SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Incorporation Trans-
parency 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 informa-
tion 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 incorpora-
tion than is needed to obtain a bank account or driv-
er’s license and typically does not name a single ben-
eficial owner. 
(4) Criminals have exploited the weaknesses in 
State formation procedures to conceal their identi-
ties 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 ter-
rorism, drug trafficking, money laundering, tax eva-
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sion, securities fraud, financial fraud, and acts of 
foreign corruption. 
(5) Law enforcement efforts to investigate cor-
porations and limited liability companies suspected 
of committing crimes have been impeded by the lack 
of available beneficial ownership information, as doc-
umented in reports and testimony by officials from 
the Department of Justice, the Department of 
Homeland Security, the Financial Crimes Enforce-
ment 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 lim-
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ited liability companies formed under the laws of 
such States. 
(8) Many States have established automated 
procedures that allow a person to form a new cor-
poration 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 re-
quest. 
(9) Dozens of Internet websites highlight the 
anonymity of beneficial owners allowed under the in-
corporation practices of some States, point to those 
practices as a reason to incorporate in those States, 
and list those States together with offshore jurisdic-
tions 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 27 countries in the European Union are 
required to have formation agents identify the bene-
ficial owners of the corporations formed under the 
laws of the country. 
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(11) To reduce the vulnerability of the United 
States to wrongdoing by United States corporations 
and limited liability companies with hidden owners, 
to protect interstate and international commerce 
from criminals misusing United States corporations 
and limited liability companies, to strengthen law en-
forcement investigations of suspect corporations and 
limited liability companies, to set minimum stand-
ards for and level the playing field among State in-
corporation 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.—Chapter 53 of title 31, 
United States Code, is amended by inserting after 
section 5332 the following new section: 
‘‘§ 5333. Transparent incorporation practices 
‘‘(a) REPORTING REQUIREMENTS.— 
‘‘(1) IN GENERAL.—Not later than October 1, 
2012, the Secretary of the Treasury shall issue regu-
lations requiring each corporation and limited liabil-
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ity company formed in a State that does not have 
an incorporation system described under subsection 
(b) to file with the Secretary such information as the 
corporation or limited liability company would be re-
quired to provide the State if such State had an in-
corporation system described under subsection (b). 
‘‘(2) DISCLOSURE OF BENEFICIAL OWNERSHIP 
INFORMATION.—Beneficial ownership information 
reported to the Secretary of the Treasury pursuant 
to paragraph (1) shall be provided by the Secretary 
of the Treasury upon receipt of— 
‘‘(A) a civil or criminal subpoena or sum-
mons from a State agency, Federal agency, or 
congressional committee or subcommittee re-
questing such information; or 
‘‘(B) 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. 
‘‘(b) INCORPORATION SYSTEM.—With respect to a 
State, an incorporation system is described under this sub-
section if it meets the following requirements: 
‘‘(1) 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 forma-
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tion process a list of the beneficial owners of the cor-
poration or limited liability company that— 
‘‘(A) except as provided in paragraph (6), 
identifies each beneficial owner by— 
‘‘(i) name; 
‘‘(ii) current address; and 
‘‘(iii) non-expired passport issued by 
the United States or a non-expired drivers 
license issued by a State; and 
‘‘(B) if any beneficial owner exercises con-
trol 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 con-
trol over the corporation or limited liability 
company. 
‘‘(2) Each corporation or limited liability com-
pany formed under the laws of the State is required 
by the State to update the list of the beneficial own-
ers of the corporation or limited liability company by 
providing the information described in paragraph (1) 
to the State not later than 60 days after the date 
of any change in the list of beneficial owners or the 
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‘‘(D) will retain information and docu-
ments 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 corpora-
tion or limited liability company terminates, 
under the laws of the State. 
‘‘(c) PENALTIES.— 
‘‘(1) IN GENERAL.—It shall be unlawful for— 
‘‘(A) any person to affect interstate or for-
eign commerce by— 
‘‘(i) knowingly providing, or attempt-
ing to provide, false or fraudulent bene-
ficial ownership information, including a 
false or fraudulent identifying photograph, 
to a State or licensed formation agent 
under State law in accordance with this 
section; 
‘‘(ii) willfully failing to provide com-
plete or updated beneficial ownership infor-
mation to a State or licensed formation 
agent under State law in accordance with 
this section; or 
‘‘(iii) knowingly disclosing the exist-
ence of a subpoena, summons, or other re-
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quest for beneficial ownership information 
from a law enforcement agency under 
State law in accordance with this section 
without written authorization from the law 
enforcement agency; or 
‘‘(B) any licensed formation agent to affect 
interstate or foreign commerce by willfully fail-
ing to obtain or maintain credible and legible 
beneficial ownership information, including any 
required identifying photograph, under State 
law in accordance with this section, or willfully 
failing to provide beneficial ownership informa-
tion in response to a subpoena, summons, or 
other request from a law enforcement agency in 
accordance with this section. 
‘‘(2) CIVIL AND CRIMINAL PENALTIES.—In ad-
dition to any civil or criminal penalty that may be 
imposed by a State, any person who violates para-
graph (1) shall be liable to the United States for a 
civil penalty of not more than $10,000. 
‘‘(d) FUNDING AUTHORIZATION.—To carry out this 
section, during the 3-year period beginning on the date 
of enactment of this section, upon application by a State, 
the Secretary shall make available to such State a reason-
able amount of funding from the Department of the 
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Treasury Forfeiture Fund established under section 
9703(a) of title 31, United States Code. 
‘‘(e) COMPLIANCE REPORT.—Nothing in this section 
authorizes the Secretary to withhold from a State any 
funding otherwise available to the State because of a fail-
ure by that State to comply with this section. Not later 
than June 1, 2014, the Comptroller General of the United 
States shall submit to the Committee on Financial Serv-
ices of the House of Representatives and the Committee 
on Homeland Security and Governmental Affairs of the 
Senate a report— 
‘‘(1) identifying which States obtain beneficial 
ownership information as described in this section; 
‘‘(2) with respect to each State that does not 
obtain such information, whether corporations and 
limited liability companies formed under the laws of 
such State are in compliance with this section and 
providing the specified beneficial ownership informa-
tion to the Secretary; and 
‘‘(3) whether the Department of the Treasury is 
in compliance with this section and, if not, what 
steps it must take to come into compliance with this 
section. 
‘‘(f) DEFINITIONS.—For the purposes of this section: 
‘‘(1) BENEFICIAL OWNER.— 
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‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘beneficial owner’ 
means a natural person who, directly or indi-
rectly— 
‘‘(i) exercises substantial control over 
a corporation or limited liability company; 
or 
‘‘(ii) has a substantial interest in or 
receives substantial economic benefits from 
the assets of the corporation or limited li-
ability company described in clause (i). 
‘‘(B) EXCEPTIONS.—The term ‘beneficial 
owner’ does not include— 
‘‘(i) a minor child; 
‘‘(ii) a person acting as a nominee, 
intermediary, custodian, or agent on behalf 
of another person; 
‘‘(iii) a person acting solely as an em-
ployee of a corporation or limited liability 
company, and whose control over or eco-
nomic benefits from the corporation or lim-
ited liability company derive solely from 
the employment status of the individual; 
‘‘(iv) a person whose only interest in 
the corporation or limited liability company 
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is through a right of inheritance, unless 
the individual also meets the requirements 
of subparagraph (A); or 
‘‘(v) a creditor of a corporation or 
limited liability company, unless the indi-
vidual also meets the requirements of sub-
paragraph (A). 
‘‘(C) LIMITATION.—A beneficial owner 
meeting the requirements for an entity under 
paragraph (2)(B) may provide the name of the 
entity instead of the name of a natural person. 
‘‘(2) CORPORATION; LIMITED LIABILITY COM-
PANY.—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 entity that is, and 
discloses in the application by the entity to 
form under the laws of the State or, if the enti-
ty was formed before the date of the enactment 
of this section, in a filing with the State under 
State law— 
‘‘(i) a business concern that is an 
issuer of a class of securities registered 
under section 12 of the Securities Ex-
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change Act of 1934 (15 U.S.C. 781) or 
that is required to file reports under sec-
tion 15(d) of that Act (15 U.S.C. 78o(d)); 
‘‘(ii) a 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; 
‘‘(iii) a depository institution (as de-
fined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813)); 
‘‘(iv) a credit union (as defined in sec-
tion 101 of the Federal Credit Union Act 
(12 U.S.C. 1752)); 
‘‘(v) a financial holding company (as 
defined in section 2 of the Bank Holding 
Company Act of 1956 (12 U.S.C. 1841)); 
‘‘(vi) a broker or dealer (as defined in 
section 3 of the Securities Exchange Act of 
1934 (15 U.S.C. 78c)) that is registered 
under section 15 of the Securities and Ex-
change Act of 1934 (15 U.S.C. 78o); 
‘‘(vii) an exchange or clearing agency 
(as defined in section 3 of the Securities 
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sor (as defined in section 1a of the Com-
modity Exchange Act (7 U.S.C. 1a)) that 
is registered with the Commodity Futures 
Trading Commission; 
‘‘(xi) a public accounting firm reg-
istered in accordance with section 102 of 
the Sarbanes–Oxley Act (15 U.S.C. 7212); 
‘‘(xii) a public utility that provides 
telecommunications 
service, 
electrical 
power, natural gas, or water and sewer 
services, within the United States; 
‘‘(xiii) a charity or nonprofit entity 
that is described in section 501(c), 527, or 
4947(a)(1) of the Internal Revenue Code 
of 1986, has not been denied tax exempt 
status, and has filed the most recently due 
annual information return with the Inter-
nal Revenue Service, if required to file 
such a return; 
‘‘(xiv) any business concern that— 
‘‘(I) employs more than 20 em-
ployees on a full time basis in the 
United States; 
‘‘(II) files income tax returns in 
the United States demonstrating more 
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than $10,000,000 in gross receipts or 
sales; and 
‘‘(III) has an operating presence 
at a physical office within the United 
States; or 
‘‘(xv) any corporation or limited liabil-
ity company formed and owned by an enti-
ty described in clause (i), (ii), (iii), (iv), 
(v), (vi), (vii), (viii), (ix), (x), (xi), (xii), 
(xiii), or (xiv); and 
‘‘(C) do not include any individual business 
concern or class of business concerns which the 
Secretary of the Treasury, with the written con-
currence of the Attorney General of the United 
States, has determined in writing should be ex-
empt from the requirements of subsection (a), 
because requiring beneficial ownership informa-
tion from the business concern would not serve 
the public interest and would not assist law en-
forcement 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 forma-
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tion of a corporation or limited liability company 
under the laws of a State.’’. 
(2) RULEMAKING.—To carry out this Act and 
the amendments made by this Act, the Secretary of 
the Treasury, in consultation with the Secretary of 
Homeland Security and the Attorney General of the 
United States, may issue guidance or a rule to clar-
ify application of the definitions added by this Act, 
or to specify how to verify beneficial ownership infor-
mation. 
(3) CONFORMING
AMENDMENTS.—Title 31, 
United States Code, is amended— 
(A) in section 5321(a)— 
(i) in paragraph (1), by striking ‘‘sec-
tions 5314 and 5315’’ each place it ap-
pears and inserting ‘‘sections 5314, 5315, 
and 5333’’; and 
(ii) in paragraph (6), by inserting 
‘‘(except 
section 
5333)’’ 
after 
‘‘sub-
chapter’’ each place it appears; and 
(B) in section 5322, by striking ‘‘section 
5315 or 5324’’ each place it appears and insert-
ing ‘‘section 5315, 5324, or 5333’’. 
(4) TABLE OF CONTENTS.—The table of con-
tents of Chapter 53 of title 31, United States Code, 
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is amended by inserting after the item relating to 
section 5332 the following: 
‘‘Sec. 5333. Transparent incorporation practices.’’. 
(5) RESTRICTIONS
ON
PUBLIC
ACCESS.—A 
State may— 
(A) restrict public access to all or any por-
tion of the beneficial ownership information 
provided to the State as described under section 
5332 of title 31, United States Code, as added 
by this Act; and 
(B) by statute, regulation, order, or inter-
pretation adopted or issued by the State after 
the date of enactment of this Act, provide for 
public access to all or any portion of such infor-
mation. 
(6) NO DUTY OF VERIFICATION.—This Act and 
the amendments made by this Act do not impose 
any obligation on a State to verify the name, ad-
dress, or identity of a beneficial owner whose infor-
mation is submitted to such State under section 
5332 of title 31, United States Code, as added by 
this Act. 
(b) ANTI-MONEY LAUNDERING OBLIGATIONS
OF 
FORMATION AGENTS.— 
(1) IN GENERAL.—Section 5312(a)(2) of title 
31, United States Code, is amended— 
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(A) in subparagraph (Y), by striking ‘‘or’’ 
at the end; 
(B) by redesignating subparagraph (Z) as 
subparagraph (AA); and 
(C) by inserting after subparagraph (Y) 
the following: 
‘‘(Z) any person involved in forming a cor-
poration or limited liability company; or’’. 
(2) DEADLINE FOR ANTI-MONEY LAUNDERING 
RULE FOR FORMATION AGENTS.— 
(A) 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 
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 subsection, to estab-
lish anti-money laundering programs under sub-
section (h) of section 5318 of that title. 
(B) FINAL
RULE.—Not later than 270 
days after the date of enactment of this Act, 
the Secretary of the Treasury shall publish the 
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rule described in this subsection in final form in 
the Federal Register. 
(C) EXCLUSIONS.—Any rule promulgated 
under this subsection shall exclude from the 
category of persons involved in forming a cor-
poration or limited liability company— 
(i) any government agency; and 
(ii) any attorney or law firm that uses 
a paid formation agent operating within 
the United States to form the corporation 
or limited liability company. 
SEC. 4. STUDY AND REPORT BY GOVERNMENT ACCOUNT-
ABILITY 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 Congress a re-
port— 
(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 
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that term is defined in section 5333(d)(1) of title 
31, United States Code, 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 mis-
conduct; and 
(B) has impeded investigations into enti-
ties 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. 
Æ 
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