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89-010                        WASHINGTON: 2019

                    RON JOHNSON, Wisconsin, Chairman
ROB PORTMAN, Ohio                    GARY C. PETERS, Michigan
RAND PAUL, Kentucky                  THOMAS R. CARPER, Delaware
JAMES LANKFORD, Oklahoma             MAGGIE HASSAN, New Hampshire
MITT ROMNEY, Utah                    KAMALA D. HARRIS, California
RICK SCOTT, Florida                  KYRSTEN SINEMA, Arizona
MICHAEL B. ENZI, Wyoming             JACKY ROSEN, Nevada

                Gabrielle D'Adamo Singer, Staff Director
                   Joseph C. Folio III, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
               David M. Weinberg, Minority Staff Director
               Zachary I. Schram, Minority Chief Counsel
          Jackson G. Voss, Minority Professional Staff Member
                     Laura W. Kilbride, Chief Clerk

                                                       Calendar No. 196
116th Congress }                                             { Report
 1st Session   }                                             { 116-92




               September 10, 2019.--Ordered to be printed


 Mr. Johnson, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1869]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1869) to require 
the disclosure of ownership of high-security space leased to 
accommodate a Federal agency, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment (in the nature of a substitute) and recommends that 
the bill, as amended, do pass.


  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis......................................3
  V. Evaluation of Regulatory Impact..................................4
 VI. Congressional Budget Office Cost Estimate........................4
VII. Changes in Existing Law Made by the Bill, as Reported............5

                         I. PURPOSE AND SUMMARY

    The purpose of S. 1869, the Secure Federal Leases from 
Espionage And Suspicious Entanglements Act, or Secure Federal 
LEASEs Act, is to provide ownership information to Federal 
tenants leasing high-security space that would allow the 
tenants to mitigate potential national security risks. S. 1869 
requires entities entering into lease agreements with the 
Federal Government for high-security space to identify 
ownership information of the property, including whether the 
immediate or highest-level owners are a foreign person or 
entity, and the Federal lessee must then notify the Federal 
tenant of this information. The bill requires the General 
Services Administration (GSA) to develop a plan for collecting 
and utilizing information on all immediate, highest-level, or 
beneficial owners of high-security space and notifying Federal 
tenants of foreign ownership. It also requires GSA to submit, 
within a year of implementation, a report to Congress on the 
status of the plan. The bill also requires Federal lessees to 
include provisions in high-security leases limiting access to 
property owners except when allowed by Federal tenants. The 
bill applies to leases entered on or after the date of the 
bill's enactment.


    The United States has long promoted foreign investment, 
including foreign ownership of real estate. In recent years, 
foreign investment in U.S. commercial office buildings has been 
increasing.\1\ Ownership affords access to a building and its 
systems, and for this reason, foreign ownership can create 
national security risks that may need to be mitigated.
    \1\Gov't Accountability Off., GSA Should Inform Tenant Agencies 
When Leasing High-Security Space from Foreign Owners, (Jan. 2017).
    In 2017, the Government Accountability Office (GAO) 
published a report\2\ finding that the GSA, a lessee of space 
for many agencies in the Federal Government, did not have 
complete information on the foreign ownership of some of the 
properties it was leasing and therefore had not notified 
Federal tenants, particularly those leasing high-security 
office space, of the nature of the foreign ownership. The 
report noted that several intelligence and law enforcement 
agencies were leasing high-security office space in foreign-
owned properties, and while many of the foreign owners were 
companies based in allied nations such as Canada, Norway, 
Japan, and South Korea, there were also owners based in 
China.\3\ GAO concluded that GSA's incomplete information and 
lack of policies and procedures regarding foreign ownership of 
high-security leased space may undermine the security of 
tenants' facilities. When GSA does not have information on 
beneficial ownership, it lacks information that should be 
shared with its tenants for their facility risk assessments, 
and when tenants do not have this information, they may not 
correctly evaluate the security risks and take appropriate 
steps to secure their buildings.
    GSA has implemented some policies to enhance the 
information available on foreign ownership of its leases--
collecting the identity of immediate and highest-level owners 
through the System for Award Management (SAM) system. Immediate 
owners are the entities or people in direct control of a 
property, while a highest-level owner would have control over 
an immediate owner. However, while useful, this information is 
not sufficient for identifying beneficial owners, who are 
defined as all the individuals with financial or ownership 
stakes in a property, not all of whom may be publicly 
identifiable. These individuals' ownership position can provide 
them with access that could prove problematic for certain 
agencies. Moreover, GSA does not have a system in place that 
would allow them to collect and utilize the information 
necessary for identifying all beneficial owners at this time.
    Another Federal agency with leasing authority, the 
Department of Defense (DOD), was given visibility over 
beneficial ownership information for high security leased 
spaces through language included in the 2018 National Defense 
Authorization Act.\4\ This improves DOD leasing security but 
leaves GSA and other leasing agencies without awareness of 
potential foreign owners.
    \4\Pub. L. 115-91, Sec.  2876.
    This legislation ensures that all agencies (particularly 
those with independent leasing authority) will have the ability 
to obtain information on foreign ownership and provide it to 
relevant Federal tenants. While a leaser may be approved by the 
Federal Government, it may not be appropriate for an agency to 
lease a high-security space from them, and this legislation 
will allow agencies to properly evaluate the risks of doing so 
and consider appropriate mitigation measures. Additionally, by 
developing a new, more comprehensive beneficial owner 
identification system, the Federal Government can be more 
vigilant in ensuring that foreign governments do not have 
access to our most sensitive leased properties.

                        III. LEGISLATIVE HISTORY

    S. 1869 was introduced on June 13, 2019 by Senator Gary 
Peters (D-MI) and Rob Portman (R-OH). The bill was referred to 
the Committee on Homeland Security and Governmental Affairs. 
The Committee considered S. 1869 at a June 19, 2019 business 
    During the business meeting, Senator Peters and Senator 
Portman offered an amendment in the nature of a substitute. The 
amendment made various technical changes and applied the bill's 
requirements to contracts entered into on or after the bill's 
passage. The Committee ordered S. 1869, as modified by the 
Peters-Portman substitute amendment, reported favorably en bloc 
by voice vote. Senators present for the vote were Johnson, 
Paul, Lankford, Scott, Enzi, Hawley, Peters, Carper, Hassan, 
Sinema, and Rosen.


Section 1. Short title; findings

    This section designates the short title of the bill as the 
``Secure Federal Leases from Espionage and Suspicious 
Entanglements Act'' or the ``Secure Federal LEASEs Act.''
    This section also lays out congressional findings 
summarizing the GAO report.

Section 2. Definitions

    This section includes definitions of the terms ``beneficial 
owner,'' ``closely held,'' ``control,'' ``covered entity,'' 
``executive agency,'' ``federal agency,'' ``federal lessee,'' 
``foreign entity,'' ``foreign person,'' ``federal tenant,'' 
``high-security leased space,'' ``highest-level owner,'' 
``immediate owner, ``sustainable economic benefits,'' ``United 
States person'', and ``widely-held.''

Section 3. Disclosure of ownership of high-security space leased for 
        Federal agencies

    The section requires that the federal agency acquiring 
leased space for high-security purposes disclose to the Federal 
lessee whether the immediate or highest level owner of the 
leased space is a foreign person or entity. Prior to awarding a 
lease requiring a disclosure, the Federal lessee must consult 
with the tenant about any security concerns and mitigation 

Section 4. Immediate, highest-level, and beneficial owners

    The section requires the GSA to develop a government-wide 
plan for identifying and reporting all owners of high-security 
lease spaces before entering into lease agreements, for the 
purposes of identifying foreign ownership. In disclosing any 
foreign ownership, GSA's plan should include information on 
pooled investment vehicles, but exclude widely-held 
investments, or investments in which there are over 100 
individual owners or investors.
    This section further adds reporting requirements and gives 
an implementation deadline.

Section 5. Other security agreements for leased space

    This section requires that lease agreements for a high-
security spaces limit owner or maintenance access to high-
security areas, as approved by the Federal tenant.

Section 6. Applicability

    This section states that the bill only applies to 
agreements entered into on or after the date of enactment.


    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.


                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 9, 2019.
Hon. Ron Johnson,
Chairman, Committee on Homeland Security and Governmental Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1869, the Secure 
Federal LEASEs Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
                                         Phillip L. Swagel,


    S. 1869 would require the General Services Administration 
(GSA) to identify a building's owners before entering into a 
lease agreement for a facility that requires high security. The 
bill also would require entities leasing high-security 
properties to the government to identify the property's owners 
and to update that information annually.
    Information from GSA indicates that the federal government 
leases around 1,300 high-security facilities and that more than 
60 percent of those leases will expire by the end of 2024. 
Using information from GSA and the Government Accountability 
Office, CBO estimates that requiring GSA to collect and provide 
ownership information would cost less than $500,000 annually 
and $2 million over the 2020-2024 period. Any spending would be 
subject to the availability of appropriated funds.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was reviewed by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.


    Because this legislation would not repeal or amend any 
provision of current law, it would not make changes in existing 
law within the meaning of clauses (a) and (b) of paragraph 12 
of rule XXVI of the Standing Rules of the Senate.