsection (s) of section 13 of the Securities Exchange Act of 1934, as added by this section, shall become effective 1 year after the date on which the Commission issues a final rule under this section.

Sec. 202 Penalty for failing to disclose offshore holdings

(a)
Securities Exchange Act of 1934— Section 21(d)(3)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended by adding at the end the following:

“(iv) Fourth tier—Notwithstanding clauses (i), (ii), and (iii), for each violation, the amount of the penalty shall not exceed $1,000,000 for any natural person or $10,000,000 for any other person, if—

“(I) such person directly or indirectly controlled any foreign entity, including any trust, corporation, limited liability company, partnership, or foundation through which an issuer purchased, sold, or held equity or debt instruments;

“(II) such person knowingly or recklessly failed to disclose any such holding, purchase, or sale by the issuer; and

“(III) the holding, purchase, or sale would have been otherwise subject to disclosure by the issuer or such person under this title.”

(b)
Securities Act of 1933— Section 20(d)(2) of the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended by adding at the end the following:

“(D) Fourth tier—Notwithstanding subparagraphs (A), (B), and (C), for each violation, the amount of the penalty shall not exceed $1,000,000 for any natural person or $10,000,000 for any other person, if—

“(i) such person directly or indirectly controlled any foreign entity, including any trust, corporation, limited liability company, partnership, or foundation through which an issuer purchased, sold, or held equity or debt instruments;

“(ii) such person knowingly or recklessly failed to disclose any such holding, purchase, or sale by the issuer; and

“(iii) the holding, purchase, or sale would have been otherwise subject to disclosure by the issuer or such person under this title.”

(c)
Investment Advisers Act of 1940— Section 203(i)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3(i)(2)) is amended by adding at the end the following:

“(D) Fourth tier—Notwithstanding subparagraphs (A), (B), and (C), for each violation, the amount of the penalty shall not exceed $1,000,000 for any natural person or $10,000,000 for any other person, if—

“(i) such person directly or indirectly controlled any foreign entity, including any trust, corporation, limited liability company, partnership, or foundation through which an issuer purchased, sold, or held equity or debt instruments;

“(ii) such person knowingly or recklessly failed to disclose any such holding, purchase, or sale by the issuer; and

“(iii) the holding, purchase, or sale would have been otherwise subject to disclosure by the issuer or such person under this title.”

Sec. 203 Deadline for anti-money laundering rule for investment advisers

(a)
Anti-Money laundering obligations for investment advisers— 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 (BB); and
(3)
by inserting after subparagraph (Y) the following:

“(Z) an investment adviser;”

(b)
Rules required— The Secretary of the Treasury shall—
(1)
in consultation with the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission, not later than 270 days after the date of enactment of this Act, publish a proposed rule in the Federal Register to carry out the amendments made by this section; and
(2)
not later than 180 days after the date of enactment of this Act, publish a final rule in the Federal Register on the matter described in paragraph (1).
(c)
Contents— The final rule published under this section shall require, at a minimum, each investment adviser (as defined in section 202(a)(11) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–2(a)(11))) registered with the Securities and Exchange Commission pursuant to section 203 of that Act (15 U.S.C. 80b–3)—
(1)
to submit suspicious activity reports and establish an anti-money laundering program under subsections (g) and (h), respectively, of section 5318 of title 31, United States Code; and
(2)
to comply with—
(A)
the customer identification program requirements under section 5318(l) of title 31, United States Code; and
(B)
the due diligence requirements under section 5318(i) of title 31, United States Code.

Sec. 204 Anti-money laundering requirements for formation agents

(a)
Anti-Money laundering obligations for formation agents— Section 5312(a)(2) of title 31, United States Code, as amended by section 203 of this Act, is amended by inserting after subparagraph (Z) the following:

“(AA) any person engaged in the business of forming new corporations, limited liability companies, partnerships, trusts, or other legal entities; or”

(b)
Deadline for anti-Money laundering rule for formation agents—
(1)
Proposed rule— The Secretary of the Treasury, in consultation with the Attorney General of the United States, the Secretary of Homeland Security, and the Commissioner of Internal Revenue, shall—
(A)
not later than 120 days after the date of enactment of this Act, publish a proposed rule in the Federal Register requiring persons described in section 5312(a)(2)(AA) of title 31, United States Code, as added by this section, to establish anti-money laundering programs under section 5318(h) of that title; and
(B)
not later than 270 days after the date of enactment of this Act, publish a final rule in the Federal Register on the matter described in subparagraph (A).
(2)
Exclusions— The rule promulgated under this subsection shall exclude from the category of persons engaged in the business of forming new corporations or other entities—
(A)
any government agency; and
(B)
any attorney or law firm that uses a paid formation agent operating within the United States to form such corporations or other entities.

Sec. 205 Strengthening John Doe summons proceedings

(a)
In general— Subsection (f) of section 7609 is amended to read as follows:

“(f) Additional requirement in the case of a John Doe summons

“(1) General Rule—Any summons described in subsection (c)(1) which does not identify the person with respect to whose liability the summons is issued may be served only after a court proceeding in which the Secretary establishes that—

“(A) the summons relates to the investigation of a particular person or ascertainable group or class of persons,

“(B) there is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with any provision of any internal revenue law, and

“(C) the information sought to be obtained from the examination of the records or testimony (and the identity of the person or persons with respect to whose liability the summons is issued) is not readily available from other sources.

“(2) Exception—Paragraph (1) shall not apply to any summons which specifies that it is limited to information regarding a United States correspondent account (as defined in section 5318A(e)(1)(B) of title 31, United States Code) or a United States payable-through account (as defined in section 5318A(e)(1)(C) of such title) of a financial institution that is held at a non-FATCA institution (as defined in section 7701(a)(51)).

“(3) Presumption in cases involving non-fatca institutions—For purposes of this section, in any case in which the particular person or ascertainable group or class of persons have financial accounts in or transactions related to a non-FATCA institution (as defined in section 7701(a)(51)), there shall be a presumption that there is a reasonable basis for believing that such person or group or class of persons may fail or may have failed to comply with provisions of internal revenue law.

“(4) Project John Doe summonses

“(A) In general—Notwithstanding the requirements of paragraph (1), the Secretary may issue a summons described in paragraph (1) if the summons—

“(i) relates to a project which is approved under subparagraph (B),

“(ii) is issued to a person who is a member of the group or class established under subparagraph (B)(i), and

“(iii) is issued within 3 years of the date on which such project was approved under subparagraph (B).

“(B) Approval of projects—A project may only be approved under this subparagraph after a court proceeding in which the Secretary establishes that—

“(i) any summons issued with respect to the project will be issued to a member of an ascertainable group or class of persons, and

“(ii) any summons issued with respect to such project will meet the requirements of paragraph (1).

“(C) Extension—Upon application of the Secretary, the court may extend the time for issuing such summonses under subparagraph (A)(i) for additional 3-year periods, but only if the court continues to exercise oversight of such project under subparagraph (D).

“(D) Ongoing court oversight—During any period in which the Secretary is authorized to issue summonses in relation to a project approved under subparagraph (B) (including during any extension under subparagraph (C)), the Secretary shall report annually to the court on the use of such authority, provide copies of all summonses with such report, and comply with the court's direction with respect to the issuance of any John Doe summons under such project.”

(b)
Jurisdiction of court—
(1)
In general— Paragraph (1) of section 7609(h) is amended by inserting after the first sentence the following new sentence: “Any United States district court in which a member of the group or class to which a summons may be issued resides or is found shall have jurisdiction to hear and determine the approval of a project under subsection (f)(2)(B).”.
(2)
Conforming amendment— The first sentence of section 7609(h)(1) is amended by striking “(f)” and inserting “(f)(1)”.
(c)
Effective date— The amendments made by this section shall apply to summonses issued after the date of the enactment of this Act.

Sec. 206 Improving enforcement of foreign financial account reporting

(a)
Clarifying the connection of foreign financial account reporting to tax administration— Paragraph (4) of section 6103(b) is amended by adding at the end the following new sentence:
(b)
Simplifying the calculation of foreign financial account reporting penalties— Section 5321(a)(5)(D)(ii) of title 31, United States Code, is amended by striking “the balance in the account at the time of the violation” and inserting “the highest balance in the account during the reporting period to which the violation relates”.
(c)
Clarifying the use of suspicious activity reports under the Bank Secrecy Act for civil tax law enforcement— Section 5319 of title 31, United States Code, is amended by inserting “the civil and criminal enforcement divisions of the Internal Revenue Service,” after “including”.