Tag: biden admin

ARPA-E: Biden’s Proposed FY 2023 Budget Boosts Investment in Clean Energy Technologies

On March 28, 2022, the Biden-Harris Administration sent the President’s Budget for Fiscal Year (FY) 2023 to the United States Congress (“Congress”). The President’s proposed $5.8 trillion budget for FY 2023 allocates billions of dollars toward combating climate change and boosting clean energy development. Biden’s budget requests $48.2 billion for the Department of Energy (“DOE”), with $700 million of those funds allocated to the DOE’s Advanced Research Projects Agency-Energy program (“ARPA-E”).[1] With these increased funds, the Biden administration plans for ARPA-E to expand its scope beyond energy technology–focused projects to include climate adaptation and resilience innovations.[2]

What Is ARPA-E?

ARPA-E is a United States federal government agency under the purview of the Department of Energy that funds and promotes the research and development of advanced energy technologies. ARPA-E was recommended to Congress in the 2005 National Academies report Rising Above the Gathering Storm: Energizing and Employing America for a Bright Economic Future, which published recommendations for federal government actions to maintain and expand U.S. competitiveness.[3] In 2007, ARPA-E was officially created after Congress implemented a number of the report’s recommendations by enacting the America COMPETES Act.[4] The 2007 Act was superseded by the America COMPETES Reauthorization Act of 2010, which incorporated much of the original language of the 2007 Act but made some modifications to ARPA-E structure.[5] In 2009, ARPA-E officially commenced operations after receiving its first appropriated funds through the American Recovery and Reinvestment Act of 2009 —$400 million to fund the establishment of ARPA-E.[6]

ARPA-E’s mission is statutorily defined as overcoming “the long-term and high-risk technology barriers in the development of energy technologies.”[7] This involves the development of energy technologies that will achieve various goals, including the reduction of fossil fuel imports, the reduction of energy-related emissions, improvements in energy efficiency, and increased resilience and security of energy infrastructure.[8] The statute directs ARPA-E to pursue these objectives through particular means:

  1. Identifying and promoting revolutionary advances in fundamental and applied sciences;
  2. Translating scientific discoveries and cutting-edge inventions into technological innovations; and
  3. Accelerating transformational technological advances in areas industry is unlikely to undertake because of technical and financial uncertainty.[9]

The Impact of ARPA-E

Since 2009, ARPA-E has provided approximately $3 billion in R&D funding for over 1,294 potentially transformational energy technology projects.[10] Publishing annual reports to analyze and catalog its influence, the agency tracks commercial impact with key early indicators, including private-sector follow-on funding, new company formation, partnership with other government agencies, publications, inventions, and patents.[11]

Many ARPA-E project teams have continued to advance their technologies: 129 new companies have been formed, 285 licenses have been issued, 268 teams have partnered with another government agency, and 185 teams have together raised over $9.87 billion in private-sector follow-on funding.[12] In addition, ARPA-E projects fostered technological innovation and advanced scientific knowledge, as evidenced by the 5,497 peer-reviewed journal articles and 829 patents issued by the U.S. Patent and Trademark Office that sprung from the ARPA-E program.[13] ARPA-E recently announced that it is starting to count exits through public listings, mergers, and acquisitions. As of January 2022, ARPA-E has 20 exits with a total reported value of $21.6 billion.[14]

How Does Biden’s FY 2023 Budget Affect ARPA-E?

Biden has requested a 56% increase for ARPA-E, to $700 million.[15] The budget also proposes expansions of ARPA-E’s purview to more fully address innovation gaps around adaptation, mitigation, and resilience to the impacts of climate change.[16] This investment in research and development of high-potential and high-impact technologies aims to help remove technological barriers to advance energy and environmental missions.[17]

The request provides that ARPA-E shall also expand its scope “to invest in climate-related innovations necessary to achieve net zero climate-inducing emissions by 2050.”[18] Given the increasing bipartisan support for alternative energy funding and ARPA-E’s continuing and rising commercial impact, it is likely that ARPA-E’s funding and support of the research and development of early-stage energy technologies will continue to pave the way for the commercialization of advanced energy technologies.

Endnotes

  1. https://www.law360.com/articles/1478133/biden-budget-provides-billions-for-clean-energy
  2. https://www.energy.gov/articles/statement-energy-secretary-granholm-president-bidens-doe-fiscal-year-2023-budget
  3. https://doi.org/10.17226/24778
  4. Id. at 22
  5. Id.
  6. Id.
  7. 42 U.S.C. § 16538(b)
  8. 42 U.S.C. § 16538(c)(1)(A)
  9. 42 U.S.C. § 16538(c)(2)
  10. https://arpa-e.energy.gov/about/our-impact
  11. Id.
  12. Id.
  13. Id.
  14. Id.
  15. https://www.science.org/content/article/biden-s-2023-budget-request-science-aims-high-again
  16. https://www.whitehouse.gov/wp-content/uploads/2022/03/budget_fy2023.pdf
  17. Id.
  18. https://www.science.org/content/article/biden-s-2023-budget-request-science-aims-high-again

Article By Kaoru C. Suzuki of Mintz

For more environmental legal news, click here to visit the National Law Review.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

COVID-19 Healthcare Enforcement Actions to Increase in 2022 and Beyond

“The Department remains committed to using every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud. We will continue to hold accountable those who seek to exploit the pandemic for personal gain, to protect vulnerable populations, and to safeguard the integrity of taxpayer-funded programs”

US Attorney General Merrick Garland – March 10, 2022, Remarks

The Biden Administration, US Department of Justice (DOJ), US Department of Health and Human Services Office of Inspector General (HHS-OIG), and other federal agencies have prioritized prosecuting COVID-19-related fraud since the pandemic began. Although the United States appears to be finally emerging from the pandemic, the government’s pandemic-related enforcement actions are here to stay for the foreseeable future. DOJ has made clear that the government’s COVID-19 enforcement efforts will accelerate, with a more significant focus on complex healthcare fraud cases and civil actions under the False Claims Act (FCA). As the federal government continues to devote additional resources towards its pandemic-related enforcement efforts, healthcare companies, hospital systems and providers should prepare for increased scrutiny.

Additional Resources Devoted to COVID-19 Fraud Enforcement Efforts

DOJ and other federal agencies have already devoted an unprecedented amount of resources to investigating and prosecuting pandemic-related fraud cases. These extensive efforts have led to immediate results. To date, DOJ has brought pandemic-related criminal charges against more than 1,000 individuals with the total alleged fraud losses exceeding $1 billion, and has seized more than $1.2 billion in fraudulently obtained relief funds.

DOJ’s pandemic-enforcement efforts show no sign of slowing down anytime soon. Less than a year after US Attorney General (AG) Merrick Garland established the COVID-19 Fraud Enforcement Task Force, the Biden administration announced that DOJ would appoint a chief prosecutor to expand on the Task Force’s “already robust efforts,” to focus on “most egregious forms of pandemic fraud” and to target particularly complex fraud schemes.

On March 10, 2022, DOJ announced that Kevin Chambers has been appointed as DOJ’s director for COVID-19 fraud enforcement. During his introductory remarks, Chambers said that DOJ would be “redoubling [its] efforts to identify pandemic fraud, to charge and prosecute those individuals responsible for it and whenever possible, to recover funds stolen from the American people.” He also indicated that DOJ would use “new tools” it has developed since the start of the pandemic to investigate such fraud.

In a March 2, 2022, speech before the American Bar Association’s Annual National Institute on White Collar Crime, AG Garland also announced that the Biden Administration will seek an additional $36.5 million in the 2022 budget for DOJ to “bolster efforts to combat pandemic-related fraud.” As evidence of this point, DOJ plans to hire 120 new prosecutors and 900 new Federal Bureau of Investigation agents who will focus on white-collar crime.

DOJ and HHS-OIG to Increasingly Focus on FCA Cases

For the past two years, officials from DOJ and HHS-OIG have identified civil and criminal healthcare fraud relating to COVID-19 as a high priority. As the effects of the pandemic subside, COVID-19-related civil enforcement actions targeting healthcare providers and healthcare companies seem set to increase.

During remarks at the Federal Bar Association’s annual Qui Tam Conference in February 2022, Gregory Demske, chief counsel to the inspector general for HHS-OIG, emphasized that COVID-19 remains a key enforcement priority. Demske indicated that HHS-OIG is focused on the use of COVID-19 to bill for medically unnecessary services, and fraud in connection with HHS’s Provider Relief Fund (PRF) and Uninsured Relief Fund. Demske also confirmed that HHS-OIG remains intensely focused on fraud in connection with telehealth services, the use of which increased exponentially during the pandemic. And, in March 2022, AG Garland reiterated that DOJ will use “every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud.”

The majority of pandemic-related healthcare enforcement actions to date have been criminal prosecutions involving truly blatant instances of fraud and abuse. Going forward, civil and administrative actions likely will be used to pursue cases that turn on lower mens rea requirements or involve more complex regulatory issues. These civil actions will include qui tam actions filed by whistleblowers, as well as FCA cases initiated directly by the DOJ.

In 2021, DOJ recovered more than $5 billion in connection with FCA cases involving the healthcare industry. Given the unprecedented amount of government funds expended to combat the COVID-19 pandemic, DOJ and HHS-OIG will undoubtedly rely on the FCA to maximize the government’s financial recovery. DOJ has already reached FCA settlements in several Paycheck Protection Program cases. It is only a matter of time before we see similar FCA investigations, complaints and settlements focused on relief funding to healthcare providers.

Pandemic-Related Healthcare Priorities

HHS’s PRF

The PRF was created as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide direct payments to “eligible health care providers for health care-related expenses [and] lost revenues that are attributable to coronavirus.” More than $140 billion has been disbursed to hospitals and healthcare providers under the PRF, which is administered by the Health Resources & Services Administration (HRSA).

Payments under the PRF are subject to specific terms and conditions. To retain PRF disbursements, providers must attest to “ongoing compliance” with these requirements and acknowledge that their “full compliance with all Terms and Conditions is material to the Secretary’s decision to disburse funds.” Notwithstanding ongoing concerns and confusion regarding the PRF program requirements, any noncompliance with the terms and conditions could result in criminal, civil and administrative enforcement actions. As recently as March 3, 2022, AG Garland identified fraud in connection with the PRF as a key DOJ enforcement priority.

To date, the Healthcare Fraud Unit of DOJ’s Criminal Division has already brought criminal charges against nine individuals for fraud relating to the PRF. These criminal cases, however, have almost exclusively focused on egregious allegations of fraud and abuses, such as misappropriating PRF disbursements and using the money for personal expenses. For example, in September 2021, DOJ charged five individuals with using PRF payments to gamble at Las Vegas casinos and purchase luxury cars.

DOJ, however, has long indicated that the FCA will also play a “significant role” in DOJ’s PRF enforcement efforts. It is now just a matter of time before such civil investigations and settlements emerge.

HRSA’s stated oversight plan includes post-payment analysis and review to determine whether HHS distributed PRF payments to eligible providers in the correct amounts; audits to assess whether recipients used the funds in accordance with laws, guidance, and terms and conditions; and the recovery of overpayments and unused or improperly used payments. Among other things, HRSA and HHS-OIG likely will evaluate ownership changes, double counting reimbursed expenses and losses, and compliance with the balanced billing requirements.

PRF oversight and enforcement actions have been delayed partly because of program complexities and extended reporting timelines. For example, the first report from PRF recipients on use of funds was not due until the end of 2021. Depending on the date funds were received, PRF recipients may have no reporting obligations through 2023. Entities that expended more than $750,000 in federal awards, including PRF payments, also must obtain an independent audit examining their financial statements; internal controls; and compliance with applicable statutes, regulations and program requirements. These independent audits of PRF payments must be submitted to the Federal Audit Clearinghouse, for nonprofit organizations, or the HRSA Division of Financial Integrity, for for-profit “commercial” organizations. Recipients also may be subject to separate audits by HHS, HHS-OIG or the Pandemic Response Accountability Committee to review copies of records and cost documentation and to ensure compliance with the applicable terms and conditions.

Finally, DOJ and HHS-OIG have increasingly relied on sophisticated data analytics to drive their healthcare enforcement efforts generally. Now that the first round of reports containing specific PRF data certifications are available to HRSA and HHS-OIG, we expect to see the use of such analytics, in conjunction with all the other available information, in connection with PRF enforcement.

Telehealth

Telehealth use expanded exponentially during the pandemic. A March 2022 HHS-OIG report showed that during the first year of the pandemic, more than 28 million Medicare beneficiaries (approximately 43% of all Medicare beneficiaries) used telehealth services—a “dramatic increase from the prior year” in which only 341,000 beneficiaries used telehealth. This increase was largely the result of HHS temporarily waiving statutory and regulatory requirements related to telehealth to allow Medicare beneficiaries to obtain expanded telehealth services.

Telehealth has been at the forefront of DOJ’s healthcare enforcement efforts for years now. For example, DOJ’s 2021 nationwide healthcare enforcement action included criminal charges against dozens of individuals for telehealth fraud schemes involving more than $1.1 billion in alleged loses. The majority of these telehealth enforcement actions to date have involved the use of telehealth to engage in traditional fraud healthcare schemes, such as illegal kickbacks and billing for medically unnecessary services and equipment.

DOJ, however, has increasingly pursued criminal enforcement actions directly related to the telehealth waivers HHS issued in response to the pandemic. For example, in November 2021, a defendant was sentenced to 82 months in prison for participating in a $73 million telehealth fraud scheme. The defendant owned laboratories that provided genetic testing and had paid his coconspirators to arrange for telehealth providers to order medically unnecessary genetic tests. The telehealth providers were not actually treating the beneficiaries, did not use the test results and often never even conducted the telemedicine consultation. Although this was primarily a traditional Anti-Kickback Statute/medical necessity case, DOJ also charged the defendant with using the COVID-19-related telehealth waivers to submit more than $1 million in false claims for sham telemedicine visits.

Similar criminal prosecutions and civil actions relating to the expanded telehealth waivers and sham telehealth encounters can be expected in the future. DOJ and HHS-OIG will likely focus on telehealth visits that resulted in claims for services and equipment with particularly high reimbursement rates, such as genetic testing and durable medical equipment. DOJ and HHS-OIG likely will use data analytics to focus on instances in which telehealth services were billed by providers with whom the beneficiary did not previously have a relationship.

Improper Billing Schemes

DOJ has also pursued criminal cases involving traditional healthcare fraud schemes that sought to take advantage of the COVID-19 pandemic. For example, in May 2021, DOJ announced criminal charges against numerous individuals who were improperly bundling COVID-19 tests with other more expensive laboratory tests, such as genetic testing, allergy testing and respiratory pathogen panel testing. DOJ has likewise pursued criminal cases in which defendants improperly used COVID-19 “emergency override” billing codes to circumvent preauthorization requirements and bill Medicare for expensive medications and treatments. Any improper billing schemes that relate to the pandemic will continue to be a focus of criminal and civil enforcement efforts going forward.

Key Takeaways and Recommendations

DOJ, HHS-OIG and other federal agencies remain focused on pursuing healthcare fraud relating to the COVID-19 pandemic. The best way for hospitals, health systems and other healthcare companies and providers to prepare for this increased enforcement activity and scrutiny is to ensure that they have a robust compliance program in place.

There is no one-size-fits-all approach to compliance, but companies can take several proactive and practical steps to minimize their enforcement risk:

  • Monitor federal and state regulatory and statutory changes. The rules, regulations and guidance relating to the COVID-19 pandemic, including for the PRF and expanded telehealth waivers, have repeatedly changed over the past two years and continue to evolve. Monitoring such changes will not only help prevent enforcement actions, but a company’s reasonable and good faith efforts to interpret and follow such rules and regulations can be a powerful defense should an investigation arise, as discussed in connection with the Allergan case, above. Further to that point, where regulatory requirements and associated guidance is ambiguous, a good documentary record of the basis for your entity’s interpretation of the rules is critical.
  • Incorporate data analytics into your compliance program. DOJ and HHS-OIG continue to rely heavily on sophisticated data analytics, including artificial intelligence, to identify and prosecute fraud. In March 2022, AG Garland emphasized DOJ’s use of “big data” to identify payment anomalies that are indicative of fraud. Healthcare companies already have access to vast amounts of data that they can and should use to proactively identify errors, monitor risk areas and address any potential misconduct.
  • Adapt your compliance program and internal controls, as appropriate, to support PRF compliance, reports and audits. Recipients should continue to practice good compliance hygiene and maintain contemporaneous records regarding the receipt and spending of federal funds. Doing so may involve implementing additional systems to track spending, recovery and relief to avoid overlapping use of funds among relief programs, or consulting with grant accounting and compliance advisors to augment existing infrastructure. Recipients also should periodically review policies, procedures and controls, particularly following major updates to program requirements and interpretations.
  • Ensure the accuracy of required PRF reports, certifications and submissions. Particularly in light of ongoing political pressure, HRSA and HHS-OIG likely will conduct extensive oversight of the PRF to identify potential errors, overpayments and improper use of funds. Recipients should carefully review guidance and instructions to avoid inadvertent errors and misstatements on all submissions. Recipients may consider revisiting prior submissions underlying significant disbursements to identify interpretative issues or compliance concerns that warrant additional supporting documentation or disclosure.
  • Carefully consider the implications before entering into arrangements with other parties. The biggest risk to healthcare companies often comes from those with whom they do business. Compliance programs should focus heavily on reducing the risk of entanglement with bad actors.
  • Be diligent in the design and oversight of marketing strategies. Healthcare companies and providers should regularly review their marketing strategies to ensure total transparency and compliance (both historic and prospective) with applicable state and federal anti-kickback statutes. Companies should confirm that patients are reached through appropriate channels. Although issues relating to COVID-19 may be the impetus for a government investigation, violations of the Anti-Kickback Statute frequently result in larger recoveries for the government.
  • Proactively examine coding and billing practices. Providers should immediately review and revisit their coding and billing practices to determine if their practices involved bundling COVID-19 testing with other claims, the use emergency override billing codes or billing for other COVID-19 related services with high reimbursement rates. There is a strong likelihood that the DOJ will review the claims data for any providers with statistically significant use of these billing and coding practices, particularly when the providers are located in geographical areas where the DOJ’s Healthcare Fraud Strike Force and HHS-OIG’s Medicare Fraud Strike Force operate.

Article By Julian L. André, Benton Curtis, and Dawn R. Helak of McDermott Will & Emery

For more health law legal news, click here to visit the National Law Review.

© 2022 McDermott Will & Emery

The Biden Administration Proposes Mark-to-Market Minimum Tax on Individuals With More than $100 Million in Assets

Summary and Background.  On March 28, 2022, the Biden Administration proposed a 20% minimum tax on individuals who have more than $100 million in assets.  The minimum tax would be based on all economic income (which the proposal refers to as “total income”), including unrealized gain.  The tax would be effective for taxable years beginning after December 31, 2022.  The minimum tax would be fully phased in for taxpayers with assets of $200 million or more.

Under the proposal, an individual’s 2023 minimum tax liability would be payable in nine equal annual installments (e.g., in 2024-2032).  For 2024 and thereafter, the minimum tax liability would be payable in five annual installments.  The tax may be avoided by giving away assets to section 501(c)(3) organizations (including private foundations or donor-advised funds) or 501(c)(4) organizations before the effective date of the legislation so as to avoid the $100 million threshold.

The Biden proposal is an attempt to appeal to Senator Joe Manchin (D-W.Va.) and address some criticisms of Senator Ron Wyden’s (D-Or.) mark-to-market proposal.  Senator Manchin has expressed support for a minimum 15% tax on individuals, and this support was apparently an impetus for the proposal.  Senator Manchin has not, however, expressed support for a mark-to-market minimum tax, and the Biden Administration does not appear to have received any support from Senator Manchin before releasing its proposal.

The five-year payment period is an attempt to address concerns that Wyden’s proposal might overtax volatile assets, and to “smooth” taxpayers’ cash flows without the need for the IRS to issue refunds.  Under the Biden Administration’s proposal, installment payments of the minimum tax may be reduced to the extent of unrealized losses.

The minimum tax is being described as a “prepayment” that may be credited against subsequent taxes on realized income.  This description provides a backup argument on constitutionality: the minimum tax isn’t a tax on unrealized income but is merely a prepayment of tax on realized income.

Operation of the Minimum Tax.  The minimum tax would apply to taxpayers with wealth (assets less liabilities) in excess of $100 million.  The proposal does not define liabilities, and does not indicate whether a taxpayer would be deemed to own the assets of his or her children, or trusts.  Therefore it is unclear as to whether a taxpayer who is close to the $100 million threshold may avoid the tax by giving away assets to children.  As mentioned above, a taxpayer can give assets to section 501(c)(3) or 501(c)(4) organizations to avoid the threshold, and so, if the minimum tax is enacted, donations to charity would be expected to dramatically increase.

The proposal phases in for taxpayers with wealth between $100 million and $200 million.  The phase in is achieved mechanically by reducing the tax liability to the extent that the sum of (w) the minimum tax liability, and (x) the uncredited prepayments exceeds two times (y) the minimum tax rate, times (z) the amount by which the taxpayer’s wealth exceeds $100 million.  Thus, for a taxpayer with $150 million of wealth and a zero basis and no prior prepayments, the $30 million of minimum tax liability would be reduced by $10 million to equal $20 million.  ($10 million is amount by which (x) $30 million exceeds (y) $20 million, which is 40% [two times the minimum tax rate] times $50 million [the amount by which the taxpayer’s wealth exceeds $100 million].)

A taxpayer subject to the minimum tax would make two calculations:  Their “normal” tax liability under our current realization system, and the “minimum” tax under the proposal. Tax would be paid on the greater of the two.

For purposes of the 20% minimum tax, the taxpayer would include all unrealized gain on “tradeable assets.”  The proposal does not define tradeable assets.  Tradeable assets would be valued using end-of-year market prices.  The taxpayer would also include all unrealized gain on “non-tradeable assets.”  Non-tradeable assets would be valued using the greater of (i) the original or adjusted cost basis, (ii) the last valuation event from investment (i.e., a round of equity financing), (iii) borrowing (i.e., a lender’s appraisal), (iv) financial statements, or (v) other methods approved by the IRS.  Original or adjusted cost basis would be deemed to increase at a rate equal to the five-year Treasury rate plus two percentage points.  The five-year Treasury rate is currently 2.76% and so, at today’s rates, non-traded assets without a valuation event would deemed to increase in value at a 4.76% annual rate.  The proposal would not require valuations of non-tradeable assets.

While a taxpayer would be subject to the minimum tax if it exceeds the normal tax, as mentioned above, payment of the minimum tax would be made in equal annual installments (nine for the first year of minimum tax liability and five thereafter).

So, assume that a taxpayer purchases an equity interest in a non-traded C corporation on January 1, 2023 for $200 million.  The taxpayer has no realized income and no other assets.  The taxpayer would have zero “normal” tax.  Assume that the five-year Treasury rate is 2.76%.  The investment would be deemed to increase in value by 4.76% (to $209.5 million).  The minimum tax would be 20% of $9.5 million, or $1.9 million.  If this was the taxpayer’s first year subject to the minimum tax, the minimum tax liability would be $211,111 in each of years 2024-32, subject to the “illiquid exception” described below.  If the taxpayer subsequently sells the C corporation, it would credit the minimum tax prepayments against his or her income tax liability.

Payments of the minimum tax would be treated as a prepayment available to be credited against subsequent taxes on realized gains.

The Biden Administration has separately proposed that death would give rise to a realization event.  If a taxpayer’s prepayments in excess of tax liability exceed gains at death, the taxpayer would be entitled to a refund.  The refund would be included in a single decedent’s gross estate for estate tax purposes.  Net uncredited used prepayments of a married decedent would be transferred to the surviving spouse (or as otherwise provided in regulations).

In contrast to Senator Wyden’s proposal, which does not require that tax be paid on unrealized gain for non-traded assets, and instead imposes a deferral charge upon realization, the Biden Administration’s proposal generally requires that minimum tax be calculated with respect to all unrealized gain, including deemed appreciation on non-traded assets, subject to an “illiquid exception.”  If tradeable assets held directly or indirectly make up less than 20% of a taxpayer’s wealth, the taxpayer may elect to include only unrealized gain in tradeable assets in the calculation of their minimum tax liability.  A taxpayer that makes this election would be subject to a deferral charge upon realization to the extent of gain, but the deferral charge would not exceed 10% of unrealized gain.  The proposal does not indicate the rate of the deferral charge.

This aspect of the Biden Administration’s proposal provides a meaningful benefit to “illiquid” taxpayers and encourages taxpayers to become “illiquid” to qualify for the exception.  The proposal provides that tradeable assets held “indirectly” are treated as owned by the taxpayer for this purpose and therefore it is unclear whether and to what extent taxpayers can contribute tradeable assets into nontradeable vehicles to qualify for the illiquid exception.  The proposal would provide the IRS with specific authority to issue rules to prevent taxpayers from inappropriately converting tradeable assets to non-tradeable assets.

Estimated tax payments would not be required for minimum tax liability, and the minimum tax payments would be excluded from the prior year’s tax liability for purposes of computing estimated tax required to avoid the penalty for underpayment of estimated taxes.

The tax is expected to affect 20,000 taxpayers (in contrast to roughly 700 under Wyden’s plan) but to generate approximately the same amount of revenue as Wyden’s proposal: $360 billion over ten years as estimated by the Treasury Department (which is expected to be around $550 billion over 10 years under the Joint Committee on Taxation’s “scoring” methodology).

Article By Robert Gaut, Martin T Hamilton, and Colleen Hart at Proskauer Rose LLP

For more tax law legal news, click here to visit the National Law Review.

© 2022 Proskauer Rose LLP.

Biden Administration Issues New Government-Wide Anti-Corruption Strategy

On Dec. 7, 2021, the White House published a government-wide policy document entitled “United States Strategy on Countering Corruption” (“Strategy”). The Strategy implements President Biden’s National Security Memorandum from earlier in 2021, which declared international corruption a threat to U.S. national security.

The Strategy is notable for several reasons:

First, the Strategy focuses not just on the “supply side” of foreign bribery and corruption—that is, companies acting in violation of the Foreign Corrupt Practices Act (FCPA)—but also on the “demand side” of the equation, namely corrupt foreign officials and those who assist them. It promises to pair vigorous enforcement of the FCPA with efforts to hold corrupt leaders themselves accountable, via U.S. money laundering laws, economic sanctions, and visa restrictions.

Second, the Strategy specifically calls out the role of illicit finance in facilitating and perpetuating foreign corruption, promising “aggressive enforcement” against those who facilitate the laundering of corrupt proceeds through the U.S. economy. Professional gatekeepers such as lawyers, accountants, and trust and company service providers are specifically identified as targets of future scrutiny. The Strategy also promises to institute legislative and regulatory changes to address anti-money laundering (AML) vulnerabilities in the U.S. financial system. These promised changes include:

  • Finalizing beneficial ownership regulations, and building a national database of beneficial owners, as mandated by the Anti-Money Laundering Act of 2020.

  • Promulgating regulations designed to reveal when real estate is used to hide ill-gotten gains. Contemporaneously with the White House’s issuance of the Strategy, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an Advance Notice of Proposed Rulemaking (ANPRM), inviting public comment on its plan to apply additional scrutiny to all-cash real estate transactions.

  • Prescribing minimum reporting standards for investment advisors and other types of equity funds, which are currently not subject to same AML program requirements as other financial institutions.

Third, the Strategy calls for a coordinated, government-wide response to corruption, and it contemplates a role not only for law enforcement and regulatory agencies but also for agencies such as the Department of State and Department of Commerce, which is to establish its own new anti-corruption task force. It remains to be seen if the increased scope of anti-corruption efforts called for by the Strategy will result in new or additional penalties for persons and entities perceived as corrupt or as facilitating corruption, but the Strategy may place an additional premium on corporate anti-corruption compliance.

Individuals and entities operating in sectors traditionally associated with corruption and/or AML risk should consider taking the following steps in response to the Strategy. These considerations apply not only to U.S. persons and businesses but also to anyone who may fall within the broad purview of the FCPA, U.S. money laundering statutes, and other laws with extraterritorial reach:

  • Increase due diligence for any pending or future transactions in jurisdictions where potentially corrupt actors or their designees play a role in awarding government contracts. Ensure any payments are the result of arms-length transactions based on legitimate financial arrangements.

  • Professional gatekeepers should become familiar with the particular risks associated with the industries in which they operate. While AMLA made it clear that lawyers, accountants, and real estate professionals will come under increased scrutiny based on the risk profile of their clients, the Strategy increases the likelihood that law enforcement will devote additional resources in this sometimes-overlooked area.

  • Given the increased role the State Department will continue to play in the anticorruption space based on the National Defense Authorization Act and the Strategy, companies doing business in or with countries vital to U.S. foreign policy goals should remember that in addition to the individual leaders of these countries, government institutions and lower-level officials could create risk and will be closely watched. Though the U.S. government often talks about specific government officials, the Strategy appears to take a broader approach.

  • Businesses should continue to examine and reexamine third-party risk with an emphasis on preventing potential problems before they occur. Additional resources and increased cooperation between and among government agencies may lead to additional investigations and enforcement actions, so compliance programs should be updated where necessary.

Article By Kyle R. Freeny and Benjamin G. Greenberg of Greenberg Traurig, LLP

For more white collar crime and consumer rights legal news, click here to visit the National Law Review.

©2021 Greenberg Traurig, LLP. All rights reserved.