U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

1 

49–010 

" ! SENATE 

114TH CONGRESS

1st Session 

REPORT

2015

114–76 

Calendar No. 140 

TRUTH IN SETTLEMENTS ACT OF 2015 

R E P O R T 

OF THE

COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

TO ACCOMPANY

S. 1109 

TO REQUIRE ADEQUATE INFORMATION REGARDING THE TAX 

TREATMENT OF PAYMENTS UNDER SETTLEMENT AGREEMENTS 

ENTERED INTO BY FEDERAL AGENCIES, AND FOR OTHER 

PURPOSES 

JULY 7, 2015.—Ordered to be printed 


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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

RON JOHNSON, Wisconsin Chairman 

JOHN MCCAIN, Arizona 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JAMES LANKFORD, Oklahoma 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

JONI ERNST, Iowa 

BEN SASSE, Nebraska 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

CORY A. BOOKER, New Jersey 

GARY C. PETERS, Michigan 

KEITH B. ASHDOWN, Staff Director 

CHRISTOPHER R. HIXON, Chief Counsel 

PATRICK J. BAILEY, Chief Counsel for Governmental Affairs 

GABRIELLE D’ADAMO SINGER, Deputy Chief Counsel for Governmental Affairs 

COURTNEY J. ALLEN, Counsel 

GABRIELLE A. BATKIN, Minority Staff Director 

JOHN P. KILVINGTON, Minority Deputy Staff Director 

MARY BETH SCHULTZ, Minority Chief Counsel 

TROY H. CRIBB, Minority Chief Counsel for Governmental Affairs 

LAURA W. KILBRIDE, Chief Clerk 


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C O N T E N T S 

Page 

I. Purpose and Summary .................................................................................. 1 

II. Background and Need for the Legislation ................................................... 1 

III. Legislative History ......................................................................................... 3 

IV. Section-by-Section Analysis .......................................................................... 3 

V. Evaluation of Regulatory Impact .................................................................. 5 

VI. Congressional Budget Office Cost Estimate ................................................ 5 

VII. Changes in Existing Law Made by the Bill, as Reported ........................... 6 


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Calendar No. 140 

114TH CONGRESS SENATE REPORT " ! 1st Session 114–76 

TRUTH IN SETTLEMENTS ACT OF 2015 

JULY 7, 2015.—Ordered to be printed 

Mr. JOHNSON, from the Committee on Homeland Security and 

Governmental Affairs, submitted the following 

R E P O R T 

[To accompany S. 1109] 

The Committee on Homeland Security and Governmental Affairs, 

to which was referred the bill (S. 1109), to require adequate information regarding the tax treatment of payments under settlement 

agreements entered into by Federal agencies, and for other purposes, having considered the same, reports favorably thereon without amendment and recommends that the bill do pass. 

I. PURPOSE AND SUMMARY

The Truth in Settlements Act seeks to provide more transparency and public access to the terms and conditions under which 

federal agencies settle enforcement actions or other cases brought 

against non-government entities and involving payments of at least 

one million dollars. 

II. BACKGROUND AND THE NEED FOR LEGISLATION

Executive agencies are entrusted with the responsibility of enforcing federal laws and holding non-government entities accountable when they violate these laws. Federal enforcement actions can 

be resolved through settlement agreements under which the party 

under federal investigation agrees to make a payment to the government. In recent years, Executive agencies have entered into settlement agreements in which the settling party or parties agree to 

make millions to billions of dollars in payments to the government, 

such as the government’s settlement agreements with Bank of 


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1 U.S. Department of Justice, Press Release: Bank of America to Pay $16.65 Billion in Historic 

Settlement for Financial Fraud Leading up to and During the Financial Crisis, Aug. 21, 2014, 

http://www.justice.gov/opa/pr/bank-america-pay-1665-billion-historic-justice-departmentsettlement-financial-fraud-leading. 2 U.S. Department of Justice, Press Release: Justice Department, Federal and state Partners 

Secure Record $13 Billion Global Settlement with JP Morgan for Misleading Investors About 

securities Containing Toxic Mortgages, Nov. 19, 2013, http://www.justice.gov/opa/pr/justicedepartment-federal-and-state-partners-secure-record-13-billion-global-settlement. See also U.S. 

Department of Justice, Press Release: JPMorgan Chase to Pay $614 Million for Submitting 

False Claims for FHA-insured and VA-guaranteed Mortgage Loans, Feb. 7, 2014, http:// 

www.justice.gov/opa/pr/jpmorgan-chase-pay-614-million-submitting-false-claims-fha-insuredand-va-guaranteed-mortgage. 3 U.S. Department of Justice, Press Release: Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead Up to the Financial 

Crisis, Feb. 3, 2015, http://www.justice.gov/opa/pr/justice-department-and-state-partnerssecure-1375-billion-settlement-sp-defrauding-investors. 4 U.S. Department of Justice, Press Release: Historic $5.15 Billion Environmental and Tort 

Settlement with Anadarko Petroleum Corp. Goes into Effect, Jan. 23, 2015, http:// 

www.justice.gov/opa/pr/historic-515-billion-environmental-and-tort-settlement-anadarkopetroleum-corp-goes-effect-0. 5 26 U.S.C. § 162(f). 

6 U.S. Government Accountability Office, Tax Administration: Systematic Information Sharing 

Would Help IRS Determine the Deductibility of Civil Settlement Payments, GAO–05–757, 1, 

Sept. 2005, available at http://www.gao.gov/products/GAO-05-747. 7Schmit, Julie, ‘‘Foreclosure settlement to distribute $3.6 billion,’’ USA Today, Feb. 28, 2013, 

http://www.usatoday.com/story/money/business/2013/02/28/foreclosure-settlement-banks/ 

1954871/. See also Dewan, Shalia and Silver-Greenburg, Jessica, ‘‘Foreclosure deal credits 

banks for routine efforts,’’ New York Times, Mar. 27, 2012, http://www.nytimes.com/2012/03/ 

28/business/foreclosure-deal-gives-banks-credit-for-routine-activities.html. 

America,1 JPMorgan Chase,2 Standard & Poor’s,3 and Anadarko 

Petroleum Corp.4 However, under existing law, there is no requirement for Executive agencies to publicly disclose how many settlement agreements the government enters into and the terms of 

these agreements, making it difficult for the public to easily access 

this information. 

Additionally, when Executive agencies do publicly disclose information about a settlement agreement, there are no uniform standards for what type of information must be disclosed. This lack of 

public disclosure requirements allows Executive agencies to omit 

key information about the terms of settlement agreements in written public statements. For example, the tax code prohibits the deduction of ‘‘any fine or similar penalty paid to a government for the 

violation of any law.’’ 5 The Government Accountability Office has 

reported ‘‘[i]n general, payments that are intended to punish (punitive payments) a violator are not deductible and payments made to 

compensate (compensatory payments) those who were harmed by a 

violation are deductible under federal law. Nevertheless, it may not 

always be clear which payments are deductible, in part because the 

Internal Revenue Code (IRC) does not address the deductibility of 

all types of payments that may be made pursuant to a civil settlement and that statutes imposing the payments may be unclear regarding whether they are punitive, compensatory, or both.’’ 6 Additionally, a settling party may earn ‘‘credits’’ toward the settlement 

amount for certain conduct.7 Therefore, without a uniform standard for public disclosure of settlement agreements, Executive agencies may not be communicating to the public the actual amount 

that will be paid by the settling party. 

Finally, there is no requirement for Executive agencies to disclose when a settlement agreement (or a portion thereof) is determined to be confidential and the justification for confidentiality. 

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8 Campbell, Dakin, ‘‘Wells Fargo Said to Settle FHFA Claims for Less Than $1 Billion,’’ 

Bloomberg Business, Oct. 31, 2013, http://www.bloomberg.com/news/articles/2013-10-31/ 

wells-fargo-said-to-settle-fhfa-claims-for-less-than-1-billion. 

ment agreements on behalf of the public without explaining to the 

public why the agreement needs to be confidential.8

The Truth in Settlements Act addresses current gaps in public 

transparency in settlement agreements entered into by Executive 

agencies and non-governmental entities for violations of federal 

law. The bill does so by establishing new, uniform, governmentwide standards for information disclosed to the American public 

about settlement agreements entered into to redress a violation of 

federal law. The bill requires agencies to post copies of settlement 

agreements involving payments of at least one million dollars by 

non-government entities and to disclose basic information about 

those agreements online in a publicly accessible and searchable format. The bill further requires agencies to disclose certain information in written public statements that describe the amount to be 

paid under a settlement agreement. If an agency determines that 

some or all of the settlement agreement must be kept confidential, 

the bill requires the agency to issue a public statement explaining 

the interests protected by confidentiality and why those interests 

outweigh the public’s right to full transparency of government actions and expenditures. 

III. LEGISLATIVE HISTORY

On April 28, 2015, Senators Warren and Lankford introduced the 

Truth in Settlements Act of 2015 (S. 1109). S. 1109 was referred 

to the Senate Committee on Homeland Security and Governmental 

Affairs. Senator Baldwin is also a cosponsor of the bill. 

The Committee considered S. 1109 at a business meeting on May 

6, 2015. The Committee ordered S. 1109 reported favorably by 

voice vote, en bloc. Senators present for the vote were Senators 

Johnson, McCain, Portman, Lankford, Ernst, Sasse, Carper, 

McCaskill, Baldwin, Heitkamp, and Peters. 

IV. SECTION-BY-SECTION ANALYSIS OF THE BILL, AS REPORTED

Section 1. Short title 

This section establishes the short title of the bill as the ‘‘Truth 

in Settlements Act of 2015.’’ 

Section 2. Information regarding settlement agreements entered into 

by Federal agencies 

Section 2(a) would create a new statutory provision, 5 U.S.C. 

§ 307. 

New section 307(a) defines key terms under the bill. The term 

‘‘covered settlement agreement’’ means a settlement agreement (including a consent decree) that is entered into by an Executive 

agency, relates to an alleged violation of Federal civil or criminal 

law, and requires the payment of a total of not less than $1,000,000 

by one or more non-Federal persons. The term ‘‘entity within the 

Federal Government’’ includes an officer or employee of the Federal 

Government acting in an official capacity. The term ‘‘non-Federal 

person’’ means a person that is ‘‘not an entity within the Federal 

Government.’’ 


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New section 307(b) would require Executive agencies that enter 

into covered settlement agreements to post copies of those agreements on their agency website in a searchable format and to post 

certain information about the agreements. This information includes the date the agreement was entered into, the names of the 

settling parties, a description of the claims each party settled, the 

amount each settling party is obligated to pay, and the total 

amount the settling parties are obligated to pay. This information 

must also include, for each settling party, the amount that is expressly specified as a civil or criminal penalty or fine, and the 

amount that is expressly specified as not tax deductible. Agencies 

are not prohibited from entering into confidential settlement agreements and are not required to post information about agreements, 

or portions thereof, that are subject to confidentiality provisions. 

Agencies must post this information online for at least five years 

and post copies of the agreement online for at least one year (or 

at least five years if the settlement amount totals $50 million or 

more). 

New section 307(c) would require an agency to issue a public 

statement if an agency determines that a covered settlement agreement should be subject to a confidentiality provision in order to 

protect the public interest. This public statement must explain 

what interests confidentiality protects and why the interests protected by confidentiality outweigh the public’s interest in knowing 

about the conduct of the Federal Government and the expenditure 

of government resources. 

New section 307(d) would require Executive agencies to include 

certain information in any written public statement that refers to 

the amount to be paid under a covered settlement agreement by a 

non-Federal person. This information includes specifying which 

portion, if any, of the amount is expressly specified under the 

agreement as a civil or criminal penalty or fine to be paid for a violation of Federal law or is expressly specified under the agreement 

as not tax deductible. If no portion of the amount to be paid under 

the agreement is expressly specified as a civil or criminal penalty 

or fine, the Executive agency must include a statement attesting to 

such. Furthermore, the Executive agency must describe what actions, if any, the settling party or parties must take under the 

agreement in lieu of payment and any payments or compensation 

the settling party or parties must make to other non-Federal persons under the agreement. 

New section 307(e) provides that the disclosure requirements of 

subsection 307(d) apply to the extent to the information to be disclosed (or portion thereof) is not subject to a confidentiality provision that prohibits such disclosure. 

New section 307(f) would require agencies to annually report to 

Congress on the number of covered settlement agreements they entered into, and the number of these agreements that were either 

partially or fully confidential. 

Section 2(b) would require settling parties who file reports for 

transactions on a national securities exchange with the Securities 

and Exchange Commission to disclose in those reports if they have 

filed a claim for a tax deduction during the reporting period for any 

payments made under a covered settlement agreement. 


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Section 2(c) would direct the Government Accountability Office to 

examine, no later than 6 months after enactment of the bill, how 

Executive agencies determine settlements or settlement terms to be 

confidential and to offer recommendations, if any, for increasing 

the transparency of Executive agency settlements. 

V. EVALUATION OF REGULATORY IMPACT

Pursuant to the requirements of paragraph 11(b) of rule XXVI of 

the Standing Rules of the Senate, the Committee has considered 

the regulatory impact of this bill and determined that the bill will 

have no regulatory impact within the meaning of the rules. The 

Committee agrees with the Congressional Budget Office’s statement that the bill contains no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would 

impose no costs on state, local, or tribal governments. The Committee agrees with the Congressional Budget Office’s statement 

that the bill would impose a low-cost private-sector mandate on 

issuers of securities that are required to submit reports to the Securities and Exchange Commission. 

VI. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, May 20, 2015. 

Hon. RON JOHNSON, 

Chairman, Committee on Homeland Security and Governmental Affairs, U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1109, the Truth in Settlements Act of 2015. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Matthew Pickford. 

Sincerely, 

KEITH HALL. 

Enclosure. 

S. 1109—Truth in Settlements Act of 2015 

S. 1109 would establish new requirements for the public disclosure of settlement agreements entered into by federal agencies. 

Specifically, the legislation would require that non-confidential settlements be posted online if they involve payments from nonfederal 

entities that are greater than $1 million and are related to a violation of civil or criminal laws. Under the bill, each settlement posted 

online would have to include the names of the parties involved, a 

description of the claims settled, the amount to be paid, and whether the settlement is a criminal or civil penalty or a fine. In addition, S. 1109 would require the Government Accountability Office 

(GAO) to complete a report on the confidentiality of settlement 

agreements. 

CBO estimates that enacting S. 1109 would have no significant 

effect on the federal budget because most of the information required is already collected during the settlement process and the 

cost of making it available online would not be significant. CBO 

also estimates that the cost for GAO to prepare the required study 


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would be small. Enacting S. 1109 could affect direct spending by 

some agencies (such as the Tennessee Valley Authority) because 

they are authorized to use receipts from the sale of goods, fees, and 

other collections to cover their operating costs; therefore, pay-asyou-go procedures apply. Because most of those agencies can make 

adjustments to the amounts collected, CBO estimates that any net 

changes in direct spending by those agencies would not be significant. Enacting the bill would not affect revenues. 

S. 1109 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA) and would not affect 

the budgets of state, local, or tribal governments. 

S. 1109 would impose a private-sector mandate, as defined in 

UMRA, on issuers of securities that are required to submit reports 

to the Securities and Exchange Commission. The bill would require 

such issuers to describe in those reports any tax deduction claimed 

that relates to payments required under a covered settlement 

agreement with a federal agency. The cost of providing such information would be only slightly more than the cost of meeting current reporting requirements. CBO estimates, therefore, that the direct cost of complying with the mandate would be small and would 

fall well below the annual threshold established in UMRA for private-sector mandates ($154 million in 2015, adjusted annually for 

inflation). 

The CBO staff contacts for this estimate are Matthew Pickford 

(for federal costs) and Paige Piper/Bach (for the private-sector impact). The estimate was approved by Theresa Gullo, Assistant Director for Budget Analysis. 

VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by S. 1109 as 

reported are shown as follows (existing law proposed to be omitted 

is enclosed in brackets, new matter is printed in italic, and existing 

law in which no change is proposed is shown in roman): 

TITLE 5—UNITED STATES CODE 

* * * * * * * 

PART 1—THE AGENCIES GENERALLY 

* * * * * * * 

CHAPTER 3—POWERS 

* * * * * * * 

SEC. 307. INFORMATION REGARDING SETTLEMENT AGREEMENTS. 

(a) DEFINITIONS.—In this section— 

(1) the term ‘covered settlement agreement’ means a settlement agreement (including a consent decree) that— 

(A) is entered into by an Executive agency; 

(B) relates to an alleged violation of Federal civil or 

criminal law; and 

(C) requires the payment of a total of not less than 

$1,000,000 by 1 or more non-Federal persons; 


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(2) the term ‘entity within the Federal Government’ includes 

an officer or employee of the Federal Government acting in an 

official capacity; and 

(3) the term ‘non-Federal person’ means a person that is not 

an entity within the Federal Government. 

(b) INFORMATION TO BE POSTED ONLINE.— (1) REQUIREMENT.— (A) IN GENERAL.—Subject to subparagraph (B), the head 

of each Executive agency shall make publicly available in 

a searchable format in a prominent location on the Web site 

of the Executive agency— 

(i) a list of each covered settlement agreement entered 

into by the Executive agency, which shall include, for 

each covered settlement agreement— 

(I) the date on which the parties entered into the 

covered settlement agreement; 

(II) the names of the parties that settled claims 

under the covered settlement agreement; 

(III) a description of the claims each party settled under the covered settlement agreement; 

(IV) the amount each party settling a claim 

under the covered settlement agreement is obligated to pay under the settlement agreement; 

(V) the total amount the settling parties are obligated to pay under the settlement agreement; and 

(VI) for each settling party— 

(aa) the amount, if any, the settling party is 

obligated to pay that is expressly specified 

under the covered settlement agreement as a 

civil or criminal penalty or fine; and 

(bb) the amount, if any, that is expressly 

specified under the covered settlement agreement as not deductible for purposes of the Internal Revenue Code of 1986; and 

(ii) a copy of each covered settlement agreement entered into the by the Executive agency. 

(B) CONFIDENTIALITY PROVISIONS.—The requirement to 

disclose information or a copy of a covered settlement agreement under subparagraph (A) shall apply to the extent that 

the information or copy (or portion thereof) is not subject to 

a confidentiality provision that prohibits disclosure of the 

information or copy (or portion thereof). 

(2) PERIOD.—The head of each Executive agency shall ensure 

that— 

(A) information regarding a covered settlement agreement 

is publicly available on the list described in paragraph 

(1)(A)(i) for a period of not less than 5 years, beginning on 

the date of the covered settlement agreement; and 

(B) a copy of a covered settlement agreement made available under paragraph (1)(A)(ii) is publicly available— 

(i) for a period of not less than 1 year, beginning on 

the date of the covered settlement agreement; or 

(ii) for a covered settlement agreement under which 

a non-Federal person is required to pay not less than 

$50,000,000, for a period of not less than 5 years, beVerDate Sep 11 2014 04:53 Jul 09, 2015 Jkt 049010 PO 00000 Frm 00011 Fmt 6659 Sfmt 6603 E:\HR\OC\SR076.XXX SR076

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ginning on the date of the covered settlement agreement. 

(c) PUBLIC STATEMENT.—If the head of an Executive agency determines that a confidentiality provision in a covered settlement agreement, or the sealing of a covered settlement agreement, is required 

to protect the public interest of the United States, the head of the 

Executive agency shall issue a public statement stating why such action is required to protect the public interest of the United States, 

which shall explain— 

(1) what interests confidentiality protects; and 

(2) why the interests protected by confidentiality outweigh the 

public’s interest in knowing about the conduct of the Federal 

Government and the expenditure of Federal resources. 

(d) REQUIREMENTS FOR WRITTEN PUBLIC STATEMENTS.—Any 

written public statement issued by an Executive agency that refers 

to an amount to be paid by a non-Federal person under a covered 

settlement agreement shall— 

(1) specify which portion, if any, of the amount to be paid 

under the covered settlement agreement by a non-Federal person— 

(A) is expressly specified under the covered settlement 

agreement as a civil or criminal penalty or fine to be paid 

for a violation of Federal law; or 

(B) is expressly specified under the covered settlement 

agreement as not deductible for purposes of the Internal 

Revenue Code of 1986; 

(2) if no portion of the amount to be paid under the covered 

settlement agreement by a non-Federal person is expressly specified under the covered settlement agreement as a civil or criminal penalty or fine, include a statement specifying that is the 

case; and 

(3) describe in detail— 

(A) any actions the non-Federal person shall take under 

the covered settlement agreement in lieu of payment to the 

Federal Government or a State or local government; and 

(B) any payments or compensation the non-Federal person shall make to other non-Federal persons under the covered settlement agreement. 

(e) CONFIDENTIALITY.—The requirement to disclose information 

under subsection (d) shall apply to the extent that the information 

to be disclosed (or portion thereof) is not subject to a confidentiality 

provision that prohibits disclosure of the information (or portion 

thereof). 

(f) REPORTING.— 

(1) IN GENERAL.—Not later than January 15 of each year, the 

head of an Executive agency that entered into a covered settlement agreement during the previous fiscal year shall submit to 

each committee of Congress with jurisdiction over the activities 

of the Executive agency a report indicating— 

(A) how many covered settlement agreements the Executive agency entered into during that fiscal year; 

(B) how many covered settlement agreements the Executive agency entered into during that fiscal year that had 

any terms or conditions that are required to be kept confidential; and 


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(C) how many covered settlement agreements the Executive agency entered into during that fiscal year for which 

all terms and conditions are required to be kept confidential. 

(2) AVAILABILITY OF REPORTS.—The head of an Executive 

agency that is required to submit a report under paragraph (1) 

shall make the report publically available in a searchable format in a prominent location on the Web site of the Executive 

agency. 

Æ 


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