Beltway Buzz, May 16, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
Republican Legislators Push Ahead With Agenda. This week, the U.S. House of Representatives’ Committee on Ways and Means advanced—on a party-line 26–19 vote—a tax reform package that included Republicans’ top fiscal priorities. The bill makes permanent many provisions of the 2017 Tax Cuts and Jobs Act and includes other measures, such as an expansion of the child tax credit. Of particular interest to the Buzz, the bill also provides temporary (2025 through 2028 tax years) above-the-line deductions for qualified tips and overtime premium pay. There is still quite a long way to go for this bill, and changes are expected, especially considering that some Republicans in the U.S. Senate have already expressed some reservations about the proposal.
OMB Approves EEO-1 Changes. On May 12, 2025, the Office of Management and Budget (OMB) approved changes to the EEO-1 form that removes employers’ option to disclose non-binary employee data. The U.S. Equal Employment Opportunity Commission (EEOC) requested the changes pursuant to President Trump’s Executive Order 14168, “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government.” The proposed instruction booklet filed with OMB indicates that the 2024 EEO-1 filing period would begin on May 20, 2025. There has been no word yet from the EEOC in light of OMB’s approval of the change. Kiosha H. Dickey and James A. Patton, Jr. have the details.
PBGC Nominee on the Move. On May 15, 2025, the U.S. Senate Committee on Health, Education, Labor and Pensions voted to advance the nomination of Janet Dhillon to serve as the director of the Pension Benefit Guaranty Corporation (PBGC). Created by the Employee Retirement Income Security Act of 1974, PBGC protects workers’ retirement benefits through its single-employer and multiemployer insurance programs. Dhillon previously served as chair of the EEOC. Her nomination now awaits a vote on the Senate floor.
House Committee Examines OSHA. On May 15, 2025, the House Committee on Education and the Workforce’s Subcommittee on Workforce Protections held a hearing entitled “Reclaiming OSHA’s Mission: Ensuring Safety Without Overreach.” The hearing focused on the Occupational Safety and Health Administration’s (OSHA) regulatory and enforcement agenda during the Biden administration and “explore[d] common-sense solutions that can return OSHA to fulfilling its purpose of advancing workplace safety.” Legislators and witnesses discussed OSHA’s proposed heat standard, the final “walkaround rule,” and the Severe Violator Enforcement Program. With regard to OSHA’s heat proposal, Republicans and their witnesses criticized its one-size-fits-all proscriptions—arguments that are likely to be made at OSHA’s public hearing on the proposal in June.
Disparate Impact Follow-Up. President Trump’s recent executive order directing federal agencies to limit the use of disparate-impact theories of liability is having a ripple effect at implementing agencies and among stakeholders. Here is the latest fallout:
Department of Energy Rescinds Regulations. The U.S. Department of Energy—not an agency that we normally deal with at the Buzz—took steps this week to rescind forty-seven regulations. Included is a direct-to-final rule, entitled, “Rescinding Regulations Related to Nondiscrimination in Federally Assisted Programs or Activities (General Provisions).” With regard to a regulatory provision concerning nondiscrimination in federally assisted programs or activities, the direct-to-final rule states the following:
Furthermore, absent a specific, identified, instance of intentional discrimination, statistical information indicating that certain protected groups are underrepresented in some occupations or professions does not obligate any FFA [federal financial assistance] recipient to take remedial or affirmative action under this part. To the contrary, any affirmative action for which “measures of success” depend on “whether some proportional goal has been reached” amounts to “outright racial balancing” which is “patently unconstitutional.” For these reasons, DOE is rescinding 10 CFR 1040.8 in its entirety.
Former EEO Officials Respond. While federal agencies begin implementing the executive order (EO), former EEOC and Office of Federal Contract Compliance Programs (OFCCP) officials issued a statement challenging the legal rationale underlying the EO, noting that President Trump’s executive order “may not change a clear statutory mandate and decades of legal precedent.” The statement further notes that contrary to the EO’s claim that the disparate impact theory eliminates meritocracy in the workplace, “disparate impact liability is a means to ensure that merit prevails and that unnecessary and unjustified criteria do not disqualify meritorious candidates on grounds linked to their race, sex, or other protected personal characteristic.” To be sure, the statement will have no impact on the administration’s current views, but it does serve as a reminder to employers and workers that while disparate impact may be deprioritized by the administration, it is still codified in federal law, has been affirmed by the Supreme Court of the United States, and is a viable legal theory for plaintiffs’ counsel.
Immigration: TPS Update.
In a notice published in the Federal Register on May 13, 2025, the U.S. Department of Homeland Security announced that it would not extend the designation of Afghanistan for Temporary Protected Status (TPS), which is set to terminate on May 20, 2025. Pursuant to the required sixty-day notice period, TPS for Afghanistan will now expire on July 14, 2025. According to the notice, “there are notable improvements in the security and economic situation such that requiring the return of Afghan nationals to Afghanistan does not pose a threat to their personal safety due to armed conflict or extraordinary and temporary conditions.”
Venezuela TPS. A bipartisan group of representatives has introduced the Venezuela TPS Act of 2025. The bill would automatically designate Venezuela for TPS for eighteen months—with an option for renewal—from the time the bill is enacted. Of course, enactment will be a significant challenge in the Republican-controlled U.S. Congress. Pursuant to a federal court ruling, Venezuela’s TPS designation has been extended through October 2, 2026, and work authorization remains valid through April 2, 2026.
RIP, Justice Souter. Supreme Court Justice David Souter died last week at the age of eighty-five. Appointed by President George H. W. Bush, Souter served on the Supreme Court from 1990 to 2009. The Buzz remembers Souter for his role in authoring two significant Supreme Court decisions on employment law. Souter authored the majority opinion in Faragher v. City of Boca Raton (1998), which held that “an employer is vicariously liable for actionable discrimination caused by a supervisor, but subject to an affirmative defense looking to the reasonableness of the employer’s conduct as well as that of a plaintiff victim.” Additionally, in Meacham v. Knolls Atomic Power Laboratory (2008)—a disparate-impact case under the Age Discrimination in Employment Act (ADEA) involving a reduction in force—the Court held that the employer, not the employee, has the burden of proving that its employment decision was based on reasonable factors other than age. Souter, writing for the 7–1 majority, stated that while “there is no denying that putting employers to the work of persuading factfinders that their choices are reasonable makes it harder and costlier to defend[,]” the Court must read the ADEA “the way Congress wrote it.”
Rising Temperatures Bring New Obligations for Maryland Employers
Maryland employers are facing the first summer under a heat-related illness prevention standard issued by Maryland Occupational Safety and Health (MOSH). MOSH joins several other Democratic-led Occupational Safety and Health Administration (OSHA) state-plan states, such as California, Nevada, Oregon, and Washington, that have promulgated similar standards in recent years.
Quick Hits
Maryland employers must comply with Maryland Occupational Safety and Health’s (MOSH) new heat-related illness prevention standard.
The MOSH standard has been criticized for its vagueness and the burden it places on employers, leading to potential confusion and inconsistent enforcement.
The Supreme Court’s decision in Loper Bright Enterprises v. Raimondo may limit MOSH’s ability to enforce its interpretation of the new standard, potentially leading to legal challenges.
The MOSH standard applies to all employers whose employees are exposed to an indoor or outdoor heat index of 80°F for more than fifteen minutes in an hour. At a heat index of 90°F or more, high-heat procedures apply. Maryland employers must:
monitor the heat index throughout the work shift;
develop and maintain a written heat-related illness prevention and management plan, made available to their employees and MOSH, that includes an extensive list of required elements, including the importance and availability of rest and drinking water, alternative cooling and control measures, symptoms of heat-related illness and how to respond, acclimatization, high-heat procedures, emergency response, and training;
acclimatize newly hired employees and those returning to the workplace after an absence of seven or more days;
provide adequate and accessible shade, or alternative cooling and control measures;
provide cool and potable drinking water throughout the workday (at least thirty-two ounces per hour per employee); and
provide training regarding heat-related illness prevention at least annually and “[i]mmediately following any incident at the worksite involving a suspected or confirmed case of heat-related illness.” The training must cover a list of specific topics, including environmental and personal factors affecting heat-related illness, acclimatization, the importance of water and rest breaks, signs and symptoms of heat-related illness, responding to heat-related illness, and how the employer will comply. Employers must retain training records for one year following the training date.
The MOSH standard is among the most onerous for employers and has been criticized for the vagueness of its acclimatization, monitoring, and training requirements. While MOSH claims the standard is intended to provide the flexibility to implement a program that considers the unique conditions present at each worksite, the standard’s breadth and ambiguity have caused confusion among employers and set the stage for inconsistent enforcement and litigation.
MOSH promised to provide guidance. It initially issued “Key Requirements” and a “Summary of Key Maryland Requirements fact sheet,” both of which simply reiterate the vague language in the standard. More recently, however, MOSH published an optional model program, itemizing specific and detailed actions that the agency stated employers should consider in developing their plan. Additionally, MOSH conducted a webinar to discuss compliance with the standard, and has now made the recording available on its website. In the webinar, MOSH offered some practical tips beyond the written guidance, including:
Employers may use the wet bulb globe temperature (WBGT) method to monitor the heat index, even though it is not specifically listed as an option in the standard.
The acclimatization schedule is specific to the individual employee—it can be less or more than the general timelines set forth in the standard.
Employers that use their own health care professional (HCP) for pre-employment physicals can direct the HCP to ask the new employee about chronic conditions or medications that pose additional risks for heat-related illness. Although the HCP should not share that specific information with the employer, the HCP can alert the employer that the employee may be more prone to heat-related illness.
Employers may not ask employees directly about their medical conditions or medications in advance of heat-related illness incidents. Employees should be trained that if they have such conditions, they must be more mindful of heat stress.
The definition of “alternative cooling and control measures” includes a variety of protective measures, such as misting equipment and cooling devices, that can alter the employer’s obligation to develop acclimatization procedures and mandatory breaks in accordance with the language in the standard.
The mandatory break periods do not necessarily require cessation of all work but instead can include light duty, paperwork, and similar activities.
Nonworking rest periods of under twenty minutes must be paid in compliance with the Fair Labor Standards Act. Longer nonworking breaks can be unpaid.
Employers must assume that day laborers and temporary employees are not acclimatized.
While the information MOSH provided in the webinar is helpful, additional written compliance guidance would be more helpful to employers developing plans. Given the ambiguous provisions in the MOSH standard, “Monday-morning quarterbacking” may be inevitable, with MOSH taking the position that the employer must be out of compliance if an employee suffers a significant heat-related illness. That position ignores the fact that heat-related illnesses often involve conditions outside of the employer’s control, such as illness, physical fitness, personal medical conditions, and age.
From a legal standpoint, MOSH’s ability to enforce its ad hoc interpretation of the standard’s provisions may be limited. In Loper Bright Enterprises v. Raimondo, the Supreme Court of the United States eliminated deference to an agency’s interpretation of its own statute. The holding will limit the ability of federal agencies to argue successfully that a court must defer to their interpretation of a standard or regulation. The effect of the Loper Bright holding on state regulatory provisions remains to be seen, but it could limit MOSH’s ability to impose its own interpretation of vague provisions on employers, particularly in the absence of written compliance guidance.
Antitrust Compliance for North Carolina Construction Companies: Avoiding Legal Pitfalls
The construction industry has long been a target for antitrust enforcement.
For construction company owners and managers, understanding antitrust laws and implementing effective compliance measures isn’t just good business practice, it’s essential protection against potentially devastating legal consequences.
Why Antitrust Matters in Construction
Antitrust laws are designed to protect consumers and the competitive marketplace from behaviors that restrict competition or trade. They apply to businesses of all sizes, including construction companies, and carry serious penalties for violations.
The construction industry faces particular scrutiny for several reasons. The project-based nature of the business creates numerous opportunities for competitors to interact on bids and contracts. The prevalence of subcontractor relationships often blurs the lines between competitors and partners. Local trade associations often bring competitors together, creating environments where improper discussions may occur. Additionally, the substantial dollar values involved in many construction projects naturally increase regulatory interest in ensuring fair and competitive practices.
Understanding the Legal Landscape
Antitrust laws operate at both federal and state levels and can create both civil and criminal liability. The core federal antitrust statutes include three primary laws that construction company managers should understand.
The Sherman Act serves as the foundational antitrust law, outlawing conduct that unreasonably restricts trade and criminalizing monopolization. It creates both civil and criminal liability for anti-competitive behaviors, making it particularly powerful in enforcement actions.
The Clayton Act, prohibits specific anti-competitive practices. These include price discrimination between customers when harmful to competition, “refusal to deal” arrangements, “tying” arrangements that stifle competition, and selling goods at unreasonably low prices specifically to destroy competition.
The Federal Trade Commission Act broadly bans “unfair methods of competition” and “unfair and deceptive acts or practices,” providing a flexible tool for regulators to address emerging anti-competitive behaviors that might not fit clearly into other statutory frameworks.
While these laws might seem abstract, courts have translated them into very specific prohibitions that affect day-to-day decisions in construction management.
“Per Se” Violations: The Highest Risk Activities
Certain behaviors are considered so inherently anti-competitive that they are deemed “per se” violations—meaning they’re automatically illegal regardless of their actual effect on competition. For construction companies, the most common per se violations fall into three categories: price fixing, market division, and bid rigging.
Price Fixing
Price fixing occurs when competitors agree to raise, fix, or maintain prices rather than allowing market forces to determine them. This doesn’t require an explicit agreement to charge exactly the same price—almost any coordination on pricing elements can violate the law.
Common examples in construction include agreements among competitors to establish or adhere to certain price discounts, hold prices firm, adopt standard formulas for computing prices, or adhere to minimum fee schedules. Each of these practices undermines the competitive pricing that antitrust laws are designed to protect.
Several warning signs might indicate potential price fixing. These include identical prices among competitors, especially when they previously varied; simultaneous price increases not supported by increased costs; or elimination of discounts that were historically offered. Any of these patterns should prompt careful review of competitive practices.
Market Division
Market division schemes involve competitors agreeing to divide markets among themselves, whether by geographic area, customer type, or project category. For example, if two contractors whose footprints previously overlapped agree that one will only pursue projects in eastern North Carolina while the other focuses on the Piedmont region, that may be an illegal market division.
These agreements also can manifest in more subtle ways. Even bidding behaviors like consistently declining to bid in certain areas or for certain customers, or submitting intentionally high bids outside your “territory,” can suggest market division. Both refusing to sell in certain markets and quoting intentionally high prices in those markets can raise suspicions of market allocation agreements.
Bid Rigging
Bid rigging is particularly relevant to construction companies and takes many forms. In bid suppression schemes, competitors agree that some will refrain from bidding or withdraw bids so that another can win. The winning bidder often rewards the others with subcontracts as compensation for not competing. With complementary bidding, competitors submit “cover bids” that are intentionally too high or contain special terms ensuring they won’t be accepted, creating the illusion of competition while guaranteeing a predetermined winner. In bid rotation schemes, all competitors submit bids but take turns being the lowest bidder according to a predetermined pattern.
Each of these practices artificially inflates prices and undermines the competitive bidding process that public and private owners rely on to obtain fair market prices. Government enforcement agencies are particularly vigilant about bid rigging in public construction projects, where taxpayer funds are at stake.
High-Risk Situations: When to Be Especially Vigilant
Certain business situations potentially create higher antitrust risk and deserve special attention from construction company managers and owners.
Interactions with Competitors
Direct communication with competitors presents the highest risk of antitrust violations. When interaction becomes necessary, construction managers should keep communications concise and strictly business-related. Any discussion of pricing, costs, or bidding strategies should be scrupulously avoided. It’s important to remember that all written communications, including emails and text messages, are potentially discoverable in litigation. Never fall into the trap of justifying questionable practices because “everyone else is doing it”—this provides no legal protection and may actually make the violation appear more deliberate.
Trade Association Meetings
Trade associations are typically the first place government investigators look when suspecting antitrust violations. While these organizations provide valuable industry benefits, they also create regular opportunities for competitors to interact. When participating in trade association activities, construction managers should avoid any discussions of prices, terms or conditions of sale, costs, future production, or marketing plans—even in informal settings like dinners or social events. Reviewing meeting agendas in advance can help identify potentially problematic discussion topics. If conversations venture into sensitive competitive areas, consider leaving the meeting to avoid even the appearance of participating in improper discussions. Having legal counsel review any information-sharing programs before participation can provide additional protection.
Joint Ventures and Partnerships
Joint ventures between competitors can serve legitimate business purposes but require careful structuring to avoid antitrust issues. If you’re considering a joint venture with a potential competitor, consulting legal counsel at the earliest possible stage can help ensure the arrangement is properly structured to achieve business objectives without creating antitrust exposure.
Communications About Pricing and Bidding
Any exchange of price information between competitors is dangerous under antitrust laws—even if the information is publicly available. This extends to all discussions about competitive bids, which are legally equivalent to discussions about prices and other sales terms. Even seemingly innocent sharing of pricing strategies or bidding approaches between competitors can create significant legal risk.
While you cannot discuss pricing with competitors, antitrust laws don’t prohibit gathering market intelligence from non-competitor sources. Customers, vendors, and publications can provide legitimate market insights without creating legal exposure. These channels allow construction companies to understand market conditions without engaging in direct communications with competitors.
Practical Compliance Strategies for Construction Managers
To protect your company and yourself from antitrust liability, several practical strategies can be implemented:
Developing a clear compliance policy is essential—this written document should clearly identify prohibited behaviors and provide guidance for high-risk situations. Regular review and updates ensure this policy remains current with changing enforcement priorities.
Implementing regular training for all employees involved in pricing, bidding, or competitive decision-making ensures everyone understands not just what’s prohibited but why these rules matter. These educational efforts should be documented and refreshed annually.
Establishing standardized protocols for bid development emphasizes independent decision-making and creates documentation showing the legitimate business basis for bidding decisions. These procedures help demonstrate that pricing decisions reflect individual business judgment rather than collusion.
Creating confidential channels for employees to report potential violations without fear of retaliation supports early internal detection of problems, allowing for corrective action before government involvement. This reporting system should include protections for whistleblowers and clear procedures for investigating concerns.
Maintaining clear records that show the legitimate business justifications for pricing decisions, market strategies, and joint ventures with competitors provides valuable evidence if questions ever arise. These records should document the business rationale, market factors, and cost considerations that drove important competitive decisions.
Implementing thorough due diligence procedures for activities like joint ventures and trade association participation helps identify and mitigate antitrust risks before they become problems. This assessment process should involve legal counsel when appropriate.
If You’re Contacted by Investigators
If government investigators contact you about a potential antitrust matter, your initial response is critical. Always treat investigators professionally and courteously, but avoid answering substantive questions until speaking with legal counsel. Limit your responses to basic identification information regarding your employment, and politely explain that any document requests must be directed to company legal counsel.
Resources
For additional guidance, valuable resources include the Department of Justice’s primer on “Price Fixing, Bid Rigging, and Market Allocation Schemes” and the FTC’s Competition Guidance Documents, both available online.
Cal/OSHA Announces Discussion Drafts for Revised Wildfire Smoke Protection and Heat Illness Prevention Standards
On Friday, May 9, 2025, the California Division of Occupational Safety and Health (Cal/OSHA) announced discussion drafts for the wildfire smoke regulation, as well as the indoor heat and outdoor heat regulations. The drafts were posted online and provide for substantial changes to both regulations. Future advisory committees will be announced, however, and Cal/OSHA requests written comments by July 7, 2025.
Quick Hits
The revisions to Section 3395, the outdoor heat illness prevention regulation, provide greater details and requirements for acclimatization. The same changes are intended for Section 3396, the indoor heat illness prevention regulation.
Both the indoor and outdoor heat draft revisions would require that the plan be distributed to new employees upon hire, during heat illness prevention training, and at least once a year.
The draft wildfire smoke regulation would adjust the AQI table to indicate that AQI Category for PM2.5 at 301 or above (as opposed to 301 to 500) as “hazardous.” Additionally, the proposed regulation clarifies that a written respiratory protection program and fit testing are not required unless the AQI for PM2.5 exceeds 500.
Despite the fact that the federal Occupational Safety and Health Administration’s (OSHA) heat proposal draft has not been adopted (on June 16, 2025, OSHA will host a virtual public hearing on its proposed rule), Cal/OSHA appears to be moving ahead, attempting to codify aspects of the federal proposal prior to that rule’s adoption.
Next Steps
Employers interested in Cal/OSHA’s draft proposals to revise the wildfire smoke protection and heat illness prevention standards can submit written comments by July 7, 2025, to [email protected] and [email protected]. An advisory meeting will be scheduled at a later date.
The Regulatory Horizon: Legal Framework for Commercial Fusion Power
Key Takeaways
The fusion power industry has evolved from primarily government-led initiatives to include over 45 private companies with combined funding exceeding $7 billion
The NRC is developing fusion-specific regulations with proposed rules anticipated in May 2025
In 39 “Agreement States,” state authorities may regulate fusion under delegated NRC authority
Beyond nuclear regulations, fusion facilities will face state and local permitting related to land use, environmental impact, and public safety
Early engagement with both federal and state regulators is advisable for fusion companies to navigate this evolving regulatory landscape
Strategic Considerations for Stakeholders
For Fusion Developers: Submit comments during the NRC’s rulemaking period to shape regulations favorable to your technology approach
For Investors: Evaluate potential fusion investments based partly on regulatory preparedness and engagement with authorities
For Utilities: Begin exploring power purchase agreement structures that account for fusion’s unique regulatory status
For Communities: Prepare to participate in upcoming state and local permitting processes by developing informed positions on fusion facility siting
For Policy Advocates: Identify gaps in current regulatory frameworks that could be addressed through state legislation or federal guidance
For International Entities: Monitor the U.S. regulatory approach as a potential model for other jurisdictions developing fusion regulations
The energy source that powers the stars was first demonstrated in an experiment in 1934.
Ever since then the promise of clean, virtually limitless energy has been greatly anticipated with commercial fusion power perennially predicted to come “within the next ten years.” Recent advances in physics, materials science, and other fields may finally prove those predictions true. This article provides a brief overview of the current state of the fusion power industry and discusses the developing regulatory framework as we await the reality of commercial fusion power.
The Emerging Fusion Industry
Fusion R&D was historically dominated by national governments collaborating on major projects like Euratom’s Joint European Torus (1973) and the International Thermonuclear Experimental Reactor (1985), which began with Euratom, Japan, the US, and Soviet Union and now includes 27 nations. While national projects in China, Japan, South Korea, France and elsewhere continue advancing fusion technology, they’ve been joined by private sector companies bringing new energy (pun intended) to commercial fusion development.
Today, over 45 companies worldwide are pursuing commercial fusion with funding exceeding $7 billion from venture capital, governments, and energy-intensive industries seeking to become fusion power customers. Unlike government efforts focused on limited technologies, private enterprises explore diverse innovative approaches. All stakeholders face challenges in high-temperature materials, plasma stability, commercial scalability, and system costs. This competition and collaboration between entrepreneurial companies and governmental projects fuels growing optimism that commercial fusion power may soon become a reality.
As technical development progresses, parallel efforts are creating regulatory frameworks that recognize fusion’s unique characteristics, ensuring safe deployment without inhibiting industry growth.
…Congress and the U.S. Nuclear Regulatory Commission (USNRC) have taken a number of steps to develop a regulatory framework for fusion power.
Evolution of the U.S. Fusion Power Regulatory Framework
As discussed in previous articles in this series, there is an extensive statutory and regulatory framework applicable to fission-based nuclear power in the United States. This framework is predicated broadly on issues related to public safety and control of the fissile material that fuels commercial reactors which could present weapons proliferation concerns if not regulated appropriately. Recognizing that fusion facilities do not present these same risks, Congress and the U.S. Nuclear Regulatory Commission (USNRC) have taken a number of steps to develop a regulatory framework for fusion power.
The Nuclear Energy Innovation and Modernization Act of 2018 (NEIMA) included “fusion reactors” in the definition of “advanced reactors” and directed USNRC to develop a regulatory framework for the licensing of advanced reactors by December 31, 2027. Following USNRC Staff’s consideration of various licensing approaches, in 2023 USNRC directed its staff to develop rules for the licensing and regulation of fusion energy facilities that treat these facilities under the “byproduct material” regulations rather than the regulations applicable to commercial fission power facilities. Congress essentially codified this decision in Section 205 of the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act of 2024 which amended the Atomic Energy Act (42 U.S.C. § 2014) and NEIMA to define “fusion machines” and classify the radioactive materials used in and produced by them as byproduct material.
This regulatory approach makes sense since fusion machines use certain byproduct materials as fuel and may produce additional byproduct materials through the fusion reaction. It offers the benefits of a streamlined process as compared to the 10 CFR Part 50 processes applicable to fission reactors and technology-neutral, risk-informed, performance-based regulations that could be relevant to multiple fusion technologies.
Since 2023, USNRC Staff has engaged with public stakeholders to develop proposed rules that will provide regulatory clarity and predictability for the US fusion power industry. USNRC has described this as a limited-scope rulemaking that considers known fusion systems and those that can be reasonably anticipated in the immediate future, builds on existing regulations as much as possible, and focuses on license application requirements and processes and other issues specific to fusion systems. USNRC’s proposed fusion power regulations will be located primarily in 10 CFR Part 30 – Rules of General Applicability to Domestic Licensing of Byproduct Material, with additional guidance in a new fusion-specific Volume 22 of NUREG-1566, Consolidated Guidance About Materials Licenses. A draft of NUREG-1566, Volume 22 was released in March 2024 and provides additional information for fusion system possession license applications and implementing guidance. Publication of the proposed rules is presently anticipated in May 2025 which will initiate the formal rulemaking proceeding.
Currently, 39 states have entered into such agreements and USNRC has indicated it intends to work with Agreement States to develop a comprehensive fusion regulatory framework.
The Agreement States Program and Other State Regulations
The Agreement States Program is based in Section 274b of the Atomic Energy Act and enables USNRC to authorize individual states to license and regulate nuclear materials – including source materials, special nuclear materials, and byproduct materials – in order to protect the public from radiation hazards associated with such materials. These agreements effectively delegate to the state USNRC’s authority to regulate the specified nuclear materials for the duration of the agreement. USNRC may also grant exemptions from certain licensing requirements of the Atomic Energy Act and from its regulations applicable to certain licensees as needed to carry-out the agreements. Such exemptions may include requirements and regulations related to byproduct materials. This is particularly relevant given that USNRC intends to regulate fusion power under the byproduct materials framework.
Currently, 39 states have entered into such agreements and USNRC has indicated it intends to work with Agreement States to develop a comprehensive fusion regulatory framework. In Agreement States, entities seeking regulatory approval to use byproduct materials for fusion applications will be required to apply to the relevant state authority; in non-Agreement States, the application will be filed with USNRC.
…it is also important to keep in mind that fusion facilities will also be regulated by state and local governments under their existing land use, environmental, public health and safety, and other relevant authority.
While states’ specific role in regulating not only byproduct materials used in fusion systems but also the systems themselves may evolve following completion of the USNRC rulemaking, states such as Massachusetts, Washington, and others are already regulating fusion systems being used for R&D purposes under their existing nuclear materials authority. Given the current state of fusion regulations and the unique technical and radiological issues associated with fusion, which state radiation control offices may be unfamiliar with, it is advisable for fusion companies to engage early with their relevant state regulators. Such engagement will allow time for states to gather relevant information and seek technical support from USNRC under the Agreement States program thereby increasing the likelihood of a timely state licensing decision that meets the company’s schedule.
While substantial attention is being paid to the federal regulations for fusion systems and, by extension, regulation by Agreement States, it is also important to keep in mind that fusion facilities will also be regulated by state and local governments under their existing land use, environmental, public health and safety, and other relevant authority. State and local permitting and siting authorities are likely to have many questions concerning how First-of-A-Kind fusion systems can be located appropriately and developed and operated consistent with public interests. Therefore, it is equally prudent for fusion companies to engage with these authorities at the appropriate stage in project development.
Conclusion
As we witness the convergence of technological breakthroughs, substantial private investment, and regulatory development, the long-promised potential of fusion energy appears increasingly within reach. USNRC’s proposed regulatory framework acknowledges fusion’s unique characteristics while providing necessary oversight. For industry stakeholders across the spectrum—from developers and investors to utilities and communities—the next three years present a window of opportunity to shape this emerging framework. By engaging proactively with federal and state regulators, participating in upcoming rulemaking processes, and preparing for implementation of the final regulations, stakeholders can help ensure that the regulatory environment supports rather than hinders fusion’s commercial development. As fusion technology moves from laboratory to commercial deployment, this collaborative approach to regulation may well become a model for how emerging clean energy technologies can be safely and effectively integrated into our energy infrastructure, potentially unlocking one of humanity’s most promising solutions to climate change and energy security challenges.
Find the previous articles from this series here:
Powering the Digital Future: Navigating the Nuclear Option for Data Centers
Cybersecurity in the Nuclear Industry: US and UK Regulation and the Sellafield Case
New Life for Nuclear Power: License Extensions and Recommissioning
Powering The Future: The UK’s Nuclear Revolution
Washington Governor Signs State’s ‘Mini-WARN Act’: Notice Required for Site Closings and Mass Reductions in Force
On May 13, 2025, Washington Governor Bob Ferguson signed a bill into law that will require employers with fifty or more full-time employees to notify the state, any union, and affected employers of a business site closing or mass reduction in force (RIF).
Quick Hits
Washington Governor Ferguson has signed the state’s new “Mini-WARN Act” law, requiring notice before closing certain business sites or conducting a mass RIF.
The Washington law requires more notice than what is required under federal law and has specific protections for employees taking state mandated paid family or medical leave.
The law, Senate Bill (SB) 5525 or the “Securing Timely Notification and Benefits for Laid-Off Employees Act,” provides employees with similar protections regarding business site closings or a “mass layoff” as the federal Worker Adjustment and Retraining Notification (WARN) Act. The Washington law is one of many state laws, known as “Mini-WARN Acts,” that provide similar notice protections regarding mass RIFs.
However, SB 5525, which was passed by state lawmakers in April 2025, requires most covered employers to provide more notice than what is required under the WARN Act, and will also protect employees from being included in a reduction while they are taking Washington’s paid family or medical leave. Further, the law grants the Washington State Employment Security Department (ESD), aggrieved employees, or the employees’ union bargaining representative a private right of action to enforce.
Next Steps
The law will now go into effect on July 27, 2025. A more comprehensive breakdown of the SB 5525 can be found in our prior article here.
Throwing Away the Toaster: Where AI Controls Are Now and May be Heading
Years ago, when I was a baby lawyer living in a group house in DC, we had a toaster—my toaster. I had owned the toaster since college and it was showing its age. Eventually, you had to hold down the thing[1] to keep the bread lowered in the slots and toasting. But the appliance still heated bread and produced toast. One morning, I became so frustrated with that toaster and the thing-holding-down effort that I threw the toaster out, fully intending to get a new toaster.
The following day, my housemate, we’ll call him Mike,[2] raised an important series of questions:
Mike: Did you throw away the toaster?
Me: Yes. I was frustrated that it did not work right.
Mike: Did you get a new toaster?
Me: No, but I will soon.
Mike: Did our old toaster make toast?
Me: [pause] Ah . . . well, I mean, umm, yes. I see your point.
Anyhow, on a possibly related note, on May 14, 2025, BIS announced that it will rescind the AI Diffusion Rule and that, until the time of the official recission, would not enforce the Biden-era regulation.
Stop-Gap Stopped
Reading the BIS announcements, it appears that, once the AI Diffusion Rule is officially rescinded, there will not be any U.S. export control that restricts the provision of cloud computing through Infrastructure as a Service (IaaS). While the export of the certain ICs will still be controlled, ICs already owned or lawfully obtained could be put to any purpose, such as providing IaaS services for the development of AI in China.
If we return to October 2023, we see a comment made regarding the 2022 semiconductor regulations, highlighting that those rules, as then written, “may give China computational access to their equivalent ‘supercomputers’ via an IaaS arrangement.” (88 Fed. Reg. 73467). BIS acknowledged that the semiconductor regulations did not then cover IaaS, when it recognized that it was “concerned regarding the potential for China to use IaaS solutions to undermine the effectiveness of the October 7 IFR controls and [BIS] continues to evaluate how it may approach this through a regulatory response.” A plain reading of that statement indicates that the semiconductor regulations were not meant to (or could not be read to) cover IaaS.
However, the 2025 AI Diffusion Rule attempted to cover to that regulatory loophole and prohibit IaaS access for Chinese AI development. The Rule created ECCN 4E091 to cover certain AI models and then created a presumption that certain IaaS services would result in an unauthorized export of those 4E091 AI models. Effectively, that presumption created a restriction on cloud service providers to be able to provide certain IaaS services to entities in the PRC. With the recission of the AI Diffusion Rule, it appears that the loophole has been reopened.
Guidance Through and Inter-Rule Interim
In tandem with the rescission of the AI Diffusion Rule, BIS also issued three guidance documents that (1) put companies on notice that the Huawei Ascend 910 series chips are presumptively subject to General Prohibition 10[3], (2) provides guidance on due diligence that companies can conduct to prevent diversion of controlled ICs, and (3) reiterates existing controls that put restrictions on certain end-users and end-uses.
Those three guidance documents give the impression of a certain tension in the rulemaking process and they provide some hints as to be in store for the replacement AI rule:
On one hand, the new administration rescinded the AI Diffusion Rule in line with, if not in response to, calls from U.S. AI-related industry. The administration also recognized that there may have been flaws with the AI Diffusion Rule. For instance, the tiered approach to limiting and restricting exports of controlled ICs exclude many countries that are friendly to the U.S.—such as Iceland, Israel, and much of the EU and Eastern Europe. The AI Diffusion Rule did not put those U.S.-aligned countries on a tier in which they could freely acquire U.S. AI-supporting chips and, additionally, did not present a clear path for how those countries could move into the more favored tier.
As an alternative to the tiered approach researchers have suggested the idea of a country-by-country approach. That approach appears to be consistent with the administration’s recent trip to the Middle East, where it is reported that agreements with Saudi Arabia and the UAE have been negotiated to purchase U.S. producers’ GPUs (notwithstanding the fact that, under current regulations, those countries face restrictions on the purchase of certain advance semiconductors because of diversion risk).
While major semiconductor manufacturers have been the face of the recission effort, other major AI infrastructure players have been lobbying the administration to have the rule rescinded. Those companies had established or were working on data center projects in countries like Malaysia, Brazil, or India that were affected by the AI Diffusion Rule, particularly in how it limited compute capacity in those countries and restricted the use of the data centers.
On the other hand, with the AI Diffusion Rule scrapped, and no replacement ready, we suspect that officials at Commerce could be concerned about the re-opening of the IaaS loophole. The guidance documents appear to attempt to try to cover the gap left by the recission of the AI Diffusion Rule. In those guidance documents, BIS explains a policy whereby sellers of controlled ICs would need to conduct additional due diligence of IaaS providers when red flags are present. That approach stands in contrast to the AI Diffusion Rule, which put some diligence requirement on the service providers. In that we see a significant clue that a new replacement rule will likely find some way to restrict IaaS providers, but balance the interests of U.S. chip manufacturers and AI hyperscalers.
The guidance also announced the Huawei Ascend 910-series chips were presumptively a foreign direct product and subject to the EAR, presumptively violative of the EAR, and ultimately subject to General Prohibit 10. Ostensibly, that guidance could have a chilling effect on the purchase of Huawei chips, particularly in countries that wish to align with U.S. policy, and would help U.S. semiconductor manufacturers regain any ground lost to Huawei in those markets.
Striking a Balance in the New AI Rule
Looking to the future, the yet-to-be-seen replacement rule is going to have to balance the competing interests of a U.S. semiconductor and AI industry that want to expand freely and globally, and the national security concerns of those in government who would want restrict access to advanced semiconductors and AI technology by countries of concern.
For example, U.S. chipmakers will want to continue selling their leading edge GPUs to data centers in Malaysia and India. At the same time, U.S. export policy hawks would want to mitigate the risk of putting immense compute power proximate to, and potentially at the disposal of, PRC AI developers. Additionally, cloud service providers in Southeast Asia will want to be able to sell their services to the largest customer in the region, and would consider using Huawei chips over U.S. alternatives if it meant they could do so. That may mean that BIS cannot put too many restrictions on the region before the chipmakers and hyperscalers begin to voice objections and press to reduce the regulation.
Now that we have thrown away the toaster, selecting a new one—writing a new AI diffusion regulation—will require regulators to walk a narrow line to satisfy the interests of both industry and national security. Those interests are not necessarily opposed to one another, but their interests may be divergent, and it will be up to drafters to find a potentially very narrow common ground.
FOOTNOTES
[1] You know. The thing. It’s a technical term in the appliance repair world.
[2] Because that was his name. In fact, it still is.
[3] General Prohibit 10—or GP10 as it is affectionately known around the Sheppard Mullin offices—is a comprehensive prohibition on essentially doing anything with an item, including destroying or moving the item, if has caused a violation or will cause a violation of the EAR.
Federal Court Nullifies EEOC Guidance on LGBTQ+ Protections
On May 15, 2025, a federal court vacated portions of the U.S. Equal Employment Opportunity Commission’s (EEOC) workplace harassment guidance, specifically, guidance on harassment based on sexual orientation and gender identity. The court vacated portions of the EEOC’s enforcement guidance because the EEOC allegedly “exceeded its statutory authority by issuing” it and by “requiring bathroom, dress, and pronoun accommodations inconsistent with the text, history, and tradition of Title VII and recent Supreme Court precedent.”
Quick Hits
A federal district court recently vacated parts of the EEOC’s guidance related to workplace harassment of LGBTQ+ employees.
Despite the Supreme Court’s holding in Bostock that discrimination based on sex in hiring or firing decisions violates Title VII’s prohibition on sex discrimination, the district court vacated the guidance based on the guidance’s “expanded” definition of sex discrimination to include sexual orientation and gender identity.
The court ruled that the EEOC exceeded its statutory authority by requiring accommodations related to bathrooms, dress, and pronouns, which it found inconsistent with Title VII of the Civil Rights Act of 1964 and recent Supreme Court precedent.
This decision follows President Trump’s executive order recognizing sex as binary and immutable, which has created uncertainty for employers regarding compliance with federal, state, and local antidiscrimination laws.
Background
In vacating the EEOC’s guidance related to LGBTQ+ workplace harassment, the U.S. District Court for the Northern District of Texas held that the EEOC’s April 2024 “Enforcement Guidance on Harassment in the Workplace” overstepped by stating Title VII’s prohibition on sex discrimination also prohibits discrimination based on sexual orientation or gender identity. The EEOC guidance flowed from the Supreme Court of the United States’ 2020 decision in Bostock v. Clayton County, Georgia, where the Court ruled Title VII prohibits employers from firing workers for being “homosexual” or transgender. The Court specifically held: “An employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.” The Court’s key holding in Bostock went on to clearly state that “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”
Following the Bostock decision, the EEOC published guidance in 2021 stating employers may not deny employees access to bathrooms, locker rooms, or showers aligning with gender identity. The 2021 guidance also stated an employer intentionally and repeatedly using an incorrect name or pronoun to refer to a transgender worker constituted unlawful harassment under Title VII. As noted in the district court’s memorandum opinion and order, the 2021 guidance was enjoined, but the EEOC issued new guidance in 2024, which the parties challenged.
On January 20, 2025, President Donald Trump released Executive Order 14168 (“Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government”), which established that the federal government recognizes only two genders, male and female. This executive order instructed the EEOC to rescind portions of its harassment guidance that were inconsistent with the order.
On January 28, 2025, EEOC Acting Chair Andrea R. Lucas rolled back much of the Biden-era technical assistance related to discrimination and harassment against LGBTQ+ individuals. However, the April 2024 enforcement guidance has not been officially rescinded because the EEOC currently lacks a quorum.
The Court Order
The U.S. District Court for the Northern District of Texas granted summary judgment to the State of Texas and the Heritage Foundation, which had sued to block the EEOC’s 2024 guidance. The court concluded the EEOC may not legally:
define “sex” to include sexual orientation and gender identity; and
define “sexual orientation” and “gender identity” as a protected class under federal law; and
prohibit employers from repeatedly and intentionally using the wrong pronouns for transgender employees.
The court’s reasoning was based on its conclusion that the EEOC’s guidance is “final agency action” and that it “produces legal consequences and determines rights and obligations of covered employers.” According to the order, “the Guidance determines the legal obligations of employers in navigating accommodation requests from transgender employees.”
According to the court, the EEOC’s “Enforcement Guidance contravenes Title VII’s plain text by expanding the scope of ‘sex’ beyond the biological binary. Second, the Enforcement Guidance contravenes Title VII by defining discriminatory harassment to include failure to accommodate a transgender employee’s bathroom, pronoun, and dress preferences.”
Next Steps
Employers will want to note that it is still unclear whether the court’s order—which states the guidance is “vacated”—has nationwide impact, making next steps unclear at this time. Moreover, the vacating of this guidance does not necessarily mean that employers are not required to abide by the EEOC’s enforcement guidance.
Despite the court’s order, employers should note that Bostock continues to be good law. Nevertheless, courts across the country have differed on whether the Bostock decision extends to bathrooms, locker rooms, showers, or similar facilities for employees to use, as well as pronoun and name usage. Various state and local laws and guidance both protect single-sex facility usage based on gender identity, and, alternatively (in government buildings), require usage of single-sex facilities based on birth sex. Indeed, many states and localities protect both gender identity as well as sexual orientation under relevant state and local antidiscrimination laws. Employers should carefully assess how to create and maintain workplaces free of harassment, discrimination, and retaliation under all applicable laws, including with regard to using employees’ names and pronouns.
Acting Chair Lucas and the Trump administration have indicated their opposition to the EEOC guidance at issue, so it is unlikely that they would appeal this case to a federal circuit court. Employers in all states may wish to review their policies and practices to ensure compliance with state and federal laws banning discrimination based on sex.
Workplace Strategies Watercooler 2025: The AI-Powered Workplace of Today and Tomorrow [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, Jenn Betts (shareholder, Pittsburgh), Simon McMenemy (partner, London), and Danielle Ochs (shareholder, San Francisco) discuss the evolving landscape of artificial intelligence (AI) in the workplace and provide an update on the global regulatory frameworks governing AI use. Simon, who is co-chair of Ogletree’s Cybersecurity and Privacy Practice Group, breaks down the four levels of risk and their associated regulations specified in the EU AI Act, which will take effect in August 2026, and the need for employers to prepare now for the Act’s stringent regulations and steep penalties for noncompliance. Jenn and Danielle, who are co-chairs of the Technology Practice Group, discuss the Trump administration’s focus on innovation with limited regulation, as well as the likelihood of state-level regulation.
Section 899: Proposed Legislation Would Increase US Tax Rates on Many Foreign Individuals, Companies, and Governments
Under the proposed Defending American Jobs and Investment Act, introduced in the House of Representatives and approved by the House Ways and Means Committee on May 14, 2025, as part of the Trump administration’s tax package known as “The One, Big, Beautiful Bill,” a new Section 899 would be added to the Internal Revenue Code. This proposed provision—titled “Enforcement of Remedies Against Unfair Foreign Taxes”—represents a significant new international tax enforcement measure.
According to the administration, the proposed Section 899 is intended to serve as a strong legislative response to the growing use of foreign tax regimes that, in its view, unfairly target and burden U.S. businesses and individuals operating abroad. The provision would authorize countermeasures against persons and companies located in jurisdictions that impose what the legislation defines as an “unfair foreign tax.”
The bill is expected to be considered by the full House next week as part of the reconciliation measure. Presuming it passes the House, this portion of the reconciliation measure will then be considered by the Senate Finance Committee, where provisions of the House measure could be changed, and then the full Senate.
Go-To Guide
Proposed Section 899 would significantly increase U.S. federal income tax rates—by 5% to 20%—on certain types of income earned by non-U.S. individuals and entities that are tax residents of, or are established or effectively managed in, “discriminatory foreign countries.” These jurisdictions are defined as those that impose an “unfair foreign tax” under the proposed legislation.
These elevated rates would apply to passive U.S. source income (such as dividends, interest, royalties, and rents), as well as income effectively connected with a U.S. trade or business (ECI).
The legislation defines “unfair foreign taxes” broadly, encompassing digital services taxes and other measures that have been widely adopted by foreign jurisdictions. As a result, a large number of non-U.S. individuals and entities could fall within the scope of the increased tax rates.
These higher rates would apply across a broad spectrum of existing tax provisions and would affect nonresident individuals, foreign corporations, and even sovereign entities.
If enacted, Section 899 would introduce substantial economic and compliance challenges, particularly for foreign governments, multinational enterprises, and investors with connections to jurisdictions that impose taxes perceived to disproportionately impact U.S. interests—such as digital services taxes or global minimum tax regimes.
Taxpayers potentially impacted by this proposal should carefully assess how their U.S. tax exposure could change under the new rules and evaluate possible strategies to mitigate adverse effects.
Click here to continue reading the full GT Alert.
McDermott+ Check-Up: May 16, 2025
THIS WEEK’S DOSE
Key House Health Committees Advance Reconciliation, Bill Held Up in Budget Committee. The Energy and Commerce Committee and Ways and Means Committee passed their recommendations for reconciliation out of committee, but the Budget Committee failed to advance the bill today and is currently scheduled to reconvene at 10pm on Sunday, May 18, 2025.
HHS Secretary Kennedy Testifies in Congress. The House Appropriations Committee and Senate Health, Education, Labor, and Pensions (HELP) Committee held hearings on the US Department of Health and Human Services (HHS) budget.
Senate Judiciary Committee Discusses PBM Reform. Committee members widely agreed on the need for pharmacy benefit manager (PBM) policy change.
House Judiciary Subcommittee on Administrative State, Regulatory Reform, and Antitrust Holds Hearing on Medical Residency. The hearing examined the structure and legal implications of the National Resident Matching Program and evaluated its antitrust exemption.
Senate Finance Committee Advances Trump HHS Nominees. The nominations for deputy secretary of HHS and assistant secretary of legislation of HHS now move to the Senate floor.
Trump Signs EO on Drug Prices. The executive order (EO) seeks to implement most-favored nation pricing.
CMS Releases Proposed Rule on MCO Taxes. The Centers for Medicare & Medicaid Services (CMS) proposal would address state-imposed “provider taxes” on managed care organizations (MCOs).
HHS Agencies Issue RFIs. The requests for information (RFI) focus on possible deregulatory actions and the health technology ecosystem.
HHS Identifies Documents for Recission. The recission was enacted upon publication.
CMS Innovation Center Releases Strategic Framework. The strategy outlines how the center intends to structure current and future value-based care models.
CONGRESS
Key House Health Committees Advance Reconciliation, Bill Held Up in Budget Committee. On May 13, 2025, and into the next afternoon, the House Energy and Commerce Committee held a 26.5 hour markup of its budget reconciliation committee print, which included sweeping policy changes to Medicaid enrollment process, eligibility, and financing, as well as a Medicare physician payment adjustment, PBM reform, and changes to the Medicare prescription drug negotiation program and the Affordable Care Act (ACA). At the same time, the House Ways and Means Committee held a 15.5 hour markup of its budget reconciliation committee print. The Ways and Means package included provisions related to paid leave, CHOICE health plans (now called ICHRAs), health savings accounts, and research, as well as significant changes to ACA Exchange enrollment. Both committees successfully advanced their committee prints along party lines and did not adopt any amendments.
Energy and Commerce Committee: The House budget resolution instructed the House Energy and Commerce committee to find a minimum of $880 billion in savings. On May 11, 2025, Democrats released a memo from the Congressional Budget Office (CBO) estimating that the Energy and Commerce reconciliation recommendations related to Medicaid, the expiration of expanded premium tax credits, finalizing the 2025 Marketplace Integrity and Affordability Proposed Rule, and the Marketplace provisions that extend beyond codifying the proposed rule would increase the number of people without health insurance by at least 13.7 million by 2034. CBO noted on May 12, 2025, that the budget reconciliation text would exceed the savings target and reduce deficits by more than $880 billion over 10 years. On May 13, 2025, CBO released a new set of preliminary scores for certain Medicaid provisions listed in the bill, which in total would save $625 billion over 10 years. The scores also estimate that a total of 7.6 million individuals would become uninsured by 2034, including 1.4 million people without verified citizenship, nationality, or satisfactory immigration status. These are the figures congressional Republicans have cited. CBO has not yet provided final scoring for the package, and particular provisions are still without a score as well. That analysis is expected in the coming days.
During the Energy and Commerce Committee the markup, Democrats offered 246 health-related amendments, many of which were ultimately withdrawn. They largely focused on extending the enhanced advanced premium tax credits (APTCs), preventing the Medicaid policies that would reduce coverage from going into effect, addressing prescription drug prices, and preserving access to home- and community-based services. Republicans did not offer any amendments. The amendments can be found here, and the committee’s section-by-section summary can be found here.
Ways and Means Committee: The budget resolution instructed the House Ways and Means Committee to produce policies that would not raise the federal deficit by more than $4 trillion if the spending cuts in the overall bill totaled less than $1.5 trillion, or by more than $4.5 trillion if the bill achieved $2 trillion in savings. The Joint Committee on Taxation found that the Ways and Means Committee’s proposed tax provisions would increase the deficit by $3.18 trillion, meeting the goals stated in the resolution.
Throughout the markup, Democrats spoke out against the Medicaid provisions being considered in the House Energy and Commerce Committee and encouraged the Ways and Means Committee to extend the enhanced APTCs. Democrats argued that if the bill was supposed to help working Americans, healthcare improvements needed to be a key part of the legislation and tax breaks for the wealthy shouldn’t be financed by taking healthcare away from lower- and middle-class working Americans. Republicans offered no amendments. Their talking points focused on how the tax package was designed to limit tax liability of working Americans and restrict provision of government benefits to US citizens only, not individuals in the country illegally.
Budget Committee: Speaker Johnson (R-LA) aims to pass the reconciliation package on the House floor before Memorial Day. Once all the committees of jurisdiction have completed their work, the House Budget Committee is tasked with pasting together the various committee prints into a single reconciliation package. That is largely a perfunctory role as they have no authority to make any changes. The Budget Committee met today, May 16, 2025, to do that work. Ultimately, a vote was held to decide if the committee should vote on the package, which failed in a 16–21 vote due to a hardline conservative push to enact larger spending cuts. When voting no, Reps. Clyde (R- GA), Roy (R-TX), Brecheen (R-OK), and Norman (R-SC) cited concerns that the federal spending reductions, particularly the Medicaid cuts, do not go far enough. Rep. Smucker (R-PA) also voted no, clarifying that the no vote was so that the committee could procedurally bring the bill back up later. Specifically, conservatives are unhappy about the Medicaid work requirement provisions. As written, the work requirements do not begin until 2029, and conservatives want to shorten that timeline.
The Budget Committee is currently scheduled to reconvene at 10pm on Sunday, May 18, 2025, to vote on the bill, and the Rules Committee is expected to meet on Wednesday, May 21, 2025, to prepare the bill for floor debate. Republican leadership continues to work behind the scenes to resolve remaining differences related to Medicaid and other issues, such as disagreement on the state and local tax deduction (SALT).
HHS Secretary Kennedy Testifies in Congress. In the House Appropriations Committee hearing, Kennedy defended the cuts outlined in President Trump’s skinny budget request and heard concerns from both Republicans and Democrats about some of his policies, such as removing fluoride from drinking water. In the Senate HELP Committee hearing, Kennedy faced questions from a bipartisan group of senators about his previous statements on vaccine safety and efficacy. In both committees, Kennedy defended workforce and program cuts from the Department of Government Efficiency.
Senate Judiciary Committee Discusses PBM Reform. The hearing examined the role of PBMs and how current practices impact drug pricing, access to medication, and local pharmacies. Republican and Democratic senators expressed concerns over low reimbursement rates to local pharmacies, lack of transparency, and the impact of vertical integration on drug affordability. Several witnesses emphasized the need to reform PBMs and recommended that future policies prioritize patients over profit.
House Judiciary Subcommittee on Administrative State, Regulatory Reform, and Antitrust Holds Hearing on Medical Residency. The hearing examined the structure and legal implications of the National Resident Matching Program and evaluated its antitrust exemption. The hearing also explored the role of the Accreditation Council for Graduate Medical Education (ACGME) in shaping residency program standards and access, and how the residency placement and accreditation system affects medical graduates and the broader physician labor market. Republicans portrayed the matching program and ACGME accreditation as monopolistic, opaque, hospital-centric, and contributing to physician shortages, wage suppression, and lack of resident autonomy. Democrats defended the matching program as an imperfect but functional solution to manage medical residency placements. They emphasized the need for increased public investment, particularly in expanding residency slots, supporting international medical graduates, and protecting research funding.
Senate Finance Committee Advances Trump HHS Nominees. The executive session considered the nominations of James O’Neill to be deputy secretary of HHS and Gary Andres to be assistant secretary of legislation of HHS. Both nominees advanced (see vote outcomes below), and their nominations will now move to the Senate floor.
James O’Neill’s nomination to be deputy secretary of HHS advanced by a vote of 14 – 13, along party lines.
Gary Andres’ nomination to be assistant secretary of legislation of HHS advanced by a vote of 19 – 8. Sens. Warner (D-VA), Whitehouse (D-RI), Hassan (D-NH), Warnock (D-GA), and Welch (D-VT) joined Republicans in voting yes.
ADMINISTRATION
Trump Signs EO on Drug Prices. President Trump’s “most-favored nation” EO seeks to equalize drug prices between the United States and other developed countries. It instructs federal agencies to take the following actions:
The US trade representative and the secretary of commerce will ensure foreign countries are not engaged in practices that lead to high drug prices in the United States.
The HHS secretary will facilitate direct-to-consumer purchasing programs for drug manufacturers that sell their products to US consumers at the most-favored nation price.
The HHS secretary, in coordination with other relevant agencies, will have 30 days to bring prices for pharmaceutical drugs in the United States in line with comparable developed nations. If significant progress toward most-favored nation pricing is not delivered at that time, HHS in conjunction with CMS must develop rulemaking to impose most-favored-nation pricing.
HHS and the US Food and Drug Administration (FDA) must consider certifying that the importation of certain prescription drugs from other developed countries is safe, and if such certification is made, FDA must create a waiver process to allow for the importation of prescription drugs.
Several federal agencies, including the Federal Trade Commission, the Office of the Attorney General, and the US Department of Commerce, are instructed to investigate any anticompetitive practices leading to higher prices.
FDA is instructed to review and potentially modify or revoke approvals granted for drugs that maybe be unsafe, ineffective, or improperly marketed.
A fact sheet can be found here. While EOs typically lay out the administration’s policy priorities, effectuating such policies requires additional actions, including potential rulemakings.
CMS Releases Proposed Rule on MCO Taxes. Federal law requires state-imposed “provider taxes,” which include MCO taxes, to be uniform and broad based, meaning it must be applied at the same level and to all MCOs in the state, not just Medicaid MCOs. However, a state can apply to CMS for a waiver from this requirement if the net impact of the tax is generally redistributive and the amount of the tax is not directly correlated to Medicaid payments. With its proposal, CMS aims to close what it considers a loophole to prohibit states from taxing Medicaid MCOs at a higher rate than non-Medicaid MCOs. CMS identified eight taxes in seven states that would be affected by this proposal, if finalized. We understand those states to be California, Illinois, Massachusetts, Michigan, New York, Ohio, and West Virginia.
Key proposals include:
Prohibiting states from explicitly taxing Medicaid units at higher tax rates than units of other payors and better implementing the mandate that a tax be generally redistributive.
Defining terms used in the regulation, including “Medicaid taxable unit” and “non-Medicaid taxable unit” to prohibit states from using overly vague language.
Specifying that noncompliant states that received their most recent waiver approval within two years of the effective date of the final rule would not be eligible for a transition period. Noncompliant states that received waiver approval more than two years prior to the effective date of the final rule would have a transition period of at least one full state fiscal year to adjust the tax to come into compliance.
Read the press release here and the fact sheet here. Comments are due on July 14, 2025.
The House reconciliation bill reported by the Energy and Commerce Committee includes a similar but not identical provision.
HHS Agencies Issue RFIs.
In conjunction with FDA, HHS asked the public to help identify any opportunities to produce cost savings, increase efficiency, and catalyze health and economic innovation through deregulation, with the goal of addressing regulations that are “unnecessary, inconsistent with the law, overly burdensome, outdated, out of alignment with current EOs, or otherwise unsound.” Read the press release here. Comments are due on July 14, 2025.
CMS and the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health IT requested input from the public regarding the digital health products market for Medicare beneficiaries, as well as the current state of data interoperability and the broader health technology infrastructure. Responses may be used to further efforts to cultivate this market, increase beneficiary access to effective digital capabilities, and increase data availability. Read the press release here. Comments are due on June 15, 2025.
HHS Identifies Documents for Recission. In a final rule, HHS rescinded the following four documents, effective immediately:
“Extension of Designation of Scarce Materials or Threatened Materials Subject to COVID-19 Hoarding Prevention Measures; Extension of Effective Date with Modifications” (86 FR 35810, July 7, 2021), which designated health and medical resources in scare supply and necessary to respond to the spread of COVID-19.
“Opioid Drugs in Maintenance and Detoxification Treatment of Opiate Addiction; Repeal of Current Regulations and Issuance of New Regulations: Delay of Effective Date and Resultant Amendments to the Final Rule” (66 FR 15347, March 19, 2001).
“Practice Guidelines for the Administration of Buprenorphine for Treating Opioid Use Disorder” (86 FR 22439, April 28, 2021), which provided eligible physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives, who are state-licensed and registered by the DEA to prescribe controlled substances, an exemption from certain statutory certification requirements related to training, counseling, and other ancillary services.
“Notification of Interpretation and Enforcement of Section 1557 of the Affordable Care Act and Title IX of the Education Amendments of 1972” (86 FR 27984, May 25, 2021), which clarified that ACA Section 1557’s prohibition on discrimination included discrimination based on sexual orientation and gender identity.
CMS Innovation Center Releases Strategic Framework. The strategy outlines how the Innovation Center intends to structure current and future value-based care models, with an emphasis on prevention, individual engagement, and market-based mechanisms. The framework highlights the center’s plans related to:
Promoting evidence-based prevention.
Increasing model activity in Medicare Advantage, Medicaid, and prescription drug pricing.
Focusing on cost savings and financial accountability.
Expanding access to consumer-facing tools and data.
Increasing the role of independent and rural providers.
Emphasizing choice and competition.
QUICK HITS
CMS Releases Draft Guidance for Third Medicare Drug Price Negotiation Cycle. The guidance seeks to improve program transparency, further prioritize selection of prescription drugs with high costs to Medicare, and minimize any negative impacts of the negotiated maximum fair price on pharmaceutical innovation. Read the press release here and the fact sheet here. Comments are due on June 26, 2025.
FDA Begins Process of Removing Ingestible Fluoride Prescription Drug Products for Children. The agency has set a goal date of October 31, 2025, for completing a safety review and public comment period.
GAO Releases Reports on Caregiving, TRICARE. The first US Government Accountability Office (GAO) report recommends that HHS clarify when youth may qualify for support services. The second report provides information on the US Department of Defense’s processing of TRICARE claims from behavioral health providers.
NEXT WEEK’S DIAGNOSIS
Both chambers will be in session next week, as the House works to pass its budget reconciliation package before the Memorial Day recess. Budget hearings will continue, with HHS Secretary Kennedy testifying in front of the Senate Appropriations Labor-HHS Subcommittee. The House Oversight and Government Reform Economic Growth, Energy Policy, and Regulatory Affairs Subcommittee and Health Care and Financial Services Subcommittee will hold a joint hearing on the Inflation Reduction Act. Meanwhile, we await the president’s full budget request for FY 2026.
Federal Reserve and FDIC Withdraw Crypto-Asset Guidance for Banks; OCC Issues Clarification for Banks
Go-To Guide:
The Board of Governors of the Federal Reserve System (Board) has withdrawn supervisory guidance for Board-supervised banks concerning crypto-asset and dollar token activities and Board expectations for these activities.
The Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) also withdrew joint supervisory statements on crypto-asset activities and exposures.
The OCC issued Interpretive Letter #1184 (IL 1184) reaffirming that OCC-supervised banks can provide and outsource crypto-asset custody services.
It is unclear whether the Board and the FDIC will issue additional guidance for integrating cryptocurrency in the U.S. banking system.
Until regulators issue specific and comprehensive crypto-asset guidance, banks should proceed with caution and adhere to existing safety and soundness expectations.
On April 24, 2025, the Board withdrew its supervisory guidance for Board-supervised banks relating to crypto-asset and dollar token activities.1The Board rescinded (1) its Aug. 16, 2022, supervisory letter that required state member banks engaging, or seeking to engage in, crypto-asset activities to provide the Board with advance notification; and (2) its Aug. 8, 2023, supervisory letter that imposed a non-objection process on state member banks issuing, holding, or transacting in dollar tokens2 to facilitate payments.
Furthermore, the Board and the FDIC joined the OCC in withdrawing from their joint statements regarding crypto-asset activities and exposures. The Board and the FDIC withdrew (1) their Jan. 3, 2023, joint statement that identified risks associated with the crypto-asset sector and expressed safety and soundness concerns with crypto-asset activities, and (2) their Feb. 23, 2023, joint statement on liquidity risks related to certain sources of funding from crypto-asset entities, which emphasized the importance of effective risk management practices.3
On May 7, 2025, the OCC issued IL 1184 clarifying that “banks may buy and sell assets held in custody at the custody customer’s direction and are permitted to outsource bank-permissible crypto-asset activities, including custody and execution services to third parties, subject to appropriate third-party risk management practices.” Related services include facilitating the customer’s cryptocurrency and fiat currency exchange transactions, transaction settlement, trade execution, recordkeeping, valuation, tax services, and reporting. The OCC noted that banks may provide crypto-asset custody services in a non-fiduciary or fiduciary capacity subject to 12 C.F.R. part 9 or 150, as applicable. While prior regulatory approval is not required, the OCC expects banks to conduct such activities “in a safe and sound manner and in compliance with applicable law.”
These developments are aligned with the broader objective of the Trump administration to position the United States as a leader in the cryptocurrency and financial technology space, as it noted during its first months after taking office.4
Potential Implications
These actions remove procedural regulatory hurdles for banks engaging in crypto-asset activities. Banks now have greater autonomy to explore permissible crypto-related activities without undergoing a prior supervisory review process. However, without explicit pre-approval, banks bear more responsibility for ensuring permissible crypto-asset activities are “consistent with safety and soundness and applicable laws and regulations.”5
The OCC’s issuance of IL 1184 reaffirms and expands upon previous guidance regarding national banks’ authority to engage in crypto-asset activities in that “[p]roviding crypto-asset custody services is a modern form of traditional bank custody activities.”6
The Board expressed that it “will instead monitor banks’ crypto-asset activities through the normal supervisory process.”7 It is unclear whether the withdrawal of guidance will ease legacy regulatory barriers for banks seeking to engage in crypto-related activities. The Board noted that it will work with the FDIC and the OCC to determine whether additional guidance is appropriate.8 The FDIC stated that it is working with the agencies to explore “issuing additional clarity with respect to banking organizations’ crypto-asset and related activities in the coming weeks and months.”9
Takeaways
While crypto is a newer asset class, federal regulators have made it clear that existing risk management expectations apply, regardless of the type of asset or technology involved. Regulators expect banks to treat crypto activities with the same level of rigor as any other line of business – if not more so, due to their volatility, legal ambiguity, and operational complexities.10 While the federal banking agencies indicated they are considering whether to issue additional guidance, banks are now operating with minimal guidance for crypto-asset specific activities. For now, banks should be prepared to learn of crypto-specific regulatory expectations during the examination process. The agencies’ statements regarding potential new guidance or clarity may serve as an opportunity to provide more tailored guidance in this space.
In the interim, banks currently engaged or considering engaging in digital-asset activity should continue to consider the prior guidance in maintaining or establishing controls for digital-asset activity, and at the same time, remain vigilant of any further guidance the regulatory agencies may provide. Key principles and practices from traditional bank risk guidance should be applied to crypto activities, including, but not limited to: KYC and CDD;11 AML and CFT;12Third-Party Risk Management;13 Operational Risk Management;14 and Governance and Risk Appetite Frameworks.15 While banks should consider engaging federal regulators proactively to seek informal feedback even though formal pre-approval is no longer required, state-chartered banks should also consider whether to engage their state regulators, as there may be divergent comfort levels between federal and state regulators regarding permissible crypto-asset activities.
1Federal Reserve Board, Federal Reserve Board announces the withdrawal of guidance for banks related to their crypto-asset and dollar token activities and related changes to its expectations for these activities, April 24, 2025 [hereinafter Federal Reserve Board announces the withdrawal of guidance for banks].
2 “Dollar tokens” are tokens denominated in national currencies and issued using distributed ledger technology or similar technologies to facilitate payments. Id.
3 Board, Federal Reserve Board announces the withdrawal of guidance for banks, supra note 1; see also FDIC, Agencies Withdraw Joint Statements on Crypto-Assets, April 24, 2025.
4 White House, Fact Sheet: Executive Order to Establish United States Leadership in Digital Financial Technology, Jan. 23, 2025. White House, Fact Sheet: President Donald J. Trump Establishes the Strategic Bitcoin Reserve and U.S. Digital Asset Stockpile, March 6, 2025.
5 FDIC, Agencies Withdraw Joint Statements on Crypto-Assets, supra note 7.
6 OCC, Interpretive Letter 1184.
7 Board, Federal Reserve Board announces the withdrawal of guidance for banks, supra note 1.
8 Id.
9 FDIC, Agencies Withdraw Joint Statements on Crypto-Assets, supra note 7.
10 See, e.g., Fed. Deposit Ins. Corp., Risk Review § 7, May 24, 2024, at 3 (discussing novel and emerging risks associated with crypto-asset activities).
11FIN-2018-G001, Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions, April 3, 2018.
12 FinCEN, Anti-Money Laundering and Countering the Financing of Terrorism National Priorities, June 30, 2021.
13 Interagency Guidance on Third-Party Relationships: Risk Management, 88 Fed. Reg. 37920, June 9, 2023.
14 Board, FDIC and OCC, Sound Practices to Strengthen Operational Resilience, Oct. 30, 2020.
15 SR letter 21-3/CA letter 21-1, Supervisory Guidance for Boards of Directors of Domestic Bank and Savings and Loan Holding Companies with Total Consolidated Assets of $100 Billion or More (Excluding Intermediate Holding Companies of Foreign Banking Organizations Established Pursuant to the Federal Reserve’s Regulation YY) and Systemically Important Nonbank Financial Companies Designated by the Financial Stability Oversight Council for Supervision by the Federal Reserve.