Report text available as:

  • TXT
  • PDF   (PDF provides a complete and accurate display of this text.) Tip ?

110th Congress                                            Rept. 110-277
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
                  IRAN SANCTIONS ENABLING ACT OF 2007

                                _______
                                

                 July 30, 2007.--Ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2347]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 2347) to authorize State and local governments to 
direct divestiture from, and prevent investment in, companies 
with investments of $20,000,000 or more in Iran's energy 
sector, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     5
Background and Need for Legislation..............................     5
Hearings.........................................................     8
Committee Consideration..........................................     8
Committee Votes..................................................     9
Committee Oversight Findings.....................................     9
Performance Goals and Objectives.................................     9
New Budget Authority, Entitlement Authority, and Tax Expenditures     9
Committee Cost Estimate..........................................     9
Congressional Budget Office Estimate.............................    10
Federal Mandates Statement.......................................    11
Advisory Committee Statement.....................................    11
Constitutional Authority Statement...............................    11
Applicability to Legislative Branch..............................    11
Earmark Identification...........................................    11
Exchange of Committee Correspondence.............................    12
Section-by-Section Analysis of the Legislation...................    17
Changes in Existing Law Made by the Bill, as Reported............    18

                               Amendment

  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Iran Sanctions Enabling Act of 2007''.

SEC. 2. FINDINGS.

  The Congress finds as follows:
          (1) The Convention on the Prevention and Punishment of the 
        Crime of Genocide, completed at Paris, December 9, 1948 
        (commonly referred to as the ``Genocide Convention'') defines 
        genocide as, among other things, the act of killing members of 
        a national, ethnic, racial, or religious group with the intent 
        to destroy, in whole or in part, the targeted group. In 
        addition, the Genocide Convention also prohibits conspiracy to 
        commit genocide, as well as ``direct and public incitement to 
        commit genocide''.
          (2) 133 member states of the United Nations have ratified the 
        Genocide Convention and thereby pledged to prosecute 
        individuals who violate the Genocide Convention's prohibition 
        on incitement to commit genocide, as well as those individuals 
        who commit genocide directly.
          (3) On October 27, 2005, at the World Without Zionism 
        Conference in Tehran, Iran, the President of Iran, Mahmoud 
        Ahmadinejad, called for Israel to be ``wiped off the map,'' 
        described Israel as ``a disgraceful blot [on] the face of the 
        Islamic world,'' and declared that ``[a]nybody who recognizes 
        Israel will burn in the fire of the Islamic nation's fury.'' 
        President Ahmadinejad has subsequently made similar types of 
        comments, and the Government of Iran has displayed inflammatory 
        symbols that express similar intent.
          (4) On December 23, 2006, the United Nations Security Council 
        unanimously approved Resolution 1737, which bans the supply of 
        nuclear technology and equipment to Iran and freezes the assets 
        of certain organizations and individuals involved in Iran's 
        nuclear program, until Iran suspends its enrichment of uranium, 
        as verified by the International Atomic Energy Agency.
          (5) Following Iran's failure to comply with Resolution 1737, 
        on March 24, 2007, the United Nations Security Council 
        unanimously approved Resolution 1747, to tighten sanctions on 
        Iran, imposing a ban on arms sales and expanding the freeze on 
        assets, in response to the country's uranium-enrichment 
        activities.
          (6) There are now signs of domestic discontent within Iran, 
        and targeted financial and economic measures could produce 
        further political pressure within Iran. According to the 
        Economist Intelligence Unit, the nuclear crisis ``is imposing a 
        heavy opportunity cost on Iran's economic development, slowing 
        down investment in the oil, gas, and petrochemical sectors, as 
        well as in critical infrastructure projects, including 
        electricity''.
          (7) Targeted financial measures represent one of the 
        strongest non-military tools available to convince Tehran that 
        it can no longer afford to engage in dangerous, destabilizing 
        activities such as its nuclear weapons program and its support 
        for terrorism.
          (8) Foreign persons that have invested in Iran's energy 
        sector, despite Iran's support of international terrorism and 
        its nuclear program, have provided additional financial means 
        for Iran's activities in these areas, and many United States 
        persons have unknowingly invested in those same foreign 
        persons.
          (9) There is an increasing interest by States, local 
        governments, educational institutions, and private institutions 
        to seek to disassociate themselves from companies that directly 
        or indirectly support the Government of Iran's efforts to 
        achieve a nuclear weapons capability.
          (10) Policy makers and fund managers may find moral, 
        prudential, or reputational reasons to divest from companies 
        that accept the business risk of operating in countries that 
        are subject to international economic sanctions or that have 
        business relationships with countries, governments, or entities 
        with which any United States company would be prohibited from 
        dealing because of economic sanctions imposed by the United 
        States.

SEC. 3. TRANSPARENCY IN U.S. CAPITAL MARKETS.

  (a) List of Persons Investing in Iran Energy Sector.--
          (1) Publication of list.--Not later than 6 months after the 
        date of the enactment of this Act and every 6 months 
        thereafter, the President shall ensure publication in the 
        Federal Register of a list of each person, whether within or 
        outside of the United States, that, as of the date of the 
        publication, has an investment of more than $20,000,000 in the 
        energy sector in Iran, and each person that is an international 
        financial institution that, as of the date of the publication, 
        has any investment in the energy sector in Iran. The list shall 
        include a description of the investment made by each such 
        person, including the dollar value, intended purpose, and 
        status of the investment, as of the date of the publication.
          (2) Prior notice to persons.--The President or a designee of 
        the President shall, at least 30 days before the list is 
        published under paragraph (1), notify each person that the 
        President or his designee, as the case may be, intends to 
        include on the list.
          (3) Delay in including persons on the list.--After notifying 
        a person under paragraph (2), the the President or a designee 
        of the President may delay including that person on the list 
        for up to 60 days if the President or designee determines and 
        certifies to the Congress that the person has taken specific 
        and effective actions to terminate the involvement of the 
        person in the activities that resulted in the notification 
        under paragraph (2).
          (4) Removal of persons from the list.--The President or a 
        designee of the President may remove a person from the list 
        before the next publication of the list under paragraph (1) if 
        the President or a designee of the President, determines that 
        the person no longer has an investment of more than $20,000,000 
        in the energy sector in Iran.
  (b) Publication on Website.--The President shall ensure that the list 
is published on an appropriate government website, updating the list as 
necessary to take into account any person removed from the list under 
subsection (a)(4).
  (c) Definition.--In this section, the term ``investment'' has the 
meaning given that term in section 14(9) of the Iran Sanctions Act (50 
U.S.C. 1701 App.).

SEC. 4. AUTHORITY OF STATE AND LOCAL GOVERNMENTS TO DIVEST FROM CERTAIN 
                    COMPANIES INVESTED IN IRAN'S ENERGY SECTOR.

  (a) Statement of Policy.--It is the policy of the United States to 
support the decision of State governments, local governments, and 
educational institutions to divest from, and to prohibit the investment 
of assets they control in, persons that have investments of more than 
$20,000,000 in Iran's energy sector.
  (b) Authority To Divest.--
          (1) In general.--Notwithstanding any other provision of law, 
        a State or local government may adopt and enforce measures to 
        divest the assets of the State or local government from, or 
        prohibit investment of the assets of the State or local 
        government in--
                  (A) persons that are included on the most recent list 
                published under section 3(a)(1), as modified under 
                section 3(a)(4); and
                  (B) persons having an investment in, or carrying on a 
                trade or business (within the meaning of section 162 of 
                the Internal Revenue Code of 1986) in or with, Iran.
          (2) Applicability.--This subsection applies to measures 
        adopted by a State or local government before, on, or after the 
        date of the enactment of this Act.
          (3) Definitions.--In this subsection:
                  (A) Investment.--The ``investment'' of assets 
                includes--
                          (i) a commitment or contribution of assets; 
                        and
                          (ii) a loan or other extension of credit of 
                        assets.
                  (B) Assets.--The term ``assets'' refers to public 
                monies and includes any pension, retirement, annuity, 
                or endowment fund, or similar instrument, that is 
                controlled by a State or local government.
                  (C) Assets of a state or local government.--The term 
                ``assets of the State or local government'' refers to 
                assets that the State or local government controls.
          (4) Additional definition.--For purposes of paragraph (1)(B), 
        the term ``investment'' means the acquisition of property or 
        assets for the production of revenue.
  (c) Preemption.--A measure of a State or local government that is 
authorized by subsection (b) is not preempted by any Federal law or 
regulation except to the extent that a person is unable to comply with 
both the measure and the Federal law or regulation.

SEC. 5. SAFE HARBOR FOR CHANGES OF INVESTMENT POLICIES BY MUTUAL FUNDS.

  Section 13 of the Investment Company Act of 1940 (15 U.S.C. 80a-13) 
is amended by adding at the end the following new subsection:
  ``(c) Safe Harbor for Changes in Investment Policies.--
Notwithstanding any other provision of Federal or State law, no person 
may bring any civil, criminal, or administrative action against any 
registered investment company or person providing services to such 
registered investment company (including its investment adviser), or 
any employee, officer, or director thereof, based upon the investment 
company divesting from, or avoiding investing in, securities issued by 
companies that are included on the most recent list published under 
section 3(a)(1) of the Iran Sanctions Enabling Act of 2007, as modified 
under section 3(b) of that Act. For purposes of this subsection the 
term `person' shall include the Federal government, and any State or 
political subdivision of a State.''.

SEC. 6. SAFE HARBOR FOR CHANGES OF INVESTMENT POLICIES BY EMPLOYEE 
                    BENEFIT PLANS.

  Section 502 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1132) is amended by adding at the end the following new 
subsection:
  ``(n) No person shall be treated as breaching any of the 
responsibilities, obligations, or duties imposed upon fiduciaries by 
this title, and no action may be brought under this section against any 
person, for divesting plan assets from, or avoiding investing plan 
assets in, persons that are included on the most recent list published 
under section 3(a)(1) of the Iran Sanctions Enabling Act, as modified 
under section 3(a)(4) of such Act.''.

SEC. 7. SENSE OF THE CONGRESS REGARDING THRIFT SAVINGS PLAN.

  It is the sense of the Congress that the Federal Retirement Thrift 
Investment Board should initiate efforts to provide a terror-free 
international investment option among the funds of the Thrift Savings 
Fund that would invest in stocks in which the International Stock Index 
Investment Fund may invest under section 8438(b)(4) of title 5, United 
States Code, other than the stock of companies that do business in any 
country the government of which the Secretary of State has determined, 
for purposes of section 6(j) of the Export Administration Act of 1979 
(as continued in effect pursuant to the International Emergency 
Economic Powers Act), section 40 of the Arms Export Control Act, 
section 620A of the Foreign Assistance Act of 1961, or other provision 
of law, is a government that has repeatedly provided support for acts 
of international terrorism.

SEC. 8. DEFINITIONS.

  In this Act:
          (1) Iran.--the term ``Iran'' includes any agency or 
        instrumentality of Iran.
          (2) Energy sector.--The term ``energy sector'' refers to 
        activities to develop petroleum or natural gas resources.
          (3) Person.--The term ``person'' means--
                  (A) a natural person as well as a corporation, 
                business association, partnership, society, trust, any 
                other nongovernmental entity, organization, or group;
                  (B) any governmental entity or instrumentality of a 
                government, including an international financial 
                institution; and
                  (C) any successor, subunit, or subsidiary of any 
                entity described in subparagraph (A) or (B).
          (4) State.--The term ``State'' includes the District of 
        Columbia, the Commonwealth or Puerto Rico, the Virgin Islands, 
        Guam, American Samoa, and the Commonwealth of the Northern 
        Mariana Islands.
          (5) State or local government.--
                  (A) In general.--The term ``State or local 
                government'' includes--
                          (i) any State and any agency or 
                        instrumentality thereof;
                          (ii) any local government within a State, and 
                        any agency or instrumentality thereof; and
                          (iii) any public institution of higher 
                        education.
                  (B) Public institution of higher education.--The term 
                ``public institution of higher education'' means a 
                public institution of higher education within the 
                meaning of the Higher Education Act of 1965.
          (6) International financial institution.--The term 
        ``international financial institution'' means the International 
        Bank for Reconstruction and Development, the International 
        Monetary Fund, and the United Nations.

SEC. 9. SUNSET.

  This Act shall terminate 30 days after the date on which the 
President has certified to Congress that--
          (1) the Government of Iran has ceased providing support for 
        acts of international terrorism and no longer satisfies the 
        requirements for designation as a state-sponsor of terrorism 
        for purposes of section 6(j) of the Export Administration Act 
        of 1979, section 620A of the Foreign Assistance Act of 1961, 
        section 40 of the Arms Export Control Act, or any other 
        provision of law; and
          (2) Iran has ceased the pursuit, acquisition, and development 
        of nuclear, biological, and chemical weapons and ballistic 
        missiles and ballistic missile launch technology.

                          Purpose and Summary

    H.R. 2347, the ``Iran Sanctions Enabling Act of 2007'' 
permits the divestment from companies with investments of 
$20,000,000 or more in Iran's energy sector in order to 
pressure the Iranian regime to cease its provocative statements 
regarding Israel and its ambitions to develop a nuclear weapons 
program. The bill directs the Federal government to produce a 
list of companies that have qualifying investments in Iran. 
State governments, local governments, and public educational 
institutions are then authorized by the legislation to divest 
their pension fund assets from companies on the list, as well 
as from companies having an investment in, or carrying on a 
trade or business in Iran. The legislation permits private 
investment and pension plan managers to divest from companies 
listed without breaching their fiduciary responsibilities to 
their investors. A provision expresses the Sense of the 
Congress that the Federal Retirement Thrift Investment Board 
should initiate efforts to provide a terror-free international 
investment option among the funds of the Thrift Savings Plan. 
The legislation includes a sunset provision stating that the 
Act shall terminate 30 days after the date on which the 
President has certified to Congress that Iran no longer 
satisfies the requirements for designation as a state-sponsor 
of terrorism and that Iran has ceased the pursuit, acquisition, 
and development of nuclear, biological, and chemical weapons 
and ballistic missiles and ballistic missile launch technology.

                  Background and Need for Legislation


Rising international tensions with Iran

    The need for legislation enabling U.S. citizens and public 
and private pension funds to divest their holdings from Iran 
arises from the statements of the President of Iran, Mahmoud 
Ahmadinejad, as well as the ongoing Iranian ambitions to 
develop a nuclear weapons program.
    On October 27, 2005, at the World Without Zionism 
Conference in Tehran, Iran, President Ahmadinejad called for 
Israel to be ``wiped off the map,'' described Israel as ``a 
disgraceful blot [on] the face of the Islamic world,'' and 
declared that ``[a]nybody who recognizes Israel will burn in 
the fire of the Islamic nation's fury.'' President Ahmadinejad 
has subsequently made similar types of comments, and the 
Government of Iran has displayed inflammatory symbols that 
express similar intent.
    Such provocative statements potentially violate the 
Convention on the Prevention and Punishment of the Crime of 
Genocide, completed at Paris, December 9, 1948 (commonly 
referred to as the ``Genocide Convention''), which does not 
limit genocide to killing members of a national, ethnic, 
racial, or religious group with the intent to destroy, the 
targeted group, but also prohibits conspiracy to commit 
genocide, as well as ``direct and public incitement to commit 
genocide''.
    The U.S., along with 132 member states of the United 
Nations, ratified the Genocide Convention and thereby pledged 
to prosecute individuals who violate its prohibition on 
incitement to commit genocide, as well as those individuals who 
commit genocide directly.
    Moreover, International Atomic Energy Agency (IAEA) 
inspections since 2003 have revealed two decades' worth of 
undeclared nuclear activities in Iran, including uranium 
enrichment and plutonium separation efforts. Despite a series 
of agreements to suspend sensitive activities, Iran has 
continued these activities. Sanction measures so far adopted by 
the U.N. Security Council have proved insufficient to motivate 
Iran to curtail its enrichment activities.
    On December 23, 2006, the United Nations Security Council 
unanimously approved Resolution 1737, which froze the assets of 
certain organizations and individuals involved in Iran's 
nuclear program and imposed a limited ban on materials and 
technology that could contribute to ``enrichment-related, 
reprocessing or heavy-water related activities, or to the 
development of nuclear weapons delivery systems'' until Iran 
suspends its enrichment of uranium, as verified by the IAEA.
    Following Iran's failure to comply with Resolution 1737, on 
March 24, 2007, the United Nations Security Council unanimously 
passed a second set of sanctions, Resolution 1747, to ratchet 
up the pressure on Iran. Resolution 1747 added some 28 
individuals and entities to the list of those whose assets are 
to be frozen and imposed a ban on Iranian arms sales and 
exports of arms and military equipment. The resolution also 
``calls upon'' all countries to ``exercise vigilance and 
restraint'' when it comes to providing heavy military arms and 
equipment to Iran and in allowing Iranian military officers and 
nuclear scientists and engineers to visit their countries.
    The resolution does not contain any cautionary suggestion 
when it comes to providing financial or other support or 
assistance for commercial investments with the Iranian 
government, including investment in Iran's key energy sector.
    Oil accounts for around 80-90 percent of Iran's total 
exports and 40-50 percent of the government's budget. Despite 
high oil prices, Iran's economy has softened considerably since 
President Ahmadinejad took office, and is vulnerable to further 
trade and investment restrictions. According to the Economist 
Intelligence Unit, the nuclear crisis ``is imposing a heavy 
opportunity cost on Iran's economic development, slowing down 
investment in the oil, gas, and petrochemical sectors, as well 
as in critical infrastructure projects, including 
electricity.''
    Iran will need substantial new foreign capital investment 
to modernize its petroleum infrastructure and to meet growing 
domestic energy demands while maintaining revenue producing oil 
exports. There are now signs of domestic discontent within 
Iran, and targeted financial and economic measures could 
produce further political pressure within Iran.
    Lawmakers have become increasingly concerned about Iran, 
and frustrations surrounding developments in the country have 
led to calls for increased economic pressure on the country.
    Companies based in the U.S. are already barred from doing 
business with Iran, but these trade and investment sanctions do 
not extend to foreign companies, which operate there legally. 
Foreign persons that have invested in Iran's energy sector, 
despite Iran's support of international terrorism and its 
nuclear program, have provided additional financial means for 
Iran's activities in these areas, and many United States 
persons have unknowingly invested in those same foreign 
persons.

The legislation

    Without mandating that they do so, H.R. 2347 recognizes the 
right and maximizes the ability of Americans to speak out 
through their investment decisions about their opposition to 
many aspects of Iranian behavior.

Public pension plans

    State and local governments that do not wish to facilitate 
Iran's nuclear ambitions have sought to divest their holdings 
in companies that have investments in Iran's oil sector.
    Constitutional challenges to State measures touching on 
international relations typically take one or more of three 
forms: (1) that the State measures conflict with and thus are 
preempted by Federal law under the Supremacy Clause; (2) that 
the State measures violate the ``dormant'' Foreign Commerce 
Clause; and (3) that the State measures violate the so-called 
``dormant foreign affairs doctrine.''
    With the reporting of this legislation, the Committee has 
concluded that, with respect to each of these challenges, 
Congress and the President have the constitutional power to 
authorize States to enact divestment measures, and Federal 
consent removes any doubt as to the constitutionality of those 
measures.
    Therefore, H.R. 2347 specifically states that it is the 
policy of the United States to support the decisions of State 
and local governments to divest from companies investing in the 
Iranian oil sector. The bill also authorizes State and local 
governments to divest from companies investing in the Iranian 
oil sector, as outlined on a list of companies that the 
President will initiate, as well as allows State and local 
governments to develop their own criteria with regard to the 
companies from which they will divest or not invest 
irrespective of the list provided by the Federal government.
    With regard to preemption, the legislation supports State 
or local efforts to divest from certain companies that do 
business with Iran by clearly stating that they are not 
preempted by any Federal law or regulation except to the extent 
that a person is unable to comply with both the State or local 
measure and the Federal law or regulation.
    Corporate and Private Sector Shareholder Activism. Private 
asset managers are faced with increasing pressure by 
shareholders to divest from companies that do business with 
Iran or invest in Iran's energy sector. The primary argument 
against such divestment is the possibility of breach of 
fiduciary responsibility by asset managers.
    The Committee finds that fund managers may find moral, 
prudential, or reputational reasons to divest from companies 
that accept the business risk of operating in countries that 
are subject to international economic sanctions or that have 
business relationships with countries, governments, or entities 
with which any United States company would be prohibited from 
dealing because of economic sanctions imposed by the United 
States.
    H.R. 2347 includes ``safe harbor'' provisions for private 
asset managers and private pension fund managers who decide, on 
their own volition, to divest from or not invest in particular 
companies included on a list provided by the Federal 
government, so that they will not be vulnerable to any 
litigation or action brought by shareholders or regulatory 
agencies.
    The legislation incorporates a sunset provision stating the 
Act shall terminate 30 days after the date on which the 
President has certified to Congress that Iran so satisfies the 
requirements for designation as a state-sponsor of terrorism 
and that Iran has ceased the pursuit, acquisition, and 
development of nuclear, biological, and chemical weapons and 
ballistic missiles and ballistic missile launch technology.

                                Hearings

    The Subcommittee on Domestic and International Monetary 
Policy, Trade and Technology held a joint hearing with the 
Committee on Foreign Affairs Subcommittee on Terrorism, 
Nonproliferation and Trade on April 18, 2007, on ``Isolating 
Proliferators and Sponsors of Terror: The Use of Sanctions and 
the International Financial System to Change Regime Behavior.'' 
The following witnesses testified:

                               PANEL ONE

         Mr. Daniel Glaser, Deputy Assistant Secretary 
        for Terrorist Financing and Financial Crimes Office of 
        Terrorism and Financial Intelligence, U.S. Department 
        of the Treasury
         Mr. Adam J. Szubin, Director, Office of 
        Foreign Assets Control, U.S. Department of the Treasury
         Paul E. Simons, Deputy Assistant Secretary, 
        Bureau of Economic, Energy, and Business Affairs, U.S. 
        Department of State
         Ms. Patricia McNerney, Principal Deputy 
        Assistant Secretary, Bureau of International Security 
        and Nonproliferation, U.S. Department of State

                               PANEL TWO

         The Honorable Sarah Steelman, Treasurer of the 
        State of Missouri
         Mr. Jack Blum, Of Counsel, Baker & Hostetler 
        Law Firm (Former special counsel for Senate Foreign 
        Relations Subcommittee on Terrorism, Narcotics, and 
        Int'l Operations)
         Mr. Roger W. Robinson, Jr., President and 
        Chief Executive Officer, Conflict Securities Advisory 
        Group
         David L. Asher, Ph.D., Senior Associate 
        Fellow, The Heritage Foundation
         Mr. Victor Comras, The Eren Law Firm (Former 
        chief U.S. architect of the international economic 
        sanctions against Yugoslavia and served as one of five 
        independent monitors overseeing U.N. sanctions al-
        Qaeda)

                        Committee Consideration

    The Committee on Financial Services met in open session on 
May 23, 2007, and ordered H.R. 2347, the Iran Sanctions 
Enabling Act of 2007, as amended, reported to the House with a 
favorable recommendation by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken with in conjunction with the 
consideration of this legislation. A motion by Mr. Frank to 
report the bill to the House, as amended, with a favorable 
recommendation was agreed to by a voice vote. During the 
consideration of the bill, the following amendments were 
considered:
    An amendment by Mr. Bachus, No. 1, changing authority from 
the Secretary of the Treasury, was agreed to by a voice vote.
    An amendment by Mr. Sherman, No. 2, regarding additional 
definition of investment, was agreed to by a voice vote.
    An amendment by Mr. Price (GA), No. 3, regarding 
international financial institutions, was agreed to a voice 
vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 2347, the ``Iran Sanctions Enabling Act of 2007'' 
permits the divestment from companies with investments of 
$20,000,000 or more in Iran's energy sector in order to 
pressure the Iranian regime to cease its provocative statements 
regarding Israel and its ambitions to develop a nuclear weapons 
program. The bill directs the Federal government to produce a 
list of companies that have qualifying investments in Iran. 
State governments, local governments, and public educational 
institutions are then authorized by the legislation to divest 
their pension fund assets from companies on the list, as well 
as from companies having an investment in, or carrying on a 
trade or business in Iran. The legislation permits private 
investment and pension plan managers to divest from companies 
listed without breaching their fiduciary responsibilities to 
their investors.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:
                                                     June 13, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2347, the Iran 
Sanctions Enabling Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sam 
Papenfuss.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 2347--Iran Sanctions Enabling Act of 2007

    H.R. 2347 would require the President to publish in the 
Federal Register, with updates every six months, a list of each 
person or entity, inside or outside of the United States, who 
has an investment in Iran's energy sector worth more than $20 
million. The bill also would allow state and local governments 
to divest their assets from any entity included in the 
published list. Finally, H.R. 2347 would prohibit lawsuits 
against companies that divest themselves from investments in 
companies included on the published list.
    CBO estimates that implementing H.R. 2347 would not have a 
significant effect on the federal budget. Enacting the bill 
would not affect direct spending or receipts. H.R. 2347 
contains no intergovernmental mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would not affect the 
budgets of state, local, or tribal governments.
    H.R. 2347 would impose a private-sector mandate, as defined 
in UMRA, on entities participating in certain private pension 
plans. It would provide liability protection for fiduciaries 
and other responsible parties of employee benefit plans if they 
were to divest assets from certain companies that invest $20 
million or more in Iran's energy sector. By providing such 
protection, the bill would eliminate an existing right of civil 
action for plan participants and beneficiaries. Due to the lack 
of information about both the value of awards in such cases and 
the number of claims that would be filed in the absence of this 
legislation, CBO cannot estimate the level of potential awards, 
if any. Therefore, CBO cannot determine whether the aggregate 
cost of mandates in the bill would exceed the annual threshold 
for private-sector mandates ($131 million in 2007, adjusted 
annually for inflation).
    The CBO staff contacts for this estimate are Sam Papenfuss 
(for federal costs), and Justin Hall (for the private-sector 
impact). This estimate was approved by Peter H. Fontaine, 
Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2347 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                  Exchange of Committee Correspondence



             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section establishes the short title of the bill, the 
``Iran Sanctions Enabling Act of 2007.''

Section 2. Findings

    Section 2 presents findings that have motivated the need 
for legislation concerning investments in Iran.

Section 3. Transparency in U.S. capital markets

    Section 3 provides for the publication of a list of 
companies with investments of $20,000,000 or more in Iran's 
energy sector. The President is directed to ensure publication 
in the Federal Register of a list of companies that have 
qualifying investments, and that have been notified at least 30 
days before the list is published. The legislation provides for 
a delay in inclusion on this list so that a company that has 
been notified will be able to shed such holdings, and provides 
that should a company on the list later shed the qualifying 
holdings, it will be removed from the list. In addition to the 
Federal Register, the list is to be published on the 
appropriate executive branch agency's websites.

Section 4. Authority of state and local governments to divest from 
        certain companies invested in Iran's energy sector

    Section 4 gives State governments, local governments, and 
educational institutions the authority to divest from assets of 
more than $20,000,000 that they control in Iran's energy sector 
according to the list produced in Section 3 or from any company 
having an investment in, or carrying on trade with or a 
business in Iran.

Section 5. Safe harbor for changes of investment policies by mutual 
        funds

    Section 5 amends the Investment Company Act of 1940 to 
create a safe harbor for changes in investment policies based 
on divestment from companies on the list in section 3.

Section 6. Safe harbor for changes of investment policies by employee 
        benefit plans

    Section 6 amends the Employee Retirement Income Security of 
Act of 1974 to allow investment managers to divest from 
companies listed without breaching their fiduciary 
responsibilities to their investors.

Section 7. Sense of the Congress regarding thrift savings plan

    Section 7 expresses the Sense of the Congress that the 
Federal Retirement Thrift Investment Board should initiate 
efforts to provide a terror-free international investment 
option among the funds of the Thrift Savings Plan that will 
exclude investments in the securities of companies that do 
business in any country the Secretary of State has placed on 
the terrorist list.

Section 8. Definitions

    Section 8 defines the terms used in the Act.

Section 9. Sunset

    Section 9 terminates the Act 30 days after the President 
has certified that the government of Iran has no longer been 
designated as a state-sponsor of terrorism for purposes of the 
State Department terrorist list, and that it has ceased the 
pursuit, acquisition, and development of designated weapons.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                     INVESTMENT COMPANY ACT OF 1940


TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *



                      CHANGES IN INVESTMENT POLICY

  Sec. 13. (a) * * *

           *       *       *       *       *       *       *

  (c) Safe Harbor for Changes in Investment Policies.--
Notwithstanding any other provision of Federal or State law, no 
person may bring any civil, criminal, or administrative action 
against any registered investment company or person providing 
services to such registered investment company (including its 
investment adviser), or any employee, officer, or director 
thereof, based upon the investment company divesting from, or 
avoiding investing in, securities issued by companies that are 
included on the most recent list published under section 
3(a)(1) of the Iran Sanctions Enabling Act of 2007, as modified 
under section 3(b) of that Act. For purposes of this subsection 
the term ``person'' shall include the Federal government, and 
any State or political subdivision of a State.

           *       *       *       *       *       *       *

                              ----------                              


EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

           *       *       *       *       *       *       *


TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

           *       *       *       *       *       *       *


Subtitle B--Regulatory Provisions

           *       *       *       *       *       *       *


Part 5--Administration and Enforcement

           *       *       *       *       *       *       *


                           CIVIL ENFORCEMENT

  Sec. 502. (a) * * *

           *       *       *       *       *       *       *

  (n) No person shall be treated as breaching any of the 
responsibilities, obligations, or duties imposed upon 
fiduciaries by this title, and no action may be brought under 
this section against any person, for divesting plan assets 
from, or avoiding investing plan assets in, persons that are 
included on the most recent list published under section 
3(a)(1) of the Iran Sanctions Enabling Act, as modified under 
section 3(a)(4) of such Act.

           *       *       *       *       *       *       *