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Regulatory Playbook
Inside analysis direct from Washington, DC
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Regulatory Playbook

Inside analysis direct from Washington, DC

Welcome to Pillsbury’s Regulatory Playbook, where you’ll find news and insights on the regulatory trends that are driving markets and shaping businesses. Here, Pillsbury’s market-leading regulatory group illuminates critical developments at the intersection of law and policy. If you need to know what’s happening, why it’s happening and how to respond, consult the Playbook.

 

Trending Issues

FCC Advances Its Space and Satellite Agenda
03.27.2024

The Federal Communications Commission (FCC or Commission), in a flurry of 2024 activity, has sought to advance its space and satellite agenda by, among other things, adopting rules that allow satellite operators and terrestrial wireless providers to partner and deliver wireless coverage to areas difficult to reach with traditional ground-based wireless signals, proposing rules that would comprise the framework by which space stations are licensed to handle in-space servicing, assembly and manufacturing (ISAM), and clarifying orbital debris mitigation rules.


FTC Cracks Down on Business-to-Business Telemarketing and Seeks Input on Addressing Tech Support Scam Calls
03.27.2024

The Federal Trade Commission (FTC) recently adopted amendments to the Telemarketing Sales Rule (TSR or Rule) that target deceptive business-to-business (B2B) telemarketing calls and enhance recordkeeping requirements applicable to telemarketers and sellers. The FTC also released a Notice of Proposed Rulemaking (NPRM or Notice) that seeks comment on a proposal to remove an exemption that, if adopted, would apply the TSR to calls initiated by a consumer in response to a technical support solicitation. The adopted amendments to the TSR will be effective 30 days after publication in the Federal Register. The recordkeeping requirements will be effective 180 days after publication in the Federal Register. Comments on the Notice will be due within 60 days of publication in the Federal Register.


SEC Adopts Long-Anticipated Rules for SPACs: Considerations for Market Participants and SEC Enforcement Objectives in the New Regulatory Environment
03.27.2024

On January 24, 2024, the Securities and Exchange Commission (SEC) announced the adoption of final rules (the Final Rules) affecting the acquisition of private operating companies by publicly traded special purpose acquisition companies (SPACs) and related financing transactions (individually and collectively, de-SPAC transactions), largely aligning them with requirements of traditional initial public offerings (IPOs). The Final Rules, which go into effect on July 1, 2024, and the adopting release also provided new guidance from the SEC with respect to SPAC and de-SPAC transactions.


SEC’s Climate Disclosure Rules Likely to Collide with California’s Climate Disclosure Laws
03.26.2024

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) finalized and adopted its controversial greenhouse gas (GHG) reporting and climate disclosure regulations after a review of over 24,000 public comments and two years of hot debate. These new SEC climate-related regulations will soon require publicly traded companies to disclose, among other things, financially “material” Scope 1 emissions (direct emissions from operations) and Scope 2 emissions (indirect emissions from energy use) in their annual reports and registration statements, and will also require registrants to provide information regarding a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, operations or financial condition. Pillsbury recently published an alert on the content and details of new SEC climate-related regulations, which can be found here.


Non-U.S. Companies on Alert: U.S. Government Issues Tri-Seal Compliance Note on Global Enforcement
03.26.2024

On March 6, 2024, the U.S. Department of Justice (DOJ), U.S. Department of Commerce, and U.S. Department of the Treasury issued a Tri-Seal Compliance Note (the “Tri-Seal Note”) emphasizing the obligations of non-U.S. persons to comply with U.S. sanctions and export control laws. The Tri-Seal Note does not issue any new rules or regulations, but rather reiterates existing U.S. trade compliance obligations for non-U.S. persons, highlights recent enforcement actions, and provides recommendations to help mitigate risks.


President Biden and Senators Support the Ramp Up in IRS Audits on Corporate Aircraft
03.22.2024

During President Biden’s State of the Union address on March 7, 2024, President Biden announced that he will eliminate tax breaks for corporate aircraft. A White House statement released the same day explains this agenda and states that President Biden will be “cracking down on corporate jet loopholes” in an effort to make high-net-worth individuals and large corporations “pay their fair share.”


Commercial Real Estate Partnership Cancellation of Debt Income
03.22.2024

With $1 trillion in commercial real estate financing expected to mature in 2024, much of it with uncertain prospect of repayment, more real estate borrowers will be faced with the prospect of taxable cancellation of debt income (CODI). Cancelled debt generally results in CODI but, if the debt is cancelled in bankruptcy or the taxpayer is insolvent, an exception to CODI may apply. The bankruptcy and insolvency exceptions are tested at the individual partner level, not at the partnership level. CODI exceptions reduce other valuable tax attributes, such as property basis and loss or credit carryovers, which are especially complex in bankruptcy.


DoD Contractor Requirement to Disclose Greenhouse Gas Emissions Has Been Halted
03.22.2024

On December 6, 2022, and January 4, 2023, we published two client alerts outlining the proposed greenhouse gas (GHG) emissions disclosure requirements and explaining the differences between the Scope 1, 2 and 3 GHG emission categories. As we previously described, FAR 23.001 defines GHG as carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride and sulfur hexafluoride. Under the proposed Federal Acquisition Regulation (FAR) regulation, virtually all federal contractors will be required to identify and report an inventory of their Scope 1 and Scope 2 GHG emissions, starting one year after a final FAR rule is issued. With limited exceptions, this requirement will apply to all government contractors who received $7.5 million or more in federal contract obligations in the prior fiscal year. Government contractors who do not qualify as small business concerns and who received more than $50 million in federal contract obligations in the prior fiscal year will also be required to report an annual inventory of their Scope 3 GHG emissions. To date, the final FAR rule has not been issued.


FCC Announces Consumer IoT Cybersecurity Labeling Program
03.21.2024

Reflecting the growing concern with cybersecurity threats associated with Internet of Things (IoT) products, the Federal Communications Commission (FCC) adopted rules at its March 2024 meeting to implement a new Voluntary Cybersecurity Labeling Program. The new label— “U.S. Cyber Trust Mark”—will be affixed on wireless consumer IoT products that go through the voluntary review program to ensure that the products comply with baseline cybersecurity criteria established in the September 2022 NIST Report 8425.


Congress Sets Its Sights on Limiting Access to Chinese Biotech Companies
03.19.2024

The BIOSECURE Act would prohibit federal agencies from contracting with, extending loans to, or awarding grants to, any company with existing or pending agreements with identified biotechnology companies. This limits funding to both the procurement of biotechnology companies and funding flowing to any entity using these technologies.


Treasury Department and IRS Issue Final Regulations and Other Guidance on the Direct Pay Election under Section 6417 of the Internal Revenue Code
03.18.2024

Under Section 6417 of the Internal Revenue Code (IRC), “applicable entities” and certain electing taxpayers can elect to treat various renewable energy tax credits as payments against tax, essentially making those credits refundable as direct payments from Treasury (the “direct pay election”). Proposed and temporary regulations relating to the direct pay election were issued by Treasury and the Internal Revenue Service (IRS) on June 14, 2023, and were published in the Federal Register on June 21, 2023 (the “Prior Regulations”). After considering numerous comments submitted by interested parties with respect to the proposed regulations, Treasury and the IRS issued final regulations on the direct pay election on March 5, 2024, which were published in the Federal Register on March 11, 2024 (the “Final Regulations”).


SEC Adopts Long-Anticipated Final Rules on Climate-Related Disclosure Requirements
03.14.2024

On March 6, 2024, the Securities and Exchange Commission (SEC) adopted final rules imposing new climate-related disclosure requirements on domestic and foreign registrants with respect to their annual reports and registration statements ( “Final Rules”). The Final Rules scaled back many of the proposals from 2022, including the elimination of certain aspects of the greenhouse gas (GHG) emission disclosure mandates, modification of the financial statement disclosure requirements, removal of some of the more granular disclosure requirements, extension of certain phase-in periods, and elimination of Scope 3 GHG emissions disclosure requirements.


FinCEN’s Proposed Rule to Regulate Investment Advisers: The Questions Industry Should Be Following
03.14.2024

On February 15, 2024, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking to regulate specified investment advisers as “financial institutions” under the Bank Secrecy Act (BSA) (the “Proposed Rule”). Investment advisers have presented a target for anti-money laundering (AML) regulation for a decade, with an earlier 2015 rulemaking effort failing to advance. The 2021 U.S. Strategy on Countering Corruption again highlighted the investment adviser sector, and the Treasury Department’s 2024 Investment Adviser Risk Assessment helped inform the Proposed Rule.


U.S. Fish & Wildlife Service Rolls Out BGEPA General Permit, Streamlining Wind and Power Line Project Approvals
03.13.2024

On February 12, 2024, the U.S. Fish and Wildlife Service (USFWS) published a final rule revising the eagle permit program under the Bald and Golden Eagle Protection Act (BGEPA). 89 Fed. Reg. 9920. The new rule streamlines the issuance of project-specific incidental take permits by establishing, for the first time, general permits for certain eligible wind energy generation and power line infrastructure projects. The rule, codified at 50 C.F.R. Parts 13 and 22, also improves the project-specific permitting process for those projects that would not otherwise qualify for the general permit by removing the requirement that permits include a specific take limit and third-party monitoring provisions for wind projects. The new permitting regime can potentially result in significant time and cost savings for eligible projects.
 

Congress Continues to Address AI in Bipartisan Fashion, Launching House AI Task Force as Latest Step
03.13.2024

On February 20, Speaker Mike Johnson (R-LA-4) and Democratic Leader Hakeem Jeffries (D-NY-8) revealed the creation of a bipartisan Task Force on Artificial Intelligence, to be chaired by Congressman Jay Obernolte (R-CA-23) and Congressman Ted Lieu (D-CA-36).


U.S. Courts of Appeals Block Two Legal Efforts to Curb DEI Initiatives
03.13.2024

The first week of March 2024 saw two U.S. Courts of Appeals separately block efforts to restrict initiatives designed to promote diversity, equity, and inclusion (DEI). Although each court decision was grounded in provisions of the U.S. Constitution, one ruling rested on the First Amendment in affirming a preliminary injunction against an anti-DEI statute, while the other applied Article III standing principles to affirm dismissal of an advocacy group’s challenge to a corporate initiative designed to increase its pipeline of diverse employees.


Conflicting Court Rulings on Subchapter V Eligibility Leave Small Businesses in Limbo
03.12.2024

In 2019, Congress passed the Small Business Reorganization Act (SBRA), which created subchapter V to chapter 11 of the Bankruptcy Code. Subchapter V is designed to create a streamlined, efficient and cost-effective way for smaller businesses to reorganize in a way that increases the likelihood of investors retaining their ownership. For example, subchapter V eliminates the absolute priority rule and instead allows the debtor to confirm, over the objection of creditors, a plan whereby equity retains ownership so long as it does not unfairly discriminate and is fair and equitable.


Sweden’s NATO Membership Is Official! Significant Business Opportunities Now Available to Swedish Companies
03.11.2024

On March 7, 2024, Sweden officially joined the North Atlantic Treaty Organization (NATO) after Hungary’s parliament cleared the last hurdle to Sweden’s membership. Sweden and Finland began pursuing NATO membership following Russia’s invasion of Ukraine in 2022. Finland joined NATO in April 2023. Sweden’s accession, however, was met with significant opposition from Hungary and Turkey based on geopolitical concerns. NATO is an alliance of over 30 countries committed to working together to guarantee the freedom and security of its members through various political and military means. The admission of Finland and Sweden into NATO is monumental because it represents the most significant expansion of the alliance since the addition of eastern European countries after the Soviet Union collapsed in 1991.


The Ayes Have It: Dartmouth Men’s Basketball Team Is the First Student-Athletes to Unionize
03.08.2024

On March 5, 2024, the Dartmouth Men’s Basketball Team voted 13-2 in favor of being represented by SEIU Local 560 (the “Union”). This vote follows the decision issued by Region 1 of the National Labor Relations Board (NLRB) that student-athletes are “employees” within the meaning of the National Labor Relations Act, as discussed in detail in our prior alert.


With Federal Efforts Stalled, States Take the Lead in Regulating the Use of Artificial Intelligence in Political Advertising
03.08.2024

In the two months since we published our article on the use of artificial intelligence in political advertising, efforts to legislate and regulate the use of such media at the federal level in Congress and at the Federal Election Commission have largely stalled. States, however, have stepped in to fill the void in advance of the November 2024 general election. With eight months to go before that election, at least 40 states have addressed the use of AI in political advertising, with dozens of bills pending in state legislatures and laws on the books in a handful of states.


Delaware Court of Chancery Invalidates Certain Board Control Rights Commonly Found in Stockholder Agreements
03.05.2024

Last month, the Delaware Court of Chancery issued a strong reminder that (1) when prevalent market practice is pitted against statutory law, it is the statute that will prevail in Delaware courts, and (2) the bedrock of Delaware law is that the board of directors manages the business and affairs of a corporation, not the stockholders.


Another Brick in the Wall: NCAA Enjoined from Enforcing NIL Rules Prohibiting Student-Athletes from Negotiating with Third Parties
03.05.2024

On February 23, 2024, U.S. District Judge Clifton Corker issued a preliminary injunction that prohibits the National College Athletic Association (NCAA) from enforcing any rules to the extent those rules “prohibit[] student-athletes from negotiating compensation for [name, image, or likeness (“NIL”)] with any third-party entity,” including boosters and booster-led collectives.


Four New State Consumer Privacy Laws Are Slated to Take Effect in 2024
03.04.2024

Despite growing momentum, the United States remains one of the largest nations without a comprehensive federal privacy law. This has led to a significant uptick in state-level privacy legislation since the 2018 enactment of the California Consumer Privacy Act. In 2023, alone, four consumer privacy laws went into effect in Colorado, Connecticut, Virginia and Utah and eight new states enacted similar laws.


USAID’s Proposed AIDAR Clause Protects Children from Sexual Exploitation and Abuse
03.01.2024

On February 28, 2024, the U.S. Agency for International Development (USAID) published a proposed rule to strengthen and consolidate USAID-specific requirements to prevent exploitation and abuse of children. If adopted, the proposed rule will add subpart 722.70, Safeguarding Against Exploitation, Sexual Abuse, Child Abuse, and Child Neglect, to the Agency for International Development Acquisition Regulation (AIDAR). It will also add a new AIDAR clause in Part 752 to enforce the requirements of subpart 722.70, to be included in USAID contracts and subcontracts.


New York District Court Holds Teaming Agreements May Be Enforced
02.29.2024

The U.S. District Court for the Southern District of New York (Crotty, J.) partially denied a motion to dismiss several claims brought by BAE Systems asserting a breach of contract by L3 Harris challenging, among other things, the enforceability of the parties’ teaming agreement. The contract relates to a Department of the Navy prime contract won by L3 Harris. BAE Systems Information and Electronics System Integration Inc. v. L3 Harris Cincinnati Electronics Corporation, S.D.N.Y. 23-cv-01860 (Feb. 9, 2024).


Reviewing Key CHIPS Act Implementation Milestones to Deliver Opportunities for the Semiconductor Supply Chain
02.29.2024

The CHIPS and Science Act, enacted in August of 2022, appropriated $52 billion to expand the U.S. semiconductor market—accounting for research, development and ultimately domestic manufacturing of current and next-generation semiconductor technology. To carry out this mission, the Department of Commerce established the CHIPS Program Office, to administer the funding opportunities for manufacturing under the Act, and the CHIPS R&D Office, to carry out the research and development activities under the Act. In addition to the CHIPS Office, other agencies have been authorized to carry out CHIPS Act programming—including the Department of Defense (DoD), which is administering the Microelectronic Commons, a lab-to-fab pathway for microelectronic products to overcome the “valley of death” and reach commercialization. The CHIPS Offices, as well as the DoD, met several milestones in 2023 and the early months of 2024.


IRS Ramps Up Audits on Corporate Aircraft Use for High-Net-Worth Individuals and Affiliated Entities
02.29.2024

The Internal Revenue Service (IRS) is continuing to increase scrutiny on high-net-worth individuals, large corporations and complex partnerships. On February 21, 2024, the IRS announced that it plans to begin dozens of audits on corporate aircraft and specifically focus on the issue of whether the use of the aircraft is being properly allocated between business and personal. As part of the announcement, IRS Commissioner Danny Werfel stated that “personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”


Cal/OSHA Approves Stricter Standards for Occupational Exposure to Lead
02.27.2024

On February 15, 2024, the California Occupational Safety & Health Standards Board approved revisions to regulations for occupational exposure to lead. (Employers in the construction industry are governed by 8 C.C.R. section 1532.1, and employers in general industry are governed by 8 C.C.R. section 5198.) The revisions are now with the Office of Administrative Law and are expected to go into effect on January 1, 2025.