INTELLIGENCE AUTHORIZATION ACT 1991

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92M00732R001100060003-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 13
• Document Creation Date: December 27, 2016
• Document Release Date: April 17, 2014
• Sequence Number: 3
• Publication Date: November 29, 1989
• Content Type: MEMO

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DATE:
FROM:
PHONE NO:
SUBJECT:
AGENCY:
NAME;
PHONE NO:
DEFENSE INTELLIGENCE AGENCY
WASHINGTON, D.C. 20940-
OCA 4018-89
FACSIMILE COVER SHEET
,79 Aio /9P9
STAT
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STAT
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U -532/GC
MEMORANDUM FOR:
DEFENSE INTELLIGENCE AGENCY
WASHINGTON, D.C. 20340.
Office of Legislative Affairs
Central Intelligence Agency
29 NOV 7999
SUBJECT intelligence Authorization Act 1991
1. Per your 20 October 1989 request. attached are DIA's
submissions.
STAT
2. The proposals include draft Language, sectJon-by-section
analysis, and cost data.
3. The proposals do not include the previously submitted
provisions for DIA Foreign Language Proficiency Pay, DIA
Acquisition of Critical Skills, and DIA Overseas Personnel
Benefits Comparability, all of which are included in the recently
enacted FY-90 intelligence Authorization Act.
4. The submitted proposals are:
A. Non-official Cover Authority
B. Training of Certain Foreign Personnel
C. Acquisition of Foreign Material
D. Employee Tax Equalization
6. Each proposal has been previously coordinated within DOD.
1 Enclosure a/s
2:27. a
Assistant General Counsel
- STAT
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ENCLOSURE
A. Non-Official Cover Authority:
1. Statutorx Lan9ue9e
SEC. XXX. Chapter 21 of Title 10, United States Code is
amended--
(a) by inserting after the chapter heading the following:
"Subchapter
I. -General Matters 421
11. Commercial Activity 431
(b) by adding at the end of the following:
- "SUBCHAPTER 11 -- COMMERCIAL ACTIVITY '
-201. Authority to engage in commercial activity.
The Secretary of Defense, consistent with this
subchapter. may engage in certain commercial activities and expend
appropriated funds as may be necessary for their operation for the
purpose of providing cover or security for the conduct of foreign
intelligence collection or other operational activities undertaken
by the Department of Defense. Such activities shall be coordinated
with, and, where appropriate, be supported by. the Director of
Central intelligence, and, to the extent such activities take place
within the United States, with the Director of the Federal Bureau
of Investigation.
202. Definition of "commercial activities".
For purposes of this subchapter, the term "commercial
activities" means activities undertaken by Department of Defense,
its elements or its personnel consistent with existing commercial
practice and includes the acquisition, use, sale, storage and
disposal of goods and Services: entering into employment and other
contracts, leases, and other agreements for real and personal
property: depositing funds into, and withdrawing funds from,
domestic and foreign commercial businesses or financial
Institutions; and acquiring licenses, registrations, permits, and
insurance.
203. Use and disposition of funds.
Funds generated by commercial activities authorized
pursuant to this sub-chapter may be used to offset necessary and
reasonable expenses arising from such activities, with the
remainder to be deposited into the Treasury on a periodic basis as
miscellaneous receipts. The disposition of such funds shall be
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audited at least annually by the intelligence element concerned.
204. Relationship with other federal laws.
(a) Except in accordance with subsections (b),(c), and
(d) commercial activities conducted pursuant to this subchapter
shall be carried out in accordance with applicable federal law.
(b) Commercial activity undertaken pursuant to this
subchapter shall not be subject to provisions of law or regulation
otherwise applicable to the activity of federal agencies, as
described in subsections (c), and (d) If the Secretary of Defense,
or his designee (who may be of no lower rank than an Assistant
Secretary of Defense or a Secretary of a Military Department)
determines In writing that a commercial activity is required to
enhance security, protect Intelligence sources and methods or
otherwise enhance cover or facilitate authorized intelligence
activities of the Department of Defense.
(0) Provisions of law or regulation which shall not be
applicable to the conduct of commercial activity as a result of a
determination made under subsection (b) shall include but are not
limited to, administrative and financial requirements pertaining
to: receipt and use of nonappropriated funds; the acquisition or
management of property or services; information disclosure,
retention, and management; federal contract or tort liability;
government employment and operations including travel, conflicts
of interest and standards of conduct; the establishment of legal
entities or government instrumentalities; and foreign trade or
financial transaction restrictions.
(d) if the Secretary of Defense or his designee makes a
determination under 204b of this Subchapter that a commercial
activity is required to enhance security, protect intelligence
sources and methods or otherwise enhance cover or facilitate
authorized intelligence activities of the Department of Defense,
such determinations, and all aspects of the commercial activity so
authorized are:
(1) specifically required to be withheld from public
disclosure under the provisions of 5 USC 652 (the "Freedom of
information Act");
(2) specifically exempted from the provisions 6 USC
552e. (the "Privacy Act"), and;
(3) specifically exempted from the provisions of 5
USC 552b (the "Government In the Sunshine Act"),
205. Relationship to the laws of other jurisdictions.
(a) Commercial activity undertaken pursuant to this
subchapter shall be carried out in accordance with applicable
state and local law and the activities may comply with the fiscal,
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taxation and other laws and shall submit to the court Jurisdiction
of a foreign nation, any of the several States, the District of
Columbia or any territory, commonwealth or possession of the United
States, to the extent necessary to protect Intelligence sources.
methods or activities from unauthorized disclosure without
abrogating the immunity of the United States.
(b) (1) In order to establish and operate the commercial
activities authorized by this subchapter, the Secretary of Defense,
or his designee is authorized to engage or retain private atlorneys
and accountants authorized to practice in the jurisdiction where
the commercial activity is to be established, to provide the legal
and accounting services necessary to establish, operate and
represent such commercial activities in the jurisdiction concerned.
(2) The Secretary of Defense or his designee shall
Insure that the private attorneys or_accountants under the ,
provisions:Of Section (b)1 have.apOTOpriete securjty alearOpes.
end have been informed of the nature'-aPd purpose of the commercial
activity.
13) The Secretary of Defense is authorized to compensate
the attorneys and accountants thus,engaged or retained consistent
with prevailing commercial practice and consistent with the
authorities granted by this sub?chapter. Such compensation may be
authorized from appropriated funds or by funds generated by the
commercial activity initiated.
206. Limitations.
(a) Nothing in this subchapter authorizes the conduct of
any intelligence activity which is not otherwise authorized by law
or Executive order.
(b) Nothing in this subchapter authorizes any activity
within the United States which would be inconsistent with existing
commercial practices, or which violates any federal or state
statute.
(c) Personnel conducting commercial activity authorized
by this subchapter May not engage in intelligence activities
within the United States other than those activities necessary to:
(1) support Department of Defense intelligence
collection activities outside the United States;
(2) support counterintelligence activities within
the United States, if those counterintelligence activities have
been previously coordinated and authorized by the FBI, and;
(3) support intelligence or other special access
programs of the Departmeht of Defense.
(d) Commercial activity may not be undertaken within the
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United States for the'purpose of providing goods or services to the
Department of Defense, other than to provide cover or security for
the activities subject to this subchapter. This limitation
specifically does not otherwise limit the authorities provided by
Sec 202 of this subchapter.
(e) A citizen of the United States or an alien admitted
to permanent residence in the United States may not be employed
by, or assigned or detailed to perform operational, managerial, or
supervisory duties for an entity engaged in commercial activity
authorized by this subchapter unless that person has been informed
of the purpose of such activity.
207. Regulations, Oversight, and Legal Review.
The Secretary of Defense shall issue regulations to
:implement the authority contained in this subchapter within 180
-days of-its enactment. ,Such regulations shall require oversight
and legal review in compliance with established intelligence
oversight procedures. Legal review of all activities will be
accomplished by the General Counsel of the Defense Department or
the Defense Intelligence Agency. Copies of such regulations shall
be provided to the Select Committee on Intelligence of the Senate
, and the Permanent Select Committee on intelligence of the House of
Representatives prior to their issuance.
208. Reports.
Not later than January 15 of each year, the Secretary of
Defense shall submit to the Select Committee on intelligence of the
Senate and the Permanent Select Committee on intelligence of the
House of Representatives a report on commercial activity
authorized pursuant to this subchapter undertaken during the
previous fiscal year. Such report shall include a description of
any exercise of the authority provided by section 204 to the
Secretary of Defense, or his designee, as well as a description of
any expenditure of appropriated or non-appropriated funds made
pursuant to this subchapter."
2. Analysis
This Legislation gives the Department of Defense authority to
engage in commercial activities for cover purposes. it Is similar
to the authorities granted the Central intelligence Agency and the
Federal Bureau of Investigation. It provides for exemption from
various federal statutes, the requirements of which are
inconsistent with a bona fide private commercial activity.
Moreover, if the federal statutes were complied with, the
operational security of the cover for the DoD activity would be
compromised. The proposal provides for commercial activities that
are bona fide and that,can, withstand the most detailed hostile
intelligence service investigation as well as domestic scrutiny.
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Sec 201. Provides the basic authority for the Secretary of
Defense to conduct commercial activities to provide cover or
security for the support of foreign intelligence collections or
other DoD operational activities.
Sec 202. The definitions are self?explanatory. The intent is
to be able to conduct commercial activities in the same way as a
private citizen or corporation would conduct them.
Sec 203. Permits the expenditure of non?appropriated funds
generated by such commercial activities as an offset to the
expense of the operation. It provides for the surplus to be
deposited in the Treasury and for annual auditing of the funds thus
generated.
Sec 204. This section goes to the heart of the exceptions from
various federal laws that govern federal government activities but
are not required'of private commercial activities. It further
provides that only the Secretary of'Defense or a limited number of
designees can approve the operation of the commercial activities
authorized by this legislation. The delegees can be no lower in
rank than an Assistant Secretary of Defense or the Secretary of a
Military Department. The high level approving official assures
responsible civilian oversight.
Sec 2040 is an exemplar of the general categories of federal
law from which an authorized commercial activity would be exempted
The listing Is purposely left broad. The specific intent of this
exemption provision Is to ensure that the authorized commercial
activity appears in every way like private commercial activity and
so that the 'veil" cannot be pierced by hostile intelligent
services.
Sec 204d continues the protection of the authorized activities
by exempting them from the requirements of the Freedom of
information Act, the Privacy Act and the Government In Sunshine
Act.
Sec 205 is intended to ensure that authorized activities are
permitted to and do comply with applicable state, local and foreign
law, including fiscal and taxation requirements. Again this
provision is necessary so that, the authorized commercial activity
looks and acts like a private commercial activity. It permits the
retaining and payment of private attorneys and accountants, as may
be required, to establish the commercial activities. This
authorization is also necessary to preserve the operational
security of the authorized commercial activities.
Sec 206 provides for the limitations on the extent of
activities undertaken by the authorized commercial activities or
supported by them. These limitations are consistent with present
intelligence law and tvertight requirements and policies.
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.
Sec 207 and 208 provide for implementing regulations, reports
to Congress and the requirements for legal review of all authorized
activities.
3. Cost Data
The cost data Is most difficult to estimate due to the vagaries
of commercial activity required. Costs are not expected to be.
large amounts. The costs will be offset by any funds generated by
the authorized commercial activity. Any appropriated fund costs
will be budgeted for in the operational budget of Dor), It is
expected that the Defense Intelligence Agency will implement a
Joint cover staff to implement an enhanced DoD cover system,
including but limited
estimated resources necessary
follow:
Requirement:.
to authorized commercial activities. The
to implement the cover system are as
FY89 FY90 . FY91 FY92 FY93 FY94
DIA cover element:
?billets (civ/mil)
0
1/0
3/0
3/0
3/0
3/0
?$ (personnel)1
0
54
162
162
162
162
Joint Cover Staff:
?billets (civ/m11)
0
4/0
5/2
7/4
13/6
13/7
?$ (personnel)
0
108
331
532
890
1123
?$ (operating)
750
38
1207
5006
4648
4415
$ Total:
750
200
1700
5700
5700
5700
1
All figures are in thousands of dollars.
B. Training of Certain Foreign Personnel:
L.Jtmattst_karaaal
To amend title 10, United States Code, to Improve existing
military intelligence collection, production and dissemination
capabilities, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America In Congress assembled, that this Act
may be cited as the 'Military Intelligence Enhancement Act."
Sec 101. Chapter .101,01 title 10, United States Code, Is
amended by adding at the' end and thereof the following new
section:
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"2011. Training of Certain Foreign Personnel
(a) Notwithstanding any other provision of law, the,
Secretary of Defense may provide training in intelligence
collection, analysis and dissemination to personnel of the armed
forces of any other country where the Secretary determines that
such training will further the collection, production or
dissemination of foreign intelligence or counterintelligence by
the Department of Defense.
(b) All intelligence training provided by the
Secretary of Defense under subsection (a) shall be coordinated
with the Director of Central intelligence according to Director of
Central Intelligence policies and procedures governing
intelligence liaison with foreign officials."
2. Analysis,
The Defense Intelligence Agency and other DoD components have
had several opportunities to establish or improve intelligence
collection capabilities frustrated because of the inability to
offer basic intelligence training for foreign military personnel.
Such training authority could enhance substantially the ability to
establish or expand liaison and cooperation with foreign
Intelligence services. The training to be provided generally would
teach basic Intelligence skills to selected foreign military
personnel. The intelligence benefits received would far outweigh
the modest training costs anticipated. The small size of such
training opportunities make the use of Foreign Assistance Act
Procedures impracticable. The United States is receiving both a
training opportunity for its own forces, enhancement of inter-
operability, and intelligence collection benefits.
3. Cost Data
Use of this training authority anticipates inclusion of small
numbers of foreign military personnel In existing, ongoing DoD
training programs or classes. Hence, this proposal will result In
only a slight increase In existing training requirements. We
anticipate that the cost of this added training Increment will be
minimal.
C. Acquisition of Foreign Material:
1. Proposed Language
Sec 102. Title 10, United States Code, is amended by adding a
new chapter 164 to read as follows:
"Chapter 164 - Foreign Materiel Utilization.
2590. Acquiring O'r txPloiting Foreign Materiel
(a) Notwithstanding any other provision of law, the
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Secretary of Defense may acquire or accept foreign materiel
important to the military or intelligence interests of the United
States, and may exchange, accept or furnish materiel, or
information concerning such materiel, pursuant to an agreement
with a foreign country or international organization governing
such materiel acquisition or exploitation. Transfers of foreign
materiel under this chapter are subject to the provisions of
seotion 603 of the National Security Act of 1947.
(b) All intelligence activities conducted by the
Secretary of Defense under subsection (a) shall be coordinated
with the Director of Central Intelligence according to Director
policies and procedures governing intelligence liaison with
foreign officials."
"2591. Funding to Acquire or Exploit Foreign Materiel
--Notwithstanding any other provision of law, sums
'.-appropriated to the.Department of Defense shall be available t
'acquire or exploit foreign materiel when such acquisition or
exploitation Is determined by the Secretary to be important to the
military or intelligence interests of the United ,States."
2. Analysis
The Department of Defense recently has had difficulty in
transferring and/or reprogramming sufficient appropriated funds
quickly enough to capitalize upon the unanticipated availability
of foreign material with significant intelligence value, or to
acquire such materiel that may have significant implications for
assessing the likelihood of success of possible foreign poliCy
actions. In both cases, timely acquisition and exploitation may
be vital. Improved acquisition and exploitation authority will
also satisfy foreign materiel requirements crucial to other
significant activities such as weapons testing and development.
The present acquisition and exploitation system does not have
sufficient flexibility to respond to these needs.
3. Cost Data
There will be no cost to this legislation, since It merely
amends the foreign materiel acquisition and exploitation
procedures. The cost of the acquisition and exploitation program
that will utilize this authority is addressed in the
appropriations process. Meaningful cost and budget data are
reviewable in that context.
D. Employee Tax Equalization:
1. Proposed Language
This provision amends section 912(1) of chapter 1 of
United States Code, to read as follows:
title 26,
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The following items shall not be included In gross Income.
and shall be exempt from taxation under this subtitle:
(1) Foreign areas allowances: In the case of civilian
officers and employees of the Government of the United States.
amounts received as allowances, or otherwise (but not amounts
received as post differentials) under--
(a) chapter 9 of title 1 of the Foreign Service Act of
1980,
(b) section 4 of the Central Intelligence Agency Act of
1949. as amended (50 U.S.C., 4030.
(c) title II of the Overseas Differentials and Allowances
Act. [or]
-0) subsection (e).Or (f) ,of the first section of the
Administrative expenses Act of 1946,- as amended. or section 22 of
such Act, [.]
(a) subsection (b) of section 9 of the National Security
Agency Act of 1959,. as amended (60 U.S.C. 402 note), whenever the
allowanc., would be excluded from gross Income under paragraphs
(1)(A) or (1)(B) of this section. or
(f) subsection 1806(a) of title 10, United States Code,
whenever the allowance would be excluded from gross income under
paragraph 1(A) of this section."
2. Analysis
This provision would amend section 912(a) of the Internal
Revenue Coda of 1954 to grant tax treatment of allowances
currently provided to certain Department of Defense (DoD)
personnel under section 9(b)(1) of the National Security Agency
Act of 1959 and section 1805 of title 10, United States Code,
comparable with that provided to Foreign Service employees for
similar allowances.
The Intelligence Authorization Act of 1982 (Public Law 97-89)
amended the National Security Agency Act of 1969 to allow the
Director of the National Security Agency to provide allowances and
benefits to certain civilian employees of DoD which were
comparable to those provided to the Department of State's Foreign
Service and to employees of the Central Intelligence Agency.
During the implementation of this statute. It was discovered that
comparability of the allowances could not be achieved unless the
tax exemption provided for Foreign Service and CIA employees under
section 912(1)(A) and(B) .of the Internal Revenue Code was also
available for civilians employed and assigned to the National
Security Agency.
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The intelligence Authorization Act for Fiscal Year 1984
(Public Law 98-215) amended title 10, United States Code, to
provide certain allowances and benefits to personnel assigned to
Defense Attache Offices (DAO) and Defense intelligence Agency
Liaison Offices (DIALO) overseas comparable to those provided by
the Secretary of State to officers and employees of the Foreign
Service under chapter 9 of title 1 of the Foreign Service Act of
1980 and the provisions of 5 U.S.C. 5924(4). Although section
1605 was designed to establish equivalence between DAO/DIALO
civilians and Foreign Service personnel with respect to many
allowances and benefits, the actual value of the allowances and
benefits to DAC' and DIALO personnel is less than the value of the
benefits to Foreign Service personnel, since the benefits granted
under the Foreign Service Act are tax-free by virtue of section
912 of the Internal Revenue Code while those granted under section
1605 are not exempt from taxation.
? The current inequity In. taxation has been compounded by
subsection 1232(b) of the Tax Reform Act of 1986 (Public Law 09-
154). This subsection provides that civilian employees of DOD
stationed In Panama may exclude from gross income allowances which
are comparable to allowances excludable under section 912(a) of the
Internal Revenue Code by employees of the Department of State
stationed in Panama. Thus, it appears that any Defense
Intelligence Agency or National Security Agency personnel stationed
In Panama will, in future taxable years, be able to exclude from
their gross income Foreign Service equivalent allowances and
benefits granted to them.
As a result of the provisions discussed above, there is now a
situation where the tax laws treat identical allowances and
benefits differently for NSA and DIA civilian personnel stationed
overseas, from that of Foreign Service personnel, Moreover, under
the Tax Reform Act of 1986, the tax laws now treat identical
allowances and benefits differently for NSA and DIA civilian
personnel In Panama from all other NSA and DIA civilian personnel
stationed overseas. The addition of the proposed paragraphs (8)
and (F) to section 912(1) of the Internal Revenue Code of 1954 will
provide equal tax treatment for identical allowances and benefits
received by NSA, DIA and Foreign Service civilian personnel
stationed around the world.
The Congress is mindful of this problem and has indicated a
willingness to assist. A provision identical to the amendment
sought here was included In S. 1243, the Fiscal Year 1988
Intelligence Authorization Act as reported by the Senate Select
Committee on Intelligence. During floor action on July 23, 1987,
however, SSCI Chairman Boren was compelled to move to strike the
provision from S. 1243 on account of a Jurisdictional dispute.
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He indicated, however, that the Congress would be very receptive
to the provision in the future (Congressional Record, July 23,
1987. pp. S 10591-92).
The provision was resubmitted to the Congress as Section 601
of the Administration's draft Fiscal Year 1989 Intelligence
Authorization bill. By letter of 26 April 1988, Chairman Stokes
of 'the Permanent Select Committee on Intelligence wrote to
Chairman Rostenkowski of the House Ways and Means Committee
concerning the proposal. By letter dated 25 May 1988, the
Director of Central intelligence wrote to Chairman Rostenkowski
soliciting favorable consideration of the proposal by the
Committee. The 100th Congress adjourned, however, without taking
action on the proposal.
3. Cost Data
-
The of-:this provision would result in the loss to
the government of Income tax revenue otherwise collectible on the
exempted amount. Further cost data Is not available.
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