Legislation filed on Tuesday by Sen. Elizabeth Warren (D-Mass.) and Sen. James Lankford (R-Okla.) seeks detailed disclosures on tax deductions that minimize the punitive cost of a federal enforcement action.

“When federal agencies close investigations and settle cases, they often tout the dollar amount obtained from the offender, but in many cases that amount is misleading because of tax deductions and other ‘credits’ built into the settlement that reduce the settlement's true value,” the senators said in a statement.

Under the proposed Truth in Settlements Act, federal agencies would be required to post basic information about major settlements and post copies of those agreements on their websites.  Any written public statement that an agency issues about the value of a major settlement must include an explanation of how those settlement payments are categorized for tax purposes and whether payments may be offset by "credits" for particular conduct. Companies that settle with federal agencies will be required to disclose in their Securities and Exchange Commission filings whether they have deducted any or all of the dollar amounts of their settlements from taxes.

To address concerns about confidentiality, the bill also requires agencies to explain publicly why confidentiality is justified in any particular instance. Agencies would need to disclose basic information about the number of settlements they deem confidential each year and the Government Accountability Office would be tasked with a study of confidentiality procedures and providing additional recommendations for increasing transparency.

A fact sheet accompanying the legislation details past enforcement actions that illustrate the issues it seeks to address:

In 2013, the Department of Justice and other regulators settled with JPMorgan Chase to resolve claims related to its past marketing, sale, and issuance of residential mortgage-backed securities. The record-setting penalty was $13 billion; $11 billion of the settlement was tax deductible.

In 2013, the Federal Reserve and Office of the Comptroller of the Currency announced an $8.5 billion settlement with 13 mortgage servicers accused of illegal foreclosure practices. More than 60 percent of the settlement, $5.2 billion, was in the form of “credits” for “loan modifications and forgiveness of deficiency judgments.” Servicers could accrue those credits by forgiving a “mere fraction” of large unpaid loans, Warren and Lankford say. For example, a servicer that wrote down $15,000 of a $500,000 unpaid loan balance would get a credit for $500,000, not $15,000.

The Federal Housing Finance Agency’s $335 million settlement with Wells Fargo for allegedly fraudulent sales of mortgage-backed securities to Fannie Mae and Freddie Mac was just a fraction of what other big banks paid to settle similar cases. Because the agency designated the settlement as confidential, neither Congress nor the public can scrutinize the deal, Warren and Lankford say.

The bill was previously introduced in the last Congress and advanced as far as the Senate Homeland Security & Governmental Affairs Committee.