Carl Levin

Mr. LEVIN

Mr. LEVIN. Madam President, I support the America Invents Act. Right now, as our economy struggles to recover, this legislation is needed to help create jobs and keep our manufacturers competitive. It will further strengthen and expand the ability of our universities to conduct research and turn that research into innovative products and processes that benefit Michigan and our Nation. Because of this legislation, we will be able to see that boost up close in my home State of Michigan, where a new satellite Patent and Trademark Office will be established in Detroit. This office will help modernize the patent system and improve the efficiency of patent review and the hiring of patent examiners. In addition, in an important victory after years of effort to address the problem, section 14 of the act finally bans tax patents, ending the troubling practice of persons seeking patents for tax avoidance strategies. Issuing such patents abuses the Tax Code by granting what some could see as a government imprimatur of approval for dubious tax strategies, while at the same time penalizing taxpayers seeking to use legitimate strategies. The section makes it clear that patents can still be issued for software that helps taxpayers prepare their tax returns, but that provision is intended to be narrowly construed and is not intended to authorize patents for business methods or financial management software. The bill will put a halt to both new and pending tax patent applications. Although it does not apply on its face to the 130-plus tax patents already granted, if someone tries to enforce one of those patents in court by demanding that a taxpayer provide a fee before using it to reduce their taxes, I hope a court will consider this bill's language and policy determination when deciding whether such efforts are consistent with public policy. This legislation is an important step forward and I urge my colleagues to support it.

Mr. LEVIN. Madam President, I move to reconsider the vote.

Mr. LEVIN

Mr. LEVIN. Mr. President, I come to the floor today to pay tribute to the life and the public service of Mark Hatfield. Mark Hatfield began his lifelong career of public service in the U.S. Navy during World War II. After the war he returned to Oregon where he served in the State house of representatives, in the State senate, as the Oregon secretary of state, and eventually as Governor of the State. Fortunately for us--for the Senate and for the country--Mark Hatfield did continue his career of public service and went on to serve five terms in the U.S. Senate. During his time in the Senate, Mark Hatfield repeatedly demonstrated he possessed the courage of his convictions. We have heard that word ``courage'' used this afternoon by Oregon Senators and others as it relates to Mark Hatfield, and there are so many examples of that courage, including an unpopular position he took relative to the Vietnam war. But in 1995 he opposed the balanced budget constitutional amendment, which was then under consideration by the Senate. It was a difficult position then to take as it is today. But he followed the courage of his convictions, and this is what he said about the constitutional amendment they were debating in the Senate back in 1995: A balanced budget can come only through leadership and compromise. This compromise must come from each one of us. . . . In the end there is no easy answer, and there never will be. Regardless of the procedural restraint in place, where there is political will to create a balanced budget we will create one. Where there is a will to avoid one, we will avoid it. . . . A vote for this balanced budget constitutional amendment is not a vote for a balanced budget, it is a vote for a fig leaf. Mark Hatfield said it as he believed it, straight from the shoulder-- courageously and direct. He did so in regard to many other issues. From the vantage point of the Appropriations Committee, Senator Hatfield was able to champion causes near and dear not only to his heart but near and dear to the hearts of so many Americans. Among these causes was medical research. Senator Hatfield was such an effective supporter of medical research that in 2005--8 years after his retirement from the Senate-- the National Institutes of Health opened the Mark Hatfield Clinical Research Center in honor of his career-long support of medical research. How well I personally remember, as a member of the FDR Memorial Commission, how Mark Hatfield joined Danny Inouye, his cochairman, to finally lead us to build the long overdue memorial to one of America's greatest Presidents. Today, the Senate mourns the passing of Senator Hatfield. How vividly those of us who had the pleasure of serving with him remember him. My wife Barbara and my deepest sympathies go out to Mark's wife Antoinette, to their family, and to their friends. As the Senate honors his extraordinary career, we can all take inspiration from his willingness to join with colleagues of both parties to achieve enduring goals.

Mr. LEVIN

Mr. LEVIN. Madam President, I understand we are alternating?

Mr. LEVIN. I would request, after the Senator from Kentucky, who is here to speak--

Mr. LEVIN. In that case, I believe I was here on the floor before the Senator from Kentucky, so I will proceed.

Mr. LEVIN. Madam President, to say the legislation before us is not ideal is truly an understatement. The notion that our deficit problem can be solved solely by cutting spending flies in the face of our experience, when in fact unwise tax cuts for the wealthy and egregious tax loopholes are significant culprits in our fiscal crisis. I believe too many Republicans are influenced by an ideology so extreme that it promised to wreak economic havoc if they did not get their way. ``No additional revenues'' became the battle cry--an approach that prevents the balanced deficit reduction the American people rightly support. The result is that this legislation incorporates some policies that are profoundly unfair to middle-income Americans. Seen in isolation, Madam President, this is not a good bill. But no public policy exists in a vacuum. Despite its many flaws, this legislation must pass. Let me explain why. While there will be a number of negative consequences as a result of this bill's passage, there will be more dire consequences if it fails to pass. The choice here is between a faulty piece of legislation on the one hand and severe damage to our economy and even greater joblessness on the other. The choice we face with this vote today is whether to accept a flawed bill or to watch the United States--the globe's preeminent economic power--default on its obligations to senior citizens, students, and veterans, as well as to those who have invested in our country by the purchase of our bonds and our Treasury notes. We have taken many steps in the past 3 years to try to restart job creation in this country. Those efforts would come undone in the crisis that would follow our failure to pass this bill. One of the things that is right about this legislation is that it avoids a misguided demand that we have another round of crisis and negotiation over this issue in a few short months. A short-term increase in the debt limit, as House Republicans demanded, would surely have led to a damaging downgrade of the government's credit rating. It would have frozen financing for businesses and consumers. We simply cannot put the American people and the American economy through that again. Despite this bill's imbalance in focusing solely on spending cuts, it does contain a mechanism that can force acceptance of what our Republican colleagues have refused to accept--the reality that revenue must be a part of real deficit reduction and that fair and effective deficit reduction efforts require shared sacrifice. The year 2011 is the year of unbalanced spending cuts, and 2012 must be a year of shared sacrifice, one in which the President uses the bully pulpit to lead the Nation to accept the notion that everyone--including, surely, the wealthy--must play a role in reducing deficits. Democrats have repeatedly emphasized this point. It is a simple fact that among the largest factors contributing to our deficits is the Bush tax cuts--tax cuts that greatly increased the growth of the gap between the wealthiest among us and working families. Today, median household income--the income of the typical American household--is lower than it was in the mid-1990s, and yet the wealthiest Americans not only do extremely well, they are doing better and better all the time. A few decades ago, the wealthiest 1 percent of all Americans took in 10 percent of all income. Today it is 24 percent. These numbers are not aberrations or actions of a free market. They reflect policy choices. Too often the choice has been to pay lip service to the middle class while driving income inequality to levels not seen in 80 years in this country. The failure to ask all Americans to join in the sacrifices required to reduce our deficit flies in the face of logic and fairness and threatens to increase the growing gap between upper income and middle-income families. Democrats have proposed commonsense steps to address the failure to include more revenue and to promote shared sacrifice. We have proposed restoration of the 39.6-percent tax bracket for the wealthiest Americans who make nearly $400,000 a year or more. Most Democrats support the end of tax breaks for the massively profitable oil companies. We seek to close loopholes that now allow tax dodgers to hide income and assets in overseas tax havens to avoid the taxes they rightly owe and to end tax breaks that let highly-paid hedge fund managers enjoy a lower income tax rate than the rate their employees pay. So far, too many have denied the need for these changes. But there is a chance at least that this legislation may finally force consideration of added revenues, added fairness in the Tax Code, and the shared sacrifice that is so missing from the cuts in the legislation before us. Why is that? Under this legislation, we will face a stark choice. We must agree before the end of this year to deficit reduction of at least $1.2 trillion over 10 years, or stand by as an automatic budget cut kicks in to accomplish that goal. A bipartisan joint committee of 12 Members of Congress will meet and develop a deficit reduction plan that avoids those automatic cuts. That joint committee will have broad powers to review and propose changes to spending and to the Tax Code, and to add revenue. Revenues will finally be back on the table where they have always belonged. Meeting that $1.2 trillion goal will not be easy, but it will be achievable--achievable, that is, if those who so far have been unwilling to compromise will recognize that revenue must be part of the equation. Nobody should be eager for the automatic cuts that would otherwise take effect. Many of those cuts would be unacceptably painful and damaging. But the very idea of those automatic cuts is that they are so unacceptable that few of us will want to see them enacted and most of us will be willing to compromise in order to avoid them. Congress used this approach once before. In 1985 we passed Gramm- Rudman-Hollings, which set forth specific deficit targets and required cuts if those targets were not met. The framework for today's legislation is based on that model. As one of the authors of the Gramm- Rudman-Hollings act, Senator Gramm put it: It was never the objective of Gramm-Rudman to trigger the sequester; the objective of Gramm-Rudman was to have the threat of the sequester force compromise and action. And it did. For example, in 1990, when facing the possibility of unacceptable cuts in defense and other important programs, President Bush and bipartisan leaders in Congress adopted a balanced deficit reduction plan that included significant new revenues. The Damocles sword of the Gramm-Rudman-Hollings deficit reduction act was the reason for that outcome. I believe that any plan from the bipartisan committee that fails the test of balance will have no chance of passage in the Senate. That means members of the committee must truly be willing to lead, to put aside partisanship and rigid ideology, if we are to avoid triggering unacceptable cuts. Success also is going to require Presidential leadership and stronger use of his bully pulpit. Democrats have demonstrated that we are willing to put forward serious deficit reduction proposals, plans that include painful cuts to important priorities. With a vote to approve this bill, which we must, it is my hope that we have reached the high tide of an ideological movement that has sought to hold tax cuts for the wealthy sacred while imposing increasingly Draconian cuts on programs for American families and threatened economic calamity if that movement did not get its way. The era of slashing programs that help middle-class Americans, with no shared sacrifice by the wealthiest among us, must end and give way to an era in which fairness and balance guide our efforts. Passing this legislation today hopefully will drive us to make that transition. I yield the floor.

Mr. LEVIN

Mr. LEVIN. Mr. President, I speak today in support of a new Bureau of Alcohol, Tobacco, Firearms and Explosives, ATF, rule requiring federally licensed firearm dealers in four Southwest border States to report the sale of multiple semi-automatic assault rifles to the same purchaser. This narrowly tailored reporting requirement, similar to one already in place for multiple handgun sales, will provide ATF with an important tool to combat straw purchases and the illegal trafficking of firearms, including the supply of weapons to drug cartels in Mexico. Under the rule, federally licensed dealers in California, Arizona, New Mexico, and Texas must report to ATF the sale of multiple semi- automatic rifles that have a caliber greater than .22 and accept detachable magazines to the same person within 5 consecutive business days. Weapons covered by the rule include AR-15s and AK-47s, military- style assault rifles favored by Mexican drug gangs. The rule focuses on sales in these four border states because they are the source of 75 percent of the firearms recovered and traced in drug-related crimes in Mexico, according to an analysis of Department of Justice statistics by the organization Mayors Against Illegal Guns. This rule allows ATF to collect information on guns that are frequently trafficked and used in crimes, improving in the Bureau's tracing efforts. Among other things, gun trace information can be used to identify potential trafficking networks and to link a suspect to a firearm in a criminal investigation. Unfortunately, there are some who want to block ATF's ability to require this information, effectively hindering its efforts to combat gun trafficking and reduce violence along the U.S.-Mexico border. The National Rifle Association and some Members of Congress have claimed that ATF does not have the authority to implement the rule and that the rule would cause an unmanageable burden on law-abiding gun dealers. Both of these claims are false. The Firearm Owners' Protection Act of 1986, Public Law 99-308, 18 U.S.C. Sec. 923 (g)(5)(A), explicitly states that each Federal firearm licensee shall, when requested by ATF, submit to the ATF any information required to be kept by that law, like the name and address of a purchaser and a firearm's serial number, or such lesser information as ATF may request. Information on the sale of multiple semi-automatic rifles is part of the record which firearm dealers are required to maintain. The claim that ATF's new rule will unfairly burden firearm dealers is also unfounded. ATF estimates that completing the form to report multiple rifle sales will take 12 minutes for gun dealers, and substantially less time for those with computerized sales systems. I cannot imagine that the overwhelming majority of Federal firearm licensees who are law-abiding will take offense to 12 minutes of work in the name of combating illegal trafficking and preventing violence. The mandatory reporting of multiple sales of semi-automatic rifles to the same person is a measured, common sense step to help combat illegal firearm trafficking. The terrible drug cartel-related violence plaguing Mexico and spilling north of the border into the United States continues to be fueled by weapons illegally trafficked from the American Southwest. Again, I support ATF's new rule, and I urge my colleagues in Congress to oppose any legislative efforts to block ATF's ability to carry it out.

Mr. LEVIN

Mr. LEVIN. Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Record on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

Mr. LEVIN

Mr. LEVIN. Today, I along with my colleague, Senator Grassley, am re- introducing the Incorporation Transparency and Law Enforcement Assistance Act, a bill designed to combat terrorism, money laundering, tax evasion, and other wrongdoing facilitated by U.S. corporations with hidden owners. This commonsense bill would end the practice of our States forming over about 2 million new corporations each year for unidentified persons, and instead require the States to ask for the identities of the persons establishing those corporations. With those names on record, U.S. law enforcement faced with corporate misconduct would then have a trail to chase instead of what today is too often a dead end. Our bill is supported by key law enforcement organizations, 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, the Society of Former Special Agents of the Federal Bureau of Investigation, and the Association of Former ATF Agents. It is also endorsed by a number of small business and public interest groups, including the Main Street Alliance, Sustainable Business Network of Washington, Global Financial Integrity, Global Witness, Public Interest Research Group, Project on Government Oversight, Jubilee USA, Citizens for Tax Justice, Tax Justice Network USA, and the FACT Coalition. This is the third time this bill has been introduced. In the 110th Congress, when the bill was introduced for the first time and he was a member of the U.S. Senate, President Obama served as an original cosponsor. It's an issue that has become more urgent with time. Right now, it takes more information to get a drivers license or open a U.S. bank account than to form a U.S. corporation. Under current law, U.S. corporations can be established anonymously, by hidden owners who don't reveal their identity. Our bill would change that by requiring any State that accepts anti-terrorism funding from DHS to add a new question to their existing incorporation forms asking applicants who want to set up a new U.S. corporation or limited liability company to answer a simple but important question: who are the actual owners? That is it. One new question on an existing form. It is not a complicated question, yet the answer could play a key role in helping law enforcement do their job. Our bill would not require States to verify the information, but penalties would apply to persons who submit false information. States, or licensed formation agents if a State has delegated the task to them, would supply the ownership information to law enforcement upon receipt of a subpoena or summons. We have all seen the news reports about U.S. corporations involved in wrongdoing, from facilitating terrorism to money laundering, financial fraud, tax evasion, corruption, and more. Let me give you a few examples. We now know that some terrorists use U.S. shell corporations to carry out their activities. Viktor Bout, an arms dealer who has been indicted and incarcerated in the United States for conspiracy to kill U.S. nationals, used shell corporations around the world in his work, including a dozen formed in Texas, Delaware, and Florida. Mr. Bout was recently extradited from Thailand to answer for his conduct at which time Attorney General Eric Holder stated: ``Long considered one of the world's most prolific arms traffickers, Mr. Bout will now appear in federal court in Manhattan to answer to charges of conspiring to sell millions of dollars worth of weapons to a terrorist organization for use in trying to kill Americans.'' It is unacceptable that Mr. Bout was able to set up shell corporations in three of our States and use them in illicit activities without ever being asked who owned those corporations. In another case, a New York company called the Assa Corporation owned a Manhattan skyscraper and, in 2007, wire transferred about $4.5 million in rental payments to a bank in Iran. U.S. law enforcement tracking the funds had no idea who was behind that shell corporation, until another government disclosed that it was owned by the Alavi Foundation which was known to have ties to the Iranian military. In other words, a New York corporation was being used to ship millions of U.S. dollars to Iran, a notorious supporter of terrorism. U.S. corporations with hidden owners have also been involved in financial crimes. In 2011, a former Russian military officer, Victor Kaganov, pled guilty to operating an illegal money transmitter business from his home in Oregon, and using Oregon shell corporations to wire more than $150 million around the world on behalf of Russian clients. U.S. Attorney Dwight Holton of the District of Oregon used stark language when describing the case: ``When shell corporations are illegally manipulated in the shadows to hide the flow of tens of millions of dollars overseas, it threatens the integrity of our financial system.'' Another recent case involves Florida attorney Scott Rothstein who, in 2010, pled guilty to fraud and money laundering in connection with a $1.2 billion Ponzi investment scheme, in which he used 85 U.S. limited liability companies to conceal his participation or ownership stake in various real estate and business ventures. Tax evasion is another type of misconduct which all too often involves the use of U.S. corporations with hidden owners. In 2006, for example, the Subcommittee showed how Kurt Greaves, a Michigan businessman, worked with Terry Neal, an offshore promoter, to form shell corporations in Nevada, Canada, and offshore secrecy jurisdictions, to hide more than $400,000 in untaxed business income. In 2004, both Mr. Greaves and Mr. Neal pled guilty to Federal tax evasion. Also in 2006, the Subcommittee showed how two brothers from Texas, Sam and Charles Wyly, created a network of 58 trusts and shell corporations to dodge the payment of U.S. taxes, including using a set of Nevada corporations to move offshore over $190 million in stock options without paying any taxes on that compensation. Still another area of abuse involves the misuse of U.S. corporations in handling corruption proceeds. One example involves Teodoro Obiang, who is the son of the President of Equatorial Guinea, holds office in that country, and is currently under investigation by the U.S. Justice Department, along with his father, for corruption and other misconduct. Between 2004 and 2008, Mr. Obiang used U.S. lawyers to form multiple California shell corporations with names like Beautiful Vision, Unlimited Horizon, and Sweet Pink; open bank accounts in the names of those corporations; and move millions of dollars in suspect funds through those and other U.S. banks. One last example involves 800 U.S. corporations whose hidden owners have stumped U.S. law enforcement which, as a result, has given up investigating their suspect conduct. In October 2004, the Homeland Security Department's division of Immigration and Customs Enforcement or ICE identified a single Utah corporation that had engaged in $150 million in suspicious transactions. ICE found that the corporation had been formed in Utah and was owned by two Panama entities which, in turn, were owned by a group of Panama holding corporations, all located in the same Panama City office. By 2005, ICE had located 800 additional U.S. corporations in nearly all 50 states associated with the same shadowy group in Panama, but was unable to obtain the name of a single natural person who owned one of the corporations. ICE learned that those corporations were associated with multiple investigations into tax fraud and other wrongdoing, but no one had been able to find the corporate owners. The trail went cold, and ICE closed the case. Yet it may be that many of those U.S. corporations are still operative. These examples of U.S. corporations with hidden owners involved in or facilitating terrorism, financial crime, tax evasion, corruption, or other misconduct provide ample evidence of the need for legislation to address the problem. The Federal Law Enforcement Officers Association or FLEOA, which represents more than 26,000 federal law enforcement officers and is a strong supporter of the bill, has stated that ``the unfortunate lax attitude demonstrated by certain states has enabled large criminal enterprises to exploit those State's flawed filing systems.'' FLEOA has stated further: ``[W]hile all Americans are inspired by the spirit of free enterprise, our membership does not want to see the United States adopt the financial hideaway image of Switzerland. 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 which represents more than 1,500 federal prosecutors, urges Congress to take legislative action to remedy inadequate state incorporation practices. NAAUSA has written: ``[M]indful of the ease with which criminals establish `front organizations' to assist in money laundering, terrorist financing, tax 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.'' Just last week, the Administration released a new Strategy to Combat Transnational Organized Crime that focused, in part, on the problem of corporations with hidden owners. It stated that transnational organized criminal networks ``rely on industry experts, both witting and unwitting, to facilitate corrupt transactions and to create the necessary infrastructure to pursue their illicit schemes, such as creating shell corporations, opening offshore bank accounts in the shell corporation's name, and creating front businesses for their illegal activity and money laundering.'' The Strategy established as one of its action plans to ``[w]ork with Congress to enact legislation to require disclosure of beneficial ownership information of legal entities at the time of company formation in order to enhance transparency for law enforcement and other purposes.'' We need legislation not only to stop the abuses being committed by U.S. corporations with hidden owners, but also to meet our international commitments. 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 two years, until 2008, to make progress toward coming into compliance with the FATF standard on beneficial ownership information. That deadline passed three years 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 meets its international commitment to comply with FATF anti-money laundering standards. The bill being introduced today is the product of years of work by the Senate Permanent Subcommittee on Investigations, which I chair. Over ten years ago, in 2000, the Government Accountability Office, 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.'' That 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 hidden owners. The alarm it sounded years ago is still ringing. In April 2006, in response to a second Subcommittee request, GAO released a report entitled, ``Corporation 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 limited liability companies, or LLCs, formed under their laws. The report also found that several States have established automated procedures that allow a person to form a new corporation or LLC in the State within 24 hours of filing an online application without any prior review of that application by State personnel. 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 on the problem. At that hearing, representatives of the U.S. Department of Justice, the Internal Revenue Service, and the Department of Treasury's Financial Crimes Enforcement Network or FinCEN testified that the failure of States to collect adequate information on the beneficial owners of the legal entities they form had impeded federal efforts to investigate and prosecute criminal acts such as terrorism, money laundering, securities fraud, and tax evasion. At the hearing, the Justice Department 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.'' As part of its testimony, FinCEN described identifying 768 incidents of suspicious international wire transfer activity involving U.S. shell corporations. The next year, in 2007, in a ``Dirty Dozen'' list of tax scams active that year, the IRS highlighted shell corporations with hidden owners as number four on the list. It wrote: 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. It was also in 2007, that we first introduced our bipartisan legislation, which was S. 2956 back then, to stop the formation of U.S. corporations with hidden owners. It was a Levin-Coleman-Obama bill. When asked about the bill in 2008, then DHS Secretary Michael Chertoff wrote: ``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.'' In 2009, the Senate Homeland Security and Governmental Affairs Committee held two hearings which examined not only the problem, but also possible solutions, including our by then revised bill, S. 569. At the first hearing entitled, ``Examining State Business Incorporation Practices: A Discussion of the Incorporation Transparency and Law Enforcement Assistance Act,'' held in June 2009, DHS testified that ``shell corporations established in the United States have been utilized to commit crimes against individuals around the world.'' The Manhattan District Attorney's office testified: ``For those of us in law enforcement, these issues with shell corporations are not some abstract idea. This is what we do and deal with every day. We see these shell corporations being used by criminal organizations, and the record is replete with examples of their use for money laundering, for their use in tax evasion, and for their use in securities fraud.'' At the second hearing, ``Business Formation and Financial Crime: Finding a Legislative Solution,'' held in November 2009, the Justice Department again testified about criminals using U.S. shell corporations. It also noted that ``each of these examples involves the relatively rare instance in which law enforcement was able to identify the perpetrator misusing U.S. shell corporations. Far too often, we are unable to do so.'' The Treasury Department testified that ``the ability of illicit actors to form corporations in the United States without disclosing their true identity presents a serious vulnerability and there is ample evidence that criminal organizations and others who threaten our national security exploit this vulnerability.'' The 2009 hearings also presented evidence of dozens of Internet websites advertising corporate formation services that highlighted the ability of corporations to be formed in the United States without asking for the identity of the beneficial owners. These websites explicitly pointed to anonymous ownership as a reason to incorporate within the United States, and often listed certain States alongside notorious offshore jurisdictions as preferred locations in which to form new corporations, essentially providing an open invitation for wrongdoers to form entities within the United States. One website, for example, set up by an international incorporation firm, advocated setting up corporations in Delaware by saying: ``DELAWARE--An Offshore Tax Haven for Non US Residents.'' It cited as one of Delaware's advantages that: ``Owners' names are not disclosed to the state.'' Another website, from a U.K. firm called ``formacorporation-offshore.com,'' listed the advantages to incorporating in Nevada. Those advantages included: ``Stockholders are not on Public Record allowing complete anonymity.'' During the 2009 hearings, I presented evidence of how one Wyoming outfit was selling so-called shelf corporations--corporations formed and then left ``on the shelf'' for later sale to purchasers who could then pretend the corporations had been in operation for years. More recently, a June 2011 Reuters news article wrote a detailed expose of how that same outfit, called Wyoming Corporate Services, has formed thousands of U.S. corporations all across the country, all with hidden owners. The article quoted the website as follows: ``A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy. A person you control . . . yet cannot be held accountable for its actions. Imagine the possibilities!'' The article described a small house in Cheyenne, Wyoming, which Wyoming Corporate Services used to provide a U.S. address for more than 2,000 corporations that it had helped to form. The article described ``the walls of the main room'' as ``covered floor to ceiling with numbered mailboxes labeled as corporate suites.'' The article reported that among the corporations using the address was a shell corporation controlled by a former Ukranian prime minister, Pavlo Lazarenko, who had been convicted of money laundering and extortion; a corporation indicted for helping online-poker operators evade a U.S. ban on Internet gambling; and two corporations barred from U.S. federal contracting for selling counterfeit truck parts to the Pentagon. The article observed that Wyoming Corporate Services continued to sell shelf corporations that existed solely on paper but could show a history of regulatory and tax filings, despite having had no real U.S. operations. That's what is going on right now, here in our own backyard, with respect to U.S. corporations. Despite the evidence of U.S. corporations being misused by organized crime, terrorists, tax evaders, and other wrongdoers, and despite years of law enforcement complaints, many of our States are reluctant to admit there is a problem in establishing U.S. corporations and LLCs with hidden 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. Beginning in 2006, the Subcommittee worked with the States to encourage them to recognize the homeland security problem they'd created and to come up with their own solution. After the Subcommittee's 2006 hearing on this issue, for example, the National Association of Secretaries of State or 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 had many 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 would 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 corporation's ``owners of record'' who can be, and often are, offshore corporations or trusts. The NASS proposal also did not require the States themselves to maintain the beneficial ownership information, or to supply it to law enforcement upon receipt of a subpoena or summons. Instead, law enforcement would have to get the information from the suspect corporation or one of its agents, thereby tipping off the corporation to the investigation. The proposal also failed to require the beneficial ownership information to be updated over time. These and other flaws in the proposal were identified by the Treasury Department, the Department of Justice, and others, but NASS decided to continue on the same course. NASS enlisted the help of the National Conference of Commissioners on Uniform State Laws or NCCUSL, which produced a proposed model law for States that wanted to adopt the NASS approach. NCCUSL presented its proposal at the Homeland Security and Governmental Affairs Committee's June 2009 hearing, where it was subjected to significant criticism. The Manhattan District Attorney's office, for example, testified: ``I say without hesitation or reservation--that from a law enforcement perspective, the bill proposed by NCCUSL would be worse than no bill at all. And there are two very basic reasons for this. It eliminates the ability of law enforcement to get corporate information without alerting the target of the investigation that the investigation is ongoing. That is the primary reason. It also sets up a system that is time-consuming and complicated.'' The Department of Justice testified: ``Senator, I would submit to you that in a criminal organization everyone knows who is in control and this will not be an issue of determining who is in control. What we are concerned about here from the law enforcement perspective are the criminals and the criminal organizations and so what we are asking is that when criminals use shell companies, they provide the name of the beneficial owner. That is the person who is in control, the criminal in control, as opposed to the NCCUSL proposal where they are suggesting that instead two nominees are provided--two nominees between law enforcement and the criminal in control.'' Despite these criticisms, NCCUSL finalized its model law in July 2009, issuing it under the title, ``Uniform Law Enforcement Access to Entity Information Act.'' At the November 2009 hearing, law enforcement again criticized the NCCUSL model law. At the hearing, Senator Levin asked: ``Now the NCCUSL, in their proposal just requires a records contact and that records contact could simply be an owner of record, which could be a shell corporation, putting us right back into a circle which leads absolutely nowhere in terms of finding the beneficial owners. Would you agree that the approach of NCCUSL in this regard is not acceptable, Ms. Shasky?'' The Justice Department representative, Jennifer Shasky, responded: ``Yes, Senator. To allow companies to provide anything less than the beneficial owner information merely provides criminals with an opportunity to evade responsibility and put nominees between themselves and the true perpetrator.'' With regard to NCCUSL's proposal, the Treasury representative, David Cohen, testified: ``[T]here is not an obligation for that live person to not be a nominee. And what I think is important in the legislation is that we get at the true beneficial owner and not someone who may be a nominee.'' In addition to its flaws, the NCCUSL model law has proven unpopular with the States for whom it was written. Despite the effort and fanfare attached to this uniform law, after two years of sitting on the books, not a single State has adopted it or given any indication of doing so. It is deeply disappointing that the States, despite the passage of five years since FATF first called upon the United States to meet its commitment to collect beneficial ownership information, have been 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, with no questions asked. It's 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 identity of the persons behind the incorporation efforts. That is why Federal legislation in this area is critical. 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 from incorporation applicants a list of the beneficial owners of each corporation or LLC formed under their laws, to maintain this information for a period of years after a corporation is terminated, and to provide the information to law enforcement upon receipt of a subpoena or summons. The bill would also require corporations and LLCs to update their beneficial ownership information on a regular basis. The ownership information would be kept by the State or, if a State maintains a formation agent licensing system and delegates this task, by a State's licensed formation agents. The particular information that would have to be provided for each beneficial owner is the owner's name, address, and unique identifying number from a State drivers license or U.S. passport. The bill would not require States or their licensed formation agents to verify this information, but penalties would apply to persons who submitted false information. In the case of U.S. corporations formed by individuals who do not possess a drivers license or passport from the United States, the bill would require the incorporation application to include a written certification from a formation agent residing within the State attesting to the fact that the agent had obtained and verified the identity of the non-U.S. beneficial owners of the corporation, by obtaining their names, addresses, and identifying information from a non-expired non-U.S. passport. The formation agent would be required to retain this information in the State for a specified period of time and produce it upon receipt of a subpoena or summons from law enforcement. To ensure that its provisions are tightly targeted, the bill would exempt a wide range of corporations from the disclosure obligation. It would exempt, for example, virtually all highly regulated corporations, because we already know who owns them. That includes all publicly- traded corporations, banks, broker-dealers, commodity brokers, registered investment funds, registered accounting firms, insurers, utilities, and charities that file returns with the IRS. The bill would also exempt corporations with a substantial U.S. presence, including at least 20 employees physically located in the United States, since those individuals could provide law enforcement with the leads needed to trace a corporation's true owners. In addition, the bill would exempt corporations whose beneficial ownership information would not benefit the public interest or assist law enforcement. These exemptions dramatically reduce the number of corporations who would be required to provide beneficial ownership information to ensure that the bill's disclosure obligation is focused on only those whose owners' identities are currently hidden. The bill does not take a position on the issue of whether the States should make the beneficial ownership information available to the public. Instead, the bill leaves it entirely up to the States to decide whether, under what circumstances, and to what extent 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 with a subpoena or summons is given ready access to the beneficial ownership information. Relative to the costs of compliance, the bill provides States with access to two separate funding sources, neither of which involves appropriated funds. For the first three years after the bill's enactment, the bill directs both the Treasury and Justice Departments to make funds available from their individual forfeiture programs to States seeking to comply with the requirements of the Act. These forfeiture funds are not appropriated taxpayer dollars; instead they are the proceeds of forfeiture actions taken against persons involved in money laundering, drug trafficking, or other wrongdoing. The two forfeiture funds typically contain between $300 and $500 million at a time. The bill would direct a total of $30 million over three years to be provided to the States from the two funds to carry out the Act. These provisions would ensure that States have adequate funds for the modest compliance costs involved with adding a new question to their incorporation forms requesting the names of the covered corporations' beneficial owners. It is common for bills establishing minimum Federal standards to seek to ensure State action by making some Federal funding dependent upon a State's meeting the specified standards. Our bill, however, states explicitly that nothing in its provisions 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 calls for a GAO report in 2015 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 funding going to noncompliant States. The bill also contains a provision that would require corporations bidding on Federal contracts to provide the same beneficial ownership information to the Federal Government as provided to the relevant State. The Subcommittee has become aware of instances in which the Federal Government has found itself doing business with U.S. corporations whose owners are hidden. It's important that when the Federal Government contracts to do business with someone, it knows who it is dealing with. Finally, the bill would require the Treasury Department to issue a rule requiring U.S. formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or LLCs for wrongdoers. The bill requires the programs to be risk based so that formation agents can target their preventative efforts toward persons who pose a high risk of being involved with money laundering. GAO would also be asked to conduct a study of existing State formation procedures for partnerships, trusts, and charitable organizations. We have worked with the Departments of Homeland Security, Treasury, and Justice to craft a bill that would address, in a fair and reasonable way, the homeland security problems created by States allowing the formation of millions of U.S. corporations and LLCs with hidden owners. What the bill comes down to is a simple requirement that States change their incorporation applications to add a single question requesting identifying information for the true owners of the corporations they form. That is not too much to ask to protect this country and the international community from wrongdoers seeking to misuse U.S. corporations. For those who say that, if the United States tightens its incorporation rules, new corporations will be formed elsewhere, it is appropriate to ask exactly where they will go. Every country in the European Union is already required to have their formation agents collect beneficial information for the corporations formed by those agents. Most offshore jurisdictions also already require request this information to be collected, including the Bahamas, Cayman Islands, and the Channel Islands. Countries around the world already request beneficial ownership information, in part because of their commitment to FATF's international anti-money laundering standards. Our 50 States should be asking for the same ownership information, but 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 do the right thing. It is been more than five years since our 2006 hearing on this issue and more than two years since the States came up with a model law on the subject, with no progress to speak of, despite repeated pleas from law enforcement. Federal legislation is necessary to reduce the vulnerability of the United States to wrongdoing by U.S. corporations with hidden 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 protect owners from personal liability for corporate acts. Unfortunately, today, the corporate form has too often been corrupted into serving those who wish to conceal their identities. 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 join us in supporting this legislation and putting 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 hidden owners. Mr. President, I ask unanimous consent that a bill summary be printed in the Record.

Mr. LEVIN

Mr. LEVIN. Today, I along with my colleague, Senator Grassley, am re- introducing the Incorporation Transparency and Law Enforcement Assistance Act, a bill designed to combat terrorism, money laundering, tax evasion, and other wrongdoing facilitated by U.S. corporations with hidden owners. This commonsense bill would end the practice of our States forming over about 2 million new corporations each year for unidentified persons, and instead require the States to ask for the identities of the persons establishing those corporations. With those names on record, U.S. law enforcement faced with corporate misconduct would then have a trail to chase instead of what today is too often a dead end. Our bill is supported by key law enforcement organizations, 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, the Society of Former Special Agents of the Federal Bureau of Investigation, and the Association of Former ATF Agents. It is also endorsed by a number of small business and public interest groups, including the Main Street Alliance, Sustainable Business Network of Washington, Global Financial Integrity, Global Witness, Public Interest Research Group, Project on Government Oversight, Jubilee USA, Citizens for Tax Justice, Tax Justice Network USA, and the FACT Coalition. This is the third time this bill has been introduced. In the 110th Congress, when the bill was introduced for the first time and he was a member of the U.S. Senate, President Obama served as an original cosponsor. It's an issue that has become more urgent with time. Right now, it takes more information to get a drivers license or open a U.S. bank account than to form a U.S. corporation. Under current law, U.S. corporations can be established anonymously, by hidden owners who don't reveal their identity. Our bill would change that by requiring any State that accepts anti-terrorism funding from DHS to add a new question to their existing incorporation forms asking applicants who want to set up a new U.S. corporation or limited liability company to answer a simple but important question: who are the actual owners? That is it. One new question on an existing form. It is not a complicated question, yet the answer could play a key role in helping law enforcement do their job. Our bill would not require States to verify the information, but penalties would apply to persons who submit false information. States, or licensed formation agents if a State has delegated the task to them, would supply the ownership information to law enforcement upon receipt of a subpoena or summons. We have all seen the news reports about U.S. corporations involved in wrongdoing, from facilitating terrorism to money laundering, financial fraud, tax evasion, corruption, and more. Let me give you a few examples. We now know that some terrorists use U.S. shell corporations to carry out their activities. Viktor Bout, an arms dealer who has been indicted and incarcerated in the United States for conspiracy to kill U.S. nationals, used shell corporations around the world in his work, including a dozen formed in Texas, Delaware, and Florida. Mr. Bout was recently extradited from Thailand to answer for his conduct at which time Attorney General Eric Holder stated: ``Long considered one of the world's most prolific arms traffickers, Mr. Bout will now appear in federal court in Manhattan to answer to charges of conspiring to sell millions of dollars worth of weapons to a terrorist organization for use in trying to kill Americans.'' It is unacceptable that Mr. Bout was able to set up shell corporations in three of our States and use them in illicit activities without ever being asked who owned those corporations. In another case, a New York company called the Assa Corporation owned a Manhattan skyscraper and, in 2007, wire transferred about $4.5 million in rental payments to a bank in Iran. U.S. law enforcement tracking the funds had no idea who was behind that shell corporation, until another government disclosed that it was owned by the Alavi Foundation which was known to have ties to the Iranian military. In other words, a New York corporation was being used to ship millions of U.S. dollars to Iran, a notorious supporter of terrorism. U.S. corporations with hidden owners have also been involved in financial crimes. In 2011, a former Russian military officer, Victor Kaganov, pled guilty to operating an illegal money transmitter business from his home in Oregon, and using Oregon shell corporations to wire more than $150 million around the world on behalf of Russian clients. U.S. Attorney Dwight Holton of the District of Oregon used stark language when describing the case: ``When shell corporations are illegally manipulated in the shadows to hide the flow of tens of millions of dollars overseas, it threatens the integrity of our financial system.'' Another recent case involves Florida attorney Scott Rothstein who, in 2010, pled guilty to fraud and money laundering in connection with a $1.2 billion Ponzi investment scheme, in which he used 85 U.S. limited liability companies to conceal his participation or ownership stake in various real estate and business ventures. Tax evasion is another type of misconduct which all too often involves the use of U.S. corporations with hidden owners. In 2006, for example, the Subcommittee showed how Kurt Greaves, a Michigan businessman, worked with Terry Neal, an offshore promoter, to form shell corporations in Nevada, Canada, and offshore secrecy jurisdictions, to hide more than $400,000 in untaxed business income. In 2004, both Mr. Greaves and Mr. Neal pled guilty to Federal tax evasion. Also in 2006, the Subcommittee showed how two brothers from Texas, Sam and Charles Wyly, created a network of 58 trusts and shell corporations to dodge the payment of U.S. taxes, including using a set of Nevada corporations to move offshore over $190 million in stock options without paying any taxes on that compensation. Still another area of abuse involves the misuse of U.S. corporations in handling corruption proceeds. One example involves Teodoro Obiang, who is the son of the President of Equatorial Guinea, holds office in that country, and is currently under investigation by the U.S. Justice Department, along with his father, for corruption and other misconduct. Between 2004 and 2008, Mr. Obiang used U.S. lawyers to form multiple California shell corporations with names like Beautiful Vision, Unlimited Horizon, and Sweet Pink; open bank accounts in the names of those corporations; and move millions of dollars in suspect funds through those and other U.S. banks. One last example involves 800 U.S. corporations whose hidden owners have stumped U.S. law enforcement which, as a result, has given up investigating their suspect conduct. In October 2004, the Homeland Security Department's division of Immigration and Customs Enforcement or ICE identified a single Utah corporation that had engaged in $150 million in suspicious transactions. ICE found that the corporation had been formed in Utah and was owned by two Panama entities which, in turn, were owned by a group of Panama holding corporations, all located in the same Panama City office. By 2005, ICE had located 800 additional U.S. corporations in nearly all 50 states associated with the same shadowy group in Panama, but was unable to obtain the name of a single natural person who owned one of the corporations. ICE learned that those corporations were associated with multiple investigations into tax fraud and other wrongdoing, but no one had been able to find the corporate owners. The trail went cold, and ICE closed the case. Yet it may be that many of those U.S. corporations are still operative. These examples of U.S. corporations with hidden owners involved in or facilitating terrorism, financial crime, tax evasion, corruption, or other misconduct provide ample evidence of the need for legislation to address the problem. The Federal Law Enforcement Officers Association or FLEOA, which represents more than 26,000 federal law enforcement officers and is a strong supporter of the bill, has stated that ``the unfortunate lax attitude demonstrated by certain states has enabled large criminal enterprises to exploit those State's flawed filing systems.'' FLEOA has stated further: ``[W]hile all Americans are inspired by the spirit of free enterprise, our membership does not want to see the United States adopt the financial hideaway image of Switzerland. 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 which represents more than 1,500 federal prosecutors, urges Congress to take legislative action to remedy inadequate state incorporation practices. NAAUSA has written: ``[M]indful of the ease with which criminals establish `front organizations' to assist in money laundering, terrorist financing, tax 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.'' Just last week, the Administration released a new Strategy to Combat Transnational Organized Crime that focused, in part, on the problem of corporations with hidden owners. It stated that transnational organized criminal networks ``rely on industry experts, both witting and unwitting, to facilitate corrupt transactions and to create the necessary infrastructure to pursue their illicit schemes, such as creating shell corporations, opening offshore bank accounts in the shell corporation's name, and creating front businesses for their illegal activity and money laundering.'' The Strategy established as one of its action plans to ``[w]ork with Congress to enact legislation to require disclosure of beneficial ownership information of legal entities at the time of company formation in order to enhance transparency for law enforcement and other purposes.'' We need legislation not only to stop the abuses being committed by U.S. corporations with hidden owners, but also to meet our international commitments. 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 two years, until 2008, to make progress toward coming into compliance with the FATF standard on beneficial ownership information. That deadline passed three years 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 meets its international commitment to comply with FATF anti-money laundering standards. The bill being introduced today is the product of years of work by the Senate Permanent Subcommittee on Investigations, which I chair. Over ten years ago, in 2000, the Government Accountability Office, 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.'' That 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 hidden owners. The alarm it sounded years ago is still ringing. In April 2006, in response to a second Subcommittee request, GAO released a report entitled, ``Corporation 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 limited liability companies, or LLCs, formed under their laws. The report also found that several States have established automated procedures that allow a person to form a new corporation or LLC in the State within 24 hours of filing an online application without any prior review of that application by State personnel. 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 on the problem. At that hearing, representatives of the U.S. Department of Justice, the Internal Revenue Service, and the Department of Treasury's Financial Crimes Enforcement Network or FinCEN testified that the failure of States to collect adequate information on the beneficial owners of the legal entities they form had impeded federal efforts to investigate and prosecute criminal acts such as terrorism, money laundering, securities fraud, and tax evasion. At the hearing, the Justice Department 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.'' As part of its testimony, FinCEN described identifying 768 incidents of suspicious international wire transfer activity involving U.S. shell corporations. The next year, in 2007, in a ``Dirty Dozen'' list of tax scams active that year, the IRS highlighted shell corporations with hidden owners as number four on the list. It wrote: 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. It was also in 2007, that we first introduced our bipartisan legislation, which was S. 2956 back then, to stop the formation of U.S. corporations with hidden owners. It was a Levin-Coleman-Obama bill. When asked about the bill in 2008, then DHS Secretary Michael Chertoff wrote: ``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.'' In 2009, the Senate Homeland Security and Governmental Affairs Committee held two hearings which examined not only the problem, but also possible solutions, including our by then revised bill, S. 569. At the first hearing entitled, ``Examining State Business Incorporation Practices: A Discussion of the Incorporation Transparency and Law Enforcement Assistance Act,'' held in June 2009, DHS testified that ``shell corporations established in the United States have been utilized to commit crimes against individuals around the world.'' The Manhattan District Attorney's office testified: ``For those of us in law enforcement, these issues with shell corporations are not some abstract idea. This is what we do and deal with every day. We see these shell corporations being used by criminal organizations, and the record is replete with examples of their use for money laundering, for their use in tax evasion, and for their use in securities fraud.'' At the second hearing, ``Business Formation and Financial Crime: Finding a Legislative Solution,'' held in November 2009, the Justice Department again testified about criminals using U.S. shell corporations. It also noted that ``each of these examples involves the relatively rare instance in which law enforcement was able to identify the perpetrator misusing U.S. shell corporations. Far too often, we are unable to do so.'' The Treasury Department testified that ``the ability of illicit actors to form corporations in the United States without disclosing their true identity presents a serious vulnerability and there is ample evidence that criminal organizations and others who threaten our national security exploit this vulnerability.'' The 2009 hearings also presented evidence of dozens of Internet websites advertising corporate formation services that highlighted the ability of corporations to be formed in the United States without asking for the identity of the beneficial owners. These websites explicitly pointed to anonymous ownership as a reason to incorporate within the United States, and often listed certain States alongside notorious offshore jurisdictions as preferred locations in which to form new corporations, essentially providing an open invitation for wrongdoers to form entities within the United States. One website, for example, set up by an international incorporation firm, advocated setting up corporations in Delaware by saying: ``DELAWARE--An Offshore Tax Haven for Non US Residents.'' It cited as one of Delaware's advantages that: ``Owners' names are not disclosed to the state.'' Another website, from a U.K. firm called ``formacorporation-offshore.com,'' listed the advantages to incorporating in Nevada. Those advantages included: ``Stockholders are not on Public Record allowing complete anonymity.'' During the 2009 hearings, I presented evidence of how one Wyoming outfit was selling so-called shelf corporations--corporations formed and then left ``on the shelf'' for later sale to purchasers who could then pretend the corporations had been in operation for years. More recently, a June 2011 Reuters news article wrote a detailed expose of how that same outfit, called Wyoming Corporate Services, has formed thousands of U.S. corporations all across the country, all with hidden owners. The article quoted the website as follows: ``A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy. A person you control . . . yet cannot be held accountable for its actions. Imagine the possibilities!'' The article described a small house in Cheyenne, Wyoming, which Wyoming Corporate Services used to provide a U.S. address for more than 2,000 corporations that it had helped to form. The article described ``the walls of the main room'' as ``covered floor to ceiling with numbered mailboxes labeled as corporate suites.'' The article reported that among the corporations using the address was a shell corporation controlled by a former Ukranian prime minister, Pavlo Lazarenko, who had been convicted of money laundering and extortion; a corporation indicted for helping online-poker operators evade a U.S. ban on Internet gambling; and two corporations barred from U.S. federal contracting for selling counterfeit truck parts to the Pentagon. The article observed that Wyoming Corporate Services continued to sell shelf corporations that existed solely on paper but could show a history of regulatory and tax filings, despite having had no real U.S. operations. That's what is going on right now, here in our own backyard, with respect to U.S. corporations. Despite the evidence of U.S. corporations being misused by organized crime, terrorists, tax evaders, and other wrongdoers, and despite years of law enforcement complaints, many of our States are reluctant to admit there is a problem in establishing U.S. corporations and LLCs with hidden 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. Beginning in 2006, the Subcommittee worked with the States to encourage them to recognize the homeland security problem they'd created and to come up with their own solution. After the Subcommittee's 2006 hearing on this issue, for example, the National Association of Secretaries of State or 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 had many 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 would 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 corporation's ``owners of record'' who can be, and often are, offshore corporations or trusts. The NASS proposal also did not require the States themselves to maintain the beneficial ownership information, or to supply it to law enforcement upon receipt of a subpoena or summons. Instead, law enforcement would have to get the information from the suspect corporation or one of its agents, thereby tipping off the corporation to the investigation. The proposal also failed to require the beneficial ownership information to be updated over time. These and other flaws in the proposal were identified by the Treasury Department, the Department of Justice, and others, but NASS decided to continue on the same course. NASS enlisted the help of the National Conference of Commissioners on Uniform State Laws or NCCUSL, which produced a proposed model law for States that wanted to adopt the NASS approach. NCCUSL presented its proposal at the Homeland Security and Governmental Affairs Committee's June 2009 hearing, where it was subjected to significant criticism. The Manhattan District Attorney's office, for example, testified: ``I say without hesitation or reservation--that from a law enforcement perspective, the bill proposed by NCCUSL would be worse than no bill at all. And there are two very basic reasons for this. It eliminates the ability of law enforcement to get corporate information without alerting the target of the investigation that the investigation is ongoing. That is the primary reason. It also sets up a system that is time-consuming and complicated.'' The Department of Justice testified: ``Senator, I would submit to you that in a criminal organization everyone knows who is in control and this will not be an issue of determining who is in control. What we are concerned about here from the law enforcement perspective are the criminals and the criminal organizations and so what we are asking is that when criminals use shell companies, they provide the name of the beneficial owner. That is the person who is in control, the criminal in control, as opposed to the NCCUSL proposal where they are suggesting that instead two nominees are provided--two nominees between law enforcement and the criminal in control.'' Despite these criticisms, NCCUSL finalized its model law in July 2009, issuing it under the title, ``Uniform Law Enforcement Access to Entity Information Act.'' At the November 2009 hearing, law enforcement again criticized the NCCUSL model law. At the hearing, Senator Levin asked: ``Now the NCCUSL, in their proposal just requires a records contact and that records contact could simply be an owner of record, which could be a shell corporation, putting us right back into a circle which leads absolutely nowhere in terms of finding the beneficial owners. Would you agree that the approach of NCCUSL in this regard is not acceptable, Ms. Shasky?'' The Justice Department representative, Jennifer Shasky, responded: ``Yes, Senator. To allow companies to provide anything less than the beneficial owner information merely provides criminals with an opportunity to evade responsibility and put nominees between themselves and the true perpetrator.'' With regard to NCCUSL's proposal, the Treasury representative, David Cohen, testified: ``[T]here is not an obligation for that live person to not be a nominee. And what I think is important in the legislation is that we get at the true beneficial owner and not someone who may be a nominee.'' In addition to its flaws, the NCCUSL model law has proven unpopular with the States for whom it was written. Despite the effort and fanfare attached to this uniform law, after two years of sitting on the books, not a single State has adopted it or given any indication of doing so. It is deeply disappointing that the States, despite the passage of five years since FATF first called upon the United States to meet its commitment to collect beneficial ownership information, have been 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, with no questions asked. It's 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 identity of the persons behind the incorporation efforts. That is why Federal legislation in this area is critical. 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 from incorporation applicants a list of the beneficial owners of each corporation or LLC formed under their laws, to maintain this information for a period of years after a corporation is terminated, and to provide the information to law enforcement upon receipt of a subpoena or summons. The bill would also require corporations and LLCs to update their beneficial ownership information on a regular basis. The ownership information would be kept by the State or, if a State maintains a formation agent licensing system and delegates this task, by a State's licensed formation agents. The particular information that would have to be provided for each beneficial owner is the owner's name, address, and unique identifying number from a State drivers license or U.S. passport. The bill would not require States or their licensed formation agents to verify this information, but penalties would apply to persons who submitted false information. In the case of U.S. corporations formed by individuals who do not possess a drivers license or passport from the United States, the bill would require the incorporation application to include a written certification from a formation agent residing within the State attesting to the fact that the agent had obtained and verified the identity of the non-U.S. beneficial owners of the corporation, by obtaining their names, addresses, and identifying information from a non-expired non-U.S. passport. The formation agent would be required to retain this information in the State for a specified period of time and produce it upon receipt of a subpoena or summons from law enforcement. To ensure that its provisions are tightly targeted, the bill would exempt a wide range of corporations from the disclosure obligation. It would exempt, for example, virtually all highly regulated corporations, because we already know who owns them. That includes all publicly- traded corporations, banks, broker-dealers, commodity brokers, registered investment funds, registered accounting firms, insurers, utilities, and charities that file returns with the IRS. The bill would also exempt corporations with a substantial U.S. presence, including at least 20 employees physically located in the United States, since those individuals could provide law enforcement with the leads needed to trace a corporation's true owners. In addition, the bill would exempt corporations whose beneficial ownership information would not benefit the public interest or assist law enforcement. These exemptions dramatically reduce the number of corporations who would be required to provide beneficial ownership information to ensure that the bill's disclosure obligation is focused on only those whose owners' identities are currently hidden. The bill does not take a position on the issue of whether the States should make the beneficial ownership information available to the public. Instead, the bill leaves it entirely up to the States to decide whether, under what circumstances, and to what extent 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 with a subpoena or summons is given ready access to the beneficial ownership information. Relative to the costs of compliance, the bill provides States with access to two separate funding sources, neither of which involves appropriated funds. For the first three years after the bill's enactment, the bill directs both the Treasury and Justice Departments to make funds available from their individual forfeiture programs to States seeking to comply with the requirements of the Act. These forfeiture funds are not appropriated taxpayer dollars; instead they are the proceeds of forfeiture actions taken against persons involved in money laundering, drug trafficking, or other wrongdoing. The two forfeiture funds typically contain between $300 and $500 million at a time. The bill would direct a total of $30 million over three years to be provided to the States from the two funds to carry out the Act. These provisions would ensure that States have adequate funds for the modest compliance costs involved with adding a new question to their incorporation forms requesting the names of the covered corporations' beneficial owners. It is common for bills establishing minimum Federal standards to seek to ensure State action by making some Federal funding dependent upon a State's meeting the specified standards. Our bill, however, states explicitly that nothing in its provisions 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 calls for a GAO report in 2015 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 funding going to noncompliant States. The bill also contains a provision that would require corporations bidding on Federal contracts to provide the same beneficial ownership information to the Federal Government as provided to the relevant State. The Subcommittee has become aware of instances in which the Federal Government has found itself doing business with U.S. corporations whose owners are hidden. It's important that when the Federal Government contracts to do business with someone, it knows who it is dealing with. Finally, the bill would require the Treasury Department to issue a rule requiring U.S. formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or LLCs for wrongdoers. The bill requires the programs to be risk based so that formation agents can target their preventative efforts toward persons who pose a high risk of being involved with money laundering. GAO would also be asked to conduct a study of existing State formation procedures for partnerships, trusts, and charitable organizations. We have worked with the Departments of Homeland Security, Treasury, and Justice to craft a bill that would address, in a fair and reasonable way, the homeland security problems created by States allowing the formation of millions of U.S. corporations and LLCs with hidden owners. What the bill comes down to is a simple requirement that States change their incorporation applications to add a single question requesting identifying information for the true owners of the corporations they form. That is not too much to ask to protect this country and the international community from wrongdoers seeking to misuse U.S. corporations. For those who say that, if the United States tightens its incorporation rules, new corporations will be formed elsewhere, it is appropriate to ask exactly where they will go. Every country in the European Union is already required to have their formation agents collect beneficial information for the corporations formed by those agents. Most offshore jurisdictions also already require request this information to be collected, including the Bahamas, Cayman Islands, and the Channel Islands. Countries around the world already request beneficial ownership information, in part because of their commitment to FATF's international anti-money laundering standards. Our 50 States should be asking for the same ownership information, but 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 do the right thing. It is been more than five years since our 2006 hearing on this issue and more than two years since the States came up with a model law on the subject, with no progress to speak of, despite repeated pleas from law enforcement. Federal legislation is necessary to reduce the vulnerability of the United States to wrongdoing by U.S. corporations with hidden 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 protect owners from personal liability for corporate acts. Unfortunately, today, the corporate form has too often been corrupted into serving those who wish to conceal their identities. 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 join us in supporting this legislation and putting 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 hidden owners. Mr. President, I ask unanimous consent that a bill summary be printed in the Record.

Mr. LEVIN

Mr. LEVIN. Mr. President, I ask to be yielded 10 minutes. I understand there is no objection on the Republican side.

Mr. LEVIN. Mr. President, whatever one's position is on the best way to cut the deficit, we all should be able to agree on this: We must raise the debt ceiling. We must pay our bills. Failing to do so is to invite economic catastrophe. The American people have had their fill of catastrophe and near-catastrophe. Recently in Afghanistan, Admiral Mullen, Chairman of our Joint Chiefs, was asked by troops if they will be paid next month. His answer was: I honestly can't answer that question. He added: I'd like to give you a better answer than that right now; I just honestly don't know. It is inconceivable to me that we will leave our troops in limbo by driving our country over the cliff of default. Our Nation's economic life is in peril. I don't remember ever in the 32 years I have been here when the Nation has been more in need of deliberation, statesmanship, and compromise. New York Times columnist David Brooks, who is a conservative columnist, recently wrote that too many Republicans seem to have joined a ``movement''--his word--in which ``the members do not accept the logic of compromise, no matter what the terms.'' I hope that some of our Republican colleagues will prove Mr. Brooks wrong on this matter because of its huge significance. The time for ignoring hard truths is over. Blind resistance to compromise may play well with some, but it is no way to solve hard problems or to govern. Drawing lines in the sand and issuing ultimatums may make for ringing sound bites, but no press release ever sent a child to college or gave a working family hope for a good job. If our Republican colleagues cannot bring themselves to support the majority leader's proposal or at least to propose modifications to it, they can vote ``no.'' But it is unthinkable to filibuster against allowing the Senate an opportunity to vote on the Reid measure itself, as this clock approaches midnight. It is one thing to vote against the Reid measure, it is quite another to deny the Senate by filibustering the opportunity to vote on the Reid measure when the issue is of such enormous importance. Last evening, and again today, the Republican leader said they would insist on 60 votes to pass the Reid amendment. That is the definition of a filibuster threat. It is the very definition. You must have 60 votes. That is based on a threat to filibuster. Hopefully, some of our Republican colleagues will support Senator Reid's proposal. It has no new revenue. Its spending cuts match the size of the debt limit increase. Its cuts have been approved by leaders of both parties. But if our Republican colleagues don't seek to modify the Reid plan and won't vote for the plan, they at least should allow the Senate to vote on it and not filibuster. Whether Senators vote for or against the Reid legislation, the American people will not forgive a filibuster that prevents us from even voting on vital legislation as we rapidly approach a cliff. In the critically important matter now before us, there is going to be a very strong public reaction against those who, with economic calamity looming before us, deny the Senate, through a threat of a filibuster and the filibuster itself, an opportunity to vote on the Reid motion to concur. Compromise does not come easy with an issue such as this, but the people of this country did not elect us to do easy things. They elected us to seek practical solutions. They elected us to lead. The test of leadership in the Senate on the matter before us is allowing us to vote not just on cloture, which is what the Republican leader suggests is a vote on the Reid motion--it is not--but on the Reid motion itself. The test of leadership in this Senate is not to filibuster the Senate so we can't vote on the important Reid motion but to allow us to proceed when that cloture motion is voted on. So I call on Senate Republicans to offer changes to the Reid proposal or vote against it, if they will, but not thwart the Senate majority from voting to adopt it, should they choose. When the cloture motion is voted on, if cloture is not invoked, and the Senate is prevented from voting up or down on the Reid proposal, under our rules, debate on the Reid proposal will continue. I want to read from the petition we are going to vote on so everybody understands what we are voting on. We are not voting on the Reid motion to concur. We are voting on whether--and these are the words of the motion--we will bring to a close the debate on that motion; will we bring to a close the debate so we can vote on the Reid motion to concur in the House amendment. So voting against bringing debate to a close, thereby denying the majority the opportunity to act, does not defeat the majority leader's motion. It stalls it. It stymies the Senate from acting. If an end is not brought to debate when this cloture motion is voted on, the Reid motion is still the pending matter. If the Republicans, then, are determined to filibuster against it and not allow us to vote on it, they, I believe, will see the wrath of this country brought down upon them.

Mr. LEVIN. I would be happy to.

Mr. LEVIN. The Senator from California is exactly correct.

Mr. LEVIN. I thank the Senator from California for reinforcing that point. I heard one of our colleagues tonight say the Republicans are willing to give us a vote on this bill. No, they are not. The Republicans are willing to have a cloture vote brought up earlier. They then will vote against cloture. But that will do nothing in terms of bringing us closer to a vote on the Reid amendment because if they will not end debate by voting yes for cloture, if they are going to filibuster-- which, apparently, they are going to do because they are determined to filibuster this bill--all that happens, if we don't get the 60 votes the first time that cloture is voted on, is it will be voted on again and again because they are filibustering. The Republicans would then be filibustering against our being able to vote on this bill. Everyone should be very clear. I hope the public will understand what is happening. The Republicans are not willing to give us a vote on the Reid motion. They are not willing to do that. We would be happy to have a vote on the Reid motion immediately, but they insist that we get a supermajority to vote. They want to succeed in a filibuster without even filibustering. That is something which is not only not in the Senate rules, it is also inconsistent with making progress on resolving this problem. The American people want us to compromise, and the refusal to compromise by a few Members of this body and by a number of Members of the other body is what is stymying this resolution. We cannot tolerate that. I think what we must do is continue to offer to compromise. The majority leader is in his office, as he has been all day, waiting to hear from the Republican leader with any suggestions he wishes to make and amendments to the majority leader's motion. It has been a long wait. It has been a fruitless wait--waiting for the Republican leader to suggest modifications. It is not enough that the Reid motion already accepts the Republican arguments of no revenue and that cuts have to equal the amount of the increase in the debt limit. Those are key demands of the Republicans. I have a great deal of trouble not including revenues. I think it is an outrage there is not shared sacrifice in this bill; that the wealthiest among us are still paying the reduced tax rate, for instance, that President Bush proposed; that we have loopholes in the law which give incentives to businesses to move jobs overseas; that we have hedge fund managers actually paying a lower tax rate on their very large incomes than their own employees pay on lesser incomes because of a loophole in the law. The American people want us to close these loopholes. So I have great trouble there is no shared sacrifice in the proposal before us, but that is the way it is. It only has spending cuts. So the Republicans have gotten that--only spending cuts. They have gotten their argument also that the amount of any increase in the debt limit be matched by spending cuts. It is now time to say yes or to propose an alternative. I yield the floor.

Mr. LEVIN

Mr. LEVIN. Will the Senator yield for a question?

Mr. LEVIN. The Republican leader, a few moments ago, said this happens around here from time to time--that 60 votes are required. Is it not true the reason 60 votes are required from time to time is because there is the threat of a filibuster unless the opponents succeed in getting an agreement that there be 60 votes? It is the short way to find out whether the debate will be had. Is it not true, though, that it is the threat of a filibuster the opponents make which produces an agreement to get 60 votes?

Mr. LEVIN. Is it not true--if I may ask my friend--whether the threat is carried out, we will know tonight at 1 a.m.? Because at 1 a.m. tomorrow morning, we will vote not on the Reid measure but on a motion which 18 Senators signed which reads as follows: That we, the undersigned Senators, in accordance with rule XXII, hereby move to bring to a close the debate on the Reid motion. Is that not true?

Mr. LEVIN. So what we will be voting on is not, as the Republican leader characterized it--which he says he is willing to vote on right away--the Reid motion but a vote on whether we will end debate on the Reid motion? And is it not further true that people who vote no tonight are voting to filibuster the Reid motion?

Mr. LEVIN. Finally, would the Senator from Illinois agree, if tonight Republicans refuse to bring this debate to a halt and to allow a vote on the Reid motion, would the Senator from Illinois not agree there will be a strong negative public reaction to a filibuster on a measure in the face of an economic calamity which would avoid that calamity?

Mr. LEVIN. I thank my friend.

Mr. LEVIN. The reason people filibuster is to try to defeat a measure and stalling and delaying a vote is much worse than just defeating a measure. It is defeating the American economy. It will be putting the economy in a ditch if we do not resolve this issue. So we have to be very clear on what the vote is tonight. It is not a vote on the Reid measure. It is a vote on this motion to bring the debate--and these are the words of the motion: We, 18 Senators, move to bring to a close the debate on the Reid motion. That is what we are voting on and the Republican leader tries to coat that or characterize that as a vote on the Reid motion. It is not. We want to vote on the Reid motion. We want to vote. But we will not be allowed to vote on the Reid motion, on the proposal which the majority leader has offered which has a majority support in this Senate; we will not be allowed to vote on that if debate is not ended, if the filibuster continues because 60 Senators are not willing to end it. We will have at least 50-plus to end debate. But let it be clear, let the public understand that if we are not allowed to vote on the Reid measure tonight, the Republicans presumably will continue their filibuster, and we are not going to just simply allow them to defeat it. We are not going to just simply sit down and say: Well, we couldn't end the debate and the filibuster; we didn't get 60 votes--if we don't--tonight. We are not going to do that. That is not going to happen tonight. This is too important to simply let a minority defeat the will of the majority by a filibuster. The Republican leader wants to characterize this again, and mischaracterize this, saying he is willing to have a vote right now on the Reid motion. No, he is not. If we were allowed a vote on the Reid motion, that would be fine. That is a regular majority vote. But what the Republican leader wants is to require 60 votes on the Reid motion in order for it to pass. That is not the way things happen under our rules. Under our rules, 60 votes are required to end a debate if the minority threatens a filibuster and insists it will filibuster unless a measure gets 60 votes. So we know what is happening. We saw it last night. We saw it here today. It is clearly the threat of a filibuster, in the hope we will say that Reid will be pulled down and defeated if we don't get 60 votes. That is what this is all about. This time, we simply cannot allow this measure to be talked to death and a vote denied. We cannot be thwarted because the American economy is at stake. So tonight, if we don't get 60 votes--and let me repeat this so everyone understands it. Tonight, if 60 votes are not there to end debate, if the Republicans intend to filibuster, then tonight that is what is going to happen. The public will see very clearly it is a filibuster, if they haven't seen it already.

Mr. LEVIN

Mr. LEVIN. Madam President, I suggest the absence of a quorum.

Mr. LEVIN

Mr. LEVIN. Mr. President, the path to deficit reduction is difficult, but some of the essentials are clear for all to see. We must cut spending, which will require real sacrifice on the part of American families. We must also add revenue, which has plunged so dramatically thanks to Bush-era tax cuts that flow primarily to the wealthiest among us. And we must avoid proposals that would see the most vulnerable among us pay the highest price for deficit reduction. That is the path a broad array of budget experts, Democratic and Republican, tell us is the only way to relieve our debt problem. And it is the path the American people tell us they understand that we need to take. In survey after survey, poll after poll, Americans voice their support for a balanced approach to deficit reduction, one in which we cut spending, yes, but also address revenues by closing tax loopholes and asking the wealthiest among us to share in the sacrifices that are required to bring down the deficit. And they tell us, unequivocally, that they do not want us to fall short of our commitment to the most vulnerable, especially those who depend on Social Security and Medicare for a secure retirement. So this is the true path to deficit reduction: targeted and sometimes painful spending cuts; closing tax loopholes, asking wealthy taxpayers to join in the sacrifices we must make; and protecting the social safety net on which our most vulnerable citizens depend. We can choose that path, difficult though it may be. Or we could take a path like the one laid out in this legislation--a path leading straight off a cliff. The American public has made it clear to the Republicans in the House of Representatives that its budget objectives, as laid out in the draconian budget plan they sent to us earlier this year, are unacceptable. Rather than heeding that message, Republicans have sent us a plan that's even worse than the first. The budget championed by House Republicans this year would have added more than $6,000 a year to the typical senior's medical bills. The plan before us today tacks another $2,500 or more onto that bill. The budget plan from House Republicans this year cut billions from Medicare to clear the way for billions in tax cuts for the wealthy. The plan before us today would enshrine protection for those tax cuts in the Constitution by requiring two-thirds majorities in both Houses to enact any revenue increase, making it virtually impossible for future Congresses to reverse such disastrous policies, or to remove tax loopholes for oil companies or tax incentives for companies that ship jobs overseas. The budget plan from House Republicans this year would cost an estimated 700,000 jobs by removing support from an already weakened economy. The economy has, if anything, become more worrisome since that budget came to us, but the legislation before us today follows the same destructive path. Let us be clear: What Republicans have proposed is to abandon our commitments to the safety, security and prosperity of the American people. They would slash Medicare and Social Security, and leave the rest of the budget so threadbare that it could not cover our important priorities. The American people want us to reduce waste and redundancy in Federal spending. But they do not want us to stop protecting the air we breathe and the water we drink, stop inspecting our food supply, stop patrolling our streets or borders or educating our young people or ensuring safe air travel or any of the things that help keep them safe and healthy and secure. And yet there is no doubt that under this plan, we would stop doing some or all of those things. We would have no choice. It is especially disturbing that many of the same people arguing for these destructive policies are responsible for the policies that brought on our deficit to begin with. Republicans are quick to blame President Obama's policies for the deficit, but the vast majority of our current woes stem from policies adopted during the previous administration by Republican majorities in Congress. Republicans pushed for massive tax cuts, tax cuts that weren't paid for and that flowed overwhelmingly to the wealthy. Republicans pushed for a war of choice in Iraq that was not paid for. Our Republican colleagues like to compare the Federal Government to a family. Families have to balance their budgets, they say; why can't the government? Well, the Federal ``family'' had a balanced budget under Democrats. Republicans wrecked our fiscal discipline with the Bush tax cuts and wars that were not paid for, and now they want middle-class and vulnerable Americans to pay the price. If the government is a family, then Republicans are the guy who gets a big raise, blows the whole raise plus the family savings on a hot rod, gets fired from his job, loses his income, and decides to stop paying the kids' tuition so he can keep the hot rod. That is the path they propose, in this legislation. We can't follow that path. The better path is difficult, but it is clear. I hope our Republican colleagues will abandon the path of ruin, reject this destructive bill and join us in making the hard choices that the people we serve need us to make, and soon. I yield the floor.