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BIOSECURE Act: Anticipated Movement, Key Provisions, and Likely Impact

Last night, the House of Representatives passed the BIOSECURE Act (BIOSECURE or the Act) by a bipartisan vote of 306 to 81.

The BIOSECURE Act prohibits federal agencies from procuring or obtaining any biotechnology equipment or service produced or provided by a biotechnology company of concern. Subject to some exceptions, it also prohibits federal agencies from contracting with a company that uses equipment or services produced or provided by a biotechnology company of concern. Further, the Act prohibits recipients of a loan or grant from a federal agency from using federal funds to purchase equipment or services from a biotechnology company of concern.

The Senate version of BIOSECURE, sponsored by Sens. Gary Peters (D-MI) and Bill Hagerty (R-TN), was voted out of the Senate Committee on Homeland Security and Governmental affairs with bipartisan support in March 2024. Given its passage in the House last night, the BIOSECURE Act is likely to be signed into law by the end of the year. The House version of BIOSECURE is likely to be the version that becomes law. President Biden is unlikely to veto the Act given its bipartisan support, his previous executive actions to support domestic biotechnology development, and his Administration’s approach towards competition with China.

The Act defines “biotechnology company of concern” as any entity that:

is subject to the jurisdiction, direction, control, or operates on behalf of the government of a foreign adversary (defined as China, Cuba, Iran, North Korea, and Russia);
is involved in the manufacturing, distribution, provision, or procurement of a biotechnology equipment or service; and
poses a risk to U.S. national security based on:
- engaging in joint research with, being supported by, or being affiliated with a foreign adversary’s military, internal security forces, or intelligence agencies;
- providing multiomic data obtained via biotechnology equipment or services to the government of a foreign adversary; or
- obtaining human multiomic data via the biotechnology equipment or services without express and informed consent.

Somewhat unusually, the Act names specific Chinese companies as automatically qualifying as “biotechnology companies of concern”:

BGI (formerly known as the Beijing Genomics Institute);
MGI;
Complete Genomics;
WuXi AppTec; and
WuXi Biologics.

Both categories include any subsidiary, parent, affiliate, or successor entities of biotechnology companies of concern.

The Act also has very broad definitions of “biotechnology equipment or service.” The definition of equipment encompasses any machine, device, or subcomponent, including software that is “designed for use in the research, development, production, or analysis of biological materials.” The definition of services is similarly broad.

The BIOSECURE Act also requires the Office of Management and Budget (OMB) to publish a list of additional biotechnology companies of concern. The list is prepared by the Secretary of Defense in coordination with the Secretaries of the Departments of Health and Human Services, Justice, Commerce, Homeland Security, and State, as well as the Director of National Intelligence and National Cyber Director. This list of companies must be published by OMB within one year of BIOSECURE’s enactment and reviewed annually by OMB in consultation with the other Departments.

Guidance and Regulatory Authorities

OMB is also tasked with developing guidance and has 120 days from enactment of the statute to do so for the named companies. For the list of biotechnology companies of concern, OMB’s guidance must be established within 180 days after the development of the list.

Beyond OMB, the Act requires the Federal Acquisition Regulatory Council to revise the Federal Acquisition Regulation (FAR) to incorporate its prohibitions. The FAR regulations must be issued within one year of when OMB establishes its guidance.

For named companies the Act’s prohibitions are effective 60 days after the issuance of the FAR regulations. For companies placed on the biotechnology company of concern list, the effective date for the Act’s prohibitions is 80 days after the issuance of FAR regulations.

Impact on Existing Business Relationships

In response to stakeholder concerns about disrupting existing commercial relationships and triggering delays in drug development, the House version of the BIOSECURE Act provides a five-year unwinding period for contracts and agreements entered into before the Act’s effective dates. Contracts entered into after the Act’s effective dates do not qualify for the five year unwinding period.

Process for Designating Companies

BIOSECURE specifies the process for designating a biotechnology company of concern. Critically, the Act does not require OMB to notify a company prior to the Department of Defense making the designation. Rather, a company will receive notice that it is being designated and placed on the biotechnology company of concern list. Moreover, the criteria for listing will only be provided “to the extent consistent with national security and law enforcement interests.” Thus, companies may face a circumstance where they are not provided the evidence supporting their designation.

Once a company receives the notice, it will have 90 days to submit information and arguments opposing the listing. The Act does not require a hearing or any formal administrative process. If practicable, the notice may also include steps the company could take to avoid being listed, but it is not required.

Safe Harbor, Waivers and Exceptions

The Act only has one safe harbor for biotechnology equipment or services that were formerly but no longer provided or produced by a biotechnology company of concern. This safe harbor seems intended to allow a biotechnology company of concern to sell their ownership of a product or service to another company without prohibitions applying to the new owner.

Agency heads may waive the Act’s prohibitions on a case-by-case basis, but only with the approval of OMB acting “in coordination with the Secretary of Defense.” Waivers must be reported to Congress within 30 days of being granted. The waiver may last for up to a year with an additional “one time” extension of 180 days allowed if an agency head determines it is “in the national security interests of the United States.” The 180-day extension must be approved by OMB and the agency head must notify and submit a justification to Congress within 10 days of the waiver being granted.

The Act has only two exceptions. First, its prohibitions do not apply to intelligence activities. Second, the prohibitions do not apply to health care services provided to federal employees, members of the armed services, and government contractors who are stationed in a foreign country or on official foreign travel.

Impact and Considerations for Clients

1. Increased Risk of Partnerships with Chinese Companies and Researchers:

Pharmaceutical and biotechnology companies that receive federal funding or contract with federal agencies should be prepared to wind down business ties to biotechnology companies in China. Impacted companies need to begin evaluating the risk to their supply chains, manufacturing capacity, and R&D pipelines in the event a business partner is listed.

Universities in the United States and other research institutes that receive federal funding will also need to undertake a similar assessment of their research partners and collaborators based in China.

2. Loss of CDMO capacity:

Wuxi App Tec is a large, global provider of contract development and manufacturing (CDMO) services to the life sciences industry. According to the New York Times “[b]y one estimate Wuxi has been involved in developing one-fourth of the drugs used in the United States.” BIOSECURE would effectively ban Wuxi from conducting business in the United States, and if passed, risks causing delays, shortages, and cost increases as companies seek to transition to other CDMOs. It will likely take years for competitors to replace the lost CDMO capacity.

3. Fate of Wuxi U.S. Facilities:

Wuxi has a large presence in the United States. It operates 12 facilities and employs almost 2,000 people. Normally, Wuxi would be expected to sell its U.S.-based facilities. However, based on Tiktok’s experience, it is unclear if the Government of China will permit Wuxi to sell its facilities as opposed to dismantling and/or relocating facilities outside of the United States.

4. OMB’s Management of Biotechnology Companies of Concern List

OMB does not typically manage processes like the one envisioned by BIOSECURE. How OMB interprets the broad criteria for listing companies will be critical. Which Departments, beyond the Department of Defense, will have the greatest influence on OMB’s decision making and how open OMB is to evidence from companies seeking to avoid listing will also need to be watched closely. Until OMB starts preparing its guidance and the FAR regulations are proposed, it is hard to anticipate the rate at which new companies will be added to the list. How the process established by BIOSECURE will interact with or leverage existing entity lists will be another development to closely monitor.

5. Retaliation by China

BIOSECURE’s passage is likely to trigger a response from the Government of China. Responses could range from imposing its own export controls to using the country’s sweeping national security laws to harass United States businesses and their employees. Companies doing business in China, particularly those in the pharmaceutical or biotech industries need to be prepared.

A Summary of Inflation Reduction Act’s Main Energy Tax Proposals

On August 7, the Senate passed the Inflation Reduction Act of 2022 (the “IRA”). The IRA contains a significant number of climate and energy tax proposals, many of which were previously proposed in substantially similar form by the House of Representatives in November 2021 (in the “Build Back Better Act”).

Extension and expansion of production tax credit

Section 45 of the Internal Revenue Code provides a tax credit for renewable electricity production. To be eligible for the credit, a taxpayer must (i) produce electricity from renewable energy resources at certain facilities during a ten-year period beginning on the date the facility was placed in service and (ii) sell that renewable electricity to an unrelated person.^[1] Under current law, the credit is not available for renewable electricity produced at facilities whose construction began after December 31, 2021.

The IRA would extend the credit for renewable electricity produced at facilities whose construction begins before January 1, 2025. The credit for electricity produced by solar power –which expired in 2016—would be reinstated, as extended by the IRA.

The IRA would also increase the credit from 1.5 to 3 cents per kilowatt hour of electricity produced.

A taxpayer would be entitled to increase its production tax credit by 500% if (i) its facility’s maximum net output is less than 1 megawatt, (ii) it meets the IRA’s prevailing wage and apprenticeship requirements,^[2]and (iii) the construction of its facility begins within fifty-nine days after the Secretary publishes guidance on these requirements.

In addition, the IRA would add a 10% bonus credit for a taxpayer (i) that certifies that any steel, iron, or manufactured product that is a component of its facility was produced in the United States (the “domestic content bonus credit”) or (ii) whose facility is in an energy community (the “energy community bonus credit”).^[3]

Extension, expansion, and reduction of investment tax credit

Section 48(a) provides an investment tax credit for the installation of renewable energy property. The amount of the credit is equal to a certain percentage (described below) of the property’s tax basis. Under current law, the credit is limited to property whose construction began before January 1, 2024.

The IRA would extend the credit to property whose construction begins before January 1, 2025. This period would be extended to January 1, 2035 for geothermal property projects. The IRA would also allow the investment tax credit for energy storage technology, qualified biogas property, and microgrid controllers.

The IRA would reduce the base credit from 30% to 6% for qualified fuel cell property; energy property whose construction begins before January 1, 2025; qualified small wind energy property; waste energy recovery property; energy storage technology; qualified biogas property; microgrid controllers; and qualified facilities that a taxpayer elects to treat as energy property. For all other types of energy property, the base credit would be reduced from 10% to 2%.

A taxpayer would be entitled to increase this base credit by 500% (for a total investment tax credit of 30%) if (i) its facility’s maximum net output is less than 1 megawatt of electrical or thermal energy, (ii) it meets the prevailing wage and apprenticeship requirements, and (iii) its facility begins construction within fifty-nine days after the Secretary publishes guidance on these requirements.

In addition, a taxpayer would be entitled to a 10% domestic content bonus credit and 10% energy community bonus credit (subject to the same requirements as for bonus credits under section 45). The IRA would also add a (i) 10% bonus credit for projects undertaken in a facility with a maximum net output of 5 megawatts and is located in low-income communities or on Indian land, and (ii) 20% bonus credit if the facility is part of a qualified low-income building project or qualified low-income benefit project.

Section 45Q (Carbon Oxide Sequestration Credit)

Section 45Q provides a tax credit for each metric ton of qualified carbon oxide (“QCO”) captured using carbon capture equipment and either disposed of in secure geological storage or used as a tertiary injection in certain oil or natural gas recovery projects. While eligibility for the section 45Q credit under current law requires that projects begin construction before January 1, 2026, the IRA would extend credit eligibility to those carbon sequestration projects that commence construction before January 1, 2033.

The IRA would increase the amount of tax credits for projects that meet certain wage and apprenticeship requirements. Specifically, the IRA would increase the amount of section 45Q credits for industrial facilities and power plants to $85/metric ton for QCOstored in geologic formations, $60/metric ton for the use of captured carbon emissions, and $60/metric ton for QCOstored in oil and gas fields. With respect to direct air capture projects, the IRA would increase the credit to $180/metric ton for projects that store captured QCO in secure geologic formations, $130/metric ton for carbon utilization, and $130/metric ton for QCO stored in oil and gas fields. The proposed changes in the amount of the credit would apply to facilities or equipment placed in service after December 31, 2022.

The IRA also would decrease the minimum annual QCO capture requirements for credit eligibility to 1,000 metric tons (from 100,000 metric tons) for direct air capture facilities, 18,750 metric tons (from 500,000 metric tons) of QCO for an electricity generating facility that has a minimum design capture capacity of 75% of “baseline carbon oxide” and 12,500 metric tons (from 100,000 metric tons) for all other facilities. These changes to the minimum capture requirements would apply to facilities or equipment that begin construction after the date of enactment.

Introduction of zero-emission nuclear power production credit

The IRA would introduce, as new section 45U, a credit for zero-emission nuclear power production.

The credit for a taxable year would be the amount by which 3 cents multiplied by the kilowatt hours of electricity produced by a taxpayer at a qualified nuclear power facility and sold by the taxpayer to an unrelated person during the taxable year exceeds the “reduction amount” for that taxable year.^[4]

In addition, a taxpayer would be entitled to increase this base credit by 500% if it meets the prevailing wage requirements.

New section 45U would not apply to taxable years beginning after December 31, 2032.

Biodiesel, Alternative Fuels, and Aviation Fuel Credit

The IRA would extend the existing tax credit for biodiesel and renewable diesel at $1.00/gallon and the existing tax credit for alternative fuels at $.50/gallon through the end of 2024. Additionally, the IRA would create a new tax credit for sustainable aviation fuel of between $1.25/gallon and $1.75/gallon. Eligibility for the aviation fuel credit would depend on whether the aviation fuel reduces lifecycle greenhouse gas emissions by at least 50%, which corresponds to a $1.25/gallon credit (with an additional $0.01/gallon for each percentage point above the 50% reduction, resulting in a maximum possible credit of $1.75/gallon). This credit would apply to sales or uses of qualified aviation fuel before the end of 2024.

Introduction of clean hydrogen credit

The IRA would introduce, as new section 45V, a clean hydrogen production tax credit. To be eligible, a taxpayer must produce the clean hydrogen after December 31, 2022 in facilities whose construction begins before January 1, 2033.

The credit for the taxable year would be equal to the kilograms of qualified clean hydrogen produced by the taxpayer during the taxable year at a qualified clean hydrogen production facility during the ten-year period beginning on the date the facility was originally placed in service, multiplied by the “applicable amount” with respect to such hydrogen.^[5]

The “applicable amount” is equal to the “applicable percentage” of $0.60. The “applicable percentage” is equal to:

20% for qualified clean hydrogen produced through a process that results in a lifecycle greenhouse gas emissions rate between 2.5 and 4 kilograms of CO₂e per kilogram of hydrogen;
25% for qualified clean hydrogen produced through a process that results in a lifecycle greenhouse gas emissions rate between 1.5 and 2.5 kilograms of CO₂e per kilogram of hydrogen;
4% for qualified clean hydrogen produced through a process that results in a lifecycle greenhouse gas emissions rate between 0.45 and 1.5 kilograms of CO₂e per kilogram of hydrogen; and
100% for qualified clean hydrogen produced through a process that results in a lifecycle greenhouse gas emissions rate of less than 0.45 kilograms of CO₂e per kilogram of hydrogen.

A taxpayer would be entitled to increase this base credit by 500% if (i) it meets the prevailing wage and apprenticeship requirements or (ii) it meets the prevailing wage requirements, and its facility begins construction within fifty-nine days after the Secretary publishes guidance on the prevailing wage and apprenticeship requirements.

FOOTNOTES

^[1] All references to section are to the Internal Revenue Code.

^[2] The IRA would require new prevailing wage and apprenticeship requirements to be satisfied in order for a taxpayer to be eligible for increased credits. To satisfy the prevailing wage requirements, a taxpayer would be required to ensure that any laborers and mechanics employed by contractors or subcontractors to construct, alter or repair the taxpayer’s facility are paid at least prevailing local wages with respect to those activities. To satisfy the apprenticeship requirements, “qualified apprentices” would be required to construct a certain percentage of the taxpayer’s facilities (10% for facilities whose construction begins before January 1, 2023 and 15% for facilities whose construction begins on January 1, 2024 or after). A “qualified apprentice” is a person employed by a contractor or subcontractor to work on a taxpayer’s facilities and is participating in a registered apprenticeship program.

^[3] An “energy community” is a brownfield site; an area which has (or had at any time after December 31, 1999) significant employment related to the extraction, processing, transport, or storage of coal, oil, or natural gas; and a census tract in which a coal mine closed or was retired after December 31, 1999 (or an adjoining census tract).

^[4]A “qualified nuclear power facility” is any nuclear facility that is owned by the taxpayer, that uses nuclear energy to produce electricity, that is not an “advanced nuclear power facility” as described in section 45J(d)(1), and is placed in service before the date that new section 45U is enacted.

“Reduction amount” is, for any taxable year, the amount equal to (x) the lesser of (i) the product of 3 cents multiplied by the kilowatt hours of electricity produced by a taxpayer at a qualified nuclear power facility and sold by the taxpayer to an unrelated person during the taxable year and (ii) the amount equal to 80% of the excess of the gross receipts from any electricity produced by the facility (excluding an advanced nuclear power facility) and sold to an unrelated person during the taxable year; (y) over the amount equal to the product of 2.5 cents multiplied by the kilowatt hours of electricity produced by the taxpayer at a qualified nuclear power facility and sold by the taxpayer to an unrelated person during the taxable year.

^[5]“Qualified clean hydrogen” is hydrogen that is produced (i) through a process that results in a lifecycle greenhouse gas emissions rate of no more than 4 kilograms of CO₂e per kilogram of hydrogen, (ii) in the United States, (iii) in the ordinary course of the taxpayer’s trade or business, (iv) for sale or use, and (v) whose production and sale or use is verified by an unrelated party. The IRA does not explain what “verified by an unrelated party” means.

Article By David S Miller, Amanda H Nussbaum, Martin T Hamilton, J. Tyler Moser, and Rita N. Halabi of Proskauer Rose LLP

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

Federal Bill Would Broaden FTC’s Role in Cybersecurity and Data Breach Disclosures

Last week, the House Energy and Commerce Committee advanced H.R. 4551, the “Reporting Attacks from Nations Selected for Oversight and Monitoring Web Attacks and Ransomware from Enemies Act” (“RANSOMWARE Act”). H.R. 4551 was introduced by Consumer Protection and Commerce Ranking Member Gus Bilirakis (R-FL).

If it becomes law, H.R. 4551 would amend Section 14 of the U.S. SAFE WEB Act of 2006 to require not later than one year after its enactment, and every two years thereafter, the Federal Trade Commission (“FTC”) to transmit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Commerce, Science, and Transportation of the Senate a report (the “FTC Report”). The FTC Report would be focused on cross-border complaints received that involve ransomware or other cyber-related attacks committed by (i) Russia, China, North Korea, or Iran; or (ii) individuals or companies that are located in or have ties (direct or indirect) to those countries (collectively, the “Specified Entities”).

Among other matters, the FTC Report would include:

The number and details of cross-border complaints received by the FTC (including which such complaints were acted upon and which such complaints were not acted upon) that involve ransomware or other cyber-related attacks that were committed by the Specified Entities;
A description of trends in the number of cross-border complaints received by the FTC that relate to incidents that were committed by the Specified Entities;
Identification and details of foreign agencies, including foreign law enforcement agencies, located in Russia, China, North Korea, or Iran with which the FTC has cooperated and the results of such cooperation, including any foreign agency enforcement action or lack thereof;
A description of FTC litigation, in relation to cross-border complaints, brought in foreign courts and the results of such litigation;
Any recommendations for legislation that may advance the security of the United States and United States companies against ransomware and other cyber-related attacks; and
Any recommendations for United States citizens and United States businesses to implement best practices on mitigating ransomware and other cyber-related attacks

Cybersecurity is an area of recent federal government focus, with other measures recently taken by President Biden, the Securities and Exchange Commission, the Food and Drug Administration, and other stakeholders.

Additionally, H.R. 4551 is also consistent with the FTC’s focus on data privacy and cybersecurity. The FTC has increasingly taken enforcement action against entities that failed to timely notify consumers and other relevant parties after data breaches and warned that it would continue to apply heightened scrutiny to unfair data security practices.

In May 2022, in a blog post titled “Security Beyond Prevention: The Importance of Effective Breach Disclosures,” the FTC’s Division of Privacy and Identity Protection had cautioned that “[t]he FTC has long stressed the importance of good incident response and breach disclosure as part of a reasonable information security program, and that, “[i]n some instances, the FTC Act creates a de facto breach disclosure requirement because the failure to disclose will, for example, increase the likelihood that affected parties will suffer harm.”

As readers of CPW know, state breach notification laws and sector-specific federal breach notification laws may require disclosure of some breaches. However, as of May 2022 it is now expressly the position of the FTC that “[r]egardless of whether a breach notification law applies, a breached entity that fails to disclose information to help parties mitigate reasonably foreseeable harm may violate Section 5 of the FTC Act.” This is a significant development, as notwithstanding the absence of a uniform federal data breach statute, the FTC is anticipated to continue exercise its enforcement discretion under Section 5 concerning unfair and deceptive practices in the cybersecurity context.

Article By Kristin L. Bryan and Jeffrey L. Turner of Squire Patton Boggs (US) LLP

For more privacy and cybersecurity legal news, click here to visit the National Law Review.

Heated Debate Surrounds Proposed Federal Privacy Legislation

As we previously reported on the CPW blog, the leadership of the House Energy and Commerce Committee and the Ranking Member of the Senate Commerce Committee released a discussion draft of proposed federal privacy legislation, the American Data Privacy and Protection Act (“ADPPA”), on June 3, 2022. Signaling potential differences amongst key members of the Senate Committee on Commerce, Science, and Transportation, Chair Maria Cantwell (D-WA) withheld her support. Staking out her own position, Cantwell is reportedly floating an updated version of the Consumer Online Privacy Rights Act (“COPRA”), originally proposed in 2019.

Early Stakeholder Disagreement

As soon as a discussion draft of the ADPPA was published, privacy rights organizations, civil liberty groups, and businesses entered the fray, drawing up sides for and against the bill. The ACLU came out as an early critic of the legislation. In an open letter to Congress sent June 10, the group urged caution, arguing that both the ADPPA and COPRA contain “very problematic provisions.” According to the group, more time is required to develop truly meaningful privacy legislation, as evidenced by “ACLU state affiliates who have been unable to stop harmful or effectively useless state privacy bills from being pushed quickly to enactment with enormous lobbying and advertising support of sectors of the technology industry that resist changing a business model that depends on consumers not having protections against privacy invasions and discrimination.” To avoid this fate, the ACLU urges Congress to “bolster enforcement provisions, including providing a strong private right of action, and allow the states to continue to respond to new technologies and new privacy challenges with state privacy laws.”

On June 13, a trio of trade groups representing some of the largest tech companies sent their open letter to Congress, supporting passage of a federal privacy law, but ultimately opposing the ADPPA. Contrary to the position taken by the ACLU, the industry groups worry that the bill’s inclusion of a private right of action with the potential to recover attorneys’ fees will lead to litigation abuse. The groups took issue with other provisions as well, such as the legislation’s restrictions on the use of data derived from publicly-available sources and the “duty of loyalty” to individuals whose covered data is processed.

Industry groups and consumer protection organizations had the opportunity to voice their opinions regarding the ADPPA in a public hearing on June 14. Video of the proceedings and prepared testimony of the witnesses are available here. Two common themes arose in the witnesses’ testimony: (1) general support for federal privacy legislation; and (2) opposition to discrete aspects of the bill. As has been the case for the better part of a decade in which Congress has sought to draft a federal privacy bill, two fundamental issues continue to drive the debate and must be resolved in order for the legislation to become law: the private right of action to enforce the law and preemption of state laws or portions of them. . While civil rights and privacy advocacy groups maintain that the private right of action does not go far enough and that federal privacy legislation should not preempt state law, industry groups argue that a private right of action should not be permitted and that state privacy laws should be broadly preempted.

The Path Forward

The Subcommittee on Consumer Protection and Commerce of the House Energy and Commerce Committee is expected to mark up the draft bill the week of June 20. We expect the subcommittee to approve the draft bill with little or no changes. The full Energy and Commerce Committee should complete work on the bill before the August recess. Given the broad bipartisan support for the legislation in the House, we anticipate that the legislation, with minor tweaks, is likely to be approved by the House, setting up a showdown with the Senate after a decade of debate.

With the legislative session rapidly drawing to a close, the prospects for the ADPPA’s passage remain unclear. Intense disagreement remains amongst key constituency groups regarding important aspects of the proposed legislation. Yet, in spite of the differences, a review of the public comments to date regarding the ADPPA reveal one nearly unanimous opinion: the United States needs federal privacy legislation. In light of the fact that most interested parties agree that the U.S. would benefit from federal privacy legislation, Congress has more incentive than ever to reach compromise regarding one of the proposed privacy bills.

Article By Shea Leitch, Jeffrey L. Turner, Kristin L. Bryan, and Kyle R. Fath of Squire Patton Boggs (US) LLP

For more data privacy and cybersecurity legal news, click here to visit the National Law Review.

House Bill To Give FDA More Funding to Address Formula Shortage

On May 17, House Appropriations Committee Chair Rosa DeLauro (D-CT) introduced H.R. 7790, a supplemental appropriations bill to provide $28 million in emergency funding to address the shortage of infant formula in the US for the fiscal year ending September 30, 2022. The bill is intended to provide the FDA with needed resources to address the shortage, prevent fraudulent products from being sold, acquire better data on the infant formula marketplace, and to help prevent a future recurrence.
Representative DeLauro stated that FDA does not currently have an adequate inspection force to inspect more plants if it approves additional applications to sell formula in the US. Thus, the supplemental appropriations are intended for “salaries and expenses.”
Relatedly, the House Appropriations Committee will hold two hearings this week to examine the recent recall of infant formula, the FDA’s handling of the recall, and the nationwide infant formula shortage.

Article By Food and Drug Law Practice Group at Keller and Heckman LLP

For more food and drug law legal news, click here to visit the National Law Review.

PFAS Air Regulations Proposed By House

In the latest federal legislative move to try to force the EPA to take quicker action than contemplated by the agency’s PFAS Roadmap of 2021, a bill was recently introduced in the House that would require the EPA to set air emission limits for all PFAS under the Clean Air Act. PFAS air regulations are something that advocates concerned about PFAS pollution issues beyond just drinking water have advocated for in the past few years. There are barriers, though, to achieving the desired results even if the legislation passes. Nevertheless, the federal legislative activity underscores the need for all companies that are currently using PFAS in their manufacturing or industrial processes to understand the full scope of compliance needs when and if PFAS air regulations become a reality.

House Bill For PFAS Air Regulations

On March 17, 2022, a bipartisan group in the House introduced the “Prevent Release Of Toxics Emissions, Contamination, and Transfer Act of 2022” (also known as the PROTECT Act of 2022 or HR 7142). The aim of the bill is to require the EPA to list all PFAS as hazardous air pollutants (HAPs) under the Clean Air Act. If passed, the designation as HAPs would require the EPA to develop regulatory limits for the emission of PFAS into the air.

The proposed steps, however, go well beyond the EPA’s own plan for potential PFAS air regulations as detailed in the EPA’s PFAS Strategic Roadmap 2021. In the PFAS Roadmap, the EPA indicates that it commits to performing ongoing investigation to:

Identify sources of PFAS air emissions;
Develop and finalize monitoring approaches for measuring stack emissions and ambient concentrations of PFAS;
Develop information on cost-effective mitigation technologies; and
Increase understanding of the fate and transport of PFAS air emissions to assess their potential for impacting human health via contaminated groundwater and other media pathways.

The EPA committed to using this information and data in order to, by the Fall of 2022, “evaluate mitigation options”, which could include listing “certain PFAS” as HAPs. However, the EPA also indicated that it might use other regulatory or non-regulatory tools to achieve results similar to formal PFAS air regulations under the Clean Air Act.

The bill, therefore, would considerably accelerate the EPA’s process for potential HAPs, which in turn could result in legal challenges to any rushed HAPs, as the EPA would not have had the opportunity to collect all necessary data and evaluate the soundness of the science behind any HAP designation.

Impact On Business

Any designation of PFAS as HAPs under the Clean Air Act will of course immediately impact companies that are utilizing PFAS and emitting PFAS into the air. While it remains to be seen whether the PROTECT Act will pass, if it were to pass and the EPA’s HAP designations were to survive any legal challenges, the impacts on businesses would be significant. Companies would need to undertake extensive testing of air emissions to determine their risk of Clean Air Act violations, which will be complicated due to limitations on current technology to do this type of testing. Companies may also need to pivot their production practices to reduce or limit PFAS air emissions, which would add unplanned costs to balance sheets. Finally, companies may wish to explore substitutes for PFAS rather than navigate Clean Air Act regulatory compliance, which is a significant undertaking that takes time and money.

It is also worth noting that a designation as a HAP for any PFAS would also trigger significant regulatory challenges to businesses that might have nothing to do with air emissions. Any substance listed as a HAP under the Clean Air Act is automatically designated as a “hazardous substance” under CERCLA (the Superfund law). Once a substance is classified as a “hazardous substance” under CERCLA, the EPA can force parties that it deems to be polluters to either cleanup the polluted site or reimburse the EPA for the full remediation of the contaminated site. Without a PFAS Superfund designation, the EPA can merely attribute blame to parties that it feels contributed to the pollution, but it has no authority to force the parties to remediate or pay costs. The designation also triggers considerable reporting requirements for companies. Currently, those reporting requirements with respect to PFAS do not exist, but they would apply to industries well beyond just PFAS manufacturers. Superfund site cleanup costs can be extensive, even as high as hundreds of millions of dollars, depending on the scope of pollution at issue and the amount of territory involved in the site.

Article By John Gardella of CMBG3 Law

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

H.R. 3684: Infrastructure Investment and Jobs Act

On November 5, the U.S. House of Representatives approved a $1.2 trillion infrastructure spending bill that will make historic investments in core infrastructure priorities including roads and bridges, rail, transit, ports, airports, the electric grid, and broadband.

The legislation, titled the Infrastructure Investment and Jobs Act (“IIJA”), will have major implications for states and municipalities of all sizes, as well as the entities involved in responding to governments’ needs for hard and cyber infrastructure.

Improvements to roadways, ports and mass transit are the focus of the legislation and the majority of the funding is targeted at these traditional hard infrastructure projects. U.S. Senator Rob Portman (R-OH) has championed the massive infrastructure bill and pushed for its passage.

This weekend, Senator Portman noted the massive impact the IIJA will have on Ohio, highlighting the bill’s bridge investment program which will award competitive grants to certain governmental entities to improve the condition of bridges. “This additional federal funding means we are one step closer to a solution for the Brent Spence Bridge,” Portman said.

The Brent Spence Bridge, which connects Cincinnati, Ohio with Covington, Kentucky has one of the busiest trucking routes in the nation. Questions about its safety and long shutdowns for repair have long concerned area residents as well as the business owners responsible for the more than $400 billion of freight which passes over the bridge every year.

While hard infrastructure priorities like bridge maintenance, port modernization, freight rail, and highway improvements account for a majority of the new spending appropriated by the bill (which totals $550 billion over five years), a sizable portion is dedicated to the expansion of broadband networks and the improvement of cybersecurity.

The new cybersecurity grant program and record-setting investments in broadband development could be game changing for state and local leaders wishing to modernize and protect their communities in these ways.

The U.S. Senate approved the IIJA in August 2020. Friday’s vote means the infrastructure bill will now move to the desk of President Joe Biden, who has indicated a bill signing ceremony will happen soon. Answers to questions about the billions of dollars in new infrastructure grants and programming are below.

Question: How will the money be distributed?

Answer: The IIJA contains formulaic allocations of funds as well as earmarks and competitive grants. Some categories and sub-categories contain both non-competitive and competitive grants.

NON-COMPETITIVE FUNDING ALLOCATION PROCESSES
- Formulas dictated by the bill are based on criteria like state population, or, potentially for specific items, users (ex: transit funds potentially determined by ridership)
- Once the money is directed to the states, the local bureaucrats are able to make the important decisions about which projects deserve the funding.
- States can also decide to allocate some of the funding to the county or city governments within their state
EARMARKS AND COMPETITIVE GRANT PROCESSES
- Earmarks override state plans for how infrastructure funds should be spent. “Earmarks come out of the money that the state was going to get anyway.”
- Localities must compete for Competitive Grants via an application process. The U.S. Department of Transportation’s Discretionary Grant Process is officially outlined on their website.
- Generally, the award of competitive grants can be influenced by advocates who confer with decisionmakers in the Executive Branch about the merits of certain proposals.

Question: Which projects will qualify for funding?

Answer: The bill details specific funding streams for the specific projects included in its provisions. Categories of projects included in the $550 billion in new spending are below.

Roads, Bridges, & Major Projects: $110B — Funds new, dedicated grant program to replace and repair bridges and increases funding for the major project competitive grant programs. Preserves the 90/10 split of federal highway aid to states.
Passenger and Freight Rail: $66B — Provides targeted funding for the Amtrak National Network for new service and dedicated funding to address repair backlogs. Increases funding for freight rail and safety.
Safety and Research: $11B — Addresses highway, pedestrian, pipeline, and other safety areas (highway safety accounts for the bulk of this funding).
Public Transit: $39.2B — Funds nation’s transit system repair backlog, which includes buses, rail cars, transit stations, track, signals, and power systems. This allocation also includes money to create new bus routes and increase accessibility to public transit for those with physical mobility challenges.
Broadband: $65B — Funds grants to states for broadband deployment and other efforts to address access issues in rural areas and low-income communities. Expands eligible private activity bond projects to include broadband infrastructure.
Airports: $25B — Increases Airport Improvement grant amounts for runways, gates, & taxiways and authorizes a new Airport Terminal Improvement program.
Ports and Waterways: $17.4B — Provides funding for waterway and coastal infrastructure, inland waterway improvements, port infrastructure, and land ports of entry through the Army Corps, DOT, Coast Guard, the GSA, and DHS.
Water Infrastructure: $54B — Provides a $15 billion for lead service line replacement and $10 billion to address PFAS in water, in addition to other items.
Power and Grid: $65B — Funds grid reliability and resiliency projects and support for a Grid Development Authority; critical minerals and supply chains for clean energy technology; key technologies like carbon capture, hydrogen, direct air capture, and energy efficiency; and energy demonstration projects from the bipartisan Energy Act of 2020.
Resiliency: $46B — Funds cybersecurity projects to address critical infrastructure needs, flood mitigation, wildfire, drought, coastal resiliency, waste management, ecosystem restoration, and weatherization.
Low-Carbon and Zero-Emission School Buses & Ferries: $7.5B — Funds and authorizes the adoption of low-carbon and zero-emission school buses, including through hydrogen, propane, LNG, compressed natural gas, biofuel, and electric technologies. Provides support for a pilot program for low emission ferries and rural ferry systems.
Electric Vehicle Charging: $7.5B — Funds alternative fuel corridors and a national build out of electric vehicle charging infrastructure. The federal funding will have a particular focus on rural and/or disadvantaged communities.
Reconnecting Communities: $1B — Provides dedicated funding for planning, design, demolition, and reconstruction of street grids, parks, or other infrastructure (funding is especially targeted at infrastructure which is deteriorating due to age).
Addressing Legacy Pollution: $21B — Funds to clean up brownfield and superfund sites, reclaim abandoned mine lands, and plug orphan oil and gas wells, improving public health and creating good-paying jobs.

Article By Katherine M. Caprez of Roetzel & Andress LPA

For more legislative and legal news, read more from the National Law Review.

Families First Coronavirus Response Act: Paid Leave now Required for Absences Related to the Coronavirus (COVID-19)

Early Saturday, March 14, 2020 the House of Representatives passed the Families First Coronavirus Response Act (the “Act”). The Senate is set to take this matter up on Monday, March 16, 2020 and President Trump stated that he will immediately sign the legislation. The Act has many facets to it including new temporary employer obligations relative to paid leaves of absence related to the Coronavirus (COVID-19) and expands employer obligations under the Federal Family and Medical Leave Law. Employers have time to prepare as the law will be effective 15 days after enactment (potentially as soon as March 31, 2020, if signed Monday). While there is much remaining to be analyzed under this new law, the following provides an initial overview so employers can begin preparations for compliance and education of the workforce.

Expansion of FMLA rights

First, the Act expands the pool of employees that qualify for federal FMLA leave. The Act will require employers with fewer than 500 employees¹ (and all government employers) to provide employees who have been employed for at least 30 days with FMLA leave for Coronavirus reasons if:

The employee is absent from work due to the employee’s physical presence jeopardizing the health of others due to exposure to the Coronavirus or due to the employee exhibiting symptoms of the virus;
The employee will care for a family member who a health care provider or a public health authority determines has been exposed to the Coronavirus or who exhibits symptoms of the virus; or
The employee is needed to care for a son or daughter under 18 because a school or a place of care (daycare) has been closed or the child care provider is not available.

The definition of “family” in the application of the above requirements is expanded to include family members who are senior citizens, grandparents, grandchildren, next of kin of the employee or is a son or daughter with special needs. The definition of “spouse” also includes domestic partners, as defined under the law.

The rights and remedies available to an employee under the federal FMLA remain the same. Therefore, we recommend that employers review existing procedures and forms utilized to determine FMLA eligibility and update those materials to recognize the Act’s broadened scope.²

Enhanced Right to Paid Time Off

The Act also mandates that employers provide “Emergency Paid Sick Leave.” This benefit is available to employees to:

Self-isolate because of a Coronavirus diagnosis;
Obtain medical diagnosis or care if the employee is experiencing the symptoms of the Coronavirus;
Comply with an order of a public official or Health Care Provider that physical presence at work would jeopardize the health of others due to the employee’s exposure to the Coronavirus or because the employee is exhibiting symptoms of the illness;
Care for a family member of the employee due to the family member’s self-quarantining based upon exposure to the virus or because the family member is exhibiting symptoms and requires medical diagnosis or care; or
Care for a child of the employee if a school or place of care has been closed or the care provider for the child is unavailable.

If an employee meets one or more of these qualifications, the Act provides that the employee is entitled to Emergency Paid Sick Leave. Specifically, full-time employees will have 80 hours of sick leave available to them and part-time employees will have their average hours of work over a 2-week period available as Paid Sick Leave. If the employee has variable hours of work each week, the employee’s average hours of work over the preceding 6 months will be used to determine the employee’s average hours per week. The sick leave benefit will be paid at the employee’s regular rate of pay for any absence due to the employee’s own treatment or quarantine. The sick leave benefit will be paid at two-thirds of the employee’s regular rate of pay for any absence to care for a family member or to provide child care due to school or daycare closure.

If an employee needs leave beyond the 2-weeks for Emergency Paid Sick Leave and continues to meet the requirements associated with the Act’s mandate for paid leave under the FMLA, the employee will be paid not less than two-thirds of the employee’s regular rate of pay (or minimum wage, if greater) for the regular hours of work missed, to the extent of the employee’s already-existing available FMLA leave. The changes to the FMLA under the Act will expire on December 31, 2020.

Finally, for employee absences associated with non-FMLA qualifying reasons (e.g., an employer’s decision to send an employee home because the employee is exhibiting flu-like symptoms), the employee may be eligible for Unemployment Insurance benefits beginning in the first week of absence. This provision will expire on December 31, 2020.

It is important to understand that the Act entitlement represents the “floor” of entitlement. In other words, employers will not enjoy a reduced obligation to provide Paid Sick Leave if it already offers Paid Sick Leave to employees. The Paid Sick Leave under the Act is in addition to what the employee may already be entitled to in employment. However, there will not be any carryover right for unused Sick Leave granted under the Act.

Again, it is important that employers revisit their protocol for determining eligibility for paid sick leave and prepare to implement the new mandate. Likewise, employers providing Paid Sick Leave and absence benefits should carefully log the wages paid related to compliance. As of now, the Act anticipates a tax credit available for sick leave wages paid to employees, subject to caps established under the law.

1 Exemptions for small employers (fewer than 50 employees) and certain emergency and healthcare workers continue to be discussed.
2 The DOL will be issuing a Notice related to the new requirements that must be posted along with other employment related Notices to employees.

ARTICLE BY Labor and Employment group at von Briesen & Roper, s.c.

For more on the developing Coronavirus situation, see the National Law Review dedicated Coronavirus News page.

House Financial Services Committee Passes Credit Reporting Bills

Four bills dealing with credit reporting were passed last Thursday by the House Financial Services Committee. While there has been bipartisan support for credit reporting reform, none of the bills received any Republican votes.

The bills, which are listed below, would make various amendments to the FCRA (Fair Credit Reporting Act), including those described below:

The “Improving Credit Reporting for All Consumers Act” would impose new requirements for conducting reinvestigations of consumer disputes and related standards, require consumer reporting agencies to create a webpage providing information about consumer dispute rights, require furnishers to retain records necessary to substantiate the accuracy and completeness of furnished information, create a right for consumers to appeal the results of a reinvestigation, prohibit automatic renewals of consumer reporting and credit scoring products and services, and require a credit scoring model to treat multiple inquiries for a credit report or credit score made in connection with certain consumer credit products within a 120-period as a single inquiry.
The “Restoring Unfairly Impaired Credit and Protecting Consumers Act” would shorten the time period during which adverse information can stay on a consumer report, require the expedited removal of fully paid or settled debts from consumer reports, impose restrictions on the reporting of information about medical debts, require a consumer reporting agency to remove adverse information relating to a private student loan where the CFPB has certified that the borrower has a valid “defraudment claim” with respect to the educational institution or career education program, allow victims of financial abuse to obtain a court order requiring the removal of adverse information, and prohibit a credit scoring model from taking into account in an adverse manner the consumer’s participation in certain credit restoration or rehabilitation programs or the absence of payment history for an existing account resulting from such participation.
The “Free Credit Scores for Consumers Act of 2019” would expand the information that must be given to consumers about credit scores, require nationwide consumer reporting agencies to provide a free credit score when providing a free annual consumer report requested by the consumer, and require free consumer reports and credit scores to be provided under certain circumstances.
The “Restricting Use of Credit Checks for Employment Decisions Act” would prohibit the use of consumer reports for most employment decisions other than where the person using the report is required by federal, state, or local law to obtain the report or the report is used in connection with a national security investigation.

The House Financial Services Committee is scheduled to mark up more bills dealing with credit reporting today.

Article by John L. Culhane, Jr. of Ballard Spahr LLP.

For more financial legislation, please see the Financial Institutions & Banking page of the National Law Review.

Key Tax Changes in the American Health Care Act

The American Health Care Act (“AHCA”), passed by the House of Representatives on May 4, 2017, repeals many of the taxes added by the Affordable Care Act (“ACA”) and makes changes to other tax rules. Some of the notable changes proposed to be made to the Internal Revenue Code are:

1. The individual mandate to maintain health insurance and the employer mandate to offer health insurance remain in the Code, but the taxes are “zeroed out” effective retroactively to 2016.

2. The following taxes, fees, credits and limitations are repealed as of the year shown below:

· The net investment income tax (NIIT) (2017)

· The 0.9% additional Medicare tax (2023)

· The small employer health insurance credit (2020)

· The $2500 limitation on contributions to a health flexible spending account (FSA) (2017)

· The annual fee on branded prescription drug sales (2017)

· The medical device excise tax (2017)

· The annual fee on health insurance providers (2017)

· The elimination of a deduction for expenses allocable to the Medicare Part D subsidy (2017)

· The 10% tanning salon tax (June 30, 2017)

3. The “Cadillac” tax on high cost health plans is delayed until 2026.

4. Individuals may be reimbursed for over-the-counter medications under a health savings account (HSA), health FSA or a health reimbursement arrangement (HRA) (2017).

5. The penalty tax on withdrawals from an HSA not used for a qualified medical expense is reduced from 20% to 10% (2017).

6. The bill would replace the current ACA premium tax credit with a new refundable, advanceable tax credit effective January 1, 2020. The credit could be applied toward the cost of any eligible health insurance coverage, whether purchased on or off the Exchange. The credit is age-based as follows:

Age	Annual Credit
Under 30	$2,000
30 – 40	$2,500
40 – 50	$3,000
50 – 60	$3,500
60 and over	$4,000

The maximum credit for a family is $14,000. The credit is adjusted each year by CPI + 1%.

The credit is phased out depending on the individual’s modified adjusted gross income (MAGI) for the year. It begins phasing out for an individual with income of $75,000 ($150,000 for joint filers) by $100 for every $1,000 in income above those thresholds. The MAGI dollar limitations are also indexed for inflation beginning in 2021. To be eligible to claim the credit, the individual must be covered by “eligible health insurance,” not be eligible for “other specified coverage” (including employer coverage or a government sponsored health program) and be a U.S. citizen or a qualified alien.

7. The bill would make the following changes to health savings accounts, effective in 2018:

§  The maximum contribution to an HSA would be increased to the out-of-pocket maximum (in 2017, $6,550 for self-only and $13,100 for family coverage).  Under current law, HSA contributions are limited to $3,400 for self-only and $6,750 for family coverage.
§  Both spouses could make a “catch-up” contribution to the same HSA.  Under current law, each spouse must have his or her own HSA.
§  If an HSA is established within 60 days after coverage under a high deductible plan begins, the individual could be reimbursed for medical expenses incurred within that 60-day period.  Under current law, an individual cannot be reimbursed for any expense incurred before the HSA is established.

The bill now moves to the Senate where significant changes are expected.

This post was written by Cynthia A. Moore of Dickinson Wright PLLC.

Tag: House of Representatives