There will be some who say that opening a modal over another modal is wrong. However, this point of view probably stems from the early days of web, where opening multiple windows was (rightly) frowned upon from a usability perspective.
If the primary task is to create a new report, adding users to the report is a secondary feature which is not really related to the primary task, and may not even be used every time you create a new report.
So in this context, given that selecting a user is a very discrete task and is very time limited, it will probably be OK to do this in a second modal, e.g. once you have selected the user(s), this second modal will now close and control will be returned back to the report modal.