ICE Inspections in the Workplace: What Employers Need to Know
With the increasing activity by the U.S. Immigration and Customs Enforcement (ICE), employers should be aware of their responsibilities and how to interact with ICE agents. Generally, ICE agents may inspect a business for workplace enforcement or to conduct inspections of employee I-9 documentation. It is imperative that employers are aware of how to best prepare and respond to these types of situations.
What Information Should Employers Obtain from ICE Agents During a Workplace Interaction?
If ICE agents visit the workplace, employers should immediately contact counsel regarding next steps. ICE agents are required to identify themselves and present proper documentation regarding the proposed search, to enter nonpublic areas of the workplace.
Here are a few steps to follow if ICE agents appear at your place of business:
Ask the ICE agents to identify themselves with their badge information and a valid subpoena or warrant.
Document each of the ICE agent’s names, the name of the U.S. attorney assigned to the case, and the type of documentation presented for your records.
Ask the ICE agents to inform you of the nature and purpose of their visit.
Ask for a copy of the warrant or subpoena. You do not have to allow ICE agents access to nonpublic areas of the workplace if a proper warrant is not present.
Once you are handed a warrant and documentation from ICE agents, tell the ICE agent that “It is our company’s policy to call our lawyer and I am doing that now.” Contact your legal counsel immediately so that they can review the documents, ensure that the warrant is valid, and whether they should be present during the search.
Do not obstruct or interfere with ICE activities or agents. Do not hide employees or help them evade the search. Do not provide any false information, shred documents, or hide documents.
Create a list of employees present during the raid.
What Parts of the Workplace Can ICE Enter?
ICE is permitted to enter publicly accessible areas of a business without a warrant. However, to enter non-public areas of a business, ICE agents are required to present, upon request, a proper warrant or subpoena. ICE generally operates using either an ICE-issued warrant, or a warrant issued by a state or federal judge in the jurisdiction in which the inspection is occurring. Only a warrant signed by a judge gives ICE agents access to the private areas of a workplace. To determine whether a judicial warrant is valid, ensure that the warrant:
States “U.S. District Court” or a California Superior Court (if in California)
Is signed by a judge
Describes the physical place to be searched
Describes the individuals to be searched or describes the items to be seized, if any
Is dated
Has been issued within the past 14 calendar days
If the warrant is missing any of these requirements, it is invalid, and employers are permitted to refrain from permitting ICE agents from entering private areas of the workplace.
What Can Employers Tell Their Employees To Do During an ICE Inspection?
If ICE agents seek to speak with an employee in the workplace during an investigation, employees do have the right to remain silent and obtain legal counsel.
What Should Employers Do Next?
Employers should have policies in place to ensure a smooth process if ICE agents conduct an inspection at the workplace. Here are some recommendations:
Indicate which areas of the office are considered public and which areas are nonpublic – since ICE can only enter public areas, if there are areas marked “Employees Only,” those are nonpublic, and ICE cannot enter without a valid warrant.
Assign an employee to be the designated representative if ICE agents visit the premises to accompany the agent(s) during an inspection. The employee may take notes or videotape the officer. The employee should note any items seized and ask the officer if copies can be made before the originals are taken. If ICE does not agree, you can obtain copies later.
Ask for a list of items seized during the search. Agents are required to provide you with an inventory of items taken.
Contact counsel for further assistance on next steps.
What Differentiates an ICE Inspection from a Notice of Inspection (NOI)?
Federal law requires that employers have an I-9 form on file for each employee within three days of an employee’s hire date to prove that the employee is authorized to work in the U.S. A Form I-9 investigation is initiated when ICE serves the employer with a Notice of Inspection (NOI) – this should not be confused with a warrant, which is addressed above. Employers are required to deliver notice to their employees within 72 hours of receiving the NOI regarding the inspection.
If ICE serves a NOI, immediately contact counsel. Additionally, employers are entitled to up to three business days to produce their employee’s I-9 forms and, if ICE determines that one or more employees are not authorized to work in the United States, employers have up to 10 days to provide valid work authorization for these employees. The employer must notify any employees who the NOI indicates are not authorized to work in the United States of that determination within 72 hours.
Ultimately, when interacting with ICE, employers should immediately contact counsel to determine next steps and the appropriate course of action.
California: Private Equity Management of Medical Practices Again Appears in Proposed Legislation
The California legislature recently introduced legislation, SB 351, that would impact private equity or hedge funds managing physician or dental practices in California. The bill is similar to a portion of California legislation from last year, AB 3129, which targeted private equity group and hedge fund management of medical practices. Last year, AB 3129 passed in the legislature but was vetoed by the Governor before becoming law. The introduction of SB 351 is part of a continuing trend in California and across the country in examining the influence of private equity investment in medical practices.
What Does SB 351 Do?
SB 351 is intended to ensure health care providers maintain control of clinical decision-making and treatment choices and to limit the influence of private equity or hedge fund influence or control over care delivery in the state.
SB 351 would codify and reinforce existing guidance relating to the prohibition on the corporate practice of medicine and dentistry. Specifically, SB 351 would prohibit a private equity group or hedge fund involved in any manner with a California physician or dental practice from interfering with professional judgment in making health care decisions or exercising control of certain practice operations.
Under the proposed legislation, prohibited activities include: determining the diagnostic tests appropriate for a particular condition; determining the need for referrals to other providers; being responsible for the ultimate care or treatment options for the patient; and determining the number of patient visits in a time period or how many hours a physician or dentist may work. Exercising control over a practice would include the following types of activities: owning or determining the content of patient medical record; selecting, hiring, or firing physicians, dentists, allied health staff, and medical assistants based on clinical competency; setting the parameters of contracts with third-party payors; setting the parameters for contracts with other physicians or dentists for care delivery; making coding and billing decisions; and approving the selection of medical equipment and supplies.
In addition, SB 351 would limit the ability of a private equity or hedge fund to restrict a provider or practice from engaging in competitive activities. SB 351 would prohibit a private equity group or hedge fund from explicitly or implicitly barring any practice provider from competing with the practice in the event of a termination or resignation of that provider from that practice. The bill would also prohibit a private equity group or hedge fund from barring a provider from disparaging, opining, or commenting on issues relating to quality of care, utilization, ethical or professional changes in the practice of medicine or dentistry, or revenue-increasing strategies employed by the private equity group or hedge fund. The California Attorney General would be entitled to injunctive relief and other equitable remedies for enforcement of the provisions of SB 351.
SB 351 contains some of the provisions that were included in AB 3129 relating to management of physician and dental practices but does not include the same breadth of limitations that were in AB 3129. Notably, SB 351 does not require the notice to and consent of the California Attorney General for certain private equity health care transactions. SB 351 also does not extend to hedge fund or private equity involvement with psychiatric practices. The scope is limited to private equity or hedge fund involvement with a physician or dental practice.
What Happens Next?
SB 351 will continue to make its way through the California legislature this year and may undergo further amendments throughout the process. Similar to AB 3129, SB 351 may garnish sufficient support to be passed by the California legislature.
The reintroduction of this legislation in California demonstrates the continuing national focus on private investment in medical practices across the country and the limitation on restrictive covenants. Management organizations and professional entities in California should review their existing arrangements to ensure compliance with applicable laws and existing corporate practice restrictions. Given the continued interest in the California legislature in addressing these issues, it may be prudent to proactively align those arrangements with the limitations in SB 351. We will continue tracking SB 351’s progress.
Congress Extends Certain Telehealth Flexibilities Through March 31, 2025
Overview
KEY UPDATE
At the close of 2024, US Congress passed a short-term extension of Medicare telehealth flexibilities as part of the American Relief Act, 2025 (ARA). The Medicare telehealth waivers, originally enacted as part of the COVID-19 public health emergency (PHE) and subsequently extended through legislation, were set to end on December 31, 2024. These flexibilities, along with the Acute Hospital Care at Home waiver program, are now set to expire March 31, 2025. The ARA failed to extend other waivers, such as the temporary safe harbor for high-deductible health plans (HDHPs) to provide first-dollar coverage of telehealth without interfering with health savings account (HSA) eligibility. While the short-term extension provides continued access to telehealth for Medicare patients, stakeholders should continue to engage with Congress for a more permanent solution.
WHY IT MATTERS
The ARA extension is limited to certain Medicare policies and is only effective through March 31, 2025. Some bipartisan policies, such as the extension of the telehealth HDHP safe harbor, were not included in the ARA. Additionally, the flexibilities related to coverage of cardiac and pulmonary rehabilitation services provided via telehealth were not extended.
The extension indicates bipartisan support for continuing coverage for telehealth services, but the short timeline warrants continued stakeholder engagement for the extension and eventual permanence of the Medicare telehealth flexibilities and reinstatement of the HDHP safe harbor. As the new administration takes office, it is unclear where telehealth will fall on the list of priorities.
In Depth
Historically, Medicare has provided coverage for telehealth services in instances where patients would otherwise be geographically distant from approved providers (e.g., physicians, nurse practitioners, and clinical psychologists). Section 1834(m) of the Social Security Act provides that telehealth services are covered if the beneficiary is seen:
At an approved “originating site” (e.g., physician office, hospital, or skilled nursing facility) that is located within a rural health professional shortage area that is either outside of a metropolitan statistical area (MSA), in a rural census tract, or in a county outside of an MSA
By an approved provider
For a defined set of services
Using certain telecommunications technologies.
Many of these Medicare restrictions regarding coverage and payment for telehealth services were waived via authority delegated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Congress subsequently extended the waivers in other pieces of legislation, including the Consolidated Appropriations Act (CAA) 2022 and CAA 2023, with the flexibilities most recently set to expire on December 31, 2024.
The ARA extended the following Medicare flexibilities through March 31, 2025:
Geographic restrictions and originating sites. Patients’ homes will continue to serve as eligible originating sites for all telehealth services (ARA § 3207(a)(2)). Geographic restrictions also remain waived (ARA § 3207(a)(1)).
Eligible practitioners. The expanded definition of the term “practitioner” will continue to apply. The expanded definition includes qualified occupational therapists, physical therapists, speech-language pathologists, and audiologists (ARA § 3207(b)).
Audio-only. Audio-only telehealth services remain eligible for reimbursement (ARA § 3207(e)).
Extending telehealth services for federally qualified health centers (FQHCs) and rural health clinics (RHCs). The US Department of Health and Human Services will cover telehealth services furnished via FQHCs and RHCs to eligible individuals (ARA § 3207(c)).
In-person requirements for mental health. The in-person requirement for mental health care to be reimbursed under Medicare has been delayed until April 1, 2025 (ARA § 3207(d)(1)).
Telehealth for hospice. Telehealth can continue to be used for the required face-to-face encounter prior to the recertification of a patient’s eligibility for hospice care (ARA § 3207(f)).
The ARA also extended the Acute Hospital Care at Home waiver program through March 31, 2025. In the midst of the PHE, the Centers for Medicare & Medicaid Services (CMS) used its PHE flexibilities to issue waivers to certain Medicare hospital conditions of participation (CoPs). These waivers, along with the PHE-related telehealth flexibilities, allowed Medicare-certified hospitals to furnish inpatient-level care in patients’ homes. Addressing hospital bed capacity during the pandemic was a high priority for CMS. These waivers and flexibilities, collectively referred to as the AHCAH Initiative, included:
Waiver of the CoP requiring nursing services to be provided on-premises 24 hours a day, seven days a week.
Waiver of the CoP requiring immediate on-premises availability of a registered nurse for care of any patient.
Waiver of CoPs that define structural and physical environment criteria specific to the hospital setting.
Telehealth flexibility allowing the home or temporary residence of an individual to serve as an originating telehealth site.
Telehealth flexibility allowing a hospital to use remote clinician services in combination with in-home nursing services to provide inpatient-level care in the patient’s home.
As with the Medicare telehealth flexibilities, these had been previously extended through December 31, 2024.
Notable flexibilities that expired or were absent from the ARA include the following:
The telehealth safe harbor for HDHPs. The CARES Act created a temporary safe harbor that permitted HDHPs to cover telehealth and remote care services on a first-dollar basis without jeopardizing eligibility for HSA contributions. By permitting health plans to provide HDHP participants coverage for telehealth services without requiring them to first meet the minimum required deductible, the safe harbor increased access to telehealth services. Additionally, covered individuals who received these services were still able to make or receive contributions to their HSAs because telehealth services were temporarily disregarded in determining eligibility for HSA contributions. Previously, the telehealth HDHP safe harbor ceased for three months from January 1, 2022, to March 31, 2022, before the CAA 2022 renewed it. Most recently extended by the CAA 2023, the telehealth safe harbor for HDHPs expired on December 31, 2024. Starting on January 1, 2025, health plans, insurers, and health plan vendors that previously relied on the telehealth HDHP safe harbor may need to update telehealth coverage for HDHP participants, such as updating plan design and/or cost sharing, to prevent disqualifying HDHP participants from making or receiving HSA contributions.
The SPEAK Act, which would establish a task force to improve access to health IT for non-English speakers.
The PREVENT DIABETES Act, which would broaden access to diabetes prevention services through the Medicare Diabetes Prevention Program.
The Sustainable Cardiopulmonary Rehabilitation Services in the Home Act, which would permanently codify cardiopulmonary rehabilitation Medicare telehealth flexibilities.
With the March 31, 2025, deadline in the not-too-distant future, stakeholders should continue to engage with Congress regarding an extension and permanent solution for the telehealth flexibilities, reinstatement of flexibilities that expired, and inclusion of the other bipartisan telehealth policies that were not included in the final ARA.
Lisa Mazur, Sarah G. Raaii, and Dale C. Van Demark contributed to this article.
Indiana Department of Revenue Determines that Video Game Enhancement Offerings are Not Subject to Sales Tax
The Indiana Department of Revenue (“Department”) determined last month that a video game publishing company’s sales from optional video game enhancement features were not subject to sales tax in Indiana. Ind. Rev. Rul. No. 2024-04-RST (Jan. 7, 2025).
The Facts: A non-Indiana video game publisher (the “Company”) sells optional video game features that enhance gameplay experience. The Company does not sell video games itself; rather, video game sales are made by a related entity of the Company. After a video game is purchased, the Company offers three optional features to the video game purchaser: (1) a monthly online subscription that allows the purchaser to play the video game online and in a multi-player setting; (2) in-game items, such as character costumes and weapons; and (3) virtual currency that the purchaser can use to pay for a monthly subscription or in-game items.
The Company requested that the Department issue a revenue ruling regarding the applicability of Indiana’s sales tax on its offerings. The Department did and determined that the Company’s offerings are not subject to the State’s sales tax.
The Law: Indiana imposes a sales tax on retail transactions made in the State and on certain specified services delivered in the State. Indiana tax law generally defines a retail transaction as a transfer of tangible personal property in the ordinary course of business and also sets forth specific examples of “retail transactions.”
Relevant here, transfers of prewritten computer software, whether delivered electronically or in a tangible medium, are retail transactions subject to sales tax. Sales tax is not imposed, however, on transactions that merely provide a right to remotely access prewritten computer software over the Internet or on sales of software as a service. Thus, if the transaction does not result in the purchaser having a possessory or ownership interest in the software, then sales tax does not apply.
In addition to transfers of prewritten computer software, electronic transfers—which grant a right of permanent use to an end user—of digital audio works, digital audiovisual works, and digital books are subject to sales tax. “Digital audio works” include works such as songs and ringtones, “digital audiovisual works” include works such as movies, and “digital books” include works that are generally recognized in the ordinary and usual sense as books. These are the only digital products on which Indiana imposes sales tax.
The Ruling: In determining whether the Company’s sales were subject to sales tax, the Department analyzed the Company’s offerings under the above provisions. Ultimately, the Department ruled that the Company’s sales of monthly subscriptions, in-game items, and virtual currency are not subject to sales tax because the sale of such items do not fit into Indiana’s definition of a “retail transaction,” and the items do not fall within the enumerated services on which Indiana imposes sales tax. The Department reasoned that the Company’s offerings are neither tangible personal property nor do they fall within the definitions of digital audio works, digital audiovisual works, or digital books.
The Takeaway: This revenue ruling is helpful for taxpayers to better understand how the Department interprets Indiana’s sales tax law to apply to these digital transactions. While the revenue ruling applies only to the Company’s facts and circumstances as described, the ruling expressly states that other taxpayers with substantially identical factual situations may rely on the ruling in preparing returns and making tax decisions. Furthermore, taxpayers can and should use revenue rulings to try to persuade taxing authorities that their position is the correct one.
Procedural Foot Faults are a Trap for the Unwary
Whether filing a tax return, a protest, or an appeal, there are countless procedural requirements that must be met in order to avoid penalties or worse. While those requirements are oftentimes tedious, they are a necessary evil to avoid future headaches.
The recent decision of the Supreme Court of Nevada highlighted one such procedural misstep. In Hohl Motorsports, Inc. v. Nevada Department of Taxation, the company filed a petition for judicial review of a deficiency determination. Hohl, No. 87189, (Nev. Feb. 10, 2025). Under Nevada law, prior to filing a petition, the company was required to either (1) pay the amount of the determination or (2) enter into a written agreement with the Department of Taxation (“Department”) to pay later. The Hohl decision centered around what constituted a “written agreement.”
In that case, the company emailed a lawyer representative of the Department prior to filing its petition. The Department’s response to the company stated that the company would have an additional 90 days to pay the determination and should timely file its petition. The company filed its petition and paid the determination a few weeks later.
Despite its email, the Department moved to dismiss the appeal for failure of the company to comply with the procedural requirements. Specifically, the Department claimed that the company did not have a written agreement with the Department to pay the determination at a later date. Upon review, the Court held that the email from the Department constituted a written agreement, which satisfied the procedural requirements.
Significantly, the Court noted that “[t]axpayers should be able to rely on the advice that they receive from the Department.” The Court stated that this is even more true when the taxpayer discusses a particular issue with the Department. The Court admonished the Department for filing the motion to dismiss and asserted that the Department “violated basic notions of justice and fair play.” In today’s world, where courts often chide taxpayers for not seeking guidance from the Department on filing positions, while also alleging that taxpayers cannot rely on information received from the Department, it is a breath of fresh air for the Supreme Court of Nevada to be a voice of reason.
While this case was an important victory for the taxpayer on the procedural requirements in Nevada, the best place to be in is to never have potentially faulted at all. Be sure to dot those i’s and cross those t’s!
LLC’s Splitting into Six Companies Not Subject to Pennsylvania Realty Transfer Tax
The Pennsylvania Commonwealth Court held that the statutory division of a limited liability company (“LLC”) which resulted in the original LLC and five new companies—with each of the new companies owning a portion of the real estate of the original LLC—was not subject to state and local realty transfer tax as there was no transfer of real estate as contemplated by the statute. Kunj Harrisburg LLC, et. al. v. Commonwealth, No. 390 F.R. 2020 (Pa. Cmwlth. Jan. 10, 2025).
The Facts: Kunj Harrisburg LLC (“Kunj”) owned a Condominium Association consisting of seven condominium units in Adams County, Pennsylvania. Pursuant to the Entity Transactions Law (“ETL”), it subsequently filed with the Department of State a Statement of Division and an accompanying Plan of Division which divided Kunj into six companies consisting of Kunj and five new companies. Kunj remained the owner of two condominium units and each of the five new companies became the owner of one condominium unit. The six companies recorded deeds in Adams County reflecting the Plan of Division and claimed exemption from the realty transfer tax.
The Department of Revenue issued Notices of Assessment to the five new companies asserting that the deeds did not qualify for exemption and assessing tax. The companies were unsuccessful in their appeals to the Board of Appeals and the Board of Finance and Revenue.
The Decision: The Commonwealth Court first reviewed the realty transfer tax which imposes tax for the recording of any document and which defines a “document” to include any deed which conveys title to real estate in the Commonwealth. It then looked to the ETL which permits an entity to divide into one or more new associations and which states that the property allocated to a new association vests “without reversion or impairment, and the division shall not constitute a transfer, directly or indirectly, of any of that property.” 15 Pa.C.S. § 367(a)(3)(ii).
Relying on the “unambiguous language” in the ETL that an association created through a statutory division is a successor to the dividing association and does not acquire its property through the transfer of the property’s beneficial interest, the Court concluded that each deed at issue did not convey title to real estate, that each deed was therefore not a “document” as contemplated by the realty transfer tax law, and that no tax was due.
This case demonstrates that when there is unambiguous statutory support for a position, while it may take a couple of levels of appeal, a taxpayer should be victorious despite a taxing agency’s position.
New York ALJ Upholds Convenience of Employer Rule Despite Employee Working Remotely Out-Of-State During COVID Lockdowns
In yet another challenge to New York’s so-called “convenience of the employer” rule, a New York Administrative Law Judge (“ALJ”) upheld the application of the rule against a Pennsylvania resident who worked remotely for a New York-based employer during the COVID-19 pandemic. In the Matter of the Petition of Myers and Langan, DTA No. 850197 (Jan. 8, 2025).
The Facts: Richard Myers, a resident of Pennsylvania, worked in New York for the Bank of Montreal (“BMO”) which provides a broad range of personal and commercial banking, wealth management, global markets, and investment banking products and services. Due to the COVID-19 pandemic, BMO temporarily closed its New York City office on March 16, 2020 and required employees to find alternative working arrangements. Mr. Myers worked from a BMO disaster recovery site in New Jersey on March 16 and March 17 and worked exclusively from his home in Pennsylvania for the remainder of the year. On his New York State nonresident income tax return, Mr. Myers claimed a refund of $104,182, which the New York Division of Taxation partially disallowed, leading to an audit and subsequent recalculation of his income allocation.
The Decision: The ALJ determined that Mr. Myers’ wages were correctly allocated to New York under the convenience of the employer rule. The rule provides that any allowance claimed for days worked outside New York for a New York-based employer must be based on the necessity of the employer, not the convenience of the employee. While there was an executive order in place requiring businesses to employ work from home policies to the maximum extent possible (the “Executive Order”), the order did not apply to essential businesses, including banks and related financial institutions, such as BMO. The ALJ found that BMO, as an essential business, was not legally mandated to close its New York office, and therefore, Mr. Myers’ remote work from out-of-state was deemed to be for his convenience rather than a necessity imposed by his employer. The ALJ noted that BMO’s decision to close its office did not qualify Mr. Myers’ remote work as a necessity for the company, and there was no evidence or explanation in the record as to why BMO closed its offices.
The Takeaway: The decision underscores the consistent application of the convenience of the employer rule by New York State Tax Appeals Tribunal ALJs, even during the unprecedented circumstances of the COVID-19 pandemic. The decision highlights the challenges nonresident employees face in proving that their remote work is a necessity for their employer. Unless there is clear evidence that the employer required the employee to work from a location outside New York, the convenience of the employer rule will apply, resulting in the allocation of income to New York. Employers need to be aware of the convenience rule, as well, as they may be required to withhold taxes in the state where the employer’s office is located, even if an employee works remotely out-of-state.
The decision suggests that if BMO were not exempt from the Executive Order as a bank or financial institution, the convenience of the employer rule would not apply, and Mr. Myers would be entitled to a refund. But, as discussed in a prior article I authored regarding application of the convenience rule, even in cases where the employer was not a bank or financial institution and was not exempt from the Executive Order, ALJs have still found that the convenience rule applies.
It remains to be seen whether appellate courts will step in to overrule ALJ decisions and find that when New York offices were closed during an unprecedented world-wide pandemic, employees were not working from their homes merely for their own convenience.
Recent Developments: Nationwide CTA Injunction Lifted, New March 21, 2025, Reporting Deadline Set, and Reporting Rule May Be Modified
Key Takeaways:
The Corporate Transparency Act (CTA) reporting requirements are back in effect following a Texas district court decision entered on February 18.
According to the Financial Crime Enforcement Network (FinCEN), the new general deadline for most reporting companies filing initial, updated, and corrected BOI reports is March 21and the deadline for a reporting company with a previously given later deadline is the later deadline.
In the interim, FinCEN “will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.”
FinCEN also “intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.”
Background:
On January 23, 2025, the United States Supreme Court (SCOTUS) reversed the U.S. district court’s preliminary injunction staying the Corporate Transparency Act (CTA) and the implementing Reporting Rule in Texas Top Cop Shop v McHenry (f/k/a Texas Top Cop Shop v Garland), Case No. 4:24-cv-00478 (E.D. Tex. 2024). For background, see our previous alerts describing the Texas Top Cop Shop district court’s December 3, 2024, opinion and order, and the Fifth Circuit’s decisions lifting and later reinstating the district court’s nationwide stay.[1]
A separate nationwide stay of the CTA Reporting Rule issued on January 7, 2025, by another Texas district court in Smith v U.S. Department of Treasury, Case No. 6:24-cv-00336 (E.D. Tex. Jan 7, 2025) was not affected by the SCOTUS order in Texas Top Cop Shop and remained in effect.[2]
On January 24, 2025, FinCEN published an updated alert acknowledging that, in light of the continuing effect of the nationwide stay in Smith, reporting companies were at that time not required to report beneficial ownership information but could do so voluntarily.[3]
On February 5, 2025, the Department of Justice (DOJ) appealed the Smith nationwide stay to the Fifth Circuit and filed a motion with the Smith district court asking it to lift that stay in view of the SCOTUS order in Texas Top Cop Shop. DOJ stated that, if lifted, FinCEN intended to extend reporting deadlines for 30 days and, during that period, evaluate whether to revise reporting requirements on “low-risk” entities and prioritize enforcement on the “most significant national security risks.”
On February 6, 2025, FinCEN published a new alert acknowledging the DOJ’s pending appeal in Smith and motion requesting the district court to lift the stay in Smith. FinCEN also confirmed its intention, if the stay was lifted, to extend the reporting deadline by 30 days and to assess options to modify further reporting deadlines for “lower-risk” entities during the 30-day period.
Smith District Court Lifts Stay of CTA Reporting Rule:
On February 18, 2025, the Smith district court stayed the preliminary relief granted in its January 5, 2025, order, including the nationwide stay of the CTA Reporting Rule, pending disposition of the Smith appeal to the Fifth Circuit.[4]
CTA Reporting Requirements Back in Effect:
On February 19, 2025, FinCEN published an updated alert stating that, in view of the Smith district court’s decision, “beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are once again back in effect.” FinCEN generally extended the deadline for most reporting companies filing initial, updated and corrected BOI reports to March 21, 2025 (30 calendar days from February 19, 2025). FinCEN also stated that “during this 30-day period, FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks” and that “FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.” At the same time, FinCEN also updated two other alerts with respect to Texas Top Cop Shop and National Small Business United v Yellen.[5]
FinCEN Updated CTA Reporting Deadlines:
The updated deadlines, as set forth in the FinCEN updated alert, follow:
For the “vast majority” of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is March 21, 2025. FinCEN also stated that it will provide an update before that deadline of any further deadline modifications, recognizing that more time may be needed to meet BOI reporting obligations.
For reporting companies that were previously given a reporting deadline later than the March 21, 2025, the applicable deadline is that later deadline. FinCEN included as an example, “if a company’s reporting deadline is in April 2025 because it qualifies for certain disaster relief extensions, it should follow the April deadline, not the March deadline.”
FinCEN also noted that the plaintiffs in National Small Business United v. Yellen are not currently required to report their beneficial ownership information to FinCEN. See FinCEN alert “Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)”.
For additional information, see the FinCEN February 19, 2025, updated Alert, Beneficial Ownership Information Reporting | FinCEN.gov], and FinCEN Notice, FIN-2025-CTA1, FinCEN Extends Beneficial Ownership Information Reporting Deadline by 30 Days; Announces Intention to Revise Reporting Rule (February 18, 2025).
If you have questions about your CTA-related engagement with the firm, please contact your Miller Canfield lawyer for further guidance.
[1] Corporate Transparency Act: Miller Canfield
[2] See the Smith district court’s opinion and order here: [Smith et al v. United States Department of The Treasury et al, No. 6:2024cv00336 – Document 30 (E.D. Tex. 2025).]
[3] The current FinCEN Alerts can be found here [Beneficial Ownership Information Reporting | FinCEN.gov.]
[4] gov.uscourts.txed.232897.39.0.pdf
[5] [Beneficial Ownership Information Reporting | FinCEN.gov]
New HSR Premerger Notification Requirements Take Effect
The new Hart-Scott-Rodino (HSR) Premerger Notification and Report Form (the “Form”) went into effect on February 10, 2025.
The new Form institutes several changes to the HSR process, including slightly expanding the category of individuals required to provide responsive documents (traditionally referenced as 4(c) documents), as well as broadening the requirement for when a draft presentation must be included in the 4(c) documents.
As to the latter, the new requirement is that a draft presentation, shared with a single member of an organization’s board of directors, must be included in the filing, even if a final version of the presentation is also included. However, whether the draft needs to be included depends on whether the recipient received the presentation in their capacity as a board member or in some other capacity, such as the CEO of an organization. In addition, the Federal Trade Commission’s (FTC’s) guidance provides that when board members have access to a collaborative drafting tool or document, the various drafts need not be provided, but a statement of noncompliance must accompany the filing.
Those attorneys who may have been looking forward to hearing live guidance from the FTC on the new HSR process may be disappointed, as the new chair issued a directive prohibiting FTC political appointees from speaking at or attending any American Bar Association (ABA) conference or event and barring the use of FTC funds for any ABA membership, participation, or event attendance. Presumably, the dictate will also scuttle the traditional agency update with the FTC Bureau Directors at the ABA Antitrust Law Spring Meeting.
DOS Announces Dropbox Eligibility Reduced to 12 Months
After quietly updating consular websites, signaling a significant change to Visa Interview Waiver (“dropbox”) eligibility requirements, on Feb. 18, 2025, the Department of State (DOS) officially announced the reversion to pre-COVID eligibility standards, reducing the window for dropbox eligibility from 48 months to 12 months. This update follows reports of Visa Application Centers turning away applicants who no longer meet the revised criteria. Effective immediately, only those renewing a visa in the same nonimmigrant category that expired within the past year qualify for the dropbox process.
This shift means more applicants will need to schedule and attend in-person visa interviews, potentially increasing wait times at U.S. consulates worldwide.
If you have questions about your visa renewal or need assistance navigating these changes, please contact your immigration counsel as soon as possible.
The CTA Strikes Back
Following a cascade of developments, the Corporate Transparency Act (CTA) is back, but with some potential changes on the horizon. Most reporting companies that have not yet filed all required reports under the CTA should prepare to file their initial, updated, or corrected reports by March 21, 2025.
In our recent alert on the CTA, we noted that the US Court of Appeals for the Fifth Circuit on December 26 reinstated a nationwide injunction prohibiting the government from enforcing the CTA. That injunction was stayed by the US Supreme Court on January 23, but a district court order in another case, Smith v. US Department of the Treasury, kept the CTA offline.
Court Orders the CTA Back into Effect
By an order dated February 17, however, the final district court order in the Smith case that was preventing the CTA’s enforcement was lifted by the US District Court for the Eastern District of Texas. As a result, beneficial ownership information (BOI) reporting requirements under the CTA are now back in effect.
FinCEN’s Response
In response, the Financial Crimes Enforcement Network (FinCEN) issued a notice stating that the new deadline for most reporting companies to file an initial, updated, or corrected BOI report is now March 21, 2025. Reporting companies that were previously given a reporting deadline later than March 21 (such as those qualifying for certain disaster relief extensions or those that were formed in late December 2024) have until that later deadline to file their initial BOI reports.
FinCEN’s notice further states that the government, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations, will provide an update before March 21 of any further modifications to this deadline. FinCEN also observes that it will initiate a process this year to revise the BOI reporting rule to reduce burdens for “lower-risk entities,” including many US small businesses, although the notice does not go into detail on what companies might fall within that category or what changes may be contemplated.
Potential Future Court Action?
While it is possible that a court may find the CTA to be unconstitutional or otherwise stay its enforcement once again, there are no guarantees that this will occur (if at all) before the new March 21 deadline.
Potential Legislative Action?
There also remains the possibility of legislative action. On February 10, the US House of Representatives unanimously passed a bill, H.R. 736 (the Protect Small Businesses from Excessive Paperwork Act of 2025), to extend the filing deadline to January 1, 2026, for reporting companies formed before January 1, 2024. That bill is now under consideration in the US Senate, although, as of the publication of this alert, there is no indication of whether or when there may be further action on the bill in the Senate.
What Now?
In light of these developments, reporting companies should resume their CTA compliance efforts to file the requisite BOI reports by March 21 (or, as applicable, a later reporting deadline for those reporting companies that were previously given a reporting deadline later than March 21).
New Jersey Updates Discrimination Law: New Rules for AI Fairness
The New Jersey AG and the Division on Civil Rights’ new guidance on algorithmic discrimination explains how AI tools might be used in ways that violate the New Jersey Law Against Discrimination. The law applies to employers in New Jersey, and some of its requirements overlap with new state “comprehensive” privacy laws. In particular, those laws’ requirements on automated decisionmaking. Those laws, however, typically do not apply in an employment context (with the exception of California). This New Jersey guidance (which mirrors what we are seeing in other states) is a reminder that privacy practitioners should keep in mind AI discrimination beyond the consumer context.
The division released the guidance last month (as reported in our sister blog) to assist businesses as they vet automated decision-making tools. In particular, to avoid unfair bias against protected characteristics like sex, race, religion, and military service. The guidance clarifies that the law prohibits “algorithmic discrimination,” which occurs when artificial intelligence (or an “automated decision-making tool”) creates biased outcomes based on protected characteristics. Key takeaways about the division’s position, as articulated in the guidance, are listed below, and can be added to practitioners’ growing rubric of requirements under the patchwork of privacy laws:
The design, training, or deployment of AI tools can lead to discriminatory outcomes. For example, the design of an AI tool may skew its decisions, or its decisions may be based on biased inputs. Similarly, data used to train tools may incorporate the developers bias and reflect those biases in their outcomes. When a business deploys a new tool incorrectly, whether intentionally or unintentionally, the outcomes can create an iterative bias.
The mechanism or type of discrimination does not matter when it comes to liability. Whether discrimination occurs through a human being or through automated tools is immaterial when it comes to liability, according to the guidance. The division’s position is if the covered entity discriminates, they have violated the NJLAD. Additionally, the type of discrimination, whether disparate or intentional, does not matter. Importantly, if an employer uses an AI tool that disproportionately impacts a protected group, then they could be liable.
AI tools might not consider reasonable accommodations and thus could result in a discriminatory outcome. The guidance points to specific incidents that could impact employers and employees. An AI tool that measures productivity may flag for discipline an individual who has timing accommodations due to a disability or a person who needs time to express breast milk. Without taking these factors into account, the result could be discriminatory.
Businesses are liable for algorithmic discrimination even if the business did not develop the tool or does not understand how it works. Given this position, employers, and other covered entities, need to understand the AI tools and automated decision-making processes and regularly assess the outcomes after deployment.
Steps businesses, and employers, can take to mitigate risk. The guidance recommends that there be quality control measures in place for the design, training, and deployment of any AI tools. Businesses should also conduct impact assessments and regular bias audits (both pre- and post- deployment). Employers and covered entities should provide notice about the use of automated decision-making tools.
Putting it into Practice: This new guidance may foreshadow a focus by the New Jersey division on employer use of AI tools. New Jersey is not the only state to contemplate AI use in the employment context. Illinois amended its employment law last year to address algorithmic bias in employment decisions. Privacy practitioners should not forget about these employment laws when developing their privacy requirements rubrics.
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