House Report 110-294 - IRAN COUNTER-PROLIFERATION ACT OF 2007

[House Report 110-294]
[From the U.S. Government Publishing Office]

110th Congress Rept. 110-294
HOUSE OF REPRESENTATIVES
1st Session Part 1

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IRAN COUNTER-PROLIFERATION ACT OF 2007

_______

August 2, 2007.--Ordered to be printed

_______

Mr. Lantos, from the Committee on Foreign Affairs, submitted the
following

R E P O R T

[To accompany H.R. 1400]

[Including cost estimate of the Congressional Budget Office]

The Committee on Foreign Affairs, to whom was referred the
bill (H.R. 1400) to enhance United States diplomatic efforts
with respect to Iran by imposing additional economic sanctions
against Iran, and for other purposes, having considered the
same, reports favorably thereon with an amendment and
recommends that the bill as amended do pass.

TABLE OF CONTENTS

Page
The Amendment.................................................... 1
Purpose and Summary.............................................. 9
Background and Need for the Legislation.......................... 9
Hearings......................................................... 13
Committee Consideration.......................................... 14
Votes of the Committee........................................... 14
Committee Oversight Findings..................................... 14
New Budget Authority and Tax Expenditures........................ 14
Congressional Budget Office Cost Estimate........................ 14
Performance Goals and Objectives................................. 18
Constitutional Authority Statement............................... 18
New Advisory Committees.......................................... 18
Congressional Accountability Act................................. 18
Earmark Identification........................................... 18
Section-by-Section Analysis and Discussion....................... 18
Changes in Existing Law Made by the Bill, as Reported............ 23

The Amendment

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Iran Counter-
Proliferation Act of 2007''.
(b) Table of Contents.--The table of contents for this Act is as
follows:

Sec. 1. Short title and table of contents.
Sec. 2. United States policy toward Iran.

TITLE I--SUPPORT FOR DIPLOMATIC EFFORTS RELATING TO PREVENTING IRAN
FROM ACQUIRING NUCLEAR WEAPONS

Sec. 101. Support for international diplomatic efforts.
Sec. 102. Peaceful efforts by the United States.

TITLE II--ADDITIONAL BILATERAL SANCTIONS AGAINST IRAN

Sec. 201. Application to subsidiaries.
Sec. 202. Additional import sanctions against Iran.
Sec. 203. Additional export sanctions against Iran.

TITLE III--AMENDMENTS TO THE IRAN SANCTIONS ACT OF 1996

Sec. 301. Multilateral regime.
Sec. 302. Mandatory sanctions.
Sec. 303. Authority to impose sanctions on principal executive
officers.
Sec. 304. United States efforts to prevent investment.
Sec. 305. Clarification and expansion of definitions.
Sec. 306. Removal of waiver authority.

TITLE IV--ADDITIONAL MEASURES

Sec. 401. Additions to terrorism and other lists.
Sec. 402. Increased capacity for efforts to combat unlawful or
terrorist financing.
Sec. 403. Exchange programs with the people of Iran.
Sec. 404. Reducing contributions to the World Bank.
Sec. 405. Restrictions on nuclear cooperation with countries assisting
the nuclear program of Iran.
Sec. 406. Elimination of certain tax incentives for oil companies
investing in Iran.

TITLE V--MISCELLANEOUS PROVISIONS

Sec. 501. Termination.

SEC. 2. UNITED STATES POLICY TOWARD IRAN.

(a) Findings.--Congress finds the following:
(1) The prospect of the Islamic Republic of Iran achieving
nuclear arms represents a grave threat to the United States and
its allies in the Middle East, Europe, and globally.
(2) The nature of this threat is manifold, ranging from the
vastly enhanced political influence extremist Iran would wield
in its region, including the ability to intimidate its
neighbors, to, at its most nightmarish, the prospect that Iran
would attack its neighbors and others with nuclear arms. This
concern is illustrated by the statement of Hashemi Rafsanjani,
former president of Iran and currently a prominent member of
two of Iran's most important decisionmaking bodies, of December
14, 2001, when he said that it ``is not irrational to
contemplate'' the use of nuclear weapons.
(3) The theological nature of the Iranian regime creates a
special urgency in addressing Iran's efforts to acquire nuclear
weapons.
(4) Iranian regime leaders have persistently denied Israel's
right to exist. Current President Mahmoud Ahmadinejad has
called for Israel to be ``wiped off the map'' and the
Government of Iran has displayed inflammatory symbols that
express similar intent.
(5) The nature of the Iranian threat makes it critical that
the United States and its allies do everything possible--
diplomatically, politically, and economically--to prevent Iran
from acquiring nuclear-arms capability and persuade the Iranian
regime to halt its quest for nuclear arms.
(b) Sense of Congress.--It is the sense of the Congress that--
(1) Iranian President Ahmadinejad's persistent denials of the
Holocaust and his repeated assertions that Israel should be
``wiped off the map'' may constitute a violation of the
Convention on the Prevention and Punishment of the Crime of
Genocide and should be brought before an appropriate
international tribunal for the purpose of declaring Iran in
breach of the Genocide Convention;
(2) the United States should increase use of its important
role in the international financial sector to isolate Iran;
(3) Iran should be barred from entering the World Trade
Organization (WTO) until all issues related to its nuclear
program are resolved;
(4) all future free trade agreements entered into by the
United States should be conditioned on the requirement that the
parties to such agreements pledge not to invest and not to
allow companies based in its territory or controlled by its
citizens to invest in Iran's energy sector or otherwise to make
significant investment in Iran;
(5) United Nations Security Council Resolution 1737 (December
23, 2006), which was passed unanimously and mandates an
immediate and unconditional suspension of Iran's nuclear
enrichment program, represents a critical gain in the worldwide
campaign to prevent Iran's acquisition of nuclear arms and
should be fully respected by all nations;
(6) the United Nations Security Council should take further
measures beyond Resolution 1737 to tighten sanctions on Iran,
including preventing new investment in Iran's energy sector, as
long as Iran fails to comply with the international community's
demand to halt its nuclear enrichment campaign;
(7) the United States should encourage foreign governments to
direct state-owned entities to cease all investment in Iran's
energy sector and all exports of refined petroleum products to
Iran and to persuade, and, where possible, require private
entities based in their territories to cease all investment in
Iran's energy sector and all exports of refined petroleum
products to Iran;
(8) moderate Arab states have a vital and perhaps existential
interest in preventing Iran from acquiring nuclear arms, and
therefore such states, particularly those with large oil
deposits, should use their economic leverage to dissuade other
nations, including the Russian Federation and the People's
Republic of China, from assisting Iran's nuclear program
directly or indirectly and to persuade other nations, including
Russia and China, to be more forthcoming in supporting United
Nations Security Council efforts to halt Iran's nuclear
program;
(9) the United States should take all possible measures to
discourage and, if possible, prevent foreign banks from
providing export credits to foreign entities seeking to invest
in the Iranian energy sector;
(10) the United States should oppose any further activity by
the International Bank for Reconstruction and Development with
respect to Iran, or the adoption of a new Country Assistance
Strategy for Iran, including by seeking the cooperation of
other countries;
(11) the United States should extend its program of
discouraging foreign banks from accepting Iranian state banks
as clients;
(12) the United States should prohibit all Iranian state
banks from using the United States banking system;
(13) United States Federal pension plans should divest
themselves of all non-United States companies investing more
than $20,000,000 in Iran's energy sector;
(14) State and local government pension plans should divest
themselves of all non-United States companies investing more
than $20,000,000 in Iran's energy sector;
(15) the United States should designate the Islamic
Revolutionary Guards Corps, which purveys terrorism throughout
the Middle East and plays an important role in the Iranian
economy, as a foreign terrorist organization under section 219
of the Immigration and Nationality Act, place the Islamic
Revolutionary Guards Corps on the list of specially designated
global terrorists, and place the Islamic Revolutionary Guards
Corps on the list of weapons of mass destruction proliferators
and their supporters;
(16) United States concerns regarding Iran are strictly the
result of actions of the Government of Iran; and
(17) the American people have feelings of friendship for the
Iranian people, regret that developments of recent decades have
created impediments to that friendship, and hold the Iranian
people, their culture, and their ancient and rich history in
the highest esteem.

TITLE I--SUPPORT FOR DIPLOMATIC EFFORTS RELATING TO PREVENTING IRAN
FROM ACQUIRING NUCLEAR WEAPONS

SEC. 101. SUPPORT FOR INTERNATIONAL DIPLOMATIC EFFORTS.

It is the sense of the Congress that--
(1) the United States should use diplomatic and economic
means to resolve the Iranian nuclear problem;
(2) the United States should continue to support efforts in
the International Atomic Energy Agency and the United Nations
Security Council to bring about an end to Iran's uranium
enrichment program and its nuclear weapons program; and
(3)(A) United Nations Security Council Resolution 1737 was a
useful first step toward pressing Iran to end its nuclear
weapons program; and
(B) in light of Iran's continued defiance of the
international community, the United Nations Security Council
should adopt additional measures against Iran, including
measures to prohibit investments in Iran's energy sector.

SEC. 102. PEACEFUL EFFORTS BY THE UNITED STATES.

Nothing in this Act shall be construed as authorizing the use of
force or the use of the United States Armed Forces against Iran.

TITLE II--ADDITIONAL BILATERAL SANCTIONS AGAINST IRAN

SEC. 201. APPLICATION TO SUBSIDIARIES.

(a) In General.--Except as provided in subsection (b), in any case in
which an entity engages in an act outside the United States which, if
committed in the United States or by a United States person, would
violate Executive Order No. 12959 of May 6, 1995, Executive Order No.
13059 of August 19, 1997, or any other prohibition on transactions with
respect to Iran that is imposed under the International Emergency
Economic Powers Act (50 U.S.C. 1701 et seq.) and if that entity was
created or availed of for the purpose of engaging in such an act, the
parent company of that entity shall be subject to the penalties for
such violation to the same extent as if the parent company had engaged
in that act.
(b) Exception.--Subsection (a) shall not apply to any act carried out
under a contract or other obligation of any entity if such contract or
obligation was entered into before the acquisition of such entity by
the parent company unless such parent company acquired such entity
knowing or having reason to know that such contract or other obligation
existed or such contract or other obligation is expanded to cover
additional activities beyond the terms of such contract or other
obligation as it existed at the time of such acquisition.
(c) Definitions.--In this section--
(1) the term ``entity'' means a partnership, association,
trust, joint venture, corporation, or other organization;
(2) an entity is a ``parent company'' of another entity if it
owns, directly or indirectly, more than 50 percent of the
equity interest in that other entity and is a United States
person; and
(3) the term ``United States person'' means any United States
citizen, any alien lawfully admitted for permanent residence to
the United States, any entity organized under the laws of the
United States, or any person in the United States.

SEC. 202. ADDITIONAL IMPORT SANCTIONS AGAINST IRAN.

Effective 120 days after the date of the enactment of this Act--
(1) goods of Iranian origin that are otherwise authorized to
be imported under section 560.534 of title 31, Code of Federal
Regulations, as in effect on March 5, 2007, may not be imported
into the United States; and
(2) activities otherwise authorized by section 560.535 of
title 31, Code of Federal Regulations, as in effect on March 5,
2007, are no longer authorized.

SEC. 203. ADDITIONAL EXPORT SANCTIONS AGAINST IRAN.

Effective on the date of the enactment of this Act--
(1) licenses to export or reexport goods, services, or
technology relating to civil aviation that are otherwise
authorized by section 560.528 of title 31, Code of Federal
Regulations, as in effect on March 5, 2007, may not be issued,
and any such license issued before such date of enactment is no
longer valid; and
(2) goods, services, or technology described in paragraph (1)
may not be exported or reexported.

TITLE III--AMENDMENTS TO THE IRAN SANCTIONS ACT OF 1996

SEC. 301. MULTILATERAL REGIME.

Section 4(b) of the Iran Sanctions Act of 1996 (50 U.S.C. 1701 note)
is amended to read as follows:
``(b) Reports to Congress.--Not later than 6 months after the date of
the enactment of the Iran Counter-Proliferation Act of 2007 and every
six months thereafter, the President shall transmit to the appropriate
congressional committees a report regarding specific diplomatic efforts
undertaken pursuant to subsection (a), the results of those efforts,
and a description of proposed diplomatic efforts pursuant to such
subsection. Each report shall include--
``(1) a list of the countries that have agreed to undertake
measures to further the objectives of section 3 with respect to
Iran;
``(2) a description of those measures, including--
``(A) government actions with respect to public or
private entities (or their subsidiaries) located in
their territories, that are engaged in Iran;
``(B) any decisions by the governments of these
countries to rescind or continue the provision of
credits, guarantees, or other governmental assistance
to these entities; and
``(C) actions taken in international fora to further
the objectives of section 3;
``(3) a list of the countries that have not agreed to
undertake measures to further the objectives of section 3 with
respect to Iran, and the reasons therefor; and
``(4) a description of any memorandums of understanding,
political understandings, or international agreements to which
the United States has acceded which affect implementation of
this section or section 5(a).''.

SEC. 302. MANDATORY SANCTIONS.

Section 5(a) of the Iran Sanctions Act of 1996 (50 U.S.C. 1701 note)
is amended by striking ``2 or more of the sanctions described in
paragraphs (1) through (6) of section 6'' and inserting ``the sanction
described in paragraph (5) of section 6 and, in addition, one or more
of the sanctions described in paragraphs (1), (2), (3), (4), and (6) of
such section''.

SEC. 303. AUTHORITY TO IMPOSE SANCTIONS ON PRINCIPAL EXECUTIVE
OFFICERS.

Section 5 of the Iran Sanctions Act of 1996 (50 U.S.C. 1701 note) is
amended by adding at the end the following:
``(g) Authority to Impose Sanctions on Principal Executive
Officers.--
``(1) Sanctions under section 6.--In addition to the
sanctions imposed under subsection (a), the President may
impose any of the sanctions under section 6 on the principal
executive officer or officers of any sanctioned person, or on
persons performing similar functions as such officer or
officers. The President shall include on the list published
under subsection (d) the name of any person on whom sanctions
are imposed under this paragraph.
``(2) Additional sanctions.--In addition to the sanctions
imposed under paragraph (1), the President may block the
property of any person described in paragraph (1), and prohibit
transactions in such property, to the same extent as the
property of a foreign person determined to have committed acts
of terrorism for purposes of Executive Order 13224 of September
23, 2001 (50 U.S.C. 1701 note).''.

SEC. 304. UNITED STATES EFFORTS TO PREVENT INVESTMENT.

Section 5 of the Iran Sanctions Act of 1996 is amended by adding the
following new subsection at the end:
``(h) United States Efforts to Address Planned Investment.--
``(1) Reports on investment activity.--Not later than January
30, 2008, and every 6 months thereafter, the President shall
transmit to the Committee on Foreign Affairs of the House of
Representatives and the Committee on Foreign Relations of the
Senate a report on investment and pre-investment activity, by
any person or entity, that could contribute to the enhancement
of Iran's ability to develop petroleum resources in Iran. For
each such activity, the President shall provide a description
of the activity, any information regarding when actual
investment may commence, and what steps the United States has
taken to respond to such activity.
``(2) Definition.--In this subsection--
``(A) the term `investment' includes the extension by
a financial institution of credit or other financing to
a person for that person's investment; and
``(B) the term `pre-investment activity' means any
activity indicating an intent to make an investment,
including a memorandum of understanding among parties
indicating such an intent.''

SEC. 305. CLARIFICATION AND EXPANSION OF DEFINITIONS.

(a) Person.--Section 14(13)(B) of the Iran Sanctions Act of 1996 (50
U.S.C. 1701 note) is amended to read as follows:
``(B)(i) a corporation, business association,
partnership, society, trust, financial institution,
insurer, underwriter, guarantor, and any other business
organization;
``(ii) any foreign subsidiary of any entity described
in clause (i); and
``(iii) any government entity operating as a business
enterprise, such as an export credit agency; and''.
(b) Petroleum Resources.--Section 14(14) of the Iran Sanctions Act of
1996 (50 U.S.C. 1701 note) is amended by inserting after ``petroleum''
the second place it appears the following: ``, petroleum refining
capacity, liquefied natural gas, the sale of oil tankers or liquefied
natural gas tankers,''.

SEC. 306. REMOVAL OF WAIVER AUTHORITY.

(a) Six-Month Waiver Authority.--Section 4 of the Iran Sanctions Act
of 1996 (50 U.S.C. 1701 note) is amended--
(1) in subsection (d)(1), by striking ``except those with
respect to which the President has exercised the waiver
authority of subsection (c)'';
(2) by striking subsection (c); and
(3) by redesignating subsections (d), (e), and (f) as
subsections (c), (d), and (e), respectively.
(b) General Waiver Authority.--Section 9 of the Iran Sanctions Act of
1996 (50 U.S.C. 1701 note) is amended by striking subsection (c).
(c) Construction.--The amendments made by this section shall not be
construed to affect any exercise of the authority of section 4(c) or
section 9(c) of the Iran Sanctions Act of 1996 as in effect on the day
before the date of the enactment of this Act.

TITLE IV--ADDITIONAL MEASURES

SEC. 401. ADDITIONS TO TERRORISM AND OTHER LISTS.

(a) Determinations and Report.--Not later than 120 days after the
date of the enactment of this Act, the President shall--
(1) determine whether the Islamic Revolutionary Guards Corps
should be--
(A) designated as a foreign terrorist organization
under section 219 of the Immigration and Nationality
Act (8 U.S.C. 1189);
(B) placed on the list of specially designated global
terrorists; and
(C) placed on the list of weapons of mass destruction
proliferators and their supporters; and
(2) report the determinations under paragraph (1) to the
Committee on Foreign Affairs of the House of Representatives
and the Committee on Foreign Relations of the Senate,
including, if the President determines that such Corps should
not be so designated or placed on either such list, the
justification for the President's determination.
(b) Extension of Authority.--The President may block all property and
interests in property of the following persons, to the same extent as
property and interests in property of a foreign person determined to
have committed acts of terrorism for purposes of Executive Order 13224
of September 21, 2001 (50 U.S.C. 1701 note) may be blocked:
(1) Persons who assist or provide financial, material, or
technological support for, or financial or other services to or
in support of, the International Revolutionary Guards Corps
(IRGC) or entities owned or effectively controlled by the IRGC.
(2) Persons otherwise associated with the IRGC or entities
referred to in paragraph (1).
(c) Definitions.--In this section--
(1) the term ``specially designated global terrorist'' means
any person included on the Annex to Executive Order 13224, of
September 23, 2001, and any other person identified under
section 1 of that Executive order whose property and interests
in property are blocked by that section; and
(2) the term ``weapons of mass destruction proliferators and
their supporters'' means any person included on the Annex to
Executive Order 13382, of June 28, 2005, and any other person
identified under section 1 of that Executive order whose
property and interests in property are blocked by that section.

SEC. 402. INCREASED CAPACITY FOR EFFORTS TO COMBAT UNLAWFUL OR
TERRORIST FINANCING.

(a) Findings.--The work of the Office of Terrorism and Financial
Intelligence of the Department of Treasury, which includes the Office
of Foreign Assets Control and the Financial Crimes Enforcement Center,
is critical to ensuring that the international financial system is not
used for purposes of supporting terrorism and developing weapons of
mass destruction.
(b) Authorization.--There is authorized for the Secretary of the
Treasury $59,466,000 for fiscal year 2008 and such sums as may be
necessary for each of the fiscal years 2009 and 2010 for the Office of
Terrorism and Financial Intelligence.
(c) Authorization Amendment.--Section 310(d)(1) of title 31, United
States Code, is amended by striking ``such sums as may be necessary for
fiscal years 2002, 2003, 2004, and 2005'' and inserting ``$85,844,000
for fiscal year 2008 and such sums as may be necessary for each of the
fiscal years 2009 and 2010''.

SEC. 403. EXCHANGE PROGRAMS WITH THE PEOPLE OF IRAN.

(a) Sense of Congress.--It is the sense of the Congress that the
United States should seek to enhance its friendship with the people of
Iran, particularly by identifying young people of Iran to come to the
United States under United States exchange programs.
(b) Exchange Programs Authorized.--The President is authorized to
carry out exchange programs with the people of Iran, particularly the
young people of Iran. Such programs shall be carried out to the extent
practicable in a manner consistent with the eligibility for assistance
requirements specified in section 302(b) of the Iran Freedom Support
Act (Public Law 109-293).
(c) Authorization.--Of the amounts available to the Department of
State for ``Educational and Cultural Exchanges'' to carry out the
Mutual Educational and Cultural Exchange Act of 1961, there is
authorized to be appropriated to the President to carry out this
section the sum of $10,000,000 for fiscal year 2008.

SEC. 404. REDUCING CONTRIBUTIONS TO THE WORLD BANK.

The President of the United States shall reduce the total amount
otherwise payable on behalf of the United States to the International
Bank for Reconstruction and Development for each fiscal year by the
percentage represented by--
(1) the total of the amounts provided by the Bank to entities
in Iran, or for projects and activities in Iran, in the then-
preceding fiscal year; divided by
(2) the total of the amounts provided by the Bank to all
entities, or for all projects and activities, in the then-
preceding fiscal year.

SEC. 405. RESTRICTIONS ON NUCLEAR COOPERATION WITH COUNTRIES ASSISTING
THE NUCLEAR PROGRAM OF IRAN.

(a) In General.--
(1) Restriction.--Notwithstanding any other provision of law
or any international agreement--
(A) no agreement for cooperation between the United
States and the government of any country that is
assisting the nuclear program of Iran or transferring
advanced conventional weapons or missiles to Iran may
be submitted to the President or to Congress pursuant
to section 123 of the Atomic Energy Act of 1954 (42
U.S.C. 2153),
(B) no such agreement may enter into force with such
country,
(C) no license may be issued for export directly or
indirectly to such country of any nuclear material,
facilities, components, or other goods, services, or
technology that would be subject to such agreement, and
(D) no approval may be given for the transfer or
retransfer directly or indirectly to such country of
any nuclear material, facilities, components, or other
goods, services, or technology that would be subject to
such agreement,
until the President makes the determination and report under
paragraph (2).
(2) Determination and report.--The determination and report
referred to in paragraph (1) are a determination and report by
the President, submitted to the Committee on Foreign Relations
of the Senate and the Committee on Foreign Affairs of the House
of Representatives, that--
(A) Iran has ceased its efforts to design, develop,
or acquire a nuclear explosive device or related
materials or technology; or
(B) the government of the country that is assisting
the nuclear program of Iran or transferring advanced
conventional weapons or missiles to Iran--
(i) has suspended all nuclear assistance to
Iran and all transfers of advanced conventional
weapons and missiles to Iran; and
(ii) is committed to maintaining that
suspension until Iran has implemented measures
that would permit the President to make the
determination described in subparagraph (A).
(b) Construction.--The restrictions in subsection (a)--
(1) shall apply in addition to all other applicable
procedures, requirements, and restrictions contained in the
Atomic Energy Act of 1954 and other laws; and
(2) shall not be construed as affecting the validity of
agreements for cooperation that are in effect on the date of
the enactment of this Act.
(c) Definitions.--In this section:
(1) Agreement for cooperation.--The term ``agreement for
cooperation'' has the meaning given that term in section 11 b.
of the Atomic Energy Act of 1954 (42 U.S.C. 2014(b)).
(2) Assisting the nuclear program of iran.--The term
``assisting the nuclear program of Iran'' means the intentional
transfer to Iran by a government, or by a person subject to the
jurisdiction of a government with the knowledge and
acquiescence of that government, of goods, services, or
technology listed on the Nuclear Suppliers Group Guidelines for
the Export of Nuclear Material, Equipment and Technology
(published by the International Atomic Energy Agency as
Information Circular INFCIRC/254/Rev. 3/Part 1, and subsequent
revisions), or the Nuclear Suppliers Group Guidelines for
Transfers of Nuclear-Related Dual-Use Equipment, Material, and
Related Technology (published by the International Atomic
Energy Agency as Information Circular INFCIR/254/Rev. 3/Part 2,
and subsequent revisions).
(3) Country that is assisting the nuclear program of iran or
transferring advanced conventional weapons or missiles to
iran.--The term ``country that is assisting the nuclear program
of Iran or transferring advanced conventional weapons or
missiles to Iran'' means--
(A) the Russian Federation; and
(B) any other country determined by the President to
be assisting the nuclear program of Iran or
transferring advanced conventional weapons or missiles
to Iran.
(4) Transferring advanced conventional weapons or missiles to
iran.--The term ``transferring advanced conventional weapons or
missiles to Iran'' means the intentional transfer to Iran by a
government, or by a person subject to the jurisdiction of a
government with the knowledge and acquiescence of that
government, of goods, services, or technology listed on--
(A) the Wassenaar Arrangement list of Dual Use Goods
and Technologies and Munitions list of July 12, 1996,
and subsequent revisions; or
(B) the Missile Technology Control Regime Equipment
and Technology Annex of June 11, 1996, and subsequent
revisions.

SEC. 406. ELIMINATION OF CERTAIN TAX INCENTIVES FOR OIL COMPANIES
INVESTING IN IRAN.

(a) In General.--Subsection (h) of section 167 of the Internal
Revenue Code of 1986 (relating to amortization of geological and
geophysical expenditures) is amended by adding at the end the following
new paragraph:
``(6) Denial when iran sanctions in effect.--
``(A) In general.--If sanctions are imposed under
section 5(a) of the Iran Sanctions Act of 1996
(relating to sanctions with respect to the development
of petroleum resources of Iran) on any member of an
expanded affiliated group the common parent of which is
a foreign corporation, paragraph (1) shall not apply to
any expense paid or incurred by any such member in any
period during which the sanctions are in effect.
``(B) Expanded affiliated group.--For purposes of
subparagraph (A), the term `expanded affiliated group'
means an affiliated group as defined in section
1504(a), determined--
``(i) by substituting `more than 50 percent'
for `at least 80 percent' each place it
appears, and
``(ii) without regard to paragraphs (2), (3),
and (4) of section 1504(b).''.
(b) Effective Date.--The amendment made by subsection (a) shall apply
to expense paid or incurred on or after January 1, 2007.

TITLE V--MISCELLANEOUS PROVISIONS

SEC. 501. TERMINATION.

(a) Termination.--The restrictions provided in sections 203, 404, and
405 shall cease to be effective with respect to Iran on the date on
which the President determines and certifies to the appropriate
congressional committees that Iran--
(1) has ceased its efforts to design, develop, manufacture,
or acquire--
(A) a nuclear explosive device or related materials
and technology;
(B) chemical and biological weapons; and
(C) ballistic missiles and ballistic missile launch
technology;
(2) has been removed from the list of countries the
governments of which have been determined, for purposes of
section 6(j) of the Export Administration Act of 1979 (50
U.S.C. 2405(j)), section 620A of the Foreign Assistance Act of
1961, section 40 of the Arms Export Control Act, or any other
provision of law, to have repeatedly provided support for acts
of international terrorism; and
(3) poses no significant threat to United States national
security, interests, or allies.
(b) Definition.--In subsection (a), the term ``appropriate
congressional committees'' means the Committee on Foreign Affairs of
the House of Representatives and the Committee on Foreign Relations of
the Senate.

Purpose and Summary

H.R. 1400, the Iran Counter-Proliferation Act of 2007, is
designed to deprive Iran of the funds and support it needs to
pursue its efforts to develop nuclear weapons and the means to
produce them. It includes a broad range of measures, including
expanding United States sanctions on Iran, sanctioning
companies that invest in Iran, prohibiting civilian nuclear
cooperation with countries that support Iran's nuclear program,
and expanding sanctions against Iranian entities that are the
instruments for Iran's support of terrorism.

Background and Need for the Legislation

Iran poses a significant threat to the United States and
our allies in the region. There is wide agreement that it is a
vital U.S. national security priority to undertake steps to
prevent Iran from acquiring weapons of mass destruction, in
particular nuclear weapons, and to end its support for
international terrorism. Given that Iran's economy, and its
ability to influence events, is heavily dependent on the
revenue derived from energy exports, recent U.S. efforts to
prevent Iran from acquiring weapons of mass destruction have
focused on seeking to deter foreign investment in Iran's
petroleum sector, while prohibiting U.S. investment.
H.R. 1400, the Iran Counter-Proliferation Act of 2007, is
the most recent effort to tighten legislative sanctions on Iran
to support such efforts. The legislation is aimed at deterring
significant amounts of foreign investment in Iran's energy
sector--specifically, any investment of $20 million or greater.
U.S. individuals and companies have been prohibited from
investing in Iran's petroleum sector since Executive Order
12957 was issued on March 15, 1995 by President Bill Clinton in
his response to his Administration's assessment that ``the
actions and policies of the Government of Iran constitute an
unusual and extraordinary threat to the national security,
foreign policy, and economy of the United States.'' The White
House spokesman at that time, Michael McCurry, made clear that
the objectionable activities were Iran's pursuit of weapons of
mass destruction, its support of international terrorism, and
its efforts to undermine the Middle East peace process.
Responding to the same concerns, a subsequent executive order,
E.O. 12959, issued on May 8, 1995, banned all ``new
investment'' in Iran by U.S. individuals and companies. The
same executive order banned virtually all trade with Iran. In
conjunction with the latter executive order, then-Secretary of
State Warren Christopher warned the international community
that the path Iran was following was a mirror image of the
steps taken by other nations that had sought nuclear weapons
capabilities.
The larger goal of H.R. 1400 is two-fold: (1) to prevent
Iran from securing nuclear arms and the means to produce them;
and (2) to ensure that this goal is achieved in peaceful
manner. In short, this legislation seeks to deprive Iran of a
significant amount of the funds it needs to pursue its nuclear
ambitions. The energy sector is the natural target of this
legislation, as it was of the Iran Sanctions Act (ISA) of 1996
and the Iran Freedom Support Act (IFSA) of 2006, for an obvious
reason: energy sales, and especially oil, are Iran's primary
source of revenue. In effect, this legislation seeks to present
the Islamic Republic of Iran with a choice: either cease its
nuclear program, or risk the political and economic future of
the Iranian people.
Although U.S. law prohibits American firms from investing
in Iran, foreign entities that fall outside of typical U.S.
sanctions continue to invest there. Such activity has enhanced
the Iranian economy, allowed Iran access to sophisticated
technology and know-how, as well as foreign currency, and
thereby contributed significantly to Iran's ability to fund
terror groups, and to finance the regime's weapons of mass
destruction programs, including its nuclear program.
The Iran Counter-Proliferation Act builds on over a decade
of legislative and executive action on this issue. After
numerous House and Senate hearings to address this problem,
Congress passed, and President Clinton signed into law, P.L.
104-172, the ``Iran and Libya Sanctions Act of 1996'' (ILSA).
The purpose of this law was to discourage foreign entities from
investing in Iran's petroleum sector by imposing certain
sanctions on them. A five year extension to ILSA was signed
into law by President George W. Bush on August 3, 2001.
To further strengthen sanctions targeting these
investments, on September 30, 2006, Congress passed, and
President Bush signed into law, P.L. 109-293, the ``Iran
Freedom Support Act'' (IFSA). Among other provisions, the IFSA
strengthened sanctions under the Iran Sanctions Act (``ISA''--
as the former ``Iran and Libya Sanctions Act of 1996'' is now
known), including by raising certain waiver thresholds to
``vital to the national security interests of the United
States,'' by enlarging the scope of those who might be subject
to sanctions, and by enhancing tools for using financial means
to address Iran's activities of concern.
However, the enacted version of IFSA did not include
language that would make export credit agencies, insurers, and
other financial institutions subject to sanctions for their
facilitation of investments in Iran's oil industry. To address
these gaps, the House Foreign Affairs Committee passed H.R. 957
on February 15, 2007. H.R. 957 also expands the activities
covered under the law to include production of petrochemicals
and liquefied natural gas. The provisions of H.R. 957 are
included in H.R. 1400 to provide a comprehensive approach to
the issues addressed in H.R. 1400. The House passed H.R. 957 on
July 31, 2007, by a vote of 415-11.
Although ISA was enacted over a decade ago, the
Administration has never sanctioned a foreign entity for taking
the objectionable step of investing $20 million or more in
Iran's energy sector, even though there have been numerous
instances of such investments since ISA became law. On one
occasion, Presidential authority has been used to waive
sanctions against foreign entities investing in Iran's
petroleum sector, and a number of investigations of possible
investment in Iran remain active. In this respect, the
Committee believes that the laws which have been enacted, as
enforced, and other steps taken by current and past
Administrations, have proven inadequate. They have not
succeeded in ending Iran's efforts to produce weapons of mass
destruction or ending Iran's other, considerable threats to
American national interests.
Specifically with respect to ISA, the Committee is deeply
dismayed that the current Administration, like the prior
Administration, has not acted to sanction a single enterprise
for investing in Iran, and has repeatedly delayed its decisions
on whether ``alleged'' investments may be subject to sanctions.
Despite this failure fully to implement its provisions, ISA
has made a positive contribution to United States national
security. First, certain concessions from countries whose
companies would have been subject to sanctions were made with
respect to those powers' dealings with Iran, in exchange for
waivers of the law's operation, pursuant (in the view of the
Administration) to the statute as enacted. In 1998, then-
Secretary of State Madeleine Albright found that an investment
in Iran, by Total, a French firm, violated ILSA, but waived
sanctions and indicated that additional waivers would be
forthcoming if there was cooperation from European Union states
on non-proliferation matters with respect to Iran. Views on the
importance of those concessions and interpretations of the
promises of future cooperation vary greatly. Second, the supply
of capital to the Iranian petroleum sector has been constrained
by the threat of sanctions, driving up the cost of capital--to
the disadvantage of Iran. Third, by highlighting the threat
from Iran, ILSA has emerged as a deterrent to investment. In
2001, Iranian economic experts themselves noted that
``sanctions result in contracts with second [-rate] companies''
and ``at least double the cost of [Iran's] oil extraction,''
requiring ``a significant part of [Iran's] economic and
financial resources are expended to compensate for such
limitations.'' This is one explanation for the widely disparate
rate of investment in the energy sector in Iran, on the one
hand, and its immediate neighbors, such as Qatar, on the other.
For this reason, in 2001, the Congress extended ILSA, as
mentioned above, for five years.
The Committee acknowledges that the Administration, after a
long and arduous effort, has been able to move the question of
Iran's nuclear arms from the International Atomic Energy Agency
(IAEA) to the United Nations Security Council (UNSC), where it
has secured the passage and implementation of sanctions on
Iran. This is an important achievement, but it must now be
followed up by further decisive action both within the UNSC,
and nationally by like-minded countries that share, in whole or
in part, our concerns about Iran.
H.R. 1400 seeks to strengthen the enforcement and
implementation of existing law in three primary ways. First and
foremost, it removes the Presidential waiver of ISA sanctions.
Second, it requires that no U.S. contracts be signed with an
offending entity, in addition to other sanctions the President
is supposed to choose from the menu of sanctions listed in
Section 6 of ISA. Third, it requires the President to submit a
report every six months to appropriate congressional committees
on foreign investment and pre-investment activity that could
contribute to the enhancement of Iran's ability to develop
petroleum resources in Iran. Although it does not require the
President to make a determination as to whether such investment
activity is sanctionable--or, in the case of pre-investment
activity, would be sanctionable--the reporting requirement
implicitly presses him to do just that. The reporting
requirement also should have a deterrent effect on investment
by putting offending entities on notice that they could be
subject to ISA sanctions.
Among other major elements of H.R. 1400 as reported by the
Committee on Foreign Affairs are the following:

LThe President is authorized to sanction CEO's
of offending entities, as well as the entities
themselves.

LThe Administration will not be allowed to
sign a nuclear cooperation agreement with any nation
that aids Iran's nuclear program.

LImport sanctions are to be re-imposed on all
Iranian exports to the United States. The Clinton
Administration lifted sanctions on Iranian carpets and
other exports in a gesture of goodwill and in an effort
to encourage a more forthcoming attitude from Tehran.
Nearly a decade later, however, it is clear that Iran
has not been responsive.

LThe President is required to determine
whether the Iranian Revolutionary Guard Corps (IRGC)
should be designated as a foreign terrorist
organization, placed on the list of specially
designated global terrorists, and/or placed on the list
of weapons of mass destruction proliferators and their
supporters. It also provides blocking the assets and
interests of persons who provide support to the IRGC.
The IRGC and its Qods Force reportedly train terrorists
throughout the Middle East, including in Iraq and in
Lebanon. The IRGC is a major base of support for
Ahmadinejad and reportedly owns large economic
enterprises in Iran. Foreign banks would presumably be
reticent about dealing with these enterprises were the
IRGC to be declared a terrorist organization or a WMD
proliferator.

LThe Treasury Department's Office of Terrorism
and Financial Intelligence is authorized $60 million
for fiscal year 2008.

LFunds are authorized funds for programs to
enhance U.S.-Iranian friendship, especially by
organizing exchange programs for young Iranians.

LTitle II of H.R. 1400, builds on provisions
within Public Law 109-293 by applying ISA sanctions to
parent companies of foreign subsidiaries which engage
in activity that ISA would prohibit for U.S. entities.

LH.R. 1400 builds on the efforts of Public Law
109-293 and, in conjunction with H.R. 957, would expand
ISA sanctions to apply to a ``financial institution,
insurer, underwriter, guarantor, any other business
organization, including any foreign subsidiaries of the
foregoing.'' H.R. 1400, like H.R. 957, also applies ISA
to petroleum byproducts and liquefied natural gas, yet
H.R. 1400 also applies the ISA to the sale of oil or
liquefied natural gas tankers.

LH.R. 1400 expresses the Sense of Congress
commending UNSCR 1737 and urging further such
resolutions.

LH.R. 1400 contains a Sense of Congress that
the U.S. should try to prevent foreign banks from
providing export credits to foreign entities seeking to
invest in the Iranian energy sector, complementing
provisions in H.R. 957, and elsewhere in H.R. 1400,
that address these issues by including export credit
agencies in ISA sanctions.

LH.R. 1400 expresses a Sense of Congress of
the American people's feelings of friendship with, and
esteem for, the Iranian people and praising Iranian
culture and history. It also regrets the
``impediments'' to the U.S.-Iran relationship caused by
``developments'' in recent decades.

The Committee is convinced that the imminence and
seriousness of the nuclear threat Iran would pose fully justify
this legislation, and it hopes that our friends and allies will
adopt similar measures and cut off further economic relations
with Iran until it ends its quest for nuclear arms and stops
its support for international terrorism. In the 1990s, some of
our friends and allies were still holding out hope that Iran's
nuclear efforts were strictly geared toward peaceful energy
use. By now, however, virtually every one of them understands
and acknowledges that Iran is determined to pursue its nuclear
program up to and including the production of nuclear arms.
Therefore, it is time for their actions and sense of urgency to
catch up with their stated perceptions. The profitability of
private companies pales in importance when compared to the
dangers posed by a nuclear Iran. Moreover, investment in Iran's
energy sector helps to sustain Iran's nuclear program and
therefore strengthens the voices of those who claim that the
urgency of the situation requires a solution by other than
peaceful means. It is time for the international community
simply to cease investing in Iran's energy industry, and this
legislation is intended to help facilitate that result.
Meanwhile, this legislation is intended to reinforce actions at
the UNSC, not undermine them.

Hearings

Over the years, the Committee has held multiple briefings
and hearings related to the subject matter of H.R. 1400,
particularly since 2003 and continuing into the 110th Congress.
On January 11, 2007, the Full Committee held a briefing
entitled, ``Next Steps in the Iran Crisis.'' The Committee was
briefed by the Under Secretary of state for Political Affairs,
Thomas R. Pickering, and the former Director of the Central
Intelligence Agency, R. James Woolsey. The Full Committee held
a hearing on January 31, 2007, entitled, ``Understanding the
Iran Crisis.'' Testimony was heard from private witnesses. On
March 6, 2007, the Committee held a hearing entitled, ``The
Iranian Challenge,'' with testimony heard from the Under
Secretary of State for Political Affairs, R. Nicholas Burns. On
March 15, 2007, the Subcommittee on Terrorism, Nonproliferation
and Trade, and the Subcommittee on the Middle East and South
Asia held a joint hearing entitled, ``Iranian Nuclear Crisis:
Latest Developments and Next Steps.''

Committee Consideration

On June 26, 2007, the Committee met in open session and
ordered favorably reported the bill H.R. 1400, as amended, by a
vote of 37-1, a quorum being present.

Votes of the Committee

Clause (3)(b) of rule XIII of the Rules of the House of
Representatives requires that the results of each record vote
on an amendment or motion to report, together with the names of
those voting for or against, be printed in the committee
report.
H.R. 1400 was reported favorably to the House, as amended,
by a vote of 37-1.

Voting yes: Lantos, Berman, Ackerman, Faleomavaega, Payne,
Sherman, Delahunt, Watson, Smith (WA), Green, Woolsey,
Jackson Lee, Hinojosa, Wu, Miller, Sanchez, Scott,
Costa, Sires, Giffords, Klein, Ros-Lehtinen, Smith
(NJ), Gallegly, Rohrabacher, Manzullo, Chabot,
Tancredo, Pence, Wilson, Boozman, Barrett, McCaul, Poe,
Inglis, Fortuno, and Bilirakis.

Voting no: Flake.

Committee Oversight Findings

In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the committee reports that the
findings and recommendations of the committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.

New Budget Authority and Tax Expenditures

Clause 3(c)(2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.

Congressional Budget Office Cost Estimate

In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the committee sets forth, with
respect to the bill, H.R. 1400, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:

U.S. Congress,
Congressional Budget Office,
Washington, DC, July 11, 2007.
Hon. Tom Lantos, Chairman,
Committee on Foreign Affairs,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1400, the Iran
Counter-Proliferation 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, who can be reached at 226-2840.
Sincerely,
Peter R. Orszag.
Enclosure

cc:
Honorable Ileana Ros-Lehtinen
Ranking Member
H.R. 1400--Iran Counter-Proliferation Act of 2007

SUMMARY

H.R. 1400 would authorize the appropriation of funds for
two specific programs within the Department of Treasury
relating to financial crimes and terrorism. The bill also would
authorize an exchange program with Iran. Additionally, the bill
would ban the import of certain items from Iran and would allow
the President to impose sanctions on certain individuals.
Finally, the bill would prohibit the transfer of nuclear
material, components, or technology to countries that are
assisting Iran to develop nuclear technology.
CBO estimates that implementing H.R. 1400 would cost $116
million in 2008 and $490 million over the 2008-2012 period,
assuming appropriation of the necessary funds. In addition,
enacting the bill would reduce revenues by less than $500,000
in 2008, by $2 million over the 2008-2012 period, and by $4
million over the 2008-2017 period. Enacting H.R. 1400 would not
affect direct spending.
H.R. 1400 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. 1400 would impose private-sector mandates, as defined
in UMRA, by requiring sanctions on certain imports and exports
with Iran. Based on information from the Departments of
Commerce and State, CBO expects that the direct cost of
complying with the mandates would fall below the annual
threshold for private-sector mandates established by UMRA ($131
million in 2007, adjusted annually for inflation).

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary impact of H.R. 1400 is summarized
in Table 1. The costs of this legislation falls within budget
functions 150 (international affairs), 750 (administration of
justice), and 800 (general government).

TABLE 1. ESTIMATED BUDGETARY IMPACT OF H.R. 1400
----------------------------------------------------------------------------------------------------------------
By Fiscal Year, in Millions of Dollars
----------------------------------------------------
2007 2008 2009 2010 2011 2012
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION\1\

Spending Under Current Law 110 0 0 0 0 0
Budget Authority\2\
Estimated Outlays 110 27 0 0 0 0

Proposed Changes 0 145 149 153 0 0
Department of Treasury Programs
Estimated Authorization Level
Estimated Outlays 0 111 147 151 36 0

Exchange Programs 0 10 10 10 11 11
Estimated Authorization Level
Estimated Outlays 0 5 9 10 10 11

Total Changes 0 155 159 163 11 11
Estimated Authorization Level
Estimated Outlays 0 116 156 161 46 11

Spending Under H.R. 1400 110 155 159 163 11 11
Estimated Authorization Level\2\
Estimated Outlays 110 143 156 161 46 11
----------------------------------------------------------------------------------------------------------------
\1\In addition to the amounts shown above, enacting H.R. 1400 also would lower revenues by less than $500,000 a
year over the 2008-2012 period, totaling $2 million over that period. For the changes in revenues over the 10-
year period, see Table 2.
\2\The 2007 level is the estimated budget authority available for two programs in the Department of Treasury:
the Office of Terrorism and Financial Intelligence ($39 million) and the Financial Crimes Enforcement Network
($71 million).

BASIS OF ESTIMATE

For the purposes of this estimate, CBO assumes that the
bill will be enacted before the start of fiscal year 2008 and
that spending will follow historical outlay patterns for
similar programs.
Spending Subject to Appropriation
H.R. 1400 would authorize appropriations for specific
programs within both the Department of Treasury and the
Department of State. In total, CBO estimates that implementing
these authorizations would cost $490 million over the 2008-2012
period, assuming appropriation of the estimated amounts.
Department of Treasury Programs. In total, section 402
would authorize the appropriation of $145 million in 2008 and
such sums as may be necessary for 2009 and 2010; $59 million
for the Office of Terrorism and Financial Intelligence and $86
million for the Financial Crimes Enforcement Network, both of
which are in the Department of Treasury. Based on information
from the Department of Treasury, CBO expects that $145 million,
adjusted for inflation, would be sufficient for fiscal years
2009 and 2010. Accordingly, CBO estimates that implementing
section 402 would cost $111 million in 2008 and $445 million
over the 2008-2012 period, assuming appropriation of the
estimated amounts.
Exchange Programs. Section 403 would authorize the
President to implement an exchange program with Iran and would
authorize the appropriation of $10 million in 2008 to implement
that program. Because the exchange program has a permanent
authorization, CBO estimates that the bill also would authorize
funding for fiscal years 2009 through 2012 equal to the $10
million authorized for 2008, adjusted for inflation. Thus, CBO
estimates that implementing section 403 would cost $5 million
in 2008 and $45 million over the 2008-2012 period, assuming
appropriation of the estimated amounts.
Revenues
Section 202 would disallow imports of certain foodstuffs
and carpets from Iran. CBO estimates that this provision would
reduce revenues by less than $500,000 in 2008, by $2 million
over the 2008-2012 period, and by $4 million over the 2008-2017
period, as shown in Table 2.

TABLE 2. ESTIMATED CHANGES IN REVENUES UNDER H.R. 1400
--------------------------------------------------------------------------------------------------------------------------------------------------------
By Fiscal Year, in Millions of Dollars
-------------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008-2012 2008-2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated Revenues * * * * * * * * -1 -1 -2 -4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = revenue loss of less than $500,000.

ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

H.R. 1400 contains no intergovernmental mandates as defined
in UMRA and would not affect the budgets of state, local or
tribal governments.

ESTIMATED IMPACT ON THE PRIVATE SECTOR

H.R. 1400 would impose private-sector mandates, as defined
in UMRA, by requiring sanctions on certain imports and exports
with Iran. The bill would impose sanctions by terminating the
authority contained in existing regulation that allow the
import of carpets and certain foodstuffs into the United
States. The bill also would impose other sanctions by
prohibiting the export of civil aviation equipment to Iran.
According to the Departments of Commerce and State, in 2006 the
United States imported from Iran about $143 million in carpets
and foodstuffs and exported to Iran about $15,000 in civil
aviation equipment. While CBO lacks information on the value of
lost profits to importers and exporters resulting from the
prohibition on those items, CBO expects that the direct cost of
complying with those mandates would fall below UMRA's annual
threshold ($131 million in 2007, adjusted annually for
inflation).

PREVIOUS CBO ESTIMATES

On June 13, 2007, CBO transmitted a cost estimate for a
similar bill, H.R. 2347, the Iran Sanctions Enabling Act of
2007, as ordered reported by the House Committee on Financial
Services on May 23, 2007. CBO determined that the bill
contained a private-sector mandate on entities participating in
certain private pension plans. CBO, however, could not
determine whether the aggregate cost of the mandates would
exceed the annual threshold.
On February 27, 2007, CBO transmitted an estimate for H.R.
957, a bill to amend the Iran Sanctions Act of 1996 to expand
and clarify the entities against which sanctions may be
imposed, as ordered reported by the House Committee on Foreign
Affairs on February 15, 2007. That bill is similar to section
304 of H.R. 1400 and the estimated costs are the same. CBO
determined that the bill contained no new mandates as defined
in UMRA.

ESTIMATE PREPARED BY:

Federal Spending: Sam Papenfuss and Sunita D'Monte (226-2840)
Federal Revenues: Emily Schlect (226-2680)
Impact on State, Local, and Tribal Governments: Neil Hood (225-
3220)
Impact on the Private Sector: Paige Piper/Bach (226-2960)

ESTIMATE APPROVED BY:

G. Thomas Woodward
Assistant Director for Tax Analysis

Peter H. Fontaine
Deputy Assistant Director for Budget Analysis

Performance Goals and Objectives

Pursuant to clause 3(c) of House rule XIII, upon enactment
of this legislation, Iran would be further deprived of the
funds and support it needs to pursue efforts to develop and
produce nuclear weapons.

Constitutional Authority Statement

Pursuant to clause 3(d) (1) of rule XIII of the Rules of
the House of Representatives, the Committee finds the authority
for this legislation in article I, section 8 of the
Constitution.

New Advisory Committees

H.R. 1400 does not establish or authorize any new advisory
committees.

Congressional Accountability Act

H.R. 1400 does not apply to the Legislative Branch.

Earmark Identification

H.R. 1400 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9(d), 9(e), or 9(f) of rule XXI.

Section-by-Section Analysis and Discussion

Section 1. Short Title and Table of Contents.
Section 1 provides that the Act may be referred to as the
``Iran Counter-Proliferation Act of 2007'' and provides a table
of contents.
Section 2. United States Policy Toward Iran.
Section 2 finds that the prospect of the Islamic Republic
of Iran achieving nuclear arms represents a grave threat to the
United States and its allies and that radical statements by
Iranian leaders suggest a nuclear Iran may not be preventable.
It consequently finds that it is critical for the United States
and its allies to do everything diplomatically, politically,
and economically viable in order to dissuade the Iranian regime
from its pursuit of nuclear arms.
Section 2 also states the sense of Congress as to the
following: that Iranian President Ahmadinejad's statements
regarding the Holocaust and Israel may constitute a violation
of the Convention on the Prevention and Punishment of the Crime
of Genocide and should be brought before an international
tribunal; that the United States should increase its efforts in
the international financial sector to isolate Iran; that Iran
should be barred from entering the World Trade Organization
until all issues related to its nuclear program are resolved;
that all future trade agreements involving Iran should be
conditioned so as to preclude investment in Iran's energy
sector; that UNSCR 1737 represents a ``critical gain'' in the
campaign to prevent Iran's acquisition of nuclear arms and
should be respected by all nations; that the UN should take
further measures beyond Resolution 1737 to tighten sanctions on
Iran; that moderate Arab states should exert leverage over
other nations, including Russia and China, to be more
forthcoming in supporting UN Security Council efforts to halt
Iran's nuclear program; that the U.S. should discourage foreign
banks from providing export credits to foreign entities seeking
to invest in the Iranian energy sector; that the U.S. should
continue discouraging foreign banks from accepting Iranian
banks as clients; that the U.S. should prohibit all Iranian
state banks from using the American banking system; that
Federal, state, and local government pension plans should
divest themselves of all non-U.S. companies investing more than
$20 million in Iran's energy sector; and that the U.S. should
designate the Iranian Revolutionary Guard Corps as a foreign
terrorist organization and a Specially Designated Global
Terrorist group and put it on the list of proliferators and
supporters of weapons of mass destruction.

TITLE I--SUPPORT FOR DIPLOMATIC EFFORTS RELATING TO PREVENTING IRAN
FROM ACQUIRING NUCLEAR WEAPONS

Section 101. Support for International Diplomatic Efforts.
Section 101 states the sense of Congress as to the
following: that the United States should use diplomatic and
economic means to resolve the Iranian nuclear problem; that the
U.S. should continue to support efforts in the International
Atomic Energy Agency and the UN Security Council to bring about
an end to Iran's programs for uranium enrichment and nuclear
weapons; that UNSCR 1737 was a useful first step toward these
ends; and that the Security Council should adopt additional
measures against Iran, include measures to prohibit investments
in its energy sector.
Section 102. Peaceful Efforts by the United States.
Section 102 states that nothing in H.R. 1400 shall be
construed as authorizing the use of force or the use of the
United States Armed Forces against Iran.

TITLE II--ADDITIONAL BILATERAL SANCTIONS AGAINST IRAN

Section 201. Application to Subsidiaries.
Section 201 generally declares that in cases in which an
entity engages in an act outside the U.S. that would violate
Executive Order No. 12959 of May 6, 1995; Executive Order 13059
of August 19, 1997; or any other prohibition on transactions
with respect to Iran that is imposed under the International
Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) and if
that entity was created or availed for the purpose of engaging
in such an act, the parent company of that entity shall be
subject to the same penalties as if the parent company had
engaged in that act. In this context a ``parent company'' is
defined by owning, directly or indirectly, more than 50 percent
equity interest in that other entity and is a United States
person. ``Entity'' is defined as a ``partnership, associated,
trust, joint venture, corporation, or other organization''.
Although the IFSA codified Section 3 of Executive Order
12959 (which authorizes the Secretary of the Treasury to take
legal action against United States persons based on oil
transactions engaged in by their foreign affiliates with Iran),
and Section 2(f) of Executive Order 13059 (which includes
foreign subsidiaries as entities subject to sanctions for
violating U.S. law), concerns remained that existing law
required the clarification that sanctions under the ISA should
apply to certain foreign subsidiaries of U.S. companies.
To eliminate these concerns, H.R. 957 was amended by an
Amendment in the Nature of a Substitute, which was adopted
during consideration of the bill by the House Foreign Affairs
Committee on February 15, 2007. The amendment provided for
imposition of liability on parent companies for violations of
sanctions by their foreign subsidiaries. For completeness, this
was included as Section 201 of the current bill.
Section 202. Additional Import Sanctions Against Iran.
Section 202 terminates the authority contained in existing
regulations to allow the import of carpets and certain
foodstuffs into the United States.
Section 203. Additional Export Sanctions Against Iran.
Section 203 prohibits the export of civil aviation
equipment to Iran.

TITLE III--AMENDMENTS TO THE IRAN SANCTIONS ACT OF 1996

Section 301. Multilateral Regime.
Section 301 amends the Iran Sanctions Act to require
additional reporting on specific U.S. diplomatic efforts to
pursue a multilateral regime against Iran. The report shall
include a list of countries that have agreed to undertake
measures against Iran; a description of those measures; any
decision by such governments to rescind or continue credits,
guarantees or other governmental assistance; and actions taken
in international fora. It also requires a list of countries
that have not agreed to undertake such measures and a
description of political understandings or international
agreements to which the United States is a party and which
affect the implementation of section 5 of the Act.
Section 302. Mandatory Sanctions.
Section 302 amends section 5 of the Iran Sanctions Act to
require that, at a minimum, companies that meet the investment
threshold in the Act cannot sell to the U.S. government.
Section 303. Authority to Impose Sanctions on Principal Executive
Officers.
Section 303 amends section 5 of the Iran Sanctions Act to
add the authority to impose sanctions on principal executive
officers of any sanctioned person, or on persons performing
similar functions as such officer or officers. In addition, the
President may block the property of any such persons.
Section 304. United States Efforts to Prevent Investment.
Section 304 requires that the President submit a report
every six months to appropriate congressional committees on
investment and pre-investment activity that could significantly
contribute to the enhancement of Iran's ability to develop
petroleum resources in Iran; for each instance the report
should include a description of the activity, any information
regarding when the actual investment may commence, and what
steps the U.S. has taken to respond to such activity. For the
purposes of this requirement, ``investment'' is defined so as
to include ``the extension by a financial institution of credit
or other financing to a person for that person's investment''
and the term ``pre-investment activity'' is defined as ``any
activity indicating an intent to make an investment, including
a memorandum of understanding among parties indicating such an
intent.''
Section 305. Clarification and Expansion of Definitions.
Section 304 amends Section 14(13) of the Iran Sanctions Act
of 1996 by adding any financial institution, insurer,
underwriter, guarantor, any other business organization,
including any foreign subsidiaries to be subject to sanctions.
It further amends paragraph (13) to clarify that a foreign
export credit agency may be subject to sanctions to the extent
that such an agency is a governmental entity operating as a
business enterprise. Under the underlying Iran Sanctions Act,
if a foreign export credit agency engages in activity that
would make such an agency subject to sanctions under the Act,
such sanctions would apply to the foreign export credit agency
itself, not against other parts of the foreign government
associated with such agency. It also amends Section 14(14) to
include petroleum by-products, liquefied natural gas, and the
sale of oil or liquefied natural gas tankers. The Committee
intends that section 5(a) of the ISA apply to any covered
entity that sells such tankers to Iran.
Section 306. Removal of Waiver Authority.
Section 306 eliminates the ability of the President to
waive sanctions under the Iran Sanctions Act under section 4 or
section 9.

TITLE IV--ADDITIONAL MEASURES

Section 401. Additions to Terrorism and Other List.
Subsection (a) requires that the President determine within
120 days of the bill's enactment whether the Iranian
Revolutionary Guard Corps (IRGC) should be designated as a
foreign terrorist organization, placed on the list of specially
designated global terrorists, and/or placed on the list of
weapons of mass destruction proliferators and their supporters,
and report that determination to the House Committee on Foreign
Affairs and the Senate Committee on Foreign Relations.
Subsection (b) also extends the authority of the President to
block all property and interest of persons who assist or
otherwise support the IRGC or entities owned or effectively
controlled by the IRGC.
Section 402. Increased Capacity for Efforts to Combat Unlawful or
Terrorist Financing
Section 402 affirms the importance of the Office of
Terrorism and Financial Intelligence of the Department of
Treasury and authorizes $59,466,000 for the Office for fiscal
year 2008 and such sums as may be necessary for fiscal years
2009 and 2010. It also amends Section 301(d)(1) of title 31,
United States Code to include authorizations of $85,844,000 for
fiscal year 2008 and such sums as may be necessary for fiscal
years 2009 and 2010 for the Financial Crimes Enforcement
Network. The authorizations for fiscal year 2008 are the
request levels for both entities.
Section 403. Exchange Programs with the People of Iran.
Section 403 declares the sense of Congress that the United
States should seek to enhance its friendship with the people of
Iran, particularly by identifying young people of Iran to come
to the United States under United States exchange programs. It
also authorizes $10,000,000 for such programs to carry out that
purpose and provides that such programs shall be carried out to
the extent practicable in a manner consistent with the
eligibility for assistance requirements specified in section
302(b) of the Iran Freedom Support Act. The Committee does not
intend to extend exchanges to Iranian officials or employees
who are involved in the development of weapons of mass
destruction, support for international terrorism, or other
actions that harm U.S. interests.
Section 404. Reducing Contributions to the World Bank.
Section 404 states that the United States shall decrease
its overall contributions to the International Bank for
Reconstruction and Development in accordance to the percentage
of total Bank investments that were made in Iran the preceding
year. This provision applies to capital replenishments of the
World Bank, not to contributions made to the International
Development Association.
Section 405. Restrictions on Nuclear Cooperation with Countries
Assisting the Nuclear Program of Iran.
Section 405 provides that, notwithstanding any other
provision of law or any international agreement, no bilateral
U.S. cooperation agreements with Russia or with any other
countries assisting Iran's nuclear or missile or advanced
conventional weapons programs may be submitted to Congress
pursuant to the Atomic Energy Act of 1954, no such agreement
may enter into force, no license may be issued to export
nuclear goods or services to such a country, and no approval
may be given for such transfer, until the President determines
and reports to the House Committee on Foreign Affairs and the
Senate Committee on Foreign Relations certifying the following:
that Iran has ceased its pursuit of a nuclear explosive device;
and that the relevant government has suspended all such
assistance to Iran and is committed to maintaining the
suspension until Iran has implemented measures to cease its
pursuit of a nuclear explosive device. These requirements shall
apply to all other applicable procedures, requirements, and
restrictions contained in the Atomic Energy Act of 1954 and
other laws but shall not affect the validity of cooperation
agreements already in effect upon the enactment of the Act.
Section 406 Elimination of Certain Tax Incentives for Oil Companies
Investing in Iran
This section provides that the U.S. subsidiary of any
company which is subject to sanctions under section 5(a) of the
Iran Sanctions Act will no longer be eligible for tax benefits
relating to geophysical exploration for petroleum resources in
the United States under section 167(h) of the Internal Revenue
Code of 1986.

TITLE V--MISCELLANEOUS PROVISIONS

Section 501. Termination.
Section 501 states that the restrictions provided in
sections 203, 404, and 405 shall no longer have force or effect
if the President determines and certifies to the House
Committee on Foreign Affairs and the Senate Committee on
Foreign Relations that Iran has stopped pursuing a nuclear
explosive device or related materials and technology, chemical
and biological weapons, ballistic missiles and launch
technology, has been removed from the list of countries
sponsoring terrorism under the Export Administration Act of
1979, and poses no significant threat to the United States or
its allies.

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 (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):

IRAN SANCTIONS ACT OF 1996

* * * * * * *
SEC. 4. MULTILATERAL REGIME.

(a) * * *
[(b) Reports to Congress.--The President shall report to the
appropriate congressional committees, not later than 1 year
after the date of the enactment of this Act, and periodically
thereafter, on the extent that diplomatic efforts described in
subsection (a) have been successful. Each report shall
include--
[(1) the countries that have agreed to undertake
measures to further the objectives of section 3 with
respect to Iran, and a description of those measures;
and
[(2) the countries that have not agreed to measures
described in paragraph (1), and, with respect to those
countries, other measures (in addition to that provided
in subsection (d)) the President recommends that the
United States take to further the objectives of section
3 with respect to Iran.
[(c) Waiver.--
[(1) In general.--The President may, on a case by
case basis, waive for a period of not more than six
months the application of section 5(a) with respect to
a national of a country, if the President certifies to
the appropriate congressional committees at least 30
days before such waiver is to take effect that such
waiver is vital to the national security interests of
the United States.
[(2) Subsequent renewal of waiver.--If the President
determines that, in accordance with paragraph (1), such
a waiver is appropriate, the President may, at the
conclusion of the period of a waiver under paragraph
(1), renew such waiver for subsequent periods of not
more than six months each.]
(b) Reports to Congress.--Not later than 6 months after the
date of the enactment of the Iran Counter-Proliferation Act of
2007 and every six months thereafter, the President shall
transmit to the appropriate congressional committees a report
regarding specific diplomatic efforts undertaken pursuant to
subsection (a), the results of those efforts, and a description
of proposed diplomatic efforts pursuant to such subsection.
Each report shall include--
(1) a list of the countries that have agreed to
undertake measures to further the objectives of section
3 with respect to Iran;
(2) a description of those measures, including--
(A) government actions with respect to public
or private entities (or their subsidiaries)
located in their territories, that are engaged
in Iran;
(B) any decisions by the governments of these
countries to rescind or continue the provision
of credits, guarantees, or other governmental
assistance to these entities; and
(C) actions taken in international fora to
further the objectives of section 3;
(3) a list of the countries that have not agreed to
undertake measures to further the objectives of section
3 with respect to Iran, and the reasons therefor; and
(4) a description of any memorandums of
understanding, political understandings, or
international agreements to which the United States has
acceded which affect implementation of this section or
section 5(a).
[(d)] (c) Enhanced Sanction.--
(1) Sanction.--With respect to nationals of countries
[except those with respect to which the President has
exercised the waiver authority of subsection (c)], at
any time after the first report is required to be
submitted under subsection (b), section 5(a) shall be
applied by substituting ``$20,000,000'' for
``$40,000,000'' each place it appears, and by
substituting ``$5,000,000'' for ``$10,000,000''.

* * * * * * *

[(e)] (d) Interim Report on Multilateral Sanctions;
Monitoring.--The President, not later than 90 days after the
date of the enactment of this Act, shall report to the
appropriate congressional committees on--
(1) * * *

* * * * * * *

[(f)] (e) Investigations.--
(1) * * *

* * * * * * *

SEC. 5. IMPOSITION OF SANCTIONS.

(a) Sanctions With Respect to the Development of Petroleum
Resources of Iran.--Except as provided in subsection (f), the
President shall impose [2 or more of the sanctions described in
paragraphs (1) through (6) of section 6] the sanction described
in paragraph (5) of section 6 and, in addition, one or more of
the sanctions described in paragraphs (1), (2), (3), (4), and
(6) of such section if the President determines that a person
has, with actual knowledge, on or after the date of the
enactment of this Act, made an investment of $40,000,000 or
more (or any combination of investments of at least $10,000,000
each, which in the aggregate equals or exceeds $40,000,000 in
any 12-month period), that directly and significantly
contributed to the enhancement of Iran's ability to develop
petroleum resources of Iran.

* * * * * * *

(g) Authority to Impose Sanctions on Principal Executive
Officers.--
(1) Sanctions under section 6.--In addition to the
sanctions imposed under subsection (a), the President
may impose any of the sanctions under section 6 on the
principal executive officer or officers of any
sanctioned person, or on persons performing similar
functions as such officer or officers. The President
shall include on the list published under subsection
(d) the name of any person on whom sanctions are
imposed under this paragraph.
(2) Additional sanctions.--In addition to the
sanctions imposed under paragraph (1), the President
may block the property of any person described in
paragraph (1), and prohibit transactions in such
property, to the same extent as the property of a
foreign person determined to have committed acts of
terrorism for purposes of Executive Order 13224 of
September 23, 2001 (50 U.S.C. 1701 note).
(h) United States Efforts to Address Planned Investment.--
(1) Reports on investment activity.--Not later than
January 30, 2008, and every 6 months thereafter, the
President shall transmit to the Committee on Foreign
Affairs of the House of Representatives and the
Committee on Foreign Relations of the Senate a report
on investment and pre-investment activity, by any
person or entity, that could contribute to the
enhancement of Iran's ability to develop petroleum
resources in Iran. For each such activity, the
President shall provide a description of the activity,
any information regarding when actual investment may
commence, and what steps the United States has taken to
respond to such activity.
(2) Definition.--In this subsection--
(A) the term ``investment'' includes the
extension by a financial institution of credit
or other financing to a person for that
person's investment; and
(B) the term ``pre-investment activity''
means any activity indicating an intent to make
an investment, including a memorandum of
understanding among parties indicating such an
intent.

* * * * * * *

SEC. 9. DURATION OF SANCTIONS; PRESIDENTIAL WAIVER.

(a) * * *

* * * * * * *

[(c) Presidential Waiver.--
[(1) Authority.--The President may waive the
requirement in section 5 to impose a sanction or
sanctions on a person described in section 5(c), and
may waive the continued imposition of a sanction or
sanctions under subsection (b) of this section, 30 days
or more after the President determines and so reports
to the appropriate congressional committees that it is
important to the national interest of the United States
to exercise such waiver authority.
[(2) Contents of report.--Any report under paragraph
(1) shall provide a specific and detailed rationale for
the determination under paragraph (1), including--
[(A) a description of the conduct that
resulted in the determination under section
5(a) or (b), as the case may be;
[(B) in the case of a foreign person, an
explanation of the efforts to secure the
cooperation of the government with primary
jurisdiction over the sanctioned person to
terminate or, as appropriate, penalize the
activities that resulted in the determination
under section 5(a) or (b), as the case may be;
[(C) an estimate of the significance of the
provision of the items described in section
5(a) or section 5(b) to Iran's ability to,
respectively, develop its petroleum resources
or its weapons of mass destruction or other
military capabilities; and
[(D) a statement as to the response of the
United States in the event that the person
concerned engages in other activities that
would be subject to section 5(a) or (b).
[(3) Effect of report on waiver.--If the President
makes a report under paragraph (1) with respect to a
waiver of sanctions on a person described in section
5(c), sanctions need not be imposed under section 5(a)
or (b) on that person during the 30-day period referred
to in paragraph (1).]

* * * * * * *

SEC. 14. DEFINITIONS.

As used in this Act:
(1) * * *

* * * * * * *

(13) Person.--The term ``person'' means--
(A) a natural person;
[(B) a corporation, business association,
partnership, society, trust, any other
nongovernmental entity, organization, or group,
and any governmental entity operating as a
business enterprise; and]
(B)(i) a corporation, business association,
partnership, society, trust, financial
institution, insurer, underwriter, guarantor,
and any other business organization;
(ii) any foreign subsidiary of any entity
described in clause (i); and
(iii) any government entity operating as a
business enterprise, such as an export credit
agency; and

* * * * * * *

(14) Petroleum resources.--The term ``petroleum
resources'' includes petroleum, petroleum refining
capacity, liquefied natural gas, the sale of oil
tankers or liquefied natural gas tankers, and natural
gas resources.

* * * * * * *

----------

TITLE 31, UNITED STATES CODE

* * * * * * *
Subtitle I--General

* * * * * * *

CHAPTER 3--DEPARTMENT OF THE TREASURY

* * * * * * *

SUBCHAPTER I--ORGANIZATION

* * * * * * *

Sec. 310. Financial Crimes Enforcement Network

(a) * * *

* * * * * * *

(d) Authorization of Appropriations.--
(1) In general.--There are authorized to be
appropriated for FinCEN [such sums as may be necessary
for fiscal years 2002, 2003, 2004, and 2005]
$85,844,000 for fiscal year 2008 and such sums as may
be necessary for each of the fiscal years 2009 and
2010.

* * * * * * *

----------

SECTION 167 OF THE INTERNAL REVENUE CODE OF 1986

SEC. 167. DEPRECIATION.

(a) * * *

* * * * * * *

(h) Amortization of Geological and Geophysical
Expenditures.--
(1) * * *

* * * * * * *

(6) Denial when iran sanctions in effect.--
(A) In general.--If sanctions are imposed
under section 5(a) of the Iran Sanctions Act of
1996 (relating to sanctions with respect to the
development of petroleum resources of Iran) on
any member of an expanded affiliated group the
common parent of which is a foreign
corporation, paragraph (1) shall not apply to
any expense paid or incurred by any such member
in any period during which the sanctions are in
effect.
(B) Expanded affiliated group.--For purposes
of subparagraph (A), the term ``expanded
affiliated group'' means an affiliated group as
defined in section 1504(a), determined--
(i) by substituting ``more than 50
percent'' for ``at least 80 percent''
each place it appears, and
(ii) without regard to paragraphs
(2), (3), and (4) of section 1504(b).

* * * * * * *