Tag: biden administraion

The Inflation Reduction Act: How Do Tribal Communities Benefit?

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”), ushering in substantial changes for tax law, climate resilience, healthcare, and more in the United States. According to the Biden administration’s press release, the new $750 billion legislation aims to lower everyday costs for families, insist that corporations pay their fair share, and combat the climate crisis. During the signing ceremony, President Biden stated, “With this law, the American people won and the special interests lost […] For a while people doubted whether any of that was going to happen, but we are in a season of substance.”

Notably, the legislation provides significant provisions for tribal communities and the Bureau of Indian Affairs. Once the funding is appropriated by Congress, it will be directed toward drought mitigation programs, fish hatcheries, modernization of electric systems, and more for Native communities, including ones in Alaska and Hawaii.

How the Inflation Reduction Act of 2022 Supports the Environment and Tribal Communities

The Inflation Reduction Act of 2022 contains an array of provisions, including the reduction of drug prices, the lowering of energy costs, and, notably, federal infrastructure investments that benefit Native communities. Andrew M. VanderJack and Laura Jones, Co-Coordinators of Van Ness Feldman’s Native Affairs Practice, highlight the most significant facets of the bill: “This legislation provides some opportunities specifically for tribes and tribal entities, including programs related to climate resiliency and adaptation, electrification, and drought relief. For example, the Emergency Drought Relief program for Tribes extends direct financial assistance to tribal governments to address drinking water shortages and to mitigate the loss of tribal trust resources.”

Pilar Thomas, Partner in Quarles & Brady’s Energy, Environment & Natural Resources Practice Group, expanded on the most significant inclusions for Tribes: “[…] the creation of a Direct Pay tax credit payment program that allows Tribes to receive a payment equal to the clean energy technology tax credits – especially for solar, wind, storage, geothermal and EV charging stations; […] direct funding for electrification and climate resiliency through DOI and USDA; […] access to the greenhouse gas reduction fund, environmental and climate justice grants; and expanded energy efficiency tax benefits and rebates for tribes and tribal members.”

“Tribal governments are also eligible to apply for other programs such as the Clean Vehicle Credit program, the Energy Efficient Commercial Buildings Deduction, and the State and Private Forestry Conservation Programs,” noted Mr. VanderJack and Ms. Jones.

How the 2022 Inflation Reduction Act Has Been Received by Tribal Communities

The 2022 Inflation Reduction Act has received a warm reception from groups such as the National Indian Health Board and Native Organizers Alliance, who laud the bill’s potential to improve environmental, medical, and economic conditions for tribal communities, some of whom still lack access to electricity or clean water. The increase in funding will allow tribes to use green energy technology to increase climate resilience and decrease individual energy costs, while reducing the effects of environmental racism with risk assessments for drinking water and climate hazards. These infrastructural changes will stimulate economic development by creating new jobs. “With critical investments in the Inflation Reduction Act, we’re making sure the federal government steps up to support Native-driven climate resilience, advance tribal energy development, and fulfill its trust responsibility to Native communities,” said Senator and Senate Committee on Indian Affairs Chairman Brian Schatz.

“This legislation will result in hundreds of millions of funding available for Tribes, and non-profits that work with tribes and tribal communities to support the clean energy transition for tribal communities, reduce energy costs for tribal members, and create jobs,” said Ms. Thomas of Quarles & Brady. “The IRA will provide a substantial down payment for every tribe to take advantage of clean energy technologies, energy efficiency and energy savings, and climate resilient solutions for their communities and tribal members individually.  The new projects, technology implementation and economic development opportunities are substantial and will create long term community and economic development sustainable improvements in tribal communities.”

Some groups feel that the new legislation does not go far enough. In an open letter to President Biden, Senate Majority Leader Chuck Schumer, and House Speaker Nancy Pelosi, Indigenous-led advocacy organization NDN Collective argued that Congress’ hesitance to fully reject fossil fuels undermines the stated goals of addressing climate change, a misstep that could disproportionately affect tribal communities at the frontlines of the environmental crisis. “We believe that moving away from investments in the fossil fuel and other extractive industries and reallocating the funding to further research and development will help us find the solutions we need for true decarbonization and large-scale equitable carbon emissions reductions,” the collective stated. “We are already aware of innovative, Indigenous-led solutions that just need the proper funding and support to be scaled and replicated.”

Challenges in Getting the 2022 Inflation Reduction Act Passed

Up to this point, the Inflation Reduction Act has faced significant challenges in Congress. The legislation is the product of extensive compromise over the Build Back Better Act within the Democratic party. The Build Back Better Bill was initially estimated to cost over $3 trillion, and ultimately, the Inflation Reduction Act was passed with a budget of $750 billion. Senator Joe Manchin of West Virginia held back his support of the bill until late July, and Republicans successfully blocked an aspect of the bill that would have capped the price of insulin for Americans with private health insurance. When presented to Congress, the vote was split by party lines with every Republican voting against the bill. Biden has criticized Republicans for this decision, saying at the signing of the Inflation Reduction Act, “every single Republican in the Congress sided with the special interests in this vote — every single one.”

Challenges for tribal governments remain as well, specifically concerning the IRA’s implementation. “Despite the incredible opportunity for tribes, major barriers remain including tribal internal capacity and capabilities, [and] federal regulatory hurdles (such as BIA leasing and easement approvals),” said Ms. Thomas.

“[…] Navigating the complexities of each program and actually obtaining funding is always the challenge,” said Mr. VanderJack and Ms. Jones of Van Ness Feldman. “Tribes and tribal entities should engage directly, whenever possible, with the grant funding agencies to make sure proposals are tailored to fit both program requirements and community needs.”

Early Assessment of How the IRA will Impact Tribal Communities

The Inflation Reduction Act, ultimately, provides meaningful resources and investments for tribal communities in a variety of ways. While the provisions are not as significant as COVID-19 relief and infrastructure funding that tribal governments have received in previous years, the new legislation is nonetheless beneficial. “While the federal grant funding is relatively small, the potential major impact is the ability to access funding through tax credit payments and rebates,” said Ms. Thomas. “This mechanism is critical as it is simplifies tribes’ access to funding (rather than, for example, seeking to obtain funding through the competitive grant programs).”

Article By Chandler Ford, Casey Karthaus, Crissonna Tennison, and Shelby Garrett of The National Law Review / The National Law Forum LLC.

For more tribal law / indigenous peoples legal news, click here to visit the National Law Review.

Copyright ©2022 National Law Forum, LLC

COVID-19: President Biden Targets Private Employers and Federal Employees and Contractors in His “Path Out of the Pandemic”

On 9 September 2021, President Biden announced his comprehensive national strategy for addressing the COVID-19 pandemic including multiple directives and actions targeted at federal, private-sector, and healthcare employers. The strategy includes regulatory action from the Occupational Safety and Health Administration (OSHA) and the Centers for Medicare & Medicaid Services (CMS) in addition to two Executive Orders, all of which include sweeping vaccination and COVID-19 safety mandates. Though the six-pronged action plan includes measures focused on vaccination efforts, protecting already vaccinated individuals, keeping schools safely open, increasing access to testing, safeguarding economic recovery, and improving care for those affected by COVID-19, this alert will address the specific directives affecting employers.

OSHA EMERGENCY TEMPORARY STANDARD FOR LARGE PRIVATE-SECTOR EMPLOYERS

As outlined in the President’s six-pronged strategy, the White House has directed OSHA to issue an emergency temporary standard (ETS) that would require private employers with 100 or more employees to either mandate the COVID-19 vaccine for its workforce or require weekly COVID-19 testing before reporting to a worksite. Though limited details were provided, this ETS would apply to approximately 80 million private-sector workers in the United States. As part of the ETS, covered employers would also be required to provide paid time off for time spent obtaining a COVID-19 vaccine as well as for recovery from post-vaccination symptoms. The ETS is anticipated to be published in the coming weeks.

As background, OSHA is authorized to issue emergency temporary standards under limited conditions, specifically when it has determined that workers may be in grave danger and a new standard is necessary for their protection in the workplace. After initial publication in the Federal Register, the temporary standard follows the usual rulemaking procedure for a permanent standard, though the timeline for a final ruling is within six months of publication. Finally, an ETS may be challenged in the appropriate U.S. Court of Appeals.1

OSHA most recently issued an ETS on 10 June 2021 that was limited to the healthcare industry. Prior to that, OSHA had not issued an emergency temporary standard since November 1983, and that one (related to asbestos) was invalidated by the U.S. Court of Appeals for the Fifth Circuit about four months later. It is reasonable to expect that a new ETS may also face legal challenges, not only in the regular course, but also due to a potential clash with state legislation and executive actions prohibiting certain requirements related to COVID-19 vaccinations.

EXECUTIVE ORDERS DIRECTED AT FEDERAL EXECUTIVE EMPLOYEES AND FEDERAL CONTRACTORS

The President’s plan also includes an Executive Order mandating the vaccine for federal executive branch employees, with exceptions only as permitted by law. Although few details have been provided, the Executive Order directs the Safer Federal Workforce Task Force (Task Force) to issue guidance within seven days as to the specific implementation protocols for affected agencies.

A separate Executive Order requires agencies to include a clause in certain federal contracts providing that contractors must comply with all workplace safety guidelines issued by the Task Force, with the specific protocols and any exceptions to be published by 24 September 2021. By 8 October 2021, the Federal Acquisition Regulatory Council, which is responsible for promulgating the Federal Acquisition Regulation (FAR), is required to (1) begin drafting the FAR clause required by the Executive Order and (2) recommend that agencies use their authority under FAR Subpart 1.4 to deviate from the FAR to include the Executive Order’s requirements in specific types of contracts. Agencies also are required to take steps to ensure that the Executive Order’s requirements are included in contracts and contract-like instruments that are not subject to the FAR, such as other transaction agreements, entered into on or after 15 October 2021. The clause will be included in contracts or contract-like instruments for services, construction, leases, and concessions. It also will be included in contracts and contract-like instruments subject to the Service Contract Act or entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public. The Executive Order specifically excludes certain types of federal agreements from compliance with the new requirement. Most notably, the Executive Order excludes federal grants, contracts below the simplified acquisition threshold (currently $250,000), and subcontracts solely for the provision of products.

EXPANDED CMS REGULATIONS FOR HEALTHCARE FACILITIES

The President’s plan also expands on the 18 August 2021 CMS emergency regulation requiring vaccination for nursing facility staff, by requiring employees of all healthcare facilities that receive funds from Medicare and Medicaid to be fully vaccinated. The new CMS directive will expand the vaccination mandate to hospitals, home care facilities and dialysis centers in the United States and will apply to nursing home staff as well as staff in hospitals and other CMS-regulated settings, including clinical staff, individuals providing services under arrangements, volunteers, and staff who are not involved in direct patient, resident, or client care. Although some states have begun to adopt vaccination mandates for the healthcare industry, the CMS directive will develop a uniform standard across all covered entities. CMS is in the process of developing an Interim Final Rule with Comment Period that will be issued in October.

PRACTICAL CONSIDERATIONS FOR EMPLOYERS

Given the broad scope of the President’s plan and the pending ETS, employers, including federal contractors, should evaluate coverage under any of the aforementioned mandates and work with counsel to develop and implement a compliance program that complies with federal, state, and local laws. Depending upon the scope of the ETS, there may be additional issues under the National Labor Relations Act and the Fair Labor Standards Act, as well as state wage and hour laws. Unionized employers should be cognizant of how these directives may impact obligations under collective bargaining agreements or whether a vaccine program would be a mandatory subject of bargaining. Finally, employers must address employee and applicant requests for a reasonable accommodation under both the Americans with Disabilities Act and Title VII of the Civil Rights Act if requiring vaccination as a condition of employment.

1 29 U.S. Code §655 (“Any person who may be adversely affected by a standard issued under this section may at any time prior to the sixtieth day after such standard is promulgated file a petition challenging the validity of such standard with the United States court of appeals for the circuit wherein such person resides or has his principal place of business, for a judicial review of such standard. A copy of the petition shall be forthwith transmitted by the clerk of the court to the Secretary.”).

Copyright 2021 K & L Gates
For more articles on mandatory COVID-19 vaccines, visit the NLR Coronavirus News section.

Wealth Planning in 2021: Preparing For a Changing Tax Landscape

Since President Biden took office at the beginning of this year, there has been much buzz and conjecture regarding what the tax policy under the Biden-Harris Administration would look like.  In light of the recently released Department of Treasury’s General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, commonly known as the “Green Book,” we now have a better idea of the proposed tax law changes that the Administration will focus on implementing in the coming year.

While the Green Book contains various tax proposals that could significantly affect estate planning, it interestingly does not include a proposal to decrease the estate and gift tax exemption, which was a major topic of discussion during last year’s election cycle (click here to review our advisory on Estate Planning and the 2020 Election).  However, some Democrats in Congress nonetheless continue to argue for this reduction.  For example, Senator Bernie Sanders’ proposed legislation, For the 99.5% Act, would reduce the gift tax exemption to $1 million per person and the estate tax exemption to $3.5 million per person and would also impose new progressive estate tax rates ranging from 45% to 65%.

In any event, the Green Book contains the proposed tax laws that reflect the Administration’s top priorities and are more likely to be enacted than those proposals not included in the Green Book.  The Green Book proposals seek to reverse many of the tax laws included in the 2017 Tax Cuts and Jobs Act enacted under former President Trump, such as a proposed increase to individual income tax rates and an end to certain capital gains tax preferences, discussed in further detail below.

Green Book Proposals That Would Affect High Net Worth Clients:

Increase Top Marginal Individual Income Tax Rate for High-Income Earners.  The top marginal income tax rate would increase from 37% to 39.6% for taxable income in excess of the top bracket threshold.  For taxable years beginning January 1, 2022, this would apply to income in excess of $509,300 for married individuals filing jointly and $452,700 for single filers, and thereafter be indexed for inflation.

Tax Capital Gains for High-Income Earners at Ordinary Income Tax Rates.  For taxpayers with adjusted gross income of more than $1 million, long-term capital gains and qualified dividends tax rates would increase to match the proposed ordinary income tax rates.  To the extent that a taxpayer’s income exceeds $1 million, rates would go from 20% (or 23.8% including the net investment income tax (“NIIT”)) to 39.6% (or 43.4% including NIIT).  This proposal currently includes a retroactive effective date of April 28, 2021.

Treat Transfers of Appreciated Property by Gift or at Death as Realization Events.  This proposal would eliminate the so called “step up in basis loophole,” which allows for an asset transferred at death to be “stepped up” to fair market value for cost basis purposes resulting in no capital gains tax imposed on the asset’s appreciation through date of death.  Instead, the transfer of an appreciated asset by gift or at death would be treated as sold for fair market value at the time of the transfer, creating a taxable gain realization event for the donor or deceased owner.  There would, however, be a $1 million per person (or $2 million per married couple) exemption from recognition of capital gains on property transferred by gift or at death, indexed for inflation.  In addition, certain exclusions would apply, including:

  • Residence.  $250,000 per person (or $500,000 per married couple) would be excluded from capital gain on the sale or transfer of any residence.
  • Surviving spouse.  Transfers by a decedent to a U.S. citizen spouse would carry over the basis of the decedent and capital gain recognition would be deferred until the surviving spouse dies or otherwise disposes of the asset.
  • Charity.  Appreciated property transferred to charity would not generate a taxable gain; however, the transfer of appreciated assets to a split-interest charitable trust would generate a taxable gain as to the share of the value transferred attributable to any non-charitable beneficiary.
  • Tangible personal property.  No capital gain would be recognized on transfers of tangible personal property (excluding collectibles).

Although the tax imposed on gains deemed realized at death would be deductible on the estate tax return of the decedent’s estate, deductions are not equivalent to tax credits and in high tax states such as New York, the additional tax could be substantial.

Impose Gain Recognition on Property Transferred to or Distributed from an Irrevocable Trust.  Any transfers of property into, and distributions in kind from, an irrevocable trust would be treated as deemed recognition events subject to capital gains tax.  In addition, while the generation-skipping transfer (“GST”) tax exempt status of a trust would not be affected, gain would automatically be recognized on property held in an irrevocable trust which has not otherwise been subject to a taxable recognition event within the prior 90 years.  The first possible recognition event would be December 31, 2030 for any trust in existence on January 1, 1940.  This proposal would also apply to transfers to, and distributions in kind from, partnerships and other non-corporate entities.  Elimination of Valuation Discounts.  The valuation of partial interests in property contributed to a trust would be equal to the proportional share of the fair market value of all of such property.  In other words, no discounts for lack of marketability or minority interests would be allowed in valuing transfers of partial interests in LLCs, corporations, partnerships or real property.

Summary

The legislative text of the Administration’s tax proposals will likely not be available until the fall.  It is important to note that any proposed tax law changes face a split 50-50 Senate, which means that the prospect of passing any tax reform at all is uncertain.  Commentators believe that the Green Book proposals will be the subject of extensive negotiation over the next several months, including significant opposition to large increases in capital gains tax rates.  In the meantime, we at Wiggin and Dana [link to PCS attorneys page] are available to discuss the Green Book proposals in more detail and to make proactive, tailored recommendations in light of the current changing tax law landscape.

© 1998-2021 Wiggin and Dana LLP

Article by Michael T. Clear, Veronica R.S. Bauer, Robert W. Benjamin, Daniel L. Daniels, and Helen C. Heintz with Wiggin and Dana LLP.

For more articles on taxes, visit the NLR Tax section.

Russia Russia Russia! The Biden Administration Imposes Tough Sanctions on Russia

This week has been a week of significant foreign policy action. Today, President Biden issued a new Executive Order imposing new tough sanctions on Russia for its interference in the U.S. 2020 presidential election, as well as the SolarWinds cyber-attack that impacted multiple U.S. government agencies. This action was taken a day after Secretary of State Blinken stated strong concerns about the increase in Russian troops along the Ukrainian border. Earlier this week, the 2021 Threat Assessment report published by the Office of DNI (Director of National Intelligence) also cited Russia as presenting “one of the most serious intelligence threats to the United States,” noting a variety of provocative actions relating to cyber, military, and intelligence activities.

Background on the New Russia Sanctions

At a high level, today’s E.O. prohibits certain dealings in Russian sovereign debt, and authorizes targeted sanctions on technology companies that support the Russian Intelligence Services’ efforts to carry out malicious cyber activities against the United States and its partners and allies. Under the E.O, the Treasury Department also announced the designation of over 30 Russian individuals and entities that carried out Russian government-directed attempts to influence the 2020 U.S. presidential election, and other acts of disinformation and interference (see full list here). In conjunction with the E.O., the U.S. expelled ten Russian diplomats that include representatives of Russian Intelligence Services.

The White House’s statement noted that these measures send “a signal that the United States will impose costs in a strategic and economically impactful manner on Russia if it continues or escalates its destabilizing international actions. This includes, in particular, efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; [and] engage in and facilitate malicious cyber activities against the United States and its allies and partners ….”

What Triggered these New Sanctions?

Last year, SolarWinds, a major U.S. information technology firm, was the subject of a cyberattack that impacted its clients’ data, including multiple U.S. government agencies and Fortune 500 companies. In December, then U.S. Secretary of State Mike Pompeo said he believed Russia was behind the attack but U.S. investigators “were still unpacking precisely what it is.” Today, the U.S. has formally named Russian Foreign Intelligence Service (SVR) as the force behind these cybersecurity hacks on SolarWinds.

In addition to the attack on SolarWinds, the Biden Administration cited Russia’s attempts to influence the 2020 U.S. presidential elections, and other acts of disinformation and interference as triggers for these sanctions.

New Prohibitions on U.S. Financial Institutions on Dealing in Russian Sovereign Debt

Under the E.O., the Biden Administration issued Directive 1 generally prohibiting U.S. financial institutions from transacting in ruble and non-ruble denominated funds and bonds. This directive expands upon existing prohibitions on certain dealings in Russian sovereign debt that have been in place since August 2019.

Specifically, as of June 14, 2021, U.S. financial institution are prohibited from:

  • Participating in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation; and
  • lending ruble or non-ruble denominated funds to the three aforementioned entities.

The immediate impact is on U.S. financial institutions, including its foreign branches, that may be dealing with Russian sovereign debt.

E.O. Authorizes Targeted Sanctions

The E.O. also authorizes targeted sanctions on persons that have supported Russia’s efforts to carry out malicious cyber activities against the United States and its interference in U.S. or foreign elections, among other things (see Section 1 of the E.O., found here). Any action taken pursuant to the E.O. requires a determination by the Treasury Department in consultation with the State Department. But, we wouldn’t be surprised if additional designations come out in the next days or weeks under this authority.

We expect that measures will be taken against high-ranking Russian officials and technology companies with close ties to Russia’s Intelligence Services. For example, among those entities already designated under the E.O. are ERA Technopolis; Pasit, AO (Pasit); Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation (SVA); Neobit, OOO (Neobit); Advanced System Technology, AO (AST); and Pozitiv Teknolodzhiz, AO (Positive Technologies) (see here).

In addition to the primary sanctions outlined above, the E.O. authorizes secondary sanctions to non-U.S. persons that provide “financial, materials, or technological” support to persons sanctioned under the E.O.

While the short-term impact will likely be on U.S. financial institutions, the broader message is that this Administration is not going to be shy about stiffer sanctions on Russia. Though the financial sector will always be a ripe target for sanctions as a foreign policy tool, if Russia’s aggression increases, we may see other sectors being targeted as well.

We will keep monitoring and updating as news develops.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.

ARTICLE BY Fatema K. Merchant and Mario Andres Torrico of
Sheppard, Mullin, Richter & Hampton LLP
For more articles on Biden Administration sanctions, visit the NLR  Election Law / Legislative News section.