The National Law Forum

Unlocking the Benefits of U.S. Citizenship

Each year, on Sept. 17, Americans celebrate Constitution and Citizenship Day. While there are many paths to citizenship – born in the U.S. or a U.S. territory, born abroad to U.S. citizens or naturalized – we all enjoy the same advantages, and equally important responsibilities. As we reflect on these responsibilities of citizenship and what it means to be a U.S. citizen, we also explore the numerous benefits and incredible opportunities that U.S. citizenship has to offer.

Benefits of U.S. citizenship

Visa-free travel

There are so many advantages when it comes to travel and the ease of travel when you’re a U.S. citizen. For example, you don’t need to prove potentially every time that you intend to make the United States your home. Permanent residents are required to show roots and ties to the U.S., and that they want to be a permanent resident and make the United States their permanent home. In addition, for lawful permanent residents, additional travel documents may be needed if you have long trips outside the U.S. By being a U.S. citizen, those requirements are no longer necessary.

Traveling with a U.S. passport allows for assistance from the government when abroad, as well as possession of one of the most travel-friendly statuses available today. U.S. passport holders can travel to certain countries without a visa. Being a U.S. citizen and having a U.S. passport opens many doors and removes a lot of visa requirements and other challenges when traveling to other countries.

The right to vote

The Constitution and laws of the United States grant numerous rights exclusively to citizens, with one of the most fundamental being the right to participate in federal elections. This right is particularly significant when compared to many countries where citizens lack a voice in their government and cannot effectively communicate their values and what’s important to them by voting. In contrast, U.S. citizens have the power to influence the nation’s future by voting for representatives and leaders who align with their values and priorities.

Keep the family together

U.S. citizenship provides a strong safeguard against family separation with the privilege of helping immediate relatives, such as a spouse, parents and unmarried children, to obtain permanent residency.

Federal employment opportunities

Most jobs within government agencies require U.S. citizenship, so becoming eligible for federal job opportunities can be a significant public service professional opportunity, including running for office to become an elected official.

Access to federal benefits

U.S. citizens are eligible for certain federal scholarships and grants and access to federal public benefits for basic needs, including Social Security benefits, Medicare and Medicaid. Citizens are also eligible for government-sponsored legal aid, which provides free or low-cost legal assistance to ensure all citizens have access to justice regardless of their financial situation.

Energy Tax Credits for a New World Part VII: Low-Income Communities Bonus Credits

What is the Low-Income Communities Bonus Credit?

The Low-Income Communities Bonus Credit available through the Inflation Reduction Act of 2022 (IRA)[1] is designed to increase the siting of, and access to renewable energy facilities in low-income communities, encourage new market participants, and provide social and economic benefits to individuals and communities that have been historically overburdened with pollution, adverse health or environmental effects, and marginalized from economic opportunities.[2]

The Low-Income Communities Bonus Credit supports “a transformative set of investments designed to create jobs, lower costs for American families, and spur an economic revitalization in communities that have historically been left behind.”[3] With the Low-Income Communities Bonus Credit the U.S. government is helping to “lower energy costs and provide breathing room for hard-working families, invest in good-paying clean energy jobs in low-income communities, and support small business growth.”[4]

The Low-Income Communities Bonus Credit is an investment tax credit (ITC) available for certain clean energy investments in low-income communities, on Indian lands, with certain affordable housing developments, and for certain projects benefiting low-income households.[5] It is an ITC for certain clean energy investments in a “Qualified Solar or Wind Facility,” that is, a facility with a net output of less than five megawatts. Unlike most of the other tax credits we have looked at in this Q&A with Andie series, there is a competitive bidding application process. Projects must receive a “Capacity Limitation Allocation Amount” to receive these credits.

What are the eligibility categories for the Low-Income Communities Bonus Credit?

There are four project eligibility criteria to qualify for the Low-Income Communities Bonus Credit:

It is located in a “low-income community” (Category 1)
It is located on “tribal Indian land” (Category 2)
It is installed on certain federal housing projects that are qualified low-income residential building facilities (Category 3)
It serves low-income households as a “qualified low-income economic project” (Category 4)

These eligibility categories are discussed in what follows.

Which tax credits do Low-Income Communities Bonus Credits apply to?

The Low-income Communities Bonus Credit is an additional bonus credit available for ITC-eligible credits at Internal Revenue Code (Code) Section 48, Energy Property ITC, and Section 48E, Clean Energy ITC (CEITC). Section 48 applies to an “eligible facility” (that is, a qualified solar or wind energy facility) for which construction begins before 2025; while the CEITC applies to construction in qualifying clean electricity generating facilities and energy storage technologies that are placed in service after December 31, 2024.[6] The base credit may be increased by 10 percent (for a project located in a low-income community or on Indian land) or by 20 percent (for a qualified low-income residential building project or a qualified low-income economic benefit project).[7]

Because the Section 48 credit expires at the end of 2024 and the Section 48E (CEIT) becomes effective January 1, 2025, we will need to look at Section 48 separately from Section 48E (CEITC) when we address the allocation procedures.

How is the Low-Income Communities Bonus Credit calculated?

The Low-Income Communities Bonus Credit is one of the few IRA energy tax credits that requires an application process and the granting of a “capacity limitation allocation amount.” For allocations in 2023 and 2024, the Section 48(e) ITC provides an increased tax credit for an eligible facility that is part of a “qualified solar or wind energy facility” and that receives a capacity limitation allocation amount. For allocations in 2025 and thereafter, the Section 48E (CEITC) credit applies to a broader group of facilities than those covered under Section 48(e).[8] For both Section 48 and 48E (CEITC), the base credit amount is six percent of a qualified investment (that is, the tax basis of the energy property), and that amount can be increased by 10- or 20-percentage points with the Low-Income Communities Bonus Credit, depending on whether the project meets certain eligibility category requirements.[9] The 10 percent credit is available for an eligible facility in a low-income community or on Indian land, while the 20 percent credit is available for a “qualified low-income residential building project” or a “qualified low-income economic benefit project.”

What is a qualified solar or wind facility?

A Qualified Solar or Wind Facility is an eligible facility if it meets three requirements.[10] First, it generates electricity solely from a wind facility, solar energy property, or small wind energy property. Second, it has a maximum net output of less than five megawatts as measured in alternating current. And third, it is described in at least one of the four Low-Income Communities Bonus Credit project categories.[11]

Because the eligible facility must have a maximum net output of less than five megawatts as measured in alternating current, can applicants divide larger projects into smaller ones to meet the five megawatts requirements?

No. The Treasury has issued Final Regulations on Low-Income Communities Bonus Credit (Final Low-Income Communities Regulations),[12] effective August 15, 2023. The Final Low-Income Communities Regulations provide that the capacity limitation allocation amounts will be made on a “single project factors test.”[13] This is intended to prevent applicants from artificially dividing larger projects into multiple facilities in an attempt to circumvent the requirement for the maximum net output.[14]

When can a Qualified Solar or Wind Facility be placed in service?

A project cannot be placed in service until after it receives the capacity allocation.[15] This is because the Treasury holds that “requiring projects to be placed in service after allocation provides the best way to promote the increase of, and access to, renewable energy facilities that would not be completed in the absence of the program.”[16] This is not viewed as an impediment because Section 48(e)(4)(E)(i) provides a “lengthy window of four years to place a facility in service following an Allocation of Capacity Limitation.”[17] Section 48E (CEITC) also provides a four-year window to place the facility in service.[18]

Definitions

What is a Category 1 low-income community for purposes of the Low-Income Communities Bonus Credit?

A Category 1 low-income community is a community that is located in a census area where the poverty rate is at least 20 percent or more, or the median family income is 80 percent or less than the median family income in the state where the community is located.[19] If the census tract is in a metropolitan area, the median family income cannot be more than 80 percent of the statewide median family income or the metropolitan area’s median family income.

The poverty rate for an eligible Category 1 low-income census tract is generally based on the threshold for low-income communities set by the New Markets Tax Credit (NMTC) Program, as noted in the Treasury Regulations. The NMTC updates its eligibility data every five years based on poverty estimates from the American Community Survey (ACS). New eligibility tables and maps for the NMTC program were released on September 1, 2023, which use underlying ACS estimates from 2016 to 2020.[20] The next NMTC update will include ACS estimates from 2021 to 2025, at which point applicants will have a period of one year following the date that the 2021-2025 NMTC is released to use the 2016-2020 NMTC dataset.[21]

How is Category 2 tribal Indian land defined?

Category 2 Tribal Indian land is land of “any Indian tribe, band, nation, or other organized group or community that is recognized as eligible for the special programs and services provided by the United States to tribes (Indians) because of their status.”[22] To qualify as Indian land, the property must meet the definition of Section 2601(2) of the Energy Policy Act of 1992, which is defined as, “Indian reservations; public domain Indian allotments; former Indian reservations in Oklahoma; land held by incorporated Native groups, regional corporations, and village corporations under the provisions of the Alaska Native Claims Settlement Act[23]; and dependent Indian communities within the borders of the United States whether within the original or subsequently acquired territory thereof, and whether within or without the limits of a State.”[24]

The Energy Policy Act of 1992 was amended by the Energy Act of 2020 to include in the definition of land occupied by a majority of Alaskan Native Tribe members.[25]

How is a Category 3 qualified low-income residential building project defined?

A Category 3 qualified low-income residential building project is a federally subsidized residential building facility “installed on the same parcel or on an adjacent parcel of land that has a residential rental building that participates in an affordable housing program, and the financial benefits of the electricity produced by such facilities are allocated equitably among the occupants of the dwelling units or the building.”[26] Projects must be part of a “qualified program”: one among various federal housing assistance programs as are set out in the Treasury Regulations. For state programs to qualify to receive the 20 percent bonus credit, they must be part of a qualified federal program. To remain a qualified low-income residential building facility, a project must maintain its participation in a covered housing program for the entire five-year tax credit recapture period.

How does a Category 4 qualified low-income economic benefit project assist low-income households?

A qualified low-income economic benefit project is one where at least 50 percent of the financial benefits of the electricity produced are provided to households with income of less than 200 percent of the poverty line, or 80 percent of the area’s median gross income.[27] The financial benefits of a low-income economic project benefiting low-income households can only be delivered in utility bills savings. “Other means such as gift cards, direct payments, or checks are not permissible. Financial benefits for these facilities must be tied to a utility bill of a qualifying household. The Treasury Department and the IRS may consider other methods of determining Category 4 financial benefits in future years.”[28]

Allocation Process

How is the annual Capacity Limitation allocated across the four facility categories?

The annual Capacity Limitation amount is divided across each facility category as is set out in each program year. For the 2023 and 2024 Program Years, for example, we have IRS Notices setting out the Allocation Process. The Applicable Bonus Credit is available at Section 48. For the calendar year 2025 and succeeding years, the applicable bonus credit is available at Section 48E (CEITC). On September 3, 2024, the Treasury issued Proposed Regulations addressing Section 48E (CEITC) (Proposed 48E Allocation Regulations).[29]

For the 2024 Program Year, for example, the annual Capacity Limitation is divided across each facility category “plus any carried over unallocated Capacity Limitation from the 2023 Program Year.”[30]

Does the Low-Income Communities Bonus Credit have a competitive bidding application?

Yes. The Low-Income Communities Bonus Credit has a competitive bidding application process that applies to each of the four eligibility categories. An annual allocation of up to 1.8 gigawatts (GWs) is available, in the aggregate, to the four categories of qualified solar or wind facilities with a maximum output of less than five megawatts.[32]

How does competitive bidding work?

Since it was introduced for the 2023 program year, competitive bidding has been very successful. The Low-Income Communities Bonus Credit program is extremely popular. The 2023 program—the first year of the competitive bidding process—was significantly over-subscribed with more than 46,000 applications submitted. Applications were for qualified facilities representing 8 GWs of capacity, although only 1.8 GWs of capacity were available for allocation.[33]

For purposes of the Section 48E Low-Income Communities Bonus Credit, we have the Proposed Section 48E Regulations to turn to as to how the competitive bidding process works. The Treasury has provided notice of a public hearing on the Proposed Regulations for October 17, 2024.

What government guidance do we have on the annual Capacity Limitation allocation process for Section 48?

For purposes of the Section 48 Low-Income Communities Bonus Credit, we have the Final Low-Income Communities Regulations. In addition, the IRS has issued revenue procedures and a Notice:

Rev. Proc. 2023-27[34] and Rev. Proc. 2024-19[35] provide information and guidance for the 2023 and the 2024 allocations. These revenue procedures both address the reservation of capacity limitations, allocation selection, and application procedures.
IRS Notice 2023-17,[36] sets out initial guidance on establishing the program to allocate the environmental justice solar and wind capacity limitation under Section 48(e).

What does the 2024 allocation program look like?

The 2024 capacity limitation allocation opened in May of 2024, with 1.8 GWs of capacity being allocated across the four eligible facility type categories.[37]

Are there any additional selection criteria for 2024?

Yes. For 2024, the Treasury has imposed what it refers to as “additional selection criteria” (ASC) for the 1.8 GWs allocation. The 2024 ASC requires at least 50 percent of the 1.8 GWs to be allocated to applications that meet specified ASC ownership and geographic criteria.

The 2024 ASC ownership criteria is based on applicants that qualify as one of the following: Tribal enterprises, Alaska Native Corporations, renewable energy cooperatives, qualified renewable energy companies, qualified tax-exempt entities,[38] Indian tribal governments, and any corporation described in Section 501(c)(12) that furnishes electricity to persons in rural areas.

The 2024 geographic criteria is based on the facility being located in a persistent poverty county or disadvantaged community as identified by the Climate and Economic Justice Screening Tool.[39] The screening tool is at an official U.S. government website, with an interactive map of census tracts that are “overburdened and underserved” and that are “highlighted as being disadvantaged.[40] For these purposes, Alaska Native Villages are considered to be disadvantaged communities.[41] The datasets used in the Screening Tool’s eight “indicators of burdens” are “climate change, energy, health, housing, legacy pollution, transportation, water and wastewater, and workforce development.”[42]

Where do we look for 2025 allocations and beyond?

The selection criteria for 2025 and beyond is addressed in the Proposed Section 48E Regulations.

Application Process

How are applications reviewed and Capacity Limitations allocated?

The Treasury and the IRS have partnered with the DOE to administer the program. The DOE’s “Office of Economic Impact and Diversity administers the program application portal and reviews applications, with the DOE making “recommendations to the IRS” based on the eligibility of the facility.[43] The Treasury and the IRS can adjust the allocations of Capacity in future years “for categories that are oversubscribed or have excess capacity.”[44] “At least 50% of the capacity within each category will be reserved for projects that meet certain ownership and/or geographic selection criteria. The ownership and geographic selection criteria can be found in §1.48(e)-1(h)(2).”[45]

How does an applicant apply for the Low-Income Communities Bonus Credit Program?

A taxpayer seeking to claim the credit must submit an application to the DOE for an allocation of capacity. The DOE allows one application per project. To begin their process, an applicant must create a login.gov account and register using the “Log In” button located at a DOE’s portal page, https://eco.energy.gov/ejbonus/s/. Before registering, applicants are encouraged to read the handy dandy “DOE Applicant User Guide”[46] available at the same web portal address. Applications are submitted through DOE’s online “Low-Income Communities Bonus Credit Program Applicant Portal” accessible at the same URL. The portal’s applicant checklist sets out rigorous documentation and attestation requirements to demonstrate that ownership requirements are being met.

How does an applicant support its allocation of capacity for its Low-Income Communities Bonus Credit application?

An applicant must submit information for each proposed facility allocation, including the “applicable category, ownership, location, facility size/capacity, whether the applicant or facility meet additional selection criteria, and other information.”[47] In addition, the applicant must complete a series of attestations and must upload to the online portal certain documentation in order to demonstrate project maturity.”[48] An allocation must be received by the taxpayer before an eligible facility can be placed in service.[49]

How are applications considered?

“There will be a 30-day period at the start of each program year where applications will be accepted for each category. Applications received within this 30-day period will all be treated as being received on the same day and time. Once the 30-day period is over, the DOE will accept applications on a rolling basis and recommend applicants to the IRS until the entire capacity limitation within the applicable category is diminished.”[50] In addition, once applications are submitted, “the DOE will review the applications and recommend projects eligible for the bonus to the IRS. The IRS will then award the applicant with an allocation of the capacity limitation or reject the application. The DOE will stop reviewing applications once the entire capacity limitation is awarded. Applicants can reapply for the bonus credit in the next program year if they remain eligible.”[51]

What happens if a facility is not placed in service within the four-year deadline?

A facility can be disqualified after it receives an allocation if the facility is not placed in service within the deadline set in Section 48(e)(4)(E) of four years after the date of allocation. “[P]roviding any type of alternative forms of completion within the four year window apart from ‘placed-in-service’ is inconsistent with the statute and not allowed.”[52]

Can a credit recipient face a recapture event?

Yes. Recapture of the benefit of any increased credit due to Section 48E is provided in Section 48(e)(5). The Treasury noted that “Under the recapture provisions of Section 48(e)(5), Congress provided that the period and percentage of such recapture must be determined under rules similar to the rules of Section 50(a). Section 50(a) generally provides that this is a five year period with differing applicable percentages depending on when the property ceases to qualify. Therefore, under Section 48(e)(5), stricter restrictions related to recapture should not be imposed.”[53]

The final regulations clarify that “any event that results in recapture under Section 50(a) will also result in recapture of the benefit of the section 48(e) Increase. The exception to the application of recapture provided in § 1.48(e)-1(n)(2) does not apply in the case of a recapture event under Section 50(a).”[54] This same recapture possibility applies to Section 48E (CEITC) credit recipients.

The firm extends gratitude to Nicholas C. Mowbray for his comments and exceptional assistance in the preparation of this article.

[1] The Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818 (2022) (IRA), August 16, 2022.

[2] “Inflation Reduction Act Guide for Local Governments and Other Tax-Exempt Entities; Solar and Storage Projects,” p. 17, New York State, January 2024, available at https://www.nyserda.ny.gov/-/media/Project/Nyserda/Files/Programs/Clean-Energy-Siting/Inflation-Reduction-Act-Guide-for-Solar-and-Storage-Projects.pdf.

[3] “Low-Income Communities Bonus Credit Program,” Department of Energy (DOE), Office of Energy Justice and Equity, available at https://www.energy.gov/justice/low-income-communities-bonus-credit-program.

[4] “U.S. Department of the Treasury, IRS Release Final Rules and Guidance on Investing in America Program to Spur Clean Energy Investments in Underserved Communities,” Press Release, U.S. Treasury, August 10, 2023, available at https://home.treasury.gov/news/press-releases/jy1688.

[5] “Low-Income Communities Bonus Credit,” IRS, available at https://www.irs.gov/credits-deductions/low-income-communities-bonus-credit.

[6] For a discussion of Sections 48 and 48E (CEITC), see Part II of this series: Production Tax Credits and Investment Tax Credits: The Old and The New.

[7] § 48(e).

[8] § 48E(h). “Elective pay and transferability frequently asked questions: Elective pay,” IRS, Overview, Q15, available at https://www.irs.gov/credits-deductions/elective-pay-and-transferability-frequently-asked-questions-elective-pay#q15.

[9] § 48(e)(1).

[10] Section 48(e)(2)(A) and the Treasury Regulations.

[11] Section 48(e)(2)(A)(iii).

[12] 88 FR 55506, “Additional Guidance on Low-Income Communities Bonus Credit Program,” U.S. Treasury, August 15, 2023, available at https://www.federalregister.gov/documents/2023/08/15/2023-17078/additional-guidance-on-low-income-communities-bonus-credit-program.

[13] Ibid.

[14] Ibid, Preamble, Definition of Qualified Solar or Wind Facility.

[15] 88 FR 55506, August 15, 2023.

[16] Ibid.

[17] Ibid.

[18] Ibid.

[19] “Inflation Reduction Act Guide for Local Governments and Other Tax-Exempt Entities; Solar and Storage Projects,” p. 18, New York State, January 2024.

[20] “Frequently Asked Questions, 48(e) Low-Income Communities Bonus Credit Program,” Q47.

[21] Ibid.

[22] Ibid.

[23] 43 U.S.C. § 1601 et seq.

[24] 106 Stat. 3113; 25 U.S.C. § 3501.

[25] The Energy Act of 2020, Section 8013, As Amended Through Pub. L. 117-286, Enacted December 27, 2022. See also “Energy Act of 2020, Section-by-Section,” Section 8013. Indian Energy, available at https://www.energy.senate.gov/services/files/32B4E9F4-F13A-44F6-A0CA-E10B3392D47A.

[26] “Inflation Reduction Act Guide for Local Governments and Other Tax-Exempt Entities; Solar and Storage Projects,” p. 18, New York State, January 2024.

[27] Ibid.

[28] FAQ#53.

[29] 89 Fed. Reg. 71193 (Sept. 3, 2024).

[30] “Low-Income Communities Bonus Credit Program,” DOE, Office of Energy Justice and Equity, available at https://www.energy.gov/justice/low-income-communities-bonus-credit-program. Also see https://www.energy.gov/sites/default/files/2024-05/48e%20Slides%20for%20PY24%20Applicant%20Webinar.pdf and refer to Rev. Proc. 2024-19 (IRS) and Treasury Regulations § 1.48(e)–1 for the full definitions and requirements of each program category.

[31] Such as rooftop solar.

[32] “U.S. Department of the Treasury, IRS Release 2024 Guidance for Second Year of Program to Spur Clean Energy Investments in Underserved Communities, As Part of Investing in America Agenda,” Press Release, U.S Treasury, March 29, 2024. Proposed Section 48E (CEITC) Regulations.

[33] “The Low-Income Communities Bonus Credit Program: Categories and How to Apply,” Morgan Mahaffey, EisnerAmper, May 29, 2024, available at https://www.eisneramper.com/insights/real-estate/low-income-communities-bonus-credit-program-0524/

[34] Rev. Proc. 2023-27, IRS, August 10, 2023, corrected by Announcement 2023-28, September 11, 2023.

[35] Rev. Proc. 2024-19, IRS, March 29, 2024.

[36] Notice 2023-17, IRS, February 13, 2023.

[37] Treas. Reg. §1.48(e)-1 defines the four categories of facilities for Low-Income Communities Bonus Credit.

[38] Including Sections 501(c)(3) and 501(d) entities.

[39] The screening tool is available at https://screeningtool.geoplatform.gov/en/#3/33.47/-97.5.

[40] Ibid.

[41] Ibid.

[42] Climate and Economic Justice Screening Tool, Frequently Asked Questions, available at https://screeningtool.geoplatform.gov/en/frequently-asked-questions#3/31.77/-95.39.

[43] Ibid.

[44] “IRS releases Guidance on Low-Income Communities Bonus Credit Program, Inflation Reduction Act,” Forvis Mazars, LLP, August 15, 2023, available at https://www.forvismazars.us/forsights/2023/08/irs-releases-guidance-on-low-income-communities-bonus-credit-program.

[45] Ibid. See also, § 1.48(e)-1(h)(2), the Reservations of Capacity Limitation allocation for facilities that meet certain additional selection criteria is available at https://www.law.cornell.edu/cfr/text/26/1.48(e)-1.

[46] “Applicant User Guide,” DOE, available at https://www.energy.gov/sites/default/files/2024-05/2024%20DOE%2048%28e%29%20Applicant%20User%20Guide.pdf.

[47] “Low-Income Communities Bonus Credit Program,” DOE, Office of Energy Justice and Equity, available at https://www.energy.gov/justice/low-income-communities-bonus-credit-program.

[48] Ibid.

[49] “Low-Income Communities Bonus Credit,” IRS, available at https://www.irs.gov/credits-deductions/low-income-communities-bonus-credit.

[50] “IRS releases Guidance on Low-Income Communities Bonus Credit Program, Inflation Reduction Act,” Forvis Mazars, LLP, August 15, 2023.

[51] Ibid.

[52] 88 Fed. Reg. 55537.

[53] 88 Fed. Reg. 55538.

[54] 88 Fed. Reg. 55538.

Read Part I, Part II, Part III, Part IV, Part V, and Part VI here.

by: Andie Kramer of ASKramer Law

For more news on Energy Tax Credits, visit the NLR Environmental Energy Resources section.

EPA Bans Ongoing Uses of Chrysotile Asbestos

On March 28, 2024, the U.S. Environmental Protection Agency (EPA) issued a final rule under the Toxic Substances Control Act (TSCA) to address to the extent necessary the unreasonable risk of injury to health presented by chrysotile asbestos based on the risks posed by certain conditions of use (COU). 89 Fed. Reg. 21970. According to the final rule, the injuries to human health include mesothelioma and lung, ovarian, and laryngeal cancers resulting from chronic inhalation exposure to chrysotile asbestos. The final rule prohibits the manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos for chrysotile asbestos diaphragms in the chlor-alkali industry; chrysotile asbestos-containing sheet gaskets in chemical production; chrysotile asbestos-containing brake blocks in the oil industry; aftermarket automotive chrysotile asbestos-containing brakes/linings; other chrysotile asbestos-containing vehicle friction products; and other chrysotile asbestos-containing gaskets. It also prohibits the manufacture (including import), processing, and distribution in commerce for consumer use of aftermarket automotive chrysotile asbestos-containing brakes/linings; and other chrysotile asbestos-containing gaskets. The final rule specifies the compliance dates for these prohibitions. The final rule also includes disposal and recordkeeping requirements for these COUs. The final rule will be effective May 28, 2024.

Manufacturing, Processing, Distribution in Commerce, and Commercial Use of Chrysotile Asbestos Diaphragms in the Chlor-alkali Industry

As of the effective date of the final rule, all persons are prohibited from the manufacture (including import) of chrysotile asbestos, including any chrysotile asbestos-containing products or articles, for diaphragms in the chlor-alkali industry. Beginning five years after the effective date of the final rule, all persons are prohibited from processing, distribution in commerce, and commercial use of chrysotile asbestos for diaphragms in the chlor-alkali industry, except as provided in 40 C.F.R. Section 751.505(c) and (d).

Section 751.505(c) permits a person to process, distribute in commerce, and commercially use chrysotile asbestos for diaphragms in the chlor-alkali industry at no more than two facilities until eight years after the effective date of the final rule, provided that they meet certain conditions.

Section 751.505(d) permits a person who meets all of the criteria of that paragraph to process, distribute in commerce, and commercially use chrysotile asbestos for diaphragms in the chlor-alkali industry at not more than one facility until 12 years after the effective date of the final rule, provided that they meet certain conditions.

Certification of Compliance for Chlor-alkali Industry

A person who processes, distributes in commerce, or commercially uses chrysotile asbestos for diaphragms in the chlor-alkali industry between five years and eight years after the effective date of the final rule must certify to EPA their compliance with all requirements of Section 751.505(c) and provide the following information to EPA: identification of the facility (or facilities) at which, by five years after the effective date of the final rule, the person has ceased all processing, distribution in commerce, and commercial use of chrysotile asbestos; identification of the one or two facilities (no more than two facilities) at which the person will after five years after the effective date of the final rule continue to process, distribute in commerce, and commercially use chrysotile asbestos diaphragms while the facility or facilities are being converted to non-chrysotile asbestos membrane technology; and the name of the facility manager or other contact.

A person who processes, distributes in commerce, or commercially uses chrysotile asbestos for diaphragms in the chlor-alkali industry between eight and 12 years after the effective date of the final rule must certify to EPA their compliance with all requirements of Section 751.505(d) and provide the following information to EPA: identification of the facility at which the person has ceased all processing, distribution in commerce, and commercial use of chrysotile asbestos after five years after the effective date of the final rule but no later than eight years after the effective date of the final rule; identification of the facility at which the person will between eight years after the effective date of the final rule and no later than 12 years continue to process, distribute in commerce, and commercially use chrysotile asbestos diaphragms while the facility is being converted to non-chrysotile asbestos membrane technology pursuant to Section 751.505(d); and the name of the facility manager or other contact.

Other Prohibitions of and Restrictions on the Manufacturing, Processing, Distribution in Commerce, and Commercial Use of Chrysotile Asbestos

Prohibition on Manufacture (Including Import), Processing, Distribution in Commerce, and Commercial Use of Chrysotile Asbestos for Chrysotile Asbestos-Containing Sheet Gaskets in Chemical Production

Beginning two years after the effective date of the final rule, all persons are prohibited from manufacturing (including importing), processing, distributing in commerce, and commercial use of chrysotile asbestos, including any chrysotile asbestos-containing products or articles, for use in sheet gaskets for chemical production, except as provided in Section 751.509(b) and (c). Any sheet gaskets for chemical production that are already installed and in use as of the applicable compliance date are not subject to this distribution in commerce and commercial use prohibition, however.

Section 751.509(b) allows the commercial use of chrysotile asbestos sheet gaskets for titanium dioxide production past the general two-year prohibition; any person may use chrysotile asbestos sheet gaskets for titanium dioxide production until five years after the effective date of the final rule. EPA notes that this provision applies only to commercial use; manufacturing (including import), processing, and distribution in commerce must cease after two years, pursuant to Section 751.509(a).

Section 751.509(c) allows the commercial use of chrysotile asbestos sheet gaskets for processing of nuclear material past the general two-year prohibition: any person who meets the applicable criteria in the paragraph may commercially use chrysotile asbestos sheet gaskets for processing nuclear material until five years after the effective date of this final rule. At the Department of Energy’s Savannah River Site, use may continue until the end of 2037. EPA notes that this provision applies only to commercial use; manufacturing (including import), processing, and distribution in commerce must cease after two years. Section 751.509(c) requires that, beginning 180 days after the effective date of the final rule, all persons commercially using chrysotile asbestos sheet gaskets for processing nuclear material must have in place exposure controls expected to reduce exposure of potentially exposed persons to asbestos, and provide potentially exposed persons in the regulated area where chrysotile asbestos sheet gasket replacement is being performed with a full-face air purifying respirator with a P-100 (HEPA) cartridge (providing an assigned protection factor of 50), or other respirators that provide a similar or higher level of protection to the wearer.

Prohibition on Manufacture (Including Import), Processing, Distribution in Commerce, and Commercial Use of Chrysotile Asbestos-Containing Brake Blocks in the Oil Industry; Aftermarket Automotive Chrysotile Asbestos-Containing Brakes/Linings; Asbestos-Containing Vehicle Friction Products; and Other Asbestos-Containing Gaskets

Beginning 180 days after the effective date of the final rule, all persons are prohibited from manufacturing (including importing), processing, distribution in commerce, and commercial use of chrysotile asbestos, including any chrysotile asbestos-containing products or articles, for commercial use of: oilfield brake blocks; aftermarket automotive brakes and linings; other vehicle friction products; and other gaskets. Any aftermarket automotive brakes and linings, other vehicle friction products, and other gaskets that are already installed and in use as of 180 days after the effective date of the final rule are not subject to this distribution in commerce and commercial use prohibition.

Prohibition on Manufacture (Including Import), Processing, and Distribution in Commerce for Aftermarket Automotive Chrysotile Asbestos-Containing Brakes/Linings and Other Asbestos-Containing Gaskets for Consumer Use

Beginning 180 days after the effective date of the final rule, all persons are prohibited from the manufacturing (including importing), processing, and distribution in commerce of chrysotile asbestos, including any chrysotile asbestos-containing products or articles, for consumer use of: aftermarket automotive brakes and linings; and other gaskets. Any aftermarket automotive brakes and linings and other gaskets that are already installed and in consumer use as of 180 days after the effective date of the final rule are not subject to this distribution in commerce prohibition.

EPA notes that this prohibition does not apply to the consumer use of any chrysotile asbestos-containing aftermarket automotive brakes and linings and other gaskets. EPA states that its authority to regulate commercial use under TSCA Section 6(a)(5) does not extend to consumer use of chemical substances or mixtures. According to EPA, the prohibition on the upstream manufacturing, processing, and distribution of chrysotile asbestos aftermarket automotive brakes and linings and other gaskets for consumer use “will remove these products from the consumer market and over time eliminate their use as these products wear out and are replaced, or the vehicles in which they are components are retired from use.”

Interim Workplace Controls of Chrysotile Asbestos Exposures

For most of the COUs where, pursuant to the final rule, the prohibition on processing and industrial use will take effect in five or more years after the effective date of the final rule, EPA requires owners or operators to comply with an eight-hour existing chemical exposure limit (ECEL), beginning six months after the effective date of the final rule. EPA notes that this requirement applies to the following COUs:

Processing and industrial use of chrysotile asbestos in bulk form or as part of chrysotile asbestos diaphragms used in the chlor-alkali industry; and
Industrial use of chrysotile asbestos sheet gaskets for titanium dioxide production.

Once a facility has completed the phase-out of chrysotile asbestos and no longer uses chrysotile asbestos in its operations, the interim requirements no longer apply.

EPA states that its intention “is to require interim workplace controls that address the unreasonable risk from chrysotile asbestos to workers directly handling the chemical or in the area where the chemical is being used until the relevant prohibitions go into effect.” EPA notes that its 2020 Risk Evaluation for Asbestos, Part 1: Chrysotile Asbestos (Asbestos Part I) “did not distinguish between employers, contractors, or other legal entities or businesses that manufacture, process, distribute in commerce, use, or dispose of chrysotile asbestos. For this reason, EPA uses the term “owner or operator” to describe the entity responsible for implementing the interim workplace controls in any workplace where an applicable COU subject to the interim workplace controls occurs. The term includes any person who owns, leases, operates, controls, or supervises such a workplace. EPA has proposed to amend 40 C.F.R. Section 751.5 to add a definition of “owner or operator” consistent with this description as part of its proposed TSCA Section 6(a) rules to regulate methylene chloride and perchloroethylene. In this final rule, EPA uses the same definition of “owner or operator” to apply to where it appears in the regulatory text for chrysotile asbestos.

EPA notes that, as mentioned in the proposed rule, TSCA risk management requirements could incorporate and reinforce requirements in Occupational Safety and Health Administration (OSHA) standards. For chrysotile asbestos, EPA states that its approach for interim controls seeks to align, to the extent possible, with certain elements of the existing OSHA standard for regulating asbestos under 29 C.F.R. Sections 1910.1001 and 1926.1101. According to EPA, the OSHA permissible exposure limit (PEL) and ancillary requirements “have established a long-standing precedent for exposure limit threshold requirements within the regulated community.” EPA acknowledges that it is applying a “lower, more protective” ECEL derived from Asbestos Part I. EPA notes that it is not establishing medical surveillance requirements based on the ECEL to align with those under 29 C.F.R. Section 1910.1001, however, and that companies must continue to follow the medical surveillance requirements established by OSHA at 0.1 fiber per cubic centimeter of air as an eight-hour time-weighted average (TWA) level.

Disposal

EPA states that it is implementing the disposal provisions in the proposed rule without significant changes. EPA notes that the disposal provisions at Section 751.513 cross reference existing EPA and OSHA regulations that address asbestos-containing waste disposal. EPA requires that for the chrysotile asbestos diaphragm COU, as well as oilfield brake blocks, other vehicle friction products, and any commercial use of other gaskets and aftermarket automotive brakes and linings COUs, regulated entities must adhere to waste disposal requirements in OSHA’s Asbestos General Industry Standard in 29 C.F.R. Section 1910.1001, including Section 1910.1001(k)(6) requiring waste, scrap, debris, bags, containers, equipment, and clothing contaminated with asbestos that are consigned for disposal to be disposed of in sealed impermeable bags or other closed, impermeable containers. For the chrysotile asbestos sheet gaskets in the chemical production COU, regulated entities must adhere to waste disposal requirements described in OSHA’s Asbestos Safety and Health Regulations for Construction in 29 C.F.R. Section 1926.1101.

EPA notes that additionally, for the chrysotile asbestos diaphragm COU, as well as oilfield brake blocks, other vehicle friction products, and any commercial use of other gaskets and aftermarket automotive brakes and linings, the final rule cross-references the disposal requirements of Asbestos National Emission Standards for Hazardous Air Pollutants (NESHAP) (40 C.F.R. Part 61, Subpart M) at 40 C.F.R. Section 61.150. EPA states that the asbestos NESHAP reduces exposure to airborne asbestos “by generally requiring sealing of asbestos-containing waste material from regulated activities in a leak-tight container and disposing of it in a landfill permitted to receive asbestos waste.” According to EPA, it is not cross-referencing this same NESHAP waste disposal provision for the disposal of chrysotile asbestos-containing waste from sheet gasket processing and use “because EPA did not find unreasonable risk for the disposal of sheet gaskets.”

EPA also requires that each manufacturer (including importer), processor, and distributor of chrysotile asbestos, including as part of products and articles for consumer uses subject to the final rule, dispose of regulated products and articles in accordance with specified disposal provisions. EPA states that these consumer uses are aftermarket automotive brakes and linings and other gaskets. EPA notes that these consumer use supply chain disposal requirements are consistent with those for disposers of aftermarket automotive brakes and linings and other gaskets intended for commercial use. EPA states that it “does not generally have TSCA section 6(a) authority to directly regulate consumer use and disposal, but under TSCA section 6(a) EPA may nonetheless regulate the disposal activity of suppliers of these products, including importers, wholesalers and retailers of asbestos-containing aftermarket automotive brakes and linings, and other gaskets.” The disposal requirements at Section 751.513 will take effect 180 days after the effective date of the final rule.

Recordkeeping

A general records provision at 40 C.F.R. Section 751.515(a) of the final rule requires that, beginning 180 days after the effective date of the final rule, all persons who manufacture (including import), process, distribute in commerce, or engage in industrial or commercial use of chrysotile asbestos must maintain ordinary business records, such as invoices and bills-of-lading related to compliance with the prohibitions, restrictions, and other provisions of this rulemaking and must make them available to EPA for inspection. Section 751.515(b) addresses recordkeeping for certifications of compliance for the chlor-alkali industry required under Section 751.507 of the rule: persons must retain records for five years to substantiate certifications required under that provision and must make them available to EPA for inspection.

Section 751.515(c) of the final rule requires retention of records for interim workplace controls of chrysotile asbestos exposures. The final rule requires owners or operators subject to the exposure monitoring provisions of Section 751.511(c) to document and retain records for each monitoring event. Additionally, Section 751.515(c) requires that owners or operators subject to the interim workplace controls described in Section 751.511 retain certain records.

Section 751.515(d) requires the retention of disposal records. Each person, except a consumer, who disposes of any chrysotile asbestos and any chrysotile asbestos-containing products or articles subject to Section 751.513, beginning 180 days after the effective date of the final rule, must retain in one location at the headquarters of the company, or at the facility for which the records were generated: any records related to any disposal of chrysotile asbestos and any chrysotile asbestos-containing products or articles generated pursuant to, or otherwise documenting compliance with, regulations specified in Section 751.513. All records under this rule must be retained for five years from the date of generation.

Commentary

Bergeson & Campbell, P.C. (B&C^®) acknowledges the historic nature of the rule, but it must also be placed into context. First, the rule applies to the few, limited ongoing uses of chrysotile asbestos that were not banned in the 1980s. It does not apply to the asbestos types that may already be in place, such as in old buildings. A ban on the manufacture, import, processing, and use of chrysotile asbestos cannot erase other types of asbestos, including chrysotile asbestos, that are and have been in place for decades. EPA’s Asbestos Part 2 risk evaluation will address the potential risk from such legacy uses and associated disposal activities. That work is underway. Second, EPA concluded that for the limited, ongoing uses of chrysotile asbestos, the only way to mitigate the risk of ongoing import, processing, use, and disposal is to ban chrysotile asbestos, except for the narrow use in brakes on specialized, large cargo aircraft operated by the National Aeronautics and Space Administration (NASA).

In its risk evaluation, EPA concluded that the use of chrysotile asbestos in chlor-alkali production does not present an unreasonable risk if protective measures are used, such as engineering controls, glove boxes, and personal protective equipment (PPE). In the final risk management rule, EPA nevertheless argues that chrysotile asbestos must be banned because the necessary PPE may not be used correctly. If this logic prevails, EPA may be in the awkward situation of needing to ban every substance that it determines as presenting an unreasonable risk when PPE is not used, meaning that EPA will have to ban nearly every substance it reviews under TSCA Section 6 (at least for the foreseeable future) because it is likely that all substances that EPA will review in the next several decades will be sufficiently hazardous for EPA to conclude that the chemical substances present an unreasonable risk from routine, unprotected inhalation and/or dermal exposures. EPA seems to be saying that someone, somewhere, under some circumstances, may decide not to wear protective measures, or not wear PPE correctly and that because of this instance, EPA cannot reduce an unreasonable risk by imposing workplace protective measures. EPA might view asbestos as a special case, but EPA did not qualify its argument in the rule.

EPA’s cost benefit analysis is surprising: EPA estimates benefits from avoided cancer cases to be between $3,000 and $6,000 per year. This is surprising in that a hazardous chemical apparently leads to so little economic benefits if asbestos is banned. The modest value would appear to be evidence that ongoing uses of chrysotile asbestos are largely not a significant health risk. In comparison, EPA’s economic analysis estimated costs ranging from $34 million to $43 million per year of implementing the rule.

EPA’s progress with advancing its TSCA Section 6 rulemaking activities on chrysotile asbestos is commendable. There are, however, several issues with EPA’s Asbestos Part I that are still unresolved and will likely resurface as the bases for any potential challenges to EPA’s rule. The first issue is EPA’s use of the now rescinded 2018 Application of Systematic Review in TSCA Risk Evaluations (the 2018 SR Document). We previously discussed our concerns with EPA’s use of this approach in Asbestos Part I. The crux of the issue is that the U.S. National Academies of Sciences, Engineering, and Medicine (NASEM) reviewed the 2018 SR Document and concluded that “The OPPT approach to systematic review does not adequately meet the state-of-practice.” This conclusion supports that EPA did not fulfill its obligations of complying with the scientific standards under TSCA Section 26. For further discussion, see our memorandum dated April 7, 2022.

The second related issue is EPA’s derivation of an inhalation unit risk (IUR) for chrysotile asbestos and its subsequent use of the IUR for establishing an ECEL. EPA derived the IUR on textile worker populations from two facilities and stated the following in Asbestos Part I: “The epidemiologic studies that are reasonably available include populations exposed to chrysotile asbestos, which may contain small, but variable amounts of amphibole asbestos.” EPA’s use of these studies was controversial and included criticisms in the peer-reviewed literature with one group of experts pointing out that “All 8 cases of pleural cancer and mesothelioma in the examined populations arose in facilities where amphiboles were present.” The same group of experts also stated that “the suggested inhalation unit risk (IUR) for chrysotile asbestos was far too high since it was not markedly different than for amosite, despite the fact that the amphiboles are a far more potent carcinogen.”

It is unclear if EPA’s study selection for deriving the IUR and exclusion of other studies was due to a flawed systematic review process or other issues, such as favoring a pre-determined outcome. The same group of experts mentioned above stated the following about EPA’s peer review on the draft version of Asbestos Part I:

[A] key limitation of the EPA meeting was that the questions that the panelists were asked to address, termed “charge questions,” did not focus on the most pertinent aspects of the document. Thus, by asking questions that avoided the thorny topics regarding chrysotile asbestos which were often poorly focused, the EPA failed to obtain relevant topical insight from the advisory panel.

Readers may find the above statements implausible, yet EPA’s sponsored peer-review activities on formaldehyde supports that they are not. On August 9, 2023, NASEM issued its report titled Review of EPA’s 2020 Draft Formaldehyde Assessment. NASEM stated the following in its report:

The committee…was not charged with commenting on other interpretations of scientific information relevant to the hazards and risks of formaldehyde, nor did its statement of task call for a review of alternative opinions on EPA’s formaldehyde assessment.

The concern with limiting the scope of a peer review is that doing so, at a minimum, creates an appearance of favoring a pre-determined outcome and may ultimately undermine the integrity of the science used in EPA’s decision-making. Either outcome is inconsistent with the scientific standards under TSCA Section 26 and EPA’s recently updated draft Scientific Integrity Policy.

The third issue relates to EPA’s unreasonable risk determination in Asbestos Part I. EPA referenced its 1994 Guidelines for Statistical Analysis of Occupational Exposure Data (the 1994 Guidelines) as the justification for evaluating monitoring samples that were below the limit of detection (LOD). EPA stated that the 1994 Guidelines “call for replacing non-detects with the LOD or LOQ [limit of quantification] divided by two or divided by the square root of two, depending on the skewness of the data distributions.” EPA also stated that “more than half of the samples were non-detectable.” The approach in the 1994 Guidelines conflicts with EPA’s 2008 Framework for Investigating Asbestos-Contaminated Superfund Sites (the 2008 Framework), which states “[w]hen computing the mean of a set of asbestos measurements, samples that are ‘nondetect’ should be evaluated using a value of zero, not ½ the analytical sensitivity [footnote omitted].” EPA did not state its rationale for not using the 2008 Framework recommendations (i.e., replacing non-detects with zero). EPA is, however, aware of the 2008 Framework, as evidenced by its use of the 2008 Framework for estimating cancer risks for less than lifetime exposure from inhalation of chrysotile asbestos.

It is not clear whether the rule will be challenged, but B&C would not be surprised if impacted industries, non-governmental organizations, and other stakeholder groups bring suit. The scientific methods and documents supporting this rule have been publicly challenged specifically, as discussed above, and generally by other expert academics in the field. This is, after all, the first final rule under TSCA Section 6(a) and will be precedent setting for other risk management rules. This rule is not just about asbestos; it reflects how EPA will manage risks for existing chemical substances EPA identifies as high-priority substances under TSCA Section 6. Stay tuned.

Emergency Congressional Action Needed to Save CFTC Whistleblower Program

In 2021, Congress passed an emergency measure to save the U.S. Commodity Futures Trading Commission (CFTC) Whistleblower Program from financial collapse. This measure is set to expire at the end of September, threatening to shut down a program which plays a critical role in policing corruption and fraud.

The CFTC Whistleblower Program’s financial crisis is due to its own success. In setting up the program, Congress placed a cap on the amount of money which could be in the fund used to finance the program, including both paying the expenses of the Whistleblower Office and paying out whistleblower awards. Only $100 million is allowed to be placed in the fund, which is entirely financed by sanctions collected thanks to the whistleblower program.

Thus, while the CFTC Whistleblower Program has directly led to over $3.2 billion in sanctions, only a fraction of that money has been placed in the CFTC Whistleblower Program’s fund. Under the CFTC Whistleblower Program, qualified whistleblowers are eligible for monetary awards of 10-30% of the sanctions collected in the enforcement action aided by their disclosure. The large sanctions being collected due to the whistleblower program therefore result in large payouts to whistleblowers.

It is these large sanctions and corresponding large awards which are threatening the program. Given the cap on the program’s fund, a large award could completely drain the balance of the fund.

In 2021, CFTC officials and whistleblower advocates raised concerns to Congress that the funding crisis could cause the CFTC Whistleblower Office to shut down. Recognizing the consequences of this, Congress passed an emergency measure which created a separate account to fund the Whistleblower Office. This meant that even if the award fund was depleted by a large award, the program could continue to function.

This measure is set to expire at the end of September, meaning that the CFTC Whistleblower Program is once again facing a funding crisis which could lead to its collapse. Congress must swiftly act again in order to save the program.

“Whistleblowers play a critical role assisting the CFTC be a strong cop on the beat. Much of our Division of Enforcement’s success is tied to the strength of our Whistleblower Office,” said CFTC Chairman Rostin Behnam back in February.

In June, Behnam also told the Senate that “the overwhelming success of the Whistleblower Program has unintentionally led to the potential for disruptions in these two vital offices due to their funding mechanisms.”

When Congress placed the cap on the CFTC Whistleblower Program’s fund back in 2010 it seemed like a fair number. The agency was little known and the great success of whistleblower award programs was not as well established.

Since then, however, the CFTC has greatly expanded as a critical law enforcement agency, thanks in large part to whistleblowers. In recent years the agency has levied massive sanctions against major global entities such as the world’s three largest oil traders, Vitol (a Dutch oil trader; $130 million sanction), Glencore (a Swiss oil trader; $1.2 billion sanction), Trafigura, (a Singapore oil trader; $55 million sanction), and the world’s largest crypto exchange, Binance ($4 billion), to name a few.

According to the CFTC, approximately 30% of the agency’s enforcement actions involve whistleblowers. The collapse of the whistleblower program would be dire for the agency’s enforcement efforts and the United States’ anti-corruption efforts more broadly.

National Whistleblower Center is calling on Congress to immediately pass an emergency measure to save the CFTC Whistleblower Program and has set up an Action Alert allowing the public to urge their elected officials to do so as well.

Geoff Schweller also contributed to this article

FTC Staff Issue Report on Multi-Level Marketing Income Disclosure Statements

On September 4, 2024, the Federal Trade Commission announced that it has issued a report that details findings from a review of income disclosure statements from 70 different multi-level marketers (MLMs).

Staff reviewed income disclosure statements in February 2023 that were publicly available on the websites of a wide array of MLMs, from large household names to smaller, less well-known companies, according to FTC attorneys. “These statements are sometimes provided to consumers who are considering joining MLMs, and often purport to show information about income that recruits could expect to receive.”

According to the report, FTC staff found a number of issues with the statements they reviewed, including that most omit key information when calculating the earnings amounts they present. Specifically, the report notes that most of the reviewed statements do not include participants with low or no earnings in their display of earnings amounts and also don’t account for the expenses faced by participants, which can outstrip the income they make. The report notes that these omissions are often not plainly disclosed in the income statements.

The report also notes that most statements emphasize the high earnings of a small group of participants, and many entirely omit or only inconspicuously disclose key information about the limited earnings made by most participants. In addition, the staff report notes that most of the disclosure statements staff reviewed present earnings information in a potentially confusing way, “like giving average earnings amounts for groups that could have very different actual incomes, or using annual income figures that aren’t based on what an actual group of participants made for the year.”

The report also notes based on staff’s analysis of data in the income disclosure statements, including information included in fine print, that many participants in those MLMs received no payments from the MLMs, and the vast majority received $1,000 or less per year—that is, less than $84 per month, on average.

“The FTC staff report documents an analysis of 70 publicly available income disclosure statements from a wide range of MLMs — big and well-known to smaller companies. The report found that these income disclosure statements showed most participants made $1,000 or less per year — that’s less than $84 dollars per month. And that may not account for expenses. In at least 17 MLMs, most participants didn’t make any money at all.”

As referenced above, the staff report documents (and provides numerous examples of) how most of the publicly available MLM income disclosure statements used all the following tactics:

Emphasizing the high dollar amounts made by a relatively small number of MLM participants.
Leaving out or downplaying important facts, like the percentage of participants who made no money.
Presenting income data in potentially confusing ways.
Ignoring expenses incurred by participants — even though expenses can, and in some MLMs often do, outstrip income.

President Biden Signs Executive Order Directing Agencies to Prioritize Pro-Union and Union Neutrality Policies

On September 6, 2024, President Biden signed an Executive Order on Investing in America and Investing in American Workers (the “Order”), that, among other things, aims to provide “incentives for federally assisted projects with high labor standards – including collective bargaining agreements, project labor agreements, and certain community benefits agreements.” Specifically, the Order directs federal agencies to prioritize projects that provide “high labor standards” for “Federal financial assistance,” which is defined as “funds obtained from or borrowed on the credit of the Federal Government pursuant to grants (whether formula or discretionary), loans, or rebates, or projects undertaken pursuant to any Federal program involving such grants, loans, or rebates.”

The Order expressly instructs agencies to prioritize projects that “provide a clear plan for efficient project delivery by promoting positive labor-management relations.” This includes project labor agreements, collective bargaining agreements, community benefits agreements, and other “agreements designed to facilitate first collective bargaining agreements, voluntary union recognition, and neutrality by the employer with respect to union organizing.”

In addition, the Order directs agencies to prioritize projects that: (i) “enhance worker productivity by promoting family-sustaining wages”; (ii) supply particular benefits, including paid leave (e.g., paid sick, family, and medical leave), healthcare benefits, retirement benefits, and child, dependent, and elder care; (iii) enact policies designed to combat discrimination that impacts workers from underserved communities; (iv) expand worker access to high-quality training and credentials that will “lead to good jobs” and strengthen workforce development; and (v) promote and protect worker health and safety. Per the Order, projects that use, among other things, union pattern wage scales, joint labor-management partnerships to invest in “union-affiliated training programs, registered apprenticeships, and pre-apprenticeship programs,” or policies that encourage worker and union participation in the design and implementation of workplace safety and health management systems, will assist in satisfying the goal of achieving “high labor standards” and should be prioritized.

To effectuate the Order’s priorities, agencies are instructed to consider including application evaluation criteria or selection factors that will prioritize those applicants for federal assistance that adopt or provide a specific plan to adopt the priorities set forth in the Order. Agencies also must consider, among other things, publishing relevant guidance, such as best practice guides, engaging more deeply with applicants prior to any award of federal assistance “to ensure that applicants understand the benefits of [the Order’s] priorities for key programs and projects,” and collecting relevant data to evaluate and monitor the progress of funding recipients in satisfying the Order’s goals.

The “implementing agencies,” or the agencies subject to the Order, are the Department of the Interior, the Department of Agriculture, the Department of Commerce, the Department of Labor, the Department of Housing and Urban Development, the Department of Transportation, the Department of Energy, the Department of Education, the Department of Homeland Security, and the Environmental Protection Agency.

Finally, the Order creates a task force, referred to as the Investing in Good Jobs Task Force, that will be co-chaired by the Secretary of Labor and the Director of the National Economic Council, or their designees, and will oversee implementation of the Order’s labor standards in funding decisions by the implementing agencies.

The White House also issued a Fact Sheet (available here) discussing the Order and President Biden’s motivation for its enactment. It remains to be seen what impact the Order will have on the implementing agencies or how those agencies may alter their funding programs to comply with the Order. We will continue to monitor these developments and will keep you informed as to any new updates.

Consumer Privacy Update: What Organizations Need to Know About Impending State Privacy Laws Going into Effect in 2024 and 2025

Over the past several years, the number of states with comprehensive consumer data privacy laws has increased exponentially from just a handful—California, Colorado, Virginia, Connecticut, and Utah—to up to twenty by some counts.

Many of these state laws will go into effect starting Q4 of 2024 through 2025. We have previously written in more detail on New Jersey’s comprehensive data privacy law, which goes into effect January 15, 2025, and Tennessee’s comprehensive data privacy law, which goes into effect July 1, 2025. Some laws have already gone into effect, like Texas’s Data Privacy and Security Act, and Oregon’s Consumer Privacy Act, both of which became effective July of 2024. Now is a good time to take stock of the current landscape as the next batch of state privacy laws go into effect.

Over the next year, the following laws will become effective:

Montana Consumer Data Privacy Act (effective Oct. 1, 2024)
Delaware Personal Data Privacy Act (effective Jan. 1, 2025)
Iowa Consumer Data Protection Act (effective Jan. 1, 2025)
Nebraska Data Privacy Act (effective Jan. 1, 2025)
New Hampshire Privacy Act (effective Jan. 1, 2025)
New Jersey Data Privacy Act (effective Jan. 15, 2025)
Tennessee Information Protection Act (effective July 1, 2025)
Minnesota Consumer Data Privacy Act (effective July 31, 2025)
Maryland Online Data Privacy Act (effective Oct. 1, 2025)

These nine state privacy laws contain many similarities, broadly conforming to the Virginia Consumer Data Protection Act we discussed here. All nine laws listed above contain the following familiar requirements:

(1) disclosing data handling practices to consumers,

(2) including certain contractual terms in data processing agreements,

(3) performing risk assessments (with the exception of Iowa); and

(4) affording resident consumers with certain rights, such as the right to access or know the personal data processed by a business, the right to correct any inaccurate personal data, the right to request deletion of personal data, the right to opt out of targeted advertising or the sale of personal data, and the right to opt out of the processing sensitive information.

The laws contain more than a few noteworthy differences. Each of the laws differs in terms of the scope of their application. The applicability thresholds vary based on: (1) the number of state residents whose personal data the company (or “controller”) controls or processes, or (2) the proportion of revenue a controller derives from the sale of personal data. Maryland, Delaware, and New Hampshire each have a 35,000 consumer processing threshold. Nebraska, similar to the recently passed data privacy law in Texas, applies to controllers that that do not qualify as small business and process personal data or engage in personal data sales. It is also important to note that Iowa adopted a comparatively narrower definition of what constitutes as sale of personal data to only transactions involving monetary consideration. All states require that the company conduct business in the state.

With respect to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Iowa’s, Montana’s, Nebraska’s, New Hampshire’s, and Tennessee’s laws exempt HIPAA-regulated entities altogether; while Delaware’s, Maryland’s, Minnesota’s, and New Jersey’s laws exempt only protected health information (“PHI”) under HIPAA. As a result, HIPAA-regulated entities will have the added burden of assessing whether data is covered by HIPAA or an applicable state privacy law.

With respect to the Gramm-Leach-Bliley Act (“GLBA”), eight of these nine comprehensive privacy laws contain an entity-level exemption for GBLA-covered financial institutions. By contrast, Minnesota’s law exempts only data regulated by GLBA. Minnesota joins California and Oregon as the three state consumer privacy laws with information-level GLBA exemptions.

Not least of all, Maryland’s law stands apart from the other data privacy laws due to a number of unique obligations, including:

A prohibition on the collection, processing, and sharing of a consumer’s sensitive data except when doing so is “strictly necessary to provide or maintain a specific product or service requested by the consumer.”
A broad prohibition on the sale of sensitive data for monetary or other valuable consideration unless such sale is necessary to provide or maintain a specific product or service requested by a consumer.
Special provisions applicable to “Consumer Health Data” processed by entities not regulated by HIPAA. Note that “Consumer Health Data” laws also exist in Nevada, Washington, and Connecticut as we previously discussed here.
A prohibition on selling or processing minors’ data for targeted advertising if the controller knows or should have known that the consumer is under 18 years of age.

While states continue to enact comprehensive data privacy laws, there remains the possibility of a federal privacy law to bring in a national standard. The American Privacy Rights Act (“APRA”) recently went through several iterations in the House Committee on Energy and Commerce this year, and it reflects many of the elements of these state laws, including transparency requirements and consumer rights. A key sticking point, however, continues to be the broad private right of action included in the proposed APRA but absent from all state privacy laws. Only California’s law, which we discussed here, has a private right of action, although it is narrowly circumscribed to data breaches. Considering the November 2024 election cycle, it is likely that federal efforts to create a comprehensive privacy law will stall until the election cycle is over and the composition of the White House and Congress is known.

The BR International Trade Report: September 2024

Welcome to this month’s issue of The BR International Trade Report, Blank Rome’s monthly digital newsletter highlighting international trade, sanctions, cross-border investment, geopolitical risk issues, trends, and laws impacting businesses domestically and abroad.

Recent Developments

BIS issues export controls targeting GAAFET, quantum, additive manufacturing, and other emerging technologies.
On September 5, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued new export controls covering gate all-around field effect transistor (“GAAFET”) technology, quantum computing items, advanced semiconductor manufacturing equipment, additive manufacturing equipment, and aerospace coating systems technology. The BIS rule establishes an export licensing requirement for the export of any such covered item to any destination in the world, as well as a new license exception authorizing export to certain specified “like-minded” countries that have implemented similar controls. See our alert.

Canada announces 100 percent tariff on Chinese EVs, while China retaliates with probe into imports of Canadian canola.
Canada’s electric vehicle (“EV”) tariff follows similar measures by the United States and the European Union, based on claims that China subsidizes its EV industry and thus has an “unfair advantage,” in the words of Canadian Prime Minister Justin Trudeau. Following the announcement of the tariff, China announced an antidumping investigation regarding imports of Canadian-origin canola.

BIS proposes rule establishing reporting requirements for AI developers and cloud providers.
On September 9, BIS issued a notice of proposed rulemaking outlining new requirements for developers of powerful AI models and computing clusters to report certain information to the U.S. government. Reportable information would include development activity, cybersecurity measures, and results of “red-team” testing to identify capabilities for illicit uses such as cyberattacks and development of chemical, biological, radiological, or nuclear weapons. The deadline for comments on the proposal is October 11.

United States implements AUKUS through ITAR exemptions for Australia and the United Kingdom.
On August 16, 2024, the U.S. Department of State announced a broad exemption from export licensing requirements under the International Traffic in Arms Regulations (“ITAR”) for most defense trade involving “authorized users” in the United States, Australia, and the United Kingdom. The ITAR relief was the linchpin of implementation of the AUKUS security pact between the three defense partners. See our alert.

Canada seeks public input on United States-Mexico-Canada Agreement (“USMCA”).
Canada has asked for public input on what Canadian priorities should be in the upcoming trilateral review of the USMCA in 2026. Unlike the previous North American Free Trade Agreement, the USMCA provides for a review at least every six years to assess how the agreement is doing and whether it should continue. Canada is inviting input on key areas that “are working well and potential areas for improvement.” Comments are due by October 31, 2024.

United States to dispute Canadian Digital Services Tax in USMCA.
The United States will challenge Canada’s new tax on digital services in a dispute under the USMCA. Canada imposes a tax on online revenues from companies that have a large global presence (€ 750 million in revenues) as well as Canadian digital revenue of $20 million (US$15 million). The U.S. claims that the tax unfairly discriminates against U.S. businesses. The first step will be consultations between the U.S. and Canadian governments. If a resolution cannot be reached, the U.S. may then request a formal dispute resolution panel. Governments have also been negotiating for years at the Organization for Economic Cooperation and Development (“OECD”) for an agreed regime to govern these taxes, and those negotiations are ongoing.

Xi Jinping touts U.S.-China “traditional friendship.”
In a meeting with U.S. National Security Advisor Jake Sullivan on August 29, Chinese leader Xi Jinping spoke of China’s interest in preserving stability in U.S.-China relations, referred to the “traditional friendship” between the two countries, and asked Sullivan to pass on his regards to President Biden. Sullivan reported after the meeting that he reassured Xi that the United States seeks to maintain stable ties, but also pressed the issues of de-escalation in the South China Sea and concerns over U.S. election interference.

The Netherlands adopts new export controls on semiconductor manufacturing equipment (“SME”), while Japan anticipates robust SME sales to China.
The Dutch government announced new controls on exports of certain advanced SME on national security grounds, reportedly bringing Dutch law in line with U.S. restrictions, a move that China blamed on U.S. “coercion.” Meanwhile, reports indicate that Japanese SME companies are counting on significant revenue from Chinese customers, even amidst heightened U.S. export controls, based on sales of SME for less advanced legacy chips that are used in cars and not in smartphones or advanced AI applications.

Huawei reportedly planning to unveil AI chip.
Reports indicate that Chinese telecom giant Huawei is nearing a release of an artificial intelligence chip, the Ascend 910C, that supposedly is comparable to high-end U.S. AI chips. The potential development comes as intense U.S. export controls aim to restrict the flow to China of advanced semiconductors that power the AI technology stack, and likely will prompt calls by Congress and national security thought leaders to consider continued calibration of U.S. policy in addressing technology-related national security challenges.

Federal study recommends that Pentagon engage with commercial chipmakers.
A report by the National Academies of Sciences, Engineering, and Medicine found that the U.S. Department of Defense (“DoD”) “currently lacks an overarching microelectronics strategy.” The report recommends that the DoD work more closely with the semiconductor industry, as it did in the latter half of the 20^th century, and partner with civilian agencies such as the U.S. Department of Commerce in order to ensure a reliable supply of semiconductors for national defense.

China implements new export controls for antimony and revises controls for drones.
China recently updated its export controls amidst escalating volleys of trade controls between the United States and China. First, China issued restrictions on exports of antimony, a key input in military items such as missiles, nuclear weapons, night vision goggles, and ammunition. Furthermore, China is adjusting its export controls over drones to lift temporary export controls over certain consumer drones, adjust standards for other controlled items, and add certain high-precision measurement equipment to its control list.

Biden Administration crafting plan for a U.S. sovereign wealth fund (“SWF”). National Security Advisor Sullivan reportedly is working on a proposal for a U.S. SWF that would support investments in emerging technologies and critical minerals, in an effort to keep pace with countries like China and Singapore, which have invested aggressively through SWFs. The plan is similar to a recent proposal by former President Trump, suggesting there could be bipartisan support for the measure.

United States considers price support for critical minerals projects.
Reports indicate that the Biden Administration is considering price support for certain U.S. critical minerals projects, in response to an influx of less costly Chinese lithium, nickel, and other minerals, and delays and cancellations of several U.S. minerals processing projects. Specifically, the administration reportedly is considering the establishment of a price floor for a limited time, with the U.S. Department of Energy paying the difference when market prices fall below the floor. The mechanism would be intended to assure investors and customers that domestic suppliers can thrive.

OFAC extends recordkeeping requirements from five to 10 years.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued an interim final rule extending the recordkeeping requirement under economic sanctions regulations from five years—which had been the requirement for decades—to 10 years. The measure is consistent with the recent extension of the statute of limitations for sanctions violations from five years to 10 years. See our prior alerts.

BIS expands export controls against Russia and Belarus.
BIS issued measures on August 23 that (i) expanded the scope of the Russia/Belarus Military End User and Procurement Foreign Direct Product rule; (ii) added 123 entities to the Entity List; (iii) added four high-diversion risk addresses to the Entity List to target diversion through shell companies; and (iv) issued new guidance to exporters on contractual language restricting exports to Russia and Belarus.

United States International Trade Commission (“USITC”) proposes quota on textile materials.
The four commissioners of the USITC unanimously recommended that the President impose a four year tariff-rate quota on imports of fine denier polyester staple fiber (“PSF”), to address serious injury to the U.S. domestic industry. Fine denier PSF is used in the production of textiles and other products such as diapers, baby wipes and coffee filters. The USITC recommends that a number of countries be excluded from this quota, primarily free trade partners of the United States. The President has the final decision on whether or not to impose a tariff-rate quota.

In Case You Missed It…

DDTC Issues Long-Awaited Rule Implementing AUKUS: Five Key Takeaways
On August 16, 2024, the U.S. Department of State announced a broad exemption from export licensing requirements for most defense trade between and among “authorized users” in the United States, Australia, and the United Kingdom, thereby issuing much-anticipated export control relief in implementation of the AUKUS security pact. Read More >>

BIS Issues New Export Controls Targeting GAAFET, Quantum, and Additive Manufacturing, and Ushers in New Age of Plurilateral Export Controls: 5 Key Takeaways
The U.S. Department of Commerce’s Bureau of Industry and Security recently issued an interim final rule under the Export Administration Regulations imposing licensing requirements for exports to all destinations worldwide of certain gate all-around field effect transistor technology, quantum computing items, advanced semiconductor manufacturing equipment, additive manufacturing equipment, and aerospace coating systems technology. Read More >>

October 2024 Visa Bulletin – New Fiscal Year, Mostly the Same Old Story

The State Department has published the much-anticipated October Visa Bulletin, the first issue of Fiscal Year 2025. Although the new year brings a brand new allotment of visa numbers in all categories, not much has changed since last month, with one exception in the All Countries category.

Below is a summary that includes Final Action Dates and changes from the previous month, but first – some background if you’re new to these blog posts. If you’re an old hand at the Visa Bulletin, feel free to skip the next paragraph.

The Visa Bulletin is released monthly by the US Department of State (in collaboration with US Citizenship and Immigration Services). If your priority date (that is, the date you got a place on the waiting list) is earlier than the cutoff date listed in the Bulletin for your nationality and category, that means a visa number is available for you that month. That, in turn, means you can submit your DS-260 immigrant visa application (if you’re applying at a US embassy abroad) or your I-485 adjustment of status application (if you’re applying with USCIS). If you already submitted that final step and your category then retrogressed, it means the embassy or USCIS can now approve your application because a visa number is again available.

Now for the October VB –

There are few changes from September for China:

EB-1 progresses 1 week to November 8, 2022m and EB-2 3 weeks to March 22, 2020
EB-3 Professionals retrogresses 5 months to April 1, 2020
EB-3 Other Workers stays stalled at January 1, 2017

Likewise, limited movement for India:

EB-1 remains stuck at February 1, 2022, and EB-2 at July 15, 2012
EB-3 Professionals and EB-3 Other Workers both advance 10 days to November 1, 2012

For All Other Countries, no changes except one dramatic one for EB-3:

EB-1 remains current
EB-2 remains stalled at March 15, 2023
EB-3 Professionals leaps almost 2 years, to November 15, 2022, making up last month’s retrogression of 1 year and gaining almost another year
EB-3 Other Workers stays stuck at January 1, 2020

NOTE 1: USCIS will accept I-485 applications in October based on the Department of State’s more favorable Dates for Filing chart, which allows from 2 months to 1 year of additional filing time depending on nationality and category:

Chinese nationals gain almost 2 months to file in EB‑1; a little over 6 months in EB-2; 7.5 months in EB‑3 Professionals; and 1 year in EB-3 Other Workers.
Indian nationals gain 2.5 months in EB-1; 5.5 months in EB-2; a little over 7 months in EB-3 Professionals; and 7 months in EB-3 Other Workers.
Nationals of all other countries may file their I-485s in advance of their priority dates being current by 4.5 months in EB-2; 3.5 months in EB-3 Professionals; and 5.75 months in EB-3 Other Workers.

NOTE 2: The Dates for Filing chart applies only to I-485 applications with USCIS. Immigrant visa applications with US embassies are always based on the Final Action Dates chart.

*Carol Schlenker also contributed to this article

EVERYTHING’S FINE: Big TCPA Win For Medical Debt Collector Suggests FCC Rulings Still Binding After Loper Bright–Let’s Hope it Stays That Way

Fascinating little case for you all today.

Consumer visits hospital for treatment. Provides phone number at admission. Receives treatment and is discharged.

Consumer fails to pay resulting invoices. Hospital and provider network turn account over to collections. Debt collector allegedly uses an ATDS to call consumer on the number she provided.

What result?

Prior to the Supreme Court’s Loper Bright decision the determination would be easy. The FCC held back in 2009 that providing a number in connection with a transaction permits autodialed calls to a consumer in connection with that transaction. And the Sixth Circuit Court of Appeals has directly held that providing a phone number on hospital intake documents permits later debt collection activity at that number–including via autodialer.

But the Loper Bright decision recently destroyed Chevron deference–meaning courts no longer have to yield to agency determinations of this sort. And while the Hobbs Act affords extra protections to certain FCC rulings, those protections only apply where certain procedural requirements were met by the Commission in adopting the rule.

So does the FCC’s rule from 2009 permitting informational calls to numbers provided in connection with a transaction still bind courts? According to the decision in Woodman v. Medicredit, 2024 WL 4132732 (D. Nv Sept. 9, 2024) the answer is yes!

In Woodman the defendant debt collector moved for summary judgment arguing the Plaintiff consented when she provided her number to the hospital. The Court had little problem applying the FCC’s 2009 order and precedent that came before Loper Bright to grant summary judgment to he defense. So just like that case is gone.

Great ruling for the defense, of course, and it makes me feel a bit better about the whole “no one knows what the law is anymore” thing, but the Woodman court didn’t really address the core issue– was the 2009 ruling enacted with sufficient APA pop and circumstance to merit Hobbs Act deference under PDR Resources.

Really interesting question and one folks should keep in mind.

Benefits of U.S. citizenship

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What are the eligibility categories for the Low-Income Communities Bonus Credit?

Which tax credits do Low-Income Communities Bonus Credits apply to?

How is the Low-Income Communities Bonus Credit calculated?

What is a qualified solar or wind facility?

Because the eligible facility must have a maximum net output of less than five megawatts as measured in alternating current, can applicants divide larger projects into smaller ones to meet the five megawatts requirements?

When can a Qualified Solar or Wind Facility be placed in service?

Definitions

Allocation Process

Application Process

Read Part I, Part II, Part III, Part IV, Part V, and Part VI here.

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Manufacturing, Processing, Distribution in Commerce, and Commercial Use of Chrysotile Asbestos Diaphragms in the Chlor-alkali Industry

Certification of Compliance for Chlor-alkali Industry

Other Prohibitions of and Restrictions on the Manufacturing, Processing, Distribution in Commerce, and Commercial Use of Chrysotile Asbestos

Interim Workplace Controls of Chrysotile Asbestos Exposures

Disposal

Recordkeeping

Commentary

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Recent Developments

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