U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

39–010 

" ! SENATE 113TH CONGRESS

2d Session 

REPORT

2014

113–259 

Calendar No. 566 

TRUTH IN SETTLEMENTS ACT OF 2014 

R E P O R T 

OF THE

COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

TO ACCOMPANY

S. 1898 

TO REQUIRE ADEQUATE INFORMATION REGARDING THE TAX 

TREATMENT OF PAYMENTS UNDER SETTLEMENT AGREEMENTS 

ENTERED INTO BY FEDERAL AGENCIES, AND FOR OTHER PURPOSES 

SEPTEMBER 18, 2014.—Ordered to be printed 


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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

TAMMY BALDWIN, Wisconsin 

HEIDI HEITKAMP, North Dakota 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

MICHAEL B. ENZI, Wyoming 

KELLY AYOTTE, New Hampshire 

GABRIELLE A. BATKIN, Staff Director 

JOHN P. KILVINGTON, Deputy Staff Director 

MARY BETH SCHULTZ, Chief Counsel 

TROY H. CRIBB, Chief Counsel for Governmental Affairs 

KEITH B. ASHDOWN, Minority Staff Director 

CHRISTOPHER J. BARKLEY, Minority Deputy Staff Director 

ANDREW C. DOCKHAM, Minority Chief Counsel 

LAURA W. KILBRIDE, Chief Clerk 


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Calendar No. 566 

113TH CONGRESS SENATE REPORT " ! 2d Session 113–259 

TRUTH IN SETTLEMENTS ACT OF 2014 

SEPTEMBER 18, 2014.—Ordered to be printed 

Mr. CARPER, from the Committee on Homeland Security and 

Governmental Affairs, submitted the following 

R E P O R T 

[To accompany S. 1898] 

The Committee on Homeland Security and Governmental Affairs, 

to which was referred the bill (S. 1898) to require adequate information regarding the tax treatment of payments under settlements 

agreements entered into by Federal agencies, and for other purposes, having considered the same, reports favorably thereon with 

an amendment in the nature of a substitute and recommends that 

the bill, as amended, do pass. 

CONTENTS 

Page 

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

II. Background and Need for the Legislation ................................................... 2 

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

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

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

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

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

I. PURPOSE AND SUMMARY

The Truth in Settlements Act seeks to bring more transparency 

to the process whereby federal agencies settle enforcement actions 

or other cases brought against private parties. It requires Executive agencies to post copies of agreements involving payments of $1 

million or more by non-government parties and to provide basic information about those agreements online in a publicly accessible 

and searchable format. It requires agencies to disclose certain information in written public statements that reference the amount 

to be paid under such an agreement. And if an agency determines 

that some or all of such an agreement must be held confidential, 

the Act requires that agency to issue a brief public statement exVerDate Sep 11 2014 02:33 Sep 23, 2014 Jkt 039010 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\SR259.XXX SR259

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1See http://www.justice.gov/opa/pr/2014/September/ (listing recent press releases). 

2See https://www.federalregister.gov/agencies/justice-department#recent_articles. 3 26 U.S.C. § 162(f). 

plaining what interests confidentiality protects and why those interests outweigh the public’s right to a full accounting of government actions and expenditures. 

II. BACKGROUND AND NEED FOR LEGISLATION

Executive agencies are responsible for holding companies and individuals accountable when they break the law. Both civil and 

criminal investigations can end in settlement agreements under 

which the party under investigation agrees to make a payment to 

the government. Although agencies enter these agreements on behalf of the American public, there are no uniform standards governing the public disclosure of the details of these agreements. As 

a result, it is often difficult—or impossible—for the public to obtain 

basic information about such agreements and thereby know whether our nation’s laws are being adequately and fairly enforced. 

The Truth in Settlements Act addresses three critical aspects of 

this lack of transparency. First, it is nearly impossible to determine 

what settlement agreements the government is entering into, let 

alone access aggregate information about agreements, or even the 

number entered into annually. Executive agencies are not currently 

required to post basic information about recent settlement agreements on their websites, so finding out about them can require significant effort. To review a sampling of recent Department of Justice (DOJ) settlement agreements, for example, the public must either look through the DOJ’s list of recent press releases for links 

to the relevant documents,1 or comb through all of DOJ’s recent 

postings in the Federal Register to find the ones relating to settlement agreements.2 Both approaches fail to provide a comprehensive list of recent agreements or a method for quickly reviewing information about those agreements. That basic lack of transparency 

is found across Executive agencies. 

Second, if an Executive agency chooses to issue a written public 

statement referencing the amount it recovered under a settlement 

agreement, it is free to omit important contextual information, such 

as how those settlement payments are categorized, and how the 

settling party may earn ‘‘credits’’ toward the settlement amount for 

certain conduct. Without this information, an agency’s public statement may be misleading. 

The categorization of settlement payments is critical because the 

tax code prohibits the deduction of ‘‘any fine or similar penalty paid 

to a government for the violation of any law.’’ 3 Meanwhile, the tax 

code generally permits the deduction of payments that are considered compensatory or restitution. The potential tax deductibility of 

settlement payments can have a significant impact on the amount 

of money the government eventually recovers in a settlement and, 

potentially, the deterrent effect of that settlement. Likewise, the 

method for calculating monetary ‘‘credits’’ for conduct in a settlement can also have a significant impact on the settlement’s ultimate value. 

Finally, agencies are not subject to a uniform standard for disclosing when they have decided to hold a settlement agreement (or 


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a portion thereof) confidential, and why confidentiality was warranted. Consequently, agencies can hold settlements confidential 

without any explanation provided to taxpayers or lawmakers of the 

need for confidentiality. 

Taken together, these three challenges make it very difficult for 

the public and legislators to evaluate the actions the government 

is taking on behalf of the American people. 

To address these problems, the Truth in Settlements Act mandates new government-wide standards for agencies to provide 

transparency to the American public on settlements. It requires Executive agencies to post copies of agreements involving payments 

of $1 million or more by non-government parties and to provide 

basic information about those agreements online in a publicly accessible and searchable format. It requires agencies to disclose certain information in written public statements that reference the 

amount to be paid under such an agreement. And if an agency determines that some or all of such an agreement must be held confidential, the Act requires that agency to issue a brief public statement explaining what interests confidentiality protects and why 

those interests outweigh the public’s right to a full accounting of 

government actions and expenditures. 

III. LEGISLATIVE HISTORY

On January 8, 2014, Senators Warren and Coburn introduced 

the Truth in Settlements Act of 2014 (S. 1898). S. 1898 was referred to the Senate Committee on Homeland Security and Governmental Affairs. Senators Levin and Begich are also cosponsors of 

the bill. 

The Committee considered S. 1898 at a business meeting on July 

30, 2014. Senator Coburn offered a substitute amendment, which 

made technical changes to the description of information that agencies would be required to disclose. The Committee adopted the substitute amendment by unanimous consent and ordered S. 1898 reported favorably as amended by the Coburn substitute amendment. 

Senators present for the vote were Senators Carper, Levin, Pryor, 

Landrieu, McCaskill, Begich, Baldwin, Coburn, Johnson, and 

Ayotte. 

IV. SECTION-BY-SECTION ANALYSIS

Section 1. Short title 

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

in Settlements Act of 2014.’’ 

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) provides definitions of key terms. 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 million 

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

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


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

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

government. 

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

into covered settlement agreements to post copies of those agreements and basic information about those agreements online in a 

searchable format. That basic information includes a description of 

the claims each party settled, and the amount each settling party 

is obligated to pay, including information about the amount, if any, 

that is expressly specified as a civil or criminal penalty or fine, and 

the amount, if any, that is expressly specified as tax deductible. 

Agencies are not required to post information about agreements, or 

portions thereof, that are subject to confidentiality provisions. 

Agencies must post copies of the agreement online for at least one 

year following the settlement (or at least five years if the settlement includes $50 million or more in payments), and must post the 

basic information about the agreement online for at least five years 

following the settlement. 

New section 307(c) would require that if an agency determines 

a covered settlement agreement should be subject to a confidentiality provision, that agency is required to issue a public statement 

explaining what interests confidentiality protects and why those interests outweigh the public’s interest in knowing about the conduct 

of the government and the expenditure of government resources. 

New section 307(d) would require agencies to specify in any written public statement referencing the amount to be paid under a 

covered settlement agreement the following information: 

• which portion of the payment, if any, is expressly specified 

as a civil or criminal penalty or fine; 

• that no portion of the payment is designated as a civil or 

criminal penalty or fine, if that is the case; 

• which portion of the payment, if any, is expressly designated as not tax deductible; 

• what actions, if any, the settling party or parties must 

take under the agreement in lieu of payment; and 

• what payments, if any, the settling party or parties must 

make to non-Federal government entities. 

New subsection 307(e) provides that the disclosure requirements 

of subsection 307(d) apply to the extent to the information to be 

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

provision that prohibits such disclosure. 

Additionally, new section 307(f) would require agencies to report 

annually to Congress on the number of covered settlement agreements they entered into, and the number of those agreements that 

were either partially or fully confidential. 

Section 2(b) would require settling parties that file reports 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. 

Section 2(c) directs the Government Accountability Office to examine how, and to what extent, agencies deem settlements confidential, and offer recommendations for increasing the transparency of Executive agency settlements. 


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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 or private-sector 

mandates as defined in the Unfunded Mandates Reform Act 

(UMRA) and would impose no costs on state, local, or tribal governments. 

VI. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, September 9, 2014. 

Hon. TOM CARPER, 

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. 1898, the Truth in Settlements Act of 2014. 

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

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

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 1898—Truth in Settlements Act of 2014 

CBO estimates that enacting S. 1898 would have no significant 

effect on the federal budget. The legislation could affect direct 

spending by agencies not funded through annual appropriations; 

therefore, pay-as-you-go procedures apply. CBO estimates, however, that any net increase in spending by those agencies would not 

be significant. Enacting the bill would not affect revenues. 

S. 1898 would establish new requirements for publicly disclosing 

settlement agreements entered into by a federal agency. Specifically, the legislation would require that non-confidential settlements involving payments from nonfederal entities greater than $1 

million and related to a violation of civil or criminal law be posted 

online. Under the bill, each settlement posted online would have to 

include the names of the parties involved, a description of the 

claims, the amount to be paid, and whether the settlement is a 

criminal or civil penalty or a fine. Because that information is already collected during the settlement process, CBO expects that 

making it available online would have a negligible cost. 

S. 1898 contains no intergovernmental mandate as defined in the 

Unfunded Mandates Reform Act and would impose no costs on 

state, local, or tribal governments. S. 1898 would impose a privatesector 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 


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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 

($152 million in 2014, 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, Deputy Assistant Director for Budget Analysis. 

VII. CHANGES IN EXISTING STATUTE 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. 1898, as 

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

is enclosed in black 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 

* * * * * * * 

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 one or more non-Federal persons; 

(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; 


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(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, the amount the settling party is obligated to pay that has been designated as a civil penalty or fine, or otherwise 

specified as not tax deductible under the covered 

settlement agreement; and 

(ii) a copy of each covered settlement agreement entered into 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) until at least the date that is 5 years after 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 until— 

(i) at least the date that is 1 year after 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, at least the date that is 5 years after 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 a civil or criminal penalty or fine to be paid for a 

violation of Federal law; or 


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(B) is expressly specified under the covered settlement 

agreement as not deductible for purposes of the Internal 

Revenue Code of 1986; and 

(2) describe in detail any actions the non-Federal person shall 

take under the covered settlement agreement— 

(A) in lieu of payment to the Federal Government or a 

State or local government; or 

(B) in addition to such a payment. 

(e) 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 had any 

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

(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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