House Committee Will Hold Hearing on “The State of U.S. Science and Technology: Ensuring U.S. Global Leadership”
The House Committee on Science, Space, and Technology will hold a hearing on February 5, 2025, on “The State of U.S. Science and Technology: Ensuring U.S. Global Leadership.” According to the Hearing Charter, the purpose of the hearing is “to assess the current condition of the United States’s science and technology enterprise and its vital role in the global innovation race.” By examining public and private investments in the United States, the Committee will also have the opportunity to discuss key objectives and strategies for maintaining U.S. leadership in driving future advancements. The Charter includes biotechnology on its list of critical technologies, stating that it has “wide-reaching applications for both commercial and military sectors, offering the potential to transform various critical industries.” Biotechnology breakthroughs include the development of improved medicines and therapeutics, agricultural productivity, biofuels and bioenergetic solutions, and substantial progress in material science and manufacturing techniques. The Committee is scheduled to hear from the following witnesses:
Heather Wilson, President, The University of Texas at El Paso, and Former Secretary of the U.S. Air Force;
Walter Copan, Vice President for Research and Technology Transfer, Colorado School of Mines, and Former Director of the National Institute of Standards and Technology;
Dr. Sudip Parikh, Chief Executive Officer and Executive Publisher, American Association for the Advancement of Science; and
Samuel Hammond, Chief Economist, Foundation for American Innovation.
The Hearing Charter lists the following overarching questions:
What is the current state of U.S. leadership in science and technology, and what is the outlook for continued leadership, particularly in areas that will help drive economic competitiveness and national security in the coming decade?
Why is it important for the United States to maintain leading capabilities in both fundamental research and technology development, and what are the consequences of loss of leadership, especially to China?
What makes the U.S. science and technology ecosystem of government, academia, and industry unique in the world, and how can we continue to use that system to our competitive advantage?
How has the relationship between the federal government and private industry for supporting science and technology changed in the last decade? How should we look to improve this cooperation in the future?
Weekly Bankruptcy Alert February 4, 2025 (For the Week Ending February 2, 2025)
Covering reported business bankruptcy filings in Massachusetts, Maine, New Hampshire, and Rhode Island, and Chapter 11 bankruptcy filings in New York and Delaware listing assets of more than $1 million.
Chapter 11
Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate
Twenty Eight Hundred Lafayette, Inc.(Portsmouth, NH)
Not Disclosed
Concord(NH)
$50,001to$100,000
$1,000,001to$10 Million
1/29/25
iM3NY LLC(Endicott, NY)
Engine, Turbine and Power Transmission Equipment Manufacturing
Wilmington(DE)
$50,000,001to$100 Million
$100,000,001to$500 Million
1/27/25
Imperium3 New York, Inc.(Endicott, NY)
Engine, Turbine and Power Transmission Equipment Manufacturing
Wilmington(DE)
$50,000,001to$100 Million
$100,000,001to$500 Million
1/27/25
Liberated Brands LLC2(Costa Mesa, CA)
Apparel Accessories and Other Apparel Manufacturing
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
2/2/25
Chapter 7
Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate
Lunchpail Productions, Inc.(Lynnfield, MA)
Not Disclosed
Boston(MA)
$0to$50,000
$100,001to$500,000
1/31/25
271 West 11th Street LLC(New York, NY)
Not Disclosed
Manhattan(NY)
$10,000,001to$50 Million
$10,000,0001to$50 Million
1/27/25
16EF Apartment LLC(Southampton, NY)
Not Disclosed
Manhattan(NY)
$10,000,001to$50 Million
$10,000,001to$50 Million
1/29/25
1Business Type information is taken from Bankruptcy Court filings, which may include incorrect categorization by the debtor or others.
2Additional affiliate filings include: Boardriders Retail, LLC, Liberated AX LLC, Liberated Brands International, Inc., Liberated Brands USA LLC (DE), Liberated-Spyder LLC, Volcom Retail Outlets, LLC, Valcom Retail, LLC and Valcom, LLC.
IRS Issues Guidance on Federal Tax Treatment of State Paid Family and Medical Leave Contributions and Benefits
The Internal Revenue Service (IRS) has released new guidance on the federal income and employment tax treatment of contributions and benefits paid under state paid family and medical leave (PFML) statutes. This guidance also outlines the related reporting requirements for employers and employees. There was no published guidance that addressed the taxation or reporting requirements of state PFML statutes before the publishing of Revenue Ruling 2025-4.
Quick Hits
The IRS has clarified the tax treatment of mandatory employee and employer contributions to state PFML funds, as well as optional employer payment of mandatory employee contributions.
Employers can deduct their contributions as business expenses, while employees may deduct their contributions as state income taxes if they itemize deductions and otherwise do not exceed the SALT deduction cap.
Amounts paid to employees as family leave benefits are included in the employee’s gross income but are not wages for federal employment tax purposes.
Amounts paid to employees as medical leave benefits align with Internal Revenue Code § 104(a)(3), which are only taxable in instances where contributions were not included in the employee’s gross income or paid by the employee.
The IRS has provided a transition period for enforcement and administration of these rules for calendar year 2025.
Background
Over recent years, a number of states have enacted PFML statutes to provide wage replacement to workers for periods in which they need to take time off from work due to their own nonoccupational injuries, illnesses, or medical conditions, or to care for a family member due to the family member’s serious health condition or other prescribed circumstance. Many PFML statutes require contributions from both the employer and the employee, with some allowing the employer to cover the employee’s mandatory contribution rather than withholding the amounts from wages (“employer pick-up”).
Federal Income Tax Treatment of Contributions
Employee Contributions
Mandatory employee contributions withheld from wages are treated as state income taxes and are deductible under § 164(a)(3) if the employee itemizes deductions and the deductions are subject to the state and local taxes (SALT) deduction limitation under § 164(b)(6). These amounts are included in the employee’s gross income and wages for federal employment tax purposes.
Employer Contributions
Mandatory employer contributions are treated as state excise taxes and are deductible by the employer under § 164(a). These amounts are not included in the employee’s gross income.
Employer Pick-Up of Employee Contributions
If an employer voluntarily pays part of the employee’s required contribution, this amount is treated as additional compensation to the employee under § 61 and is included in the employee’s gross income and wages for federal employment tax purposes. The employer can deduct this amount as a business expense under § 162.
Federal Income Tax Treatment of Benefits
Family Leave Benefits
Amounts paid to employees as family leave benefits are included in the employee’s gross income but are not wages for federal employment tax purposes. The state must report these payments on Form 1099 if they aggregate $600 or more in any taxable year.
Medical Leave Benefits
Amounts paid to employees as medical leave benefits that are attributable to the employee’s contribution (including employer pick-up of employee contributions) are excluded from the employee’s gross income under § 104(a)(3) and are neither wages for federal employment tax purposes nor treated as sick pay. However, to qualify for medical leave benefits under a PFML statute, the time off from work must relate to the employee’s own serious health condition. Further, amounts attributable to the employer’s contribution are included in the employee’s gross income and are considered wages for federal employment tax purposes. The state must follow the sick pay reporting rules attributable to third-party payments by a party that is not an agent of the employer.
Transition Period for Enforcement and Administration
The IRS has designated calendar year 2025 as a transition period for the enforcement and administration of the information reporting requirements and other rules described in the guidance. This transition period is intended to provide states and employers time to configure their reporting and other systems.
NY DEC Proposes Environmental Justice-Focused Amendments to SEQRA and UPA—Potential Impacts on Project Permitting
On Jan. 29, 2025, the New York State Department of Environmental Conservation (DEC) proposed amendments to its State Environmental Quality Review Act (SEQRA) (6 NYCRR Part 617) and the Uniform Procedures Act (UPA) (6 NYCRR Part 621) regulations to integrate environmental justice (EJ) considerations into environmental reviews. These amendments, mandated by Environmental Conservation Law (ECL) Article 8, build upon DEC’s final Division of Environmental Permits Policy “Permitting and Disadvantaged Communities” (DEP-24-1), which replaced the draft DEP-23-1 and has guided DEC permit applicants in assessing disproportionate burdens on disadvantaged communities (DACs) since its finalization on May 9, 2024. However, the proposed regulations would expand the scope of these requirements beyond DEC-regulated programs by incorporating disproportionate burden assessments into SEQRA, which applies to all lead agencies conducting environmental reviews, not just DEC. These amendments also align with New York’s 2023-2024 environmental justice siting law, which strengthened EJ protections in state permitting decisions. By codifying and broadening these EJ considerations, the amendments seek to ensure that projects located in or impacting DACs do not exacerbate existing pollution burdens, potentially influencing permitting outcomes and project timelines.
Disproportionate Pollution Burden in SEQRA Determinations
The proposed rule adds a new criterion to the determination of significance under SEQRA: an action that “may cause or increase a disproportionate pollution burden on a disadvantaged community that is directly or significantly indirectly affected by such action” (6 NYCRR § 617.7(c)(1)(xiii)). Under the existing regulatory framework, government actions resulting in at least one significant adverse environmental impact warrants a determination of significance, triggering the preparation of an Environmental Impact Statement (EIS) on the proposed action. Under the proposed changes offered by DEC, a determination of significance may be warranted based on potential disproportionate burdens to an associated DAC, even in the absence of significant adverse environmental impacts, triggering the need to prepare an EIS. Thus, the question of what constitutes a “disproportionate burden” becomes paramount for applicants seeking government funding or approvals subject to SEQRA.
Mandated Cumulative Impact Assessments and DEC Assessment Tools
DEC’s proposed regulations also facilitate preparation of required disproportionate burden analyses. Agencies must now evaluate whether an action would result in an increased burden on DACs by considering “reasonably related long-term, short-term, direct, indirect, and cumulative impacts” (6 NYCRR § 617.7(c)(2)). The proposed rule updates DEC’s Environmental Assessment Forms (EAFs) to require applicants to analyze and disclose potential disproportionate pollution burdens on DACs (6 NYCRR § 617.2(l)). These changes apply to both the Short Environmental Assessment Form (Appendix A) and Full Environmental Assessment Form (Appendix B). The revised EAF requirements place a greater responsibility on project sponsors to conduct detailed environmental justice assessments before submitting applications, which could add to project planning costs and development timelines.
The Role of the Disadvantaged Community Assessment Tool (DACAT)
To facilitate the implementation of cumulative impact assessments, DEC has introduced the Disadvantaged Community Assessment Tool (DACAT), a screening tool designed to identify DAC census tracts at risk of increased pollution burdens. Utilizing data from the Climate Justice Working Group (CJWG) DAC map, DACAT compares disadvantaged communities to statewide and regional non-DAC benchmarks and flags census tracts with a 25% higher pollution burden score for increased scrutiny. Thus, this tool is intended to help applicants and lead agencies identify DACs with existing pollution burdens. Rather than assessing project-specific impacts, DACAT relies on available data to flag areas based on historical environmental burdens, ensuring a standardized approach. Additionally, the tool designates all Indigenous lands as DACs, aligning with the finalized DAC map created by the CJWG, though this approach may prompt discussions about its regulatory implications. The proposed use of pre-set percentile scores to identify pollution burden provides certainty but may also invite feedback during the comment process regarding its flexibility. DEC will need to balance these factors as it evaluates the tool’s implementation.
Increased Permitting Hurdles
While a project’s environmental justice impacts have been considered under SEQRA, the proposed regulations require a more fulsome review of impacts to the surrounding community by requiring that an applicant assess whether a project or action poses a “disproportionate burden” on a DAC and, if so identified, include mitigation measures or alternative project designs.
Additional Substantive EJ Obligations Contained in Amendments to the Uniform Procedures Act (UPA)
In addition to SEQRA, DEC is proposing amendments to its Uniform Procedures Act, 6 NYCRR Part 621 (UPA), which governs how the agency processes permit applications, to further integrate environmental justice considerations into New York’s permitting reviews. These changes expand the scope of required environmental justice reviews by formalizing how “existing burden reports” are prepared in connection with certain DEC permit applications, including air facility permits, water discharge permits and solid waste permits. This change is required by the 2023 amendment to ECL Article 70, enacted as Chapter 49 of the Laws of 2023, which mandates that permit applicants prepare an existing burden report where the applicable permit “may cause or contribute more than a de minimis amount of pollution to any disproportionate pollution burden on a disadvantaged community.” ECL 70-0118(2)(a). Applications for permit renewals and modifications are also required to prepare existing burden reports, though DEC may exempt the applicant from such requirement if it determines that “the permit would serve an essential environmental, health, or safety need of the disadvantaged community for which there is no reasonable alternative.” ECL 70-0118(2)(b). See GT Alert,“New York Regulator Releases Draft Policy to Implement Environmental Justice Provisions of NY Climate Law,” October 2023.
Pursuant to ECL 70-0118, DEC must consider the existing burden report when considering any new permit application and provides that the agency “shall not issue an applicable permit for a new project if it determines that the project will cause or contribute more than a de minimis amount of pollution to a disproportionate pollution burden on the disadvantaged community.” ECL 70-0118(3)(b). Neither the amended statute nor the proposed regulations define that level of pollution as greater than de minimis. For permit renewals and modifications, the statute and proposed implementing regulations would preclude DEC from issuing permit renewals or modifications when permit renewal or modification “would significantly increase” the disproportionate burden on the DAC. ECL 70-0118(3)(c) and (d).
The proposed regulations also emphasize community participation, requiring applicants to demonstrate how they will mitigate disproportionate pollution impacts and engage with affected communities. Under the proposed rule, applicants must “provide opportunities for meaningful community engagement” and incorporate public feedback into project designs (6 NYCRR § 621.4(f)). This provision introduces potential new legal and regulatory risks for developers, as failure to meet these standards could result in permit challenges or denials.
As proposed by DEC, the amendments to SEQR and UPA could present challenges to applicants seeking air, water discharge or solid and hazardous waste permits implicating non-de minimis impacts on DACs. However, the recent statutory changes, as implemented by the draft regulations, could also impact projects in or near that DACs that aren’t commonly understood as burdensome to a community. Although these proposed regulations attempt to clarify the process DEC will apply for preparing and considering existing burden reports, many permittees may find themselves in uncharted waters under the new regulatory framework.
For example, renewable energy projects such as solar farms or wind turbines are generally considered environmentally beneficial, yet under the proposed framework, their siting within or near a DAC may trigger heightened scrutiny. While these projects aim to reduce carbon emissions, they could still introduce localized environmental concerns, such as land use changes, noise, or other cumulative burdens, requiring additional evaluation. Similarly, infrastructure improvements, including road expansions or public transit enhancements, may face greater regulatory hurdles. Although these projects often provide public benefits, their potential to contribute to temporary construction-related pollution, increased traffic congestion, or altered community dynamics could necessitate a more comprehensive review process.
While the draft regulations seek to provide clarity regarding how DEC will assess existing burden reports, many permit applicants may find themselves navigating an increasingly complex regulatory landscape. As a result, projects that historically may not have raised significant environmental justice concerns could now be subject to more stringent review, adding new layers of uncertainty to the permitting process. See N.Y. Dep’t of Envtl. Conservation, Program Policy DEP 24-1: Permitting and Disadvantaged Communities (2024).
EPA Extends Comment Period on Draft TSCA Risk Evaluation for 1,3-Butadiene
The U.S. Environmental Protection Agency (EPA) announced on January 31, 2025, that it is extending the public comment period on the draft risk evaluation for 1,3-butadiene under the Toxic Substances Control Act (TSCA). 90 Fed. Reg. 8798. Comments that were due February 3, 2025, are now due March 5, 2025. EPA states in its announcement that to give the peer reviewers on the Science Advisory Committee on Chemicals (SACC) time to review any additional comments received, it is in the process of rescheduling the February 4, 2025, virtual preparatory meeting and the February 25-28, 2025, peer review meeting for the draft risk evaluation. EPA will announce the new dates for these meetings once they have been selected.
Navigating the Tariff Landscape: Updates on U.S. Imports from Canada, Mexico and China
On February 1, 2025, President Trump signed orders imposing a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China. The tariffs are set to take effect on Tuesday, February 4.
Following a discussion with Mexico’s President Claudia Sheinbaum on Monday, February 3, President Trump announced a one-month pause on the tariffs for Mexico. Canadian Prime Minister Justin Trudeau and President Trump announced that they had reached an agreement for a similar 30-day pause later that evening.
History
A president can raise tariffs without congressional approval in certain circumstances, such as if there is a threat to national security, a war or emergency, harm or potential harm to a U.S. industry or unfair trade practices by a foreign country. President Trump is using the International Emergency Economic Powers Act to impose these tariffs. Tariffs saw their first major resurgence since the 1930s during President Trump’s 2017-2020 term, and President Biden continued to use tariffs during his administration.
Tariffs are generally imposed as a percentage of a good’s value or as a fixed amount on a specific item when it crosses an international border. The tariff is paid by the importer. The increase in cost may cause a variety of effects such as:
Importing companies finding alternate sources for the goods,
Importing companies passing the price increase on to consumers,
Exporting companies lowering the product price to maintain the importer’s business, or,
Exporting companies relocating to other jurisdictions to avoid tariffs altogether.
Updated Tariffs
Mexico Tariffs
Following the one-month pause referenced above, the new tariff will be at a rate of 25% on the value of the good, in addition to any other import fees. The order indicates that tariffs will cover all imported merchandise.
Canada Tariffs
Following the 30-day pause referenced above, the new tariff will be at a rate of 25% on the value of the good, in addition to any other import. The order indicates that tariffs will cover all imported merchandise other than “energy or energy resources” which will be subject to a 10% rate instead.
“Energy or energy resources” includes crude oil, natural gas, lease condensates, refined petroleum products, uranium, coal and critical minerals among other energy sources.
China Tariffs
The new tariff will be 10% on the value of the good, in addition to any other import fees. The order indicates that tariffs will cover all imported merchandise from China.
Client Guidance
The increased costs from tariffs may be challenging for many businesses and the following actions serve as a baseline for navigating the current landscape as you navigate these new tariffs.
Notify customers if increased costs of tariffs will be passed down to them and inform them that any tariff-related price hikes will be reflected on invoices. Failure to pay may result in supply disruption.
Review contracts with suppliers and customers to determine how the cost of the new tariffs will be allocated. Look for price-adjustment clauses, force majeure language or other relevant terms.
Begin negotiations with suppliers or explore sourcing options from different countries.
Importers should review import compliance policies.
New DHS Security Requirements Impact Compliance for Employers with Workers in Six “Countries of Concern”
The U.S. Department of Homeland Security (DHS) recently published new security requirements for certain restricted transactions covered by the U.S. Department of Justice’s (DOJ) sensitive data export rules. The security requirements could create compliance issues for employers with workers in certain countries that have been identified as posing national security concerns, a list that currently includes China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela.
Quick Hits
The U.S. Department of Homeland Security published new security requirements for restricted transactions to prevent access to covered data and systems by countries of concern and certain persons affiliated with such countries.
The security requirements, which include stricter cybersecurity policies, multifactor authentication (MFA), incident response plans, and robust encryption to prevent unauthorized access to sensitive data, were published in conjunction with a Justice Department rule implementing a Biden administration-era executive order on cybersecurity.
Companies with employees in high-risk countries may face significant challenges in ensuring compliance with the new requirements, particularly regarding access to essential networks needed for business operations.
On January 3, 2025, the DHS’s Cybersecurity and Infrastructure Security Agency (CISA) released finalized security requirements for restricted transactions pursuant to Executive Order (EO) 14117, “Preventing Access to American’s Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern,” issued in February 2024 by then-President Joe Biden. The requirements were developed in conjunction with a DOJ final rule, which was published in the Federal Register on January 8, 2025, implementing EO 14117.
The CISA security requirements apply to certain restricted transactions identified by the DOJ that involve “bulk sensitive personal data or United States Government-related data” as defined by the DOJ and EO 14117 or that are of a class of transaction determined by the DOJ to pose an unacceptable risk to national security because it may enable certain “countries of concern or covered persons to access bulk sensitive personal data or United States Government-related data.”
The DOJ has identified six “countries of concern”: (1) China, including the special administrative regions of Hong Kong and Macau, (2) Cuba, (3) Iran, (4) North Korea, (5) Russia, and (6) Venezuela. A “covered person” is an individual or entity associated with a country of concern, and the term includes: (1) entities that are controlled or owned by one or more countries of concern, (2) entities that are controlled by “one or more persons” affiliated with a country of concern, (3) individuals who are “employee[s] or contractor[s] of a country of concern,” or (4) an entity controlled by a country of concern, and individuals the attorney general determines may be controlled by or act on behalf of a country of concern or other “covered person.”
Existing laws and regulations surrounding international data transfers, which are often transaction- or sector-specific, did not comprehensively address bulk data transfers to countries of concern. And, with respect to the personal data of U.S. citizens, certain common data processing principles are unequally applied given the existing patchwork of state and sectoral privacy laws. Accordingly, in an effort to fill the gap, the security requirements articulated by the DHS cover (1) organizational and system-level requirements for covered systems and (2) data-level requirements for data that is the subject of a restricted transaction.
Organizational- and System-Level Requirements
The security requirements state that entities must require that “basic organizational cybersecurity policies, practices, and requirements” are implemented with respect to any covered system (i.e., information systems used to interact with covered data in connection with restricted transactions). These steps include:
maintaining an inventory of covered system assets and ensuring the “inventory is updated on a recurring basis”;
designating an organizational level individual, such as a Chief Information Security Officer, who will be “responsible and accountable” for cybersecurity and governance, risk, and compliance (GRC) functions;
remediating any known exploited vulnerabilities (KEVs);
documenting vendor/supplier agreements for covered systems;
developing an “accurate network topology of the covered system”;
adopting policies that require approval of new hardware or software before it is deployed in a covered system; and
developing and maintaining incident response plans.
The requirements further call for entities to implement “logical and physical access controls” to protect access to data by covered persons or countries of concern, including the use of multifactor authentication (MFA) to prevent inappropriate access to data or, in the limited circumstances where MFA is not possible, stringent password requirements. Entities will wish to consider paying close attention to their processes for evaluating the sufficiency of the their security protocols on an ongoing basis, including through the issuance and management of identities and credentials associated with authorized users, services, and hardware, and the prompt revocation of credentials of individuals who leave or change roles.
The requirements likewise mandate the ongoing collection and storage of logs that relate to access to covered systems and the security of the same. Additional technical specifications include the default denial of connections. Finally, the requirements direct entities to conduct internal data risk assessments and evaluate, on an ongoing basis, whether an entity’s approach to security is sufficient to prevent access to covered data.
Data-Level Requirements
The CISA security requirements direct entities to implement data-level measures to “fully and effectively prevent access to covered data that is linkable, identifiable, unencrypted, or decryptable using commonly available technology” by the covered person, employee, or vendor, or the governments of countries of concern. The requirements call for:
applying data minimization and masking strategies, which must include the preparation of and adherence to written data retention and deletion policies, and processing restrictions geared toward transforming the data such that it is no longer considered to be covered data or such that it is unlikely to be linked to an American person;
utilizing compulsory encryption techniques to protect data;
applying “privacy enhancing technologies” or “differential privacy techniques” during the course of any processing activities associated with covered data; and
configuring identity and access management techniques to deny access to covered systems by covered persons or countries of concern.
Next Steps
The CISA security requirements may have major implications for global companies with employees in countries of concern, such as China, and are likely to raise concerns about whether such employees will be able to access networks and information that are critical for them to do their jobs.
However, employers with substantial operations in potentially impacted countries may want to take note that while the security requirements discussed above are being implemented pursuant to a Biden administration EO, it remains to be seen whether the Trump administration will roll back the security measures as part of the administration’s ongoing deregulation focus, particularly to the extent the requirements may have the practical impact of restricting work in China. Moreover, President Trump has issued a “Regulatory Freeze Pending Review,” which could delay the April 8, 2025, effective date of the DOJ’s final rule.
In the meantime, employers may want to take steps to prepare for the CISA security requirements and DOJ regulations regarding countries of concern and covered persons. To do so, companies may want to assess the extent to which they employ covered persons in countries of concern or have entered into contracts with vendors who rely upon personnel based in such countries. If they determine this to be the case, they may wish to assess whether they have necessary privacy and security safeguards, both technical and contractual, to prevent improper access to protected personal and U.S. government data.
Laken Riley Act Could Impact U.S. Visa Stamping for Certain Foreign Nationals
On January 29, 2025, President Trump signed the first bill of his second presidential term into law. The legislation, named the Laken Riley Act, gives substantial power to state attorneys general (and other authorized state officers) to interpret and implement federal immigration policies.
Quick Hits
The Laken Riley Act authorizes states to sue for injunctive relief to stop the issuance of visas to nationals of a country that denies or unreasonably delays the acceptance of nationals ordered removed from the United States.
The act potentially allows state attorneys general to disrupt federal immigration policies and procedures.
Foreign nationals of certain countries may be unable to obtain visa stamping at U.S. consulates if their “home countries” deny or unreasonably delay the acceptance of their nationals ordered removed from the United States.
The Laken Riley Act places unprecedented power in the hands of state attorneys general (and other authorized state officers) to reshape federal immigration law by allowing states to sue for injunctive relief to halt the issuance of visas at U.S. consulates for nationals of certain countries. Thus, a singular state’s attorney general could potentially sue for injunctive relief to stop visa issuance to nationals of entire countries.
Next Steps
It will be important to closely monitor which countries are willing to cooperate with the Trump administration by repatriating and accepting their nationals who are ordered removed from the United States. Countries that deny or unreasonably delay repatriation could cause immense unintended issues for their nationals who are lawfully present in the United States or intend to lawfully enter the United States. Impacted foreign nationals needing new visa stamps for international travel or initial visa stamps to enter the United States could face unexpected delays or impasses in these scenarios.
EU Fines EU?!: Alleged Unlawful Data-Transfer Dust-Up
Following a German case brought against the EU Commission, the EU General Court found that the Commission had made an improper transfer of personal information to the US. The plaintiff, a German citizen, alleged (among other things) that his information was sent through the EU Commission’s website to the US through an automated social media login option when he registered for a Commission event. He further alleged that this violated the government-agency equivalent of GDPR (EUDPR), as it occurred during a period in time when the Privacy Shield had been found inadequate, and the replacement program was not yet in place.
The court noted that the Commission, in making the transfer, relied only on website terms for the US data recipient. It did not enter into a contract that included standard contractual clauses or otherwise have “appropriate safeguard[s].” The court ordered the Commission to pay the individual €400.
Putting It Into Practice: This case -brought against the EU entity that oversees GDPR compliance- is a reminder of EU concerns with data transfers to the US. As we await further developments with the Data Privacy Framework under the new administration, companies may want to re-examine the mechanisms (including standard contractual clauses + additional safeguards) EU-US data transfers.
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Deadline for Filing Annual Pesticide Production Reports — March 1, 2025
The March 1, 2025, deadline for all establishments, foreign and domestic, that produce pesticides, devices, or active ingredients to file their annual production for the 2024 reporting year is fast approaching. Pursuant to Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Section 7(c)(1) (7 U.S.C. § 136e(c)(1)), “Any producer operating an establishment registered under [Section 7] shall inform the Administrator within 30 days after it is registered of the types and amounts of pesticides and, if applicable, active ingredients used in producing pesticides” and this information “shall be kept current and submitted to the Administrator annually as required.”
Reports must be submitted on or before March 1 annually for the prior reporting year’s production and distribution. The report, filed through the submittal of the U.S. Environmental Protection Agency (EPA) Form 3540-16: Pesticide Report for Pesticide-Producing and Device-Producing Establishments, must include the name and address of the producing establishment, as well as pesticide production information, such as product registration number, product name, and amounts produced and distributed. The annual report is always required, even when no products are produced or distributed.
EPA has created the electronic reporting system to submit pesticide-producing establishment reports using the Section Seven Tracking System (SSTS). Users will be able to use SSTS within EPA’s Central Data Exchange (CDX) to submit annual pesticide production reports. Electronic reporting is efficient, saves time by making the process faster, and saves money in mailing costs and related logistics. EPA is encouraging all reporters to submit electronically to ensure proper submission and a timely review of the report.
Links to EPA Form 3540-16, as well as instructions on how to report and how to add and use EPA’s SSTS electronic filing system, are available below:
EPA Form 3540-16: Pesticide Report for Pesticide-Producing and Device-Producing Establishments;
Instructions for Completing EPA Form 3540-16 (available within the ZIP file); and
Electronic Reporting for Pesticide Establishments.
Further information is available on EPA’s website.
REBO Quarterly: 2024 in Retrospect
STATE-LEVEL REAL ESTATE BENEFICIAL RESTRICTIONS ON OWNERSHIP
2024 was a busy year for legislatures throughout the United States on the topic of limitations and restrictions on ownership of real property assets. Last year, state legislators introduced over 75 bills in 29 states throughout the country that affect the beneficial ownership of real property. Legislative proposals affecting beneficial ownership generally fell into three categories: restricting ownership of agricultural land by foreign persons or entities; restricting ownership of any real property near critical infrastructure by foreign persons or entities; and restricting ownership of agricultural land by corporate entities.
The most common ownership bills specifically targeted individuals, entities, and governments from certain countries designated as “foreign countries of concern.” These “foreign countries of concern” most often included the People’s Republic of China, Iran, Russia, North Korea, and Venezuela.
While the majority of bills introduced pertain to foreign ownership, certain states have also explored restricting domestic corporate ownership of real property. Growing interest in enacting corporate farming laws has the potential to trigger unintended consequences that the commercial real estate industry must be aware of when acquiring tracts of land, particularly when acquired for development in rural or semi-rural areas. In addition, corporate ownership provisions may be intertwined within larger foreign ownership legislative proposals, necessitating a careful analysis of all bills affecting beneficial ownership of land.
Successfully Enacted State Beneficial Ownership Bills
Of the successful bills prohibiting certain parties from owning land, the definition of those subject to restriction varies by state. The majority of bills passed in 2024 prohibit “foreign adversary” citizens, governments, and business entities as defined in 15 C.F.R. § 7.4, a list generated by the secretary of the Department of Commerce, which currently lists the People’s Republic of China, Cuba, Iran, North Korea, Russia, and Venezuela. Others prohibit adversaries designated by the secretary of state as a Country of Particular Concern,1 or countries subject to international traffic in arms regulations under 22 C.F.R. § 126.1.2 Some seek to define adversaries as those parties on sanctions lists maintained by the Office of Foreign Assets Control,3 while others directly name a list of countries.4
States also diverge in the exemption provisions they include in law. Louisiana and Indiana exempt legal permanent residents from their foreign ownership laws. Louisiana’s HB 238 also contains a provision not found in other bills passed this year that exempts religious, educational, charitable, or scientific corporations. Oklahoma, Tennessee, Nebraska, and Kansas bills exempt from their ownership laws business entities that have a national security agreement with the Committee on Foreign Investment in the United States (CFIUS). Georgia, Mississippi, and South Dakota bills stipulate that foreign ownership prohibitions do not apply to business entities leasing land for agricultural research and development purposes. Indiana specifies that its prohibition law does not apply to agricultural land that has not been used for farming within the last five years, unless it is recognized by the US Farm Service Agency as farmland.
Proposed foreign ownership bills around the country differ in their treatment of existing real property owned by prohibited foreign parties. The most common treatment of the bills that were successful in 2024 was to direct any prohibited parties to divest of their ownership interest within a certain timeframe of the bill’s effective date, typically one or two years.5 Some bills specify that their provisions only apply after the bill’s effective date or a future date.6 In rare circumstances, a bill will apply retroactively; Idaho’s HB 496 was signed into law in March 2024 but applied retroactively to April 2023.
The following 15 bills impacting beneficial ownership of land were approved by state legislatures in 2024:
Georgia SB 420
Introduced on 29 January and signed into law on 30 April, the bill adds a new section to the code that provides that no nonresident alien shall acquire directly or indirectly any possessory interest in agricultural land or land within 10 miles of any military installation. In this case, “nonresident alien” is defined narrowly to mean a noncitizen of the United States who also is an agent of a foreign government designated as a foreign adversary and has been absent from the United States for six out of the preceding 12 months. The prohibition also applies to business entities domiciled in a foreign adversary or domiciled in the United States but with 25% ownership by a foreign adversary.
Idaho HB 496
HB 496 was introduced on 7 February and signed by the governor on 12 March. It amends existing foreign ownership restrictions to exempt federally recognized Indian tribes from the definition of “foreign government.” It also adds forest lands to the kinds of property that foreign governments and state-controlled enterprises are prohibited from acquiring.
Indiana HB 1183
Introduced on 9 January and signed into law on 15 March, the bill, in addition to prohibiting citizens or business entities controlled by a foreign adversary (which includes the People’s Republic of China, Cuba, Iran, North Korea, Russia, and Venezuela) from acquiring agricultural land in the state, also specifically prohibits the acquisition of mineral rights, water rights, or riparian rights on agricultural land.
Iowa SF 2204
Introduced on 1 February and signed into law on 9 April, the bill tightens existing Iowa statutes restricting foreign persons and business entities from acquiring agricultural land suitable for use in farming. The act amends Iowa code by eliminating a provision in law that suspends certain registration requirements, thereby restoring its requirements. SF 2204 also expands the information required to be completed in a registration form to include the identity of the foreign person or authorized representative; the identity of any parent corporation, subsidiary, or person acting as an intermediary; the purpose for holding the agricultural land; and a listing of any other interest in agricultural land held by the registrant that exceeds 250 acres.
Iowa SF 574
SF 574 was introduced on 24 April 2023, and carried over into 2024, where it was signed by the governor on 1 May. The bill created the “Major Economic Growth Attraction Program.” As part of multiple provisions relating to economic development, the law authorizes the Iowa Economic Development Authority board to give an exemption to the existing restrictions in law on agricultural land holdings for a foreign business if it meets certain requirements. These requirements include a business locating the project on a site larger than 250 acres and a business making a qualifying investment in the proposed project of over US$1 billion.
Kansas SB 172
SB 172 was introduced on 7 February and passed by the Kansas Legislature on 30 April. However, Kansas Governor Laura Kelly (D) vetoed the bill. The bill would have prohibited foreign principals from acquiring any interest in nonresidential real property within 100 miles of any military installation. Given the wide restriction range and the position of McConnell Air Force Base in Wichita near the center of the state, the bill would have applied to most areas of the state. Democrats largely opposed the legislation, and critics of the bill voiced concern that language in the bill allowing seizure of private property without guaranteed compensation would be unconstitutional. In her veto message, Governor Kelly wrote:
“While I agree that it is important for our state to implement stronger protections against foreign adversaries, this legislation contains multiple provisions that are likely unconstitutional and cause unintended consequences…the retroactive nature of this legislation raises further serious constitutional concerns.”
The bill ultimately was not reconsidered by legislators and did not become law.
Louisiana HB 238
HB 238 was introduced on 27 February and was signed into law on 3 June. The bill restricts foreign adversaries or corporations in which a foreign adversary has a controlling interest from owning, acquiring, leasing, or otherwise obtaining any interest in agricultural land. The law defines “foreign adversary” as the People’s Republic of China (and Hong Kong), Iran, Cuba, North Korea, Russia, and Venezuela.
Mississippi SB 2519
Introduced on 16 February and signed by the governor on 15 April, the bill prohibits ownership of majority part or a majority interest in forest or agricultural land by a nonresident alien. “Majority part” or “majority interest” means an interest of 50% or more in the aggregate held by nonresident aliens. “Nonresident alien” is defined as an individual or business entity domiciled in the People’s Republic of China, Cuba, Iran, North Korea, Russia, or Venezuela, or an entity domiciled in the United States but majority owned by a foreign adversary entity. In addition, the bill specifies that land classified as industrial or residential but is otherwise used as forest or agricultural land shall be subject to the act.
Nebraska LB 1301
Introduced on 16 January at the request of the governor, LB 1301 was signed on 16 April. The bill amends existing law to prohibit nonresident aliens, foreign corporations, and foreign governments from purchasing, acquiring title to, or taking any leasehold interest extending for a period for more than five years (or any other greater interest less than a fee interest) in any real estate in the state by descent, devise, purchase, or otherwise. The law also prohibits restricted entities from purchasing, acquiring, holding title to, or being a lessor or lessee of real estate for the purpose of erecting manufacturing or industrial establishments, with certain exemptions.
Nebraska LB 1120
Separately, LB 1120, which was introduced on 10 January and also signed into law on 16 April, requires that upon a conveyance of real property located in whole or in part within a restricted area (i.e., within a certain radius of critical infrastructure or a military installation), the purchaser must complete and sign an affidavit stating it is not affiliated with any foreign government or nongovernment person determined to be a foreign adversary pursuant to 15 C.F.R. § 7.4. Specifically, the bill targets those individuals and entities from the People’s Republic of China, Cuba, Iran, North Korea, Russia, and Venezuela.
Oklahoma SB 1705
Introduced on 5 February and approved by the governor on 31 May, the bill amends the exiting foreign ownership law to prohibit foreign government adversaries and foreign government enterprises from acquiring land in the state. The law defines a “foreign government enterprise” to mean a business entity or state-backed investment fund in which a foreign government adversary holds a controlling interest.
South Dakota HB 1231
HB 1231 was introduced on 31 January and signed by the governor on 3 March. Prior to passage, South Dakota prohibited aliens and foreign governments from acquiring agricultural lands exceeding 160 acres. HB 1231 prohibits foreign entities from owning, leasing, or holding an easement on agricultural land in the state unless the lease is exclusively for agricultural research purposes and encumbers no more than 320 acres, or the lease is exclusively for contract feeding of livestock.
Tennessee HB 2553
HB 2553 was introduced on 31 January and was signed into law on 21 May. The bill replaces the prior definitions of individuals and entities restricted in their real property ownership and expands upon land ownership restrictions through the creation of two separate prohibitions: one that restricts a prohibited foreign-party-controlled business from acquiring an interest in public or private land and another that restricts a prohibited foreign party from acquiring an interest in agricultural land (regardless of whether the party intends to use it for nonfarming purposes). Additionally, HB 2553 creates the Office of Agricultural Intelligence within the Tennessee Department of Agriculture to enforce the new law.
Utah HB 516
Introduced on 8 February and signed into law on 21 March, the bill modifies the definition of a “restricted foreign entity” to prevent entities owned or majority controlled by the following governments from obtaining any interest in real property in the state: the People’s Republic of China, Iran, North Korea, or Russia.
Wyoming SF 77
SF 77 was introduced on 6 February and signed by the governor on 14 March. The bill allows the governor and the Wyoming Office of Homeland Security to designate critical infrastructure zones and requires county clerks to report each transaction involving property within a five-mile radius of the designated zones. The law also authorizes the attorney general to take any action necessary to determine the identity of any party reported by the county clerks.
Corporate Ownership Spotlight
While the majority of bills introduced in the states regarding beneficial ownership of land focused on limiting foreign actors, at least five bills proposed changes that would reduce the ability of business entities to acquire real property. Nebraska’s LB 1301 and Iowa’s SF 2204, detailed above, both made changes to existing statutes that restrict corporate entities from engaging in farming in those states. In addition, two bills in California and one in Virginia took aim at investment funds acquiring land or water rights.
California Assembly Bill 1205
As originally introduced, the bill required the State Water Resources Control Board to conduct a study and report to the legislature on the existence of speculation or profiteering by an investment fund in the sale, transfer, or lease of an interest in any surface water right or groundwater right previously put to beneficial use on agricultural lands. The measure was amended in August 2024 to remove all study provisions and instead renames and makes changes to the unrelated California Promise Program.
California SB 1153
SB 1153 would have prohibited a hedge fund from purchasing, acquiring, leasing, or holding a controlling interest in agricultural land within the state. The bill would have required the California Department of Food and Agriculture to compile an annual report containing, among other information, the total amount of agricultural land that is under hedge fund ownership, how that land is being put to use, and any legislative, regulatory, or administrative policy recommendations in light of the information from the annual report. The bill did not receive a hearing before the end of the legislative session.
Virginia SB 693
SB 693 was introduced on 19 January but did not receive a hearing before the legislative session concluded. The bill would have restricted any partnership, corporation, or real estate investment trust that manages funds pooled from investors, is a fiduciary to such investors, and has US$50 million or more in net value or assets under management on any day during a taxable year from acquiring any interest in residential land in the state.
Ongoing Rulemaking and Court Challenges
In addition to the aforementioned bills that were signed into law in 2024, certain other bills that were passed in 2023 continue to be active in 2024 and 2025. Specifically, in Florida, bills related to the foreign ownership of real property in the state continue to make headlines. Florida Statute § 692.202–.205, which were signed into law in 2023, create a three-pronged approach to restricting foreign ownership of real property assets in the state.7 The first prong prohibits the foreign ownership of agricultural land in the state with few exceptions. The second prong prohibits foreign ownership of any real property within a certain radius of critical infrastructure or military installations within the state. Lastly, the third prong prohibits Chinese ownership (at the individual, entity, or government level) of any real property within the state. The statute also creates a registration regime for all real property assets held by foreign principals prior to 1 July 2023. Administrative rules and regulations regarding the first prong of the statute were finalized as of 4 April 2024. Final rules surrounding the third prong of the laws were published in late January by the Florida Department of Commerce and will become effective 6 February 2025. In addition to the rule promulgation, the third prong of the statute is also currently being challenged in the Eleventh Circuit Court of Appeals. We continue to actively monitor these developments.
In Arkansas, SB 383 was enacted in 2023. The proposal prohibited foreign investments through two separate restrictions: a restriction on foreign-party-controlled businesses from acquiring interest in land, and a restriction on prohibited foreign parties from acquiring any interest in agricultural land. In November 2024, Jones Eagle—a digital asset mining company owned by a Chinese-born naturalized US citizen—filed a lawsuit requesting a preliminary injunction against the law. On 9 December, the presiding federal judge granted the injunction, which prevents enforcement of the law against the company until further orders from the court. The plaintiff argues that the federal government retains exclusive authority over foreign affairs, and that the Arkansas law violates this foreign affairs preemption. The court found that Jones Eagle was likely to prevail on the question, noting that the Arkansas law “go[es] so far as to target specific foreign countries for economic restrictions and conflict with the express foreign policy of the federal government as represented by the FIRRMA and ITAR regimes.”8 The case is pending in the Eighth Circuit Court of Appeals. We will continue to actively monitor these developments and their effect on recent and upcoming legislation regarding foreign ownership of real property.
FEDERAL-LEVEL RESTRICTIONS ON BENEFICIAL OWNERSHIP OF REAL ESTATE
Like state legislatures, there was a strong focus on foreign investment in agricultural land in Congress in 2024. Unlike state legislatures, Congress has not yet implemented restrictive or prohibitive measures addressing foreign or corporate ownership of real property.
Though largely a Republican effort, a few bills were bipartisan: H.R. 7678, the Protecting Against Foreign Adversary Investments Act sponsored by then-Representative Elissa Slotkin (D-MI-7), would have required CFIUS’s approval of certain real estate sales to foreign entities of concern and required a report to Congress assessing the feasibility of divestiture of real estate owned by foreign entities of concern.
Members of Congress also introduced several bills building on the Agricultural Foreign Investment Disclosure Act (AFIDA) and CFIUS authorities by (i) expanding AFIDA reporting mandates or increasing penalties for nondisclosure or both, and (ii) extending CFIUS jurisdiction over broader categories of land. There were also bills that would create new stand-alone prohibitions on purchases of US land by certain foreign persons.
A provision of proposed bill H.R. 7476 to counter Chinese influence would have required the United States Department of Agriculture (USDA) to prohibit the purchase of agricultural land by companies owned in full or in part by the People’s Republic of China. S. 3666 would have required data sharing between the USDA and CFIUS, while S. 4443 would have directed the director of national intelligence to complete a study on the threat posed to the United States by foreign investment in agricultural land. Most recently, Senator Mike Braun (R-IN) and Representative Dan Newhouse (R-WA-4) introduced companion bills requiring the USDA to notify CFIUS of each covered transaction it has reason to believe may pose a risk to national security.
In addition to stand-alone legislation, elements of some of the above bills were included in annual budget appropriations omnibus packages. On 4 March 2024, the federal Fiscal Year 2024 Agriculture Appropriations bill was signed into law by President Joe Biden as part of the Consolidated Appropriations Act, 2024. The package included a section addressing foreign ownership of agricultural land: it required the secretary of agriculture to be included as a member of CFIUS on a case-by-case basis with respect to covered transactions involving agricultural land, biotechnology, or the agricultural industry. The bill also directed the USDA to notify CFIUS of any agricultural land transaction that it has reason to believe may pose a risk to national security, particularly on transactions by the governments of the People’s Republic of China, North Korea, Russia, and Iran.
2025 FORECAST
Federal Level
The Farm Bill is a five-year package of bills that governs a broad range of agricultural programs covering commodities, conservation, nutrition, rural development, forestry, energy, and more. The last time a Farm Bill was passed into law was the Agriculture Improvement Act of 2018, which was passed on 20 December 2018 and expired on 30 September 2023. Facing a stalemate on negotiations of a new Farm Bill in late 2023 and early 2024, members of Congress agreed to pass a one-year extension of the 2018 Farm Bill to continue authorizations until the end of the fiscal year (September 2024) and the end of the crop year (December 2024).
However, Senate and House negotiations on a new Farm Bill did not sufficiently progress in 2024, so agriculture leaders again passed a one-year extension on 21 December 2024 to continue authorizations until September 2025. While there is strong commitment from Republican Congressional leadership to finalize the bill this year, success will depend on many factors, including on how quickly the House and Senate can address other policy priorities.
Both the Senate Democratic and the House Republican agriculture leaders have released draft Farm Bill proposals for a new five-year authorization. Both parties and chambers seem to agree on the need to address foreign ownership of agricultural land. The Senate Democratic and the House Republican proposals include provisions to the following:
Establish a minimum civil penalty if a person has failed to submit a report or has knowingly submitted a report under AFIDA with incomplete, false, or misleading information.
Direct outreach programs to increase public awareness and provide education regarding AFIDA reporting requirements.
Require the USDA to designate a chief of operations within the department to monitor compliance of AFIDA.
Mandate establishment of an online filing system for AFIDA reports.
In addition, the federal House Agriculture Committee has six incoming Republicans this year—five of them newcomers to Congress—who will want to make their mark on agricultural policy in the new legislative session. Newcomer Mark Messmer (R-IN-8) previously sponsored and passed a bill in 2022 in Indiana to cap the amount of agricultural land any foreign business entity can acquire in the state. In addition, Rep. Newhouse, who has prioritized addressing foreign ownership of agricultural land in the past two years, joins the House Agriculture Committee this year. We expect to see legislation from Rep. Newhouse in this area.
State Level
With respect to the outlook in the states, 46 states meet annually, while four states (Nevada, North Dakota, Texas, and Montana) meet only during odd-numbered years. With the additional four states convening this year, we expect to see a very active year for legislative proposals affecting beneficial ownership of real property.
New Jersey and Virginia are the only states where bills from the 2024 legislative session carry over into the 2025 session, which means that all legislative proposals that were not signed into law in 2024 in the other 48 states are considered to have died and must be re-introduced in 2025.
Already as of 29 January, at least 57 bills affecting beneficial ownership have been pre-filed or introduced in 22 different states. The majority of these bills so far are aimed at preventing foreign entities from acquiring agricultural land.
Footnotes
1 Oklahoma Senate Bill (SB) 1705.
2 Tennessee House Bill (HB) 2553.
3 Nebraska Legislature Bill (LB) 1301.
4 Utah HB 516, South Dakota HB 1231.
5 Tennessee HB 2553; Kansas SB 172; Mississippi SB 2519; Utah HB 516.
6 Louisiana HB 238; Wyoming Senate File (SF) 77.
7 Marisa N. Bocci, Kari L. Larson & Douglas Stanford, Real Estate Beneficial Ownership Regulatory Alert: Florida Restricts Real Estate Ownership by Individuals and Entities From “Countries of Concern”, K&L Gates HUB (Sept. 11, 2023).
8 Jones Eagle LLC v. Ward, 4:24-cv-00990-KGB (E.D. Ark. Dec. 9, 2024).
US Withdrawal From the Paris Climate Accord and its Impact on the Voluntary Carbon Market
Introduction: A Withdrawal with Broad Implications
On January 20, 2025, President Donald Trump issued a series of executive orders on energy and environmental topics that included initiating a US withdrawal from the Paris Climate Accords, a move consistent with his previous term’s policy and a central promise of his campaign.
This order was an anticipated “day one” action, as President Trump withdrew from the Paris Agreement during his first term and clearly stated his intention to repeat the action upon taking office again. The executive order references Trump’s distaste for international agreements that do not properly balance domestic economic and energy-sector development with environmental goals.
To formally pull the United States out of the Paris Agreement, the Trump administration will need to formally submit a withdrawal letter to the United Nations, which administers the pact. The withdrawal would become official one year after the submission. The formal withdrawal of the United States and subsequent changes to agreements under the UN Framework Convention on Climate Change cannot be transmitted to the United Nations until President Trump’s nominee to be US Ambassador to the UN, Rep. Elise Stefanik (R-NY), is confirmed by the Senate. She appeared before the Senate Committee on Foreign Relations on January 21, 2025, for a confirmation hearing, and the Senate is expected to vote on her confirmation this week.
This announcement coincided with the declaration of a national energy emergency under another executive order, as well as several other executive orders issued on the same day or since that together emphasize a refocus on hydrocarbon production and energy independence without mention of any correlative offset commitments.
Indirect Impacts on the Voluntary Carbon Market
The withdrawal raises key questions about the future of the voluntary carbon market (VCM), particularly in light of the Paris Climate Accords’ role in driving offset demand.
Under the Biden administration, the US government’s strong support for carbon markets included endorsement of guiding principles to bolster integrity, CFTC guidance to facilitate the scaling of carbon credit trading on derivative markets and fostering private sector confidence in the VCM. In contrast, the Trump administration’s decision to withdraw from the Paris Agreement and its general dissatisfaction with ESG and climate disclosure initiatives may undermine confidence in the VCM by reducing the impetus for corporate and national net-zero commitments.
Without the federal endorsement of climate goals, corporate strategies might shift away from investing in carbon offsets, diminishing demand for carbon credits. Furthermore, uncertainty surrounding federal support could delay or derail the development of new VCM projects that depend on long-term revenue from carbon credit sales. If federal support for the VCM is lacking, the private sector may follow suit.
Lessons From the First Withdrawal: Resilience of the Market
Under President Trump’s first term, the VCM subsisted under an administration that did not support the Paris Accord from the beginning. In that period, the United States was actually only “out of” the Paris Agreement for about 100 days — despite the withdrawal being initiated at the beginning of that term — with the federal messaging to the market clear from the outset (if not fully in effect). The delay was due to the signatory countries only being able to give a notice to withdraw from the Paris Agreement within the first three years of its start date — which, for the United States, was November 4, 2016 — with a subsequent one-year withdrawal process to follow. The United States therefore formally withdrew on November 4, 2020, the day after Joe Biden won the election, and re-entered the Paris Agreement under President Biden on February 19, 2021.
It should be emphasised that President Trump’s first withdrawal from the Paris Climate Accord did not significantly hinder the VCM. In fact, the market grew during that period, with robust private-sector demand for offsets driving progress. Between 2016 and 2021, the VCM experienced notable expansion, both in terms of transaction volume and the range of projects receiving funding. Carbon credit issuances from the four main registries increased in volume significantly from 2017 to 2021 (by more than 300 percent). There was then a dip after 2021 with the chief causal suspects being the scrutiny over market robustness, slow progress under the annual UN COP gatherings (in particular regarding the roll out under Article 6.4 of an international UN-backed trading mechanism for carbon credits) as well as the expected market vagaries of a young, developing trading system. Few attributed the cause to the delayed impact from the first US withdrawal from the Paris Climate Accords years before the dip. The resilience of the VCM suggests that federal policy is not the sole determinant of its trajectory.
Furthermore, the market is global in nature and likely to grow with international offset trading, further insulating it from shortfalls in federal support. The increasing integration of international carbon trading mechanisms provides additional stability and opportunity for the VCM, independent of domestic policy shifts. COP 29 made significant advances with respect to the Article 6.4 trading mechanism and, when operational, this is expected to bolster the VCM globally.
Additionally, the voluntary nature of the VCM means it operates largely outside regulatory frameworks, relying instead on private-sector leadership and investment. In this context, a lack of government support could incentivize corporations to independently bolster the market, particularly as international competition for climate leadership intensifies.
A Pro-Market Administration: Contradictions and Possibilities
To be sure, the Trump administration’s broader climate stance creates potential headwinds for the VCM, a point that is underscored by the administration’s other early moves to pull back from federal initiatives that underpin investment in projects that could generate voluntary carbon credits (discussed below). However, in addition to the points outlined above, there are other reasons to believe that the VCM could thrive despite what might be perceived to be a federal withdrawal. As a “pro-markets” administration, Trump’s economic policies prioritize private-sector growth and innovation. The VCM represents a burgeoning industry with significant economic potential, aligning with the administration’s stated commitment to fostering successful markets. In this context, the VCM should not pose a risk to the economic interests or energy security of the United States, which are the main concerns that the executive orders seek to address.
Supporting the VCM could also serve as a strategic response to growing foreign competition in the carbon trading space, ensuring US companies remain competitive globally.
Other Potential Executive Order Headwinds for VCMs
In addition to withdrawing the United States from the Paris Climate Accord, President Trump has so far directed the government not only to emphasize and clear the way for new hydrocarbon production and infrastructure, but also to take aim at Biden-era regulations, grants and loan programs that encourage non-hydrocarbon energy and energy transition projects.
For example, President Trump has issued executive orders and related memoranda:
pausing federal funding streams under existing law and the disbursement of additional funds through the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) (including some that currently flow to energy transition projects);
withdrawing offshore areas from future wind energy leasing;
freezing, at least for now, the issuance of awards and permits for wind projects; and
rescinding the Biden administration’s priorities and coordination efforts for implementing the IIJA and the IRA.
However, within a few days of the announcement of the pause on federal funding streams, this action was temporarily stayed by at least two federal judges pending review and a memorandum detailing the funding to be frozen was subsequently rescinded by the White House.
The pause in authorized and appropriated clean energy spending has been criticized on constitutional grounds. As noted above, preliminary court challenges have resulted in some setbacks for the new administration on this front. However, it is anticipated that the administration will continue to press its agenda calling into question new governmental expenditures for certain disfavoured technologies or projects.
The above actions may reduce developer appetite (and if the actions are fully realized, federal funding) for projects that could play a role in generating credits for the VCM, and that may in turn reduce its liquidity and viability. However, the reasons for potential resilience of the VCM discussed above also apply to these administration actions. Due in part to the differences in how voluntary carbon offsets are generated as compared with federal tax credits, not all transactions and projects involved in the creation or trading of offset in the VCM are impacted by these actions, and the administration’s pursuit of new infrastructure and energy production may ultimately benefit such projects.
Conclusion: Competing Factors and an Uncertain Future
The US withdrawal from the Paris Climate Accord under President Trump and the new administration’s actions seeking to roll back existing incentives for energy transition and climate-focused new projects introduces potential challenges for the VCM, from reduced federal support to weakened corporate commitments to offsets. However, the market’s unregulated nature, historical resilience and alignment with private-sector growth could offset these challenges. The ultimate trajectory of the VCM will depend on the interplay between federal initiatives, private-sector leadership and international climate efforts. As the global demand for carbon offsets continues to rise, the US VCM may well find pathways to growth despite a shifting domestic policy landscape.