Senate Updates Code Section 899
On Monday, 16 June 2025, the Senate Finance Committee released its version (the Senate Proposal) of the Section 899 retaliatory tax provisions that also are included in the “One Big Beautiful Bill Act” (the Act) that was passed by the House of Representatives on 22 May 2025.1 The Senate Proposal contains significant changes (in both form and substance) from the House-passed provision (House Proposal). For a discussion of the House Proposal and the impact it would have on certain cross-border transactions, see our previous alert.
Significant Changes in US Senate Proposal
Below is a summary of certain significant changes to Code Section 8992 in the Senate Proposal.
Delayed Start Date
Under the House Proposal, Code Section 899 would apply to calendar year taxpayers starting in 2026. Under the Senate Proposal, Code Section 899 would apply to calendar year taxpayers starting in 2027.
Lower Increased Rates of Tax
Under the House Proposal, the US tax rates to which an “applicable person” is subject would increase by five percentage points per year, up to a maximum of 20 percentage points above the applicable statutory rate (determined without regard to a reduced rate). Under the Senate Proposal, the US tax rates to which an “applicable person” is subject would increase by five percentage points per year, up to a maximum of 15 percentage points above the rate to which the applicable person would otherwise be subject (which may be a reduced rate). For example, an applicable person that is eligible for a 0% tax rate under a US tax treaty would (assuming Section 899 overrides the 0% treaty rate) be subject to a maximum US withholding tax rate of 50% under the House Proposal, which is reduced to a maximum US withholding tax rate of 15% under the Senate Proposal.
Fewer Exclusions Survive Code Section 899
Under the House Proposal, certain statutory tax exemptions and exclusions, such as the portfolio interest exemption, would not be impacted by Code Section 899. Under the Senate Proposal, while certain enumerated exemptions and exclusions, notably including the portfolio interest exemption, are not impacted by Code Section 899, any exemptions or exclusions not enumerated may be impacted. This calls into question the viability of numerous existing tax exclusions and exemptions for which applicable persons may be eligible, such as (1) exclusions under income tax treaties (such as a prohibition on the taxation of interest income by the United States and exclusions appliable to certain categories of foreign treaty residents) and (2) the exclusion for FIRPTA gains afforded to qualified foreign pension plans (QFPFs).
Certain Unfair Foreign Taxes No Longer Trigger Increased US Tax Rates
Under the House Proposal, applicable persons with respect to any country that enacted an “unfair foreign tax” (referred to as a discriminatory foreign country) would be subject to increased US tax rates. An unfair foreign tax included an undertaxed profits rule (UTPR) tax, a diverted profits tax (DPT), a digital services tax (DST), and certain other taxes identified by the Secretary of the Treasury. Under the Senate Proposal, countries whose applicable persons are subject to increased US tax rates would include only those countries that have enacted an “extraterritorial tax” (which generally includes a UTPR tax but does not include a DPT or a DST). However, the Super BEAT provisions discussed below would apply to any “offending foreign country,” that is, any country that has enacted any unfair foreign tax, including a UTPR tax or a DST (a DPT is not a per se unfair foreign tax under the Senate Proposal). See our previous alert for a list of countries imposing one or more of these taxes.
Changes to Super BEAT
Under the House Proposal, the 3% BEAT base erosion payments threshold would have been eliminated entirely for US corporations majority-owned by applicable persons. Under the Senate Proposal, the BEAT base erosion payments threshold is retained, but (1) is reduced to 0.5% for US corporations that are majority-owned by applicable persons, and (2) is reduced to 2% for all other US corporations. In addition, whereas the House Proposal would have established a higher Super BEAT tax rate under Code Section 899, the Senate Proposal increases the BEAT tax rate under Code Section 59A to 14% for all taxpayers (regardless of ownership by applicable persons). The Senate Proposal also adds a “high-tax” exception to base erosion payments under the regular BEAT that is not applicable to taxpayers subject to the Super-BEAT.3
In summary
The Senate Proposal is less disruptive than the House Proposal in certain respects, including the deferral of its effective date of Code Section 899 by one year and the lower cap on US tax rate increases (15 percentage points above the US tax rates that would otherwise be applicable, compared with 20 percentage points above US statutory tax rates without regard to any reduction in rate in the House Proposal). Notwithstanding the foregoing, the Senate Proposal (like the House Proposal) would have a significant impact on investment and operations in the United States by applicable persons. It would also override significant exemptions and exclusions under the Code that were thought to have been unaffected by the House Proposal, such as the exemption for QFPFs from FIRPTA gains.
Next Steps
There are several procedural and political hurdles for Congress to clear before Section 899 becomes law.
As has become the norm for recent landmark tax legislation when one Party controls the White House and both chambers of Congress, the Act is being considered under the reconciliation process. Reconciliation provides a statutory relief from the normal filibuster and cloture process for Senate debate, effectively overriding a requirement of a sixty-vote majority to pass legislation through the Senate.4 Instead, a simple majority vote in the Senate is sufficient to pass budget reconciliation legislation. In exchange for this “privileged” status, such legislation is limited to provisions with a budgetary impact and is subject to restrictions called the Byrd Rule.
The Senate Proposal currently is undergoing the “Byrd Bath,” where the minority Party challenges certain provisions as “extraneous” and in violation the Byrd Rule, with the Senate Parliamentarian ruling on these challenges. The Section 899 proposal is expected to be challenged under this procedure.
There are several ways that a provision may be considered extraneous, including (i) if it addresses an item outside the jurisdiction of the committee that is responsible for the provision or (ii) if it produces changes in revenue or spending which are merely incidental to the non-budgetary components of the provision (i.e., its budgetary impact does not substantially outweigh its policy implications).5
Section 899 has already survived one Byrd Rule challenge, with the Parliamentarian ruling that it rightly falls under the jurisdiction of the Senate Finance Committee and not the Foreign Relations Committee, the body generally tasked with issues impacting US treaty obligations. An additional challenge is expected on the grounds that Section 899 is primarily a policy proposal intended to backstop President Trump’s tariff policy rather than a budgetary measure. A ruling is expected later this week.
For the Act to become law, the House and the Senate must agree on the same bill. If the proposal survives the Byrd Rule challenge and passes the Senate in its current form as part of the complete Act, the House must either pass an identical version of the Act or revise the bill and return it to the Senate to reconsideration. Section 899 may be revised as part of this process, but it is expected to be included in final legislation. Both chambers hope to pass the Act in time for a 4 July 2025 signing ceremony by President Trump. Although discussions are ongoing among the White House, House, and Senate, given the significant differences between the House and Senate versions as they currently exist, reaching consensus that quickly may not be viable. A more realistic timeline may be to approve the legislation before the August recess.
Footnotes
1 Chairman Crapo Releases Finance Committee Reconciliation Text, June 16, 2025, available at https://www.finance.senate.gov/chairmans-news/chairman-crapo-releases-finance-committee-reconciliation-text.
2 Section 899 is not currently a section of the Internal Revenue Code of 1986, as amended (the Code). References to Code Section 899 herein are to such section as set forth in the House Proposal and Senate Proposal.
3 The US Senate Proposal contains other noteworthy revisions to US international tax provisions that are outside the scope of this alert.
4 See Standing Rules Of The Senate, R. XXII, S. Doc. No. 113–18 (2013).
5 2 U.S.C. § 644(b)(1), Extraneous matter in reconciliation legislation. Other limitations include (i) where the provision does not produce a change in government spending or revenues; (ii) if the net effect of provisions reported by the committee overseeing the provision fails to achieve its reconciliation instructions; (iii) the provision increases the deficit beyond the 10-year reconciliation window; or (iv) if the provision makes changes to Social Security.
Oregon Extends Privacy Law to Specifically List Auto Makers
In ongoing tweaks to state privacy laws, Oregon has amended its state privacy law to cover auto manufacturers. Specifically, those that process or control personal information that they get from a person’s use of a car. As most are aware, the law requires disclosures when collecting personal information, provision of rights to consumers (including the ability to delete and port personal information), and limits on profiling among other things. While the Oregon law, like most state “comprehensive” laws, includes applicability thresholds, there are no thresholds for this new applicability to car manufacturers. The law is slated to go into effect in September of this year.
Putting It Into Practice: This amendment demonstrates a growing concern by law makers and regulators around data collected in motor vehicles. We anticipate seeing similar developments in coming months.
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Vermont Enacts Age-Appropriate Design Code
On June 12, 2025, Vermont Governor Phil Scott signed into law the Vermont Age-Appropriate Design Code Act (S.B. 69) (the “Code”). The Code takes effect on January 1, 2027.
The Code requires “covered businesses” that develop or provide online services, products, or features “reasonably likely to be accessed” by minors under the age of 18 to refrain from using privacy-invasive design features in their online services. The Code requires covered businesses to use age-assurance methods specified in rules to be issued by the Vermont Attorney General to verify the age of users.
“Covered business” is defined as “a sole proprietorship, partnership, limited liability company, corporation, association, other legal entity, or an affiliate thereof” that:
conducts business in the state of Vermont;
generates a majority of its revenue from online services;
employs online products, services or features that are “reasonably likely to be accessed” by a minor under the age of 18;
collects Vermont consumers’ personal data or has such data collected on its behalf by a processor; and
alone or jointly with others determines the purposes and means of the processing of Vermont consumers’ personal data.
The Code indicates that an online service is “reasonably likely to be accessed” by a “covered minor” if it meets one or more of the following criteria:
the online service is “directed to children” as defined under COPPA;
the online service is determined to be routinely accessed by an audience composed of at least two percent of minors ages two through 17, based on competent and reliable evidence of audience composition;
the audience of the online service is determined to be composed of at least two percent minors ages two through 17, based on internal company research; or
the covered business knew or should have known that at least two percent of the audience of the online service includes minors ages two through 17.
“Covered minor” is defined as a Vermont consumer who a covered business “actually knows” is a minor or labels as a minor pursuant to age assurance methods in rules adopted by the Vermont Attorney General.
The Code requires covered businesses to meet a “minimum duty of care” with respect to covered minors, by ensuring that a covered business’s use of minors’ personal data and the design of an online service will not result in: (1) reasonably foreseeable emotional distress to a covered minor; (2) reasonably foreseeable compulsive use of the online service by a covered minor; or (3) identity-based discrimination against a covered minor (i.e., based on race, ethnicity, sex, disability, sexual orientation, gender identity, gender expression, religion, or national origin). The Code further requires covered businesses to ensure that the content viewed by a covered minor does not cause emotional distress, compulsive use or discrimination to covered minors.
To meet this minimum duty of care, the Code requires covered businesses to configure all default privacy settings to the highest level of privacy for covered minors, including by:
not displaying the existence of a covered minor’s account on a social media platform to any “known adult” user unless the covered minor has expressly and unambiguously allowed a specific adult user to view their account or made their account public;
not displaying content created or posted by a covered minor on a social media platform to any known adult user unless the covered minor has expressly and unambiguously allowed a specific known adult user to view their content or chosen to make their content publicly available;
prohibiting known adult users from liking, commenting on, or otherwise providing feedback on a covered minor’s social media content unless the covered minor has expressly and unambiguously allowed a specific known adult user to do so;
prohibiting known adult users from direct messaging a covered minor on a social media platform unless the covered minor has expressly and unambiguously decided to allow direct messaging with a specific known adult user;
not displaying a covered minor’s location to other users, unless the covered minor has expressly and unambiguously shared their location with a specific user;
not displaying users connected to a covered minor on a social media platform unless the covered minor expressly and unambiguously chooses to share the information with a specific user;
disabling search engine indexing of a covered minor’s account profile; and
not sending push notifications to covered minors.
A covered business shall not provide covered minors with a singular setting that would make all of the default privacy settings less protective at once, nor shall they request that covered minors reduce their privacy settings unless given express consent. “Known adult” is defined as a Vermont consumer who a covered business “actually knows” is an adult or labels as an adult pursuant to age assurance methods in rules adopted by the Vermont Attorney General.
In addition, the Code requires covered businesses to:
provide a prominent, accessible and responsive mechanism to delete a covered minor’s social media account and honor such deletion requests within 15 days;
provide detailed privacy disclosures prominently and clearly on their websites or mobile applications, including specific information about the use of algorithmic recommendation systems;
refrain from collecting, selling, sharing, or retaining any personal data of a covered minor that is not necessary to provide the online service with which the covered minor is actively and knowingly engaged;
use previously collected personal data of a covered minor only for the purpose for which it was collected, unless necessary to comply with the Code;
provide a conspicuous signal to the covered minor if their online activity or location is being monitored by any individual, including a parent or guardian;
refrain from using a covered minor’s personal data to select, recommend, or prioritize content unless the selection is based on:
the minor’s express and unambiguous request for specific content, such as:
content from a specific account, feed, or user;
a specific category of content (e.g., “cat videos” or “breaking news”); or
content with characteristics similar to the media currently being viewed;
user-selected privacy or accessibility settings; or
a search query initiated by the covered minor, which may be used only to select and prioritize media in response to that search;
refrain from sending push notifications to covered minors between 12:00 midnight and 6:00 a.m.;
limit the collection of personal data for age assurance to that which is strictly necessary for the verification process;
immediately delete any personal data collected for age assurance upon determining whether the user is a covered minor, except for the determination of the user’s age range;
refrain from using age assurance data for any other purpose or combining it with other personal data, aside from the age range determination;
avoid disclosing age assurance data to any third party that is not a processor; and
implement a review process that allows users to appeal their age determination.
The Vermont Attorney General has the authority to enforce the Code.
The enactment of the Code mirrors the actions of other states that have passed similar legislation, including California, Maryland and Nebraska, and reflects a broader movement to implement legal structures that guide the use of minors’ online data in an effort to minimize potentially harmful effects of certain online platforms to minor users. The California and Maryland laws have been the subject of lawsuits on First Amendment grounds, with the California law currently fully enjoined.
Montana, Indiana, Colorado, Oregon, and Utah Amend Restrictive Covenant Laws for Healthcare Providers
In the wake of the nationwide injunction last year barring the Federal Trade Commission’s (FTC) attempted Noncompete Ban, states have continued to legislate the scope of enforceable restrictive covenants, especially noncompetes.
In particular, many states are legislating specific rules for restrictive covenants for certain providers in the healthcare industry. In addition to the other states we previously reported noted, the latest wave of such states to pass legislation regarding noncompetes for health care providers includes Montana, Indiana, Colorado, Oregon, and Utah.
Montana
Since the beginning of April 2025, Montana has passed two new laws, each limiting the scope of noncompetes and non-solicits for healthcare providers in the state. Previously, Montana had already banned noncompetes and non-solicits as to a variety of healthcare providers, including psychiatrists or addiction medicine physicians, psychologists, social workers, professional counselors, addiction counselors, marriage and family therapists, and behavioral health peer support specialists.
The first new law went into effect in mid-April 2025 and expanded the existing noncompete and non-solicit limits to cover naturopathic physicians, registered professional nurses, advanced practice registered nurses, and physician assistants, but it does not apply in the context of the sale and purchase of a medical practice.
Governor Greg Gianforte signed the second new law on May 19, 2025. It expands the existing noncompete and non-solicit ban to all licensed physicians, not just psychiatrists or addiction medicine physicians, but sets forth certain exceptions. The new law exempts not only contracts for the sale and purchase of a medical practice, but also provisions requiring physicians to repay loans, relocation costs, signing bonuses, educational expenses, and tuition reimbursement expenses. The second new law will go into effect on January 1, 2026.
Indiana
On May 6, 2025, Indiana Governor Mike Braun, signed a new law, effective July 1, 2025, that removes several barriers to mobility for physicians. As of the effective date, hospitals may not use any noncompete, non-solicits exceeding one year, or any non-service agreements with physicians. The new law also restricts hospitals’ use of TRAPs, or training repayment agreements.
The new Indiana law has several notable exceptions. It does not apply to: (a) contracts for the sale of a business entity where the physician owns more than 50% of the business at the time of the sale; (b) nondisclosure agreements (“NDAs”); or non-solicits that last a year or less and do not restrict patient interactions, referrals, clinical collaborations, or physicians’ professional relationships.
Colorado
Colorado Governor Jared Polis signed a bill into law that further restricts noncompetes and non-solicits for certain medical providers in Colorado. The law, Concerning Limitations on Restrictive Employment Agreements, will go into effect on August 6, 2025. It prohibits noncompetes and non-solicits for physicians, physician assistants, advanced practice nurses, certified midwives, and dentists. The law explicitly permits such medical providers to supply patients with certain information before leaving a medical or dental practice, including the provider’s continuing practice of medicine/dentistry, their new professional contact information, and the fact of the patients’ right to choose a healthcare provider.
The new law specifically notes exemptions for NDAs and confidentiality provisions regarding trade secrets, and further qualifies the exemption for the sale of a business. For individuals owning a minority ownership share received as equity compensation or related to services rendered, the amendment includes a unique provision for calculating the maximum duration of an enforceable non-compete. The length of a noncompete in that context cannot exceed the total consideration received by the individual divided by the average annualized cash compensation received by the individual from the business during the preceding two years or the length of affiliation, whichever is shorter.
Oregon
Oregon Governor Tina Kotek signed a new law, effective upon her signature on June 9, 2025, that imposes additional restrictions on noncompetes, NDAs and other types of agreements of “medical licensees”, defined as individuals licensed: (i) to practice medicine; (ii) as a nurse practitioner; (iii) as a physician associate; or (iv) to practice naturopathic medicine.
In certain circumstances, the new law imposes an ownership threshold on medical licensee noncompetes, mandates that the medical entity enforcing the noncompete provide the medical licensee with documentation of the professional medical entity’s protectable interest, and limits the noncompete to the three years after the date on which the medical licensee was hired.
Utah
Utah Governor Spencer Cox signed a new law on March 26, 2025 that went into effect on May 7, 2025 which largely regulates health care services “platforms” (defined as “an electronic program, system, or application through which a health care worker may accept a shift to perform a health care service or role, as an independent contractor, at a health care facility.”). The new law prohibits health care services platforms from requiring health care workers to enter noncompetes, and prohibits them from banning healthcare workers from finding or accepting shifts using another platform or accepting a shift of employment with a healthcare provider or facility.
Stay tuned to this blog in the coming months for more updates on healthcare noncompete legislation. Epstein Becker & Green, P.C. maintains a 50-State Health Care Supplement to its 50-State Noncompete Survey, available as a combined document here. The 50-State Health Care Supplement details health care-specific exclusions and restrictions, including applicable statutes, for the states that have enacted them.
Texas Legislature Amends Data Broker Law
On May 30, 2025, the Texas legislature passed S.B. 1343 (the “Bill”), which amends the Texas Data Broker Act (the “Act”) to impose new notice and registration obligations on data brokers. The Bill now awaits signature by Texas Governor Greg Abbott.
The Act, which came into effect on September 1, 2023, currently requires data brokers to provide a clear, readily accessible notice on their website or mobile application that (1) states the entity is a data broker and (2) contains language provided by the Texas Secretary of State. The Bill amends the Act to require data brokers to also disclose in the notice how consumers can exercise their privacy rights under the Texas Data Privacy and Security Act.
The Bill further amends the Act to include additional content requirements for data broker registration statements submitted to the Texas Secretary of State. The Act currently requires data brokers to include the following in their registration statements: (1) the legal name of the data broker; (2) a contact person and the primary physical address, email address, telephone number, and website address of the data broker; (3) a description of the categories of data the data broker processes and transfers; (4) a statement of whether or not the data broker implements a purchaser credentialing process; (5) if the data broker has actual knowledge that the data broker possesses personal data of a known child: (A) a statement detailing the data collection practices, databases, sales activities, and opt-out policies that are applicable to the personal data of a known child; and (B) a statement on how the data broker complies with applicable federal and state law regarding the collection, use, or disclosure of personal data from and about a child on the Internet; and (6) the number of security breaches the data broker experienced during the preceding year and the total number of consumers affected by each breach. The Bill amends the Act to require that the registration statement also include a link to a page on the data broker’s website that prominently displays specific instructions on how consumers may exercise their privacy rights under the Texas Data Privacy and Security Act.
If signed by the Governor, the amendments to the Act will take effect September 1, 2025.
Diversity Visa Lottery Selection Finalized for Fiscal Year 2026
On May 3, 2025, the U.S. Department of State completed the selection process for the Diversity Visa Lottery for fiscal year 2026. Created by the Immigration Act of 1990, the U.S. Diversity Visa (DV) program, often referred to as the “Diversity Lottery,” aims to enhance the diversity of the immigrant population by selecting individuals from countries with historically low immigration rates to the United States. Annually, the program distributes 55,000 immigrant visas through a random selection process among eligible applicants.
Quick Hits
Diversity Visa (DV) Lottery entrants may want to verify their selection status through the official Entrant Status Check webpage.
Selection in the DV Lottery does not guarantee a visa due to the limited number of available visas.
Fraudulent emails and letters targeting DV Lottery entrants have increased. The U.S. government will never request advance payment. Official notifications are only available through the Entrant Status Check webpage.
Entrants may check their selection status by visiting the official Entrant Status Check webpage and entering their entry confirmation number, last name, and date of birth. The State Department exclusively uses this method to inform entrants of their selection status; notifications are not sent through email, mail, or phone. The selection notice on the webpage will be accessible until September 30, 2026. Entrants who do not verify their selection status may forfeit the opportunity to continue with the DV Lottery process.
If selected, the portal will provide instructions on how to proceed with an application for permanent residence. However, being selected in the DV Lottery does not guarantee a visa, as approximately 125,000 entrants will be initially chosen for only 55,000 available visas. This over-selection accounts for cases where applicants may not pursue visa issuance, fail to qualify, or are affected by the statutory limit of 7 percent of available visas per country. Each selectee receives a unique case number associated with the selectee’s country of birth that determines the order of processing, with lower numbers being processed earlier. The State Department publishes a monthly Visa Bulletin indicating which case numbers are current for processing. Selectees may want to monitor this bulletin starting in September 2025.
Provided the Visa Bulletin permits, and all other criteria outlined in the selection notice are satisfied, selectees will be eligible to file for adjustment of status or an immigrant visa application until September 2026. If present in the United States, diversity visa selectees must complete the adjustment of status process by September 30 of the fiscal year for which they were selected. Unused visas cannot be transferred to the following fiscal year.
The State Department cautions that there has been a significant rise in fraudulent emails and letters targeting Diversity Lottery entrants. Scammers often impersonate the U.S. government to solicit payment or personal information from entrants. Although entrants might receive an email from the U.S. government reminding them to check their selection status via the portal, they will not receive a notification letter or email confirming their selection. The official Entrant Status Check webpage is the sole method for verifying selection status. The fees associated with the DV application process are paid to the U.S. embassy or consulate cashier at the time an appointment is scheduled. The U.S. government will never ask an entrant to send payment in advance by check, money order, or wire transfer.
If an entrant is not selected, they may continue to monitor their email and the official Entrant Status Check webpage for notice of a second selection. Non-selectees and first-time entrants may enter the 2027 Diversity Visa Lottery, which will likely begin accepting applications in fall 2025.
Key Takeaways and Next Steps
The State Department has completed the selection process for the Diversity Visa Lottery for fiscal year 2026. Entrants may check their selection status by visiting the portal on the official Entrant Status Check webpage.
As a cautionary step, all entrants may want to remain vigilant to scams and contact official U.S. government resources for assistance.
Selectees should review their selection notice for the next steps and monitor the Visa Bulletin to determine when they may apply for adjustment of status or an immigrant visa application.
DOJ’s Data Security Program: Key Compliance Considerations for Impacted Entities
Go-To Guide
The Department of Justice’s new Data Security Program (DSP), effective April 8, 2025, imposes significant restrictions on U.S. government contractors and global companies that handle sensitive U.S. personal or government-related data.
U.S. persons and organizations that transfer, share, or provide access to such data must assess whether their transactions involve designated countries of concern and covered persons.
The DSP requires new due diligence, recordkeeping, reporting, and annual auditing obligations, with full enforcement beginning July 8, 2025. Non-compliance can result in severe civil and criminal penalties.
On April 11, 2025, the DOJ’s National Security Division (NSD) issued a Compliance Guide, Implementation and Enforcement Policy, and FAQs for its Data Security Program (DSP), finalized pursuant to Executive Order 14117 and the 28 C.F.R. Part 202. The DSP is primarily designed to prevent certain cross-border data flows and transactions. Individuals and companies subject to the DSP are required to comply with new security requirements, reporting and recordkeeping duties, and due diligence rules.
The recently issued guidance makes evident NSD’s intent to make the DSP an enforcement priority for this administration. Access to Americans’ bulk sensitive or personal data or U.S. government-related data increases the ability of countries of concern to engage in a wide range of malicious activities. The DSP is currently subject to a 90-day initial enforcement period, which is a limited enforcement window to give individuals and companies additional time to bring their transactions and processes into compliance with the DSP. After July 8, 2025, NSD will implement full enforcement of the DSP.
Click here to continue reading the full GT Alert.
Congress Should Use Budget Bill to Strengthen IRS Whistleblower Program
Since it was established in 2006, the Internal Revenue Service (IRS) Whistleblower Program has dramatically bolstered the United States’ efforts to crack-down on tax fraud schemes, identify tax cheats, deter would-be fraudsters and overall shrink the tax gap. In the less than two decades the program has been in operation, it has led to the recovery of over $7 billion while conserving the IRS’s time and resources.
However, in recent years, a number of issues have begun to plague the program, as delays have ballooned while payouts to whistleblowers have shrunk down. These issues threaten to undermine a critical and cost-effective tool in the United States’ anti-tax fraud arsenal by disincentivizing insiders from coming forward and utilizing the program.
Luckily, there has been bipartisan support in Congress for fixing the issues plaguing the IRS Whistleblower Program. The provisions found in the IRS Whistleblower Program Improvement Act, introduced by Senators Chuck Grassley (R-IA) and Ron Wyden (D-OR) during the last session of Congress were included in the draft discussion of the Taxpayer Assistance and Service Act unveiled earlier this year by Senators Wyden and Mike Crapo (R-ID).
These critically needed provisions have not been included in the budget reconciliation bill currently being considered by the Senate, however.
Including the reform provisions of the IRS Whistleblower Program Improvement Act in the budget bill will encourage and increase reporting to the IRS Whistleblower Program, leading to greater recoveries and enabling the IRS to be more efficient in their investigations with fewer resources.
Power of the IRS Whistleblower Program
Shortly after it was established in 2006, the Internal Revenue Service (IRS) Whistleblower Program demonstrated its potential to revolutionize the United States’ efforts to crack down on tax fraud and shrink the tax gap.
The monetary awards and protections offered by the program shifted the calculus for tax whistleblowers across the globe. Suddenly, the benefits of reporting tax fraud to U.S. authorities outweighed the benefits of keeping quiet and aiding in the fraud. Tax whistleblowing became a rational economic activity for bankers and other insiders.
Most notably, in 2009, UBS banker Bradley Birkenfeld came forward and blew the whistle on a major offshore banking scheme to hide U.S. taxpayer funds in Switzerland. While Birkenfeld came away with a record $104 million award, the benefits for the United States were even larger. According to University of California Davis law Professor Dennis Ventry:
“Thanks to [the] whistleblower . . . the U.S. government (take a deep breath) received: $780 million and the names of 250 high-dollar Americans . . . another 4,450 names and accounts of U.S. citizens . . . 120 criminal indictments of U.S. taxpayers and tax advisors . . . the closure of prominent Swiss banks . . . $5.5 billion collected from the IRS Offshore Voluntary Disclosure Program (OVDP), with untold tens of billions of dollars still payable . . .”
Overall, whistleblowers reporting under the IRS Whistleblower Program have directly allowed the United States to recover nearly $7 billion while the program’s deterrence effect has led to the payment of billions of dollars more in taxes from those who would be otherwise inclined to cheat the tax system but are wary of a whistleblower coming forward. A study of the similarly structured tax whistleblower award provisions within New York state’s False Claims Act found that that tax whistleblower program brought in an extra 7.7% in state tax revenue and that firms reduced their state tax avoidance in response both to the passage of the law and to press releases about tax whistleblower settlements.
“These whistleblower laws do work, and they’re reasonably inexpensive from a government perspective,” says Aruhn Venkat, one of the study’s authors and assistant professor of accounting at Texas University’s McCombs School of Business.
Crucially, the IRS Whistleblower Program helps the IRS be more efficient with its enforcement efforts and focuses its efforts on large tax cheats, since the program only covers matters where the amount of taxes in dispute exceeds $2 million. Whistleblowers come forward, identify bad actors, and provide valuable evidence about tax fraud. This allows the Commission to focus its efforts on recovering taxpayer funds from these high net-worth bad actors and not chase down the rabbit-hole of seeking enforcement avenues among the majority of honest taxpayers.
Recent Issues
The IRS Whistleblower Program’s recent annual reports to Congress detail a program facing issues. The annual money recovered by the program fell from $1.44 billion in Fiscal Year 2018 to just $245 million in Fiscal Year 2021 and the agency’s payouts to whistleblowers dropped from $312 million to $36 million over those same years.
In recent years, those totals have rebounded from those 2021 lows but still fall short of the numbers from 2018 and preceding years. In FY 2023, the IRS awarded $88.7 million to whistleblowers based on the $337 million the agency was able to collect thanks to whistleblower disclosures.
Even more troubling are the statistics on the average processing time for whistleblower award claims. The time to process mandatory award payments is up to an average of 11.29 years and there is a total backlog of 30,135 cases.
These delays are troubling, not just for the hardships they cause whistleblowers, but because of the way in which the disincentive would-be whistleblowers from coming forward. In 2006 (before the IRS whistleblower law was modernized), the Treasury Inspector General for Tax Administration raised concerns in a report that the average 7 1/2 year processing time for awards was undermining awards’ effectiveness as an incentive.
“If the claims are not timely processed, the rewards may lose some of their motivating value,” the TIGTA report stated. It further noted that cutting processing time “would make the Program more attractive to future informants wishing to report violations of tax laws.”
In recent years, the IRS Whistleblower Office has worked hard to address the issues plaguing the program, including increasing staffing at the office, disaggregating whistleblower claims to speed up award payouts, and demonstrating more dedication to working alongside whistleblowers and their representation.
While these administrative actions have made an impact, Congressional action is still urgently needed on the issue.
Critical Reforms
The whistleblower provisions found in the IRS Whistleblower Improvement Act and Taxpayer Assistance and Service Act directly address a number of the major issues plaguing the program through technical but common-sense reforms which fully align with the original intent behind the program.
The reforms include:
Imposition of interest on delayed awards. In order to reduce the debilitating delays in the processing of whistleblower award claims, the bill imposes a fairly modest interest payment onto whistleblower awards which the IRS delays at least 1 year in issuing.
Institution of de novo review in award case appeals. The bill gives whistleblowers a realistic opportunity to oppose an illegal or improper denial of an award. Under the amendment, if the IRS denies an award, the whistleblower can challenge the denial in Tax Court under the de novo standard of review. This simply means that the whistleblower can conduct discovery and can learn the actual basis for a denial and challenge it before an independent judge. This provision is designed to ensure that the IRS finally and properly adjudicates all whistleblower cases and will subject the IRS to accountability if they fail to implement the law as intended by Congress.
Removal of budget sequestration for whistleblower awards. The IRS program is the only whistleblower program in which an administrative agency reduces the amount of an award based on the budget sequestration rules adopted under President Obama. Applying budget sequestration to whistleblower payments is unjustifiable and results in payments below the mandatory statutory minimum award amount of 15% of the funds collected by the IRS in the relevant enforcement action. The amendments will fix that.
Other reforms in the bill include requiring more details in the IRS Whistleblower Program’s annual reports to Congress, aligning the program’s handling of attorney’s fees with other whistleblower award programs, and establishing the presumption of anonymity for whistleblowers.
A Cost Effective Program
A hurdle for the reforms’ passage has been the Joint Committee on Taxation’s (JCT) scoring of the IRS Whistleblower Improvement Act’s provisions, which suggest that the reforms would be costly and increase the budget. However, this is misleading about the cost effectiveness of the IRS Whistleblower Program and of cost-benefit of reforms making that program more effective.
Overall, the IRS Whistleblower Program has proven to be highly cost effective. Years ago, in reviewing the importance of tax whistleblowers, the IRS “estimated the IRS incurred slightly over 4 cents in cost (including personnel and administrative costs) for each dollar collected from the Informants’ Rewards Program (including interest), compared to a cost of over 10 cents per dollar collected for all enforcement programs.” A 2021 research paper estimated that “that the average whistleblower complaint at the IRS generates around $30,664 in tax revenues, and costs $590 to process.”
Furthermore, the previously discussed study on the NY State False Claims Act’s tax provisions found that the program had a 3,000 percent return on investment. A report from the U.K.’s Royal United Services Institute (RUSI) details that the Commodity Futures Trading Commission (CFTC) Whistleblower Program (a similar program to the IRS’) had “a gross operating profit of more than US$2.6 billion” over a ten year period.
The JCT scoring of the reform provisions found that the removal of budget sequestration on awards and the institution of de novo review could increase the amount awarded to whistleblowers and thus increase the costs of the program.
The scoring underestimates, however, the extent to which these reforms will make the program more attractive to whistleblowers, leading to more highly quality tips and thus increasing the funds recovered by the program.
Conclusion
An IRS Whistleblower Program which works for whistleblowers is necessary for the program to reach its full potential as an immensely cost-effective enforcement tool with an expansive deterrent effect. The technical reforms found in the IRS Whistleblower Improvement Act make the program more attractive to would-be-whistleblowers by addressing the debilitating delays and hurdles to full award payments currently plaguing the program.
By including these provisions in the One Big Beautiful Act, Congress will be increasing the ability of the IRS to recover unpaid taxes from fraudsters, bolstering the federal budget in one of the most efficient means possible.
Geoff Schweller also contributed to this article.
Maybe So, Maybe Not: Mississippi AG’s Office Opines That Mississippi Law Prohibits Most Consumable Hemp Products While Recognizing Opinion’s Limitations
All participants of Mississippi’s cannabis industry should take notice of an opinion the Mississippi Attorney General’s Office published on June 11, 2025. The opinion answered three questions Mississippi Rep. Lee Yancey presented: (1) Is the sale of non-FDA approved hemp-derived products designed for human ingestion and/or consumption prohibited in Mississippi; (2) is the possession of non-FDA approved hemp-derived products designed for human ingestion and/or consumption prohibited in Mississippi; and (3) if the answer to the first two questions is yes, are municipalities authorized to enact rules and regulations that prohibit or penalize the sale and/or possession of the same?
The attorney general, relying on Mississippi’s Uniform Controlled Substances Law (MSCSL), answered the first two questions in the affirmative, concluding that the terms of the MSCSL prohibited the sale and possession of such products unless they were being sold or possessed pursuant to the provisions of Mississippi’s medical cannabis laws and regulations. The opinion, however, notes its limitations by acknowledging that components of the analysis are controlled by federal law: “[A] complete response to [Yancey’s] request is outside the scope of an official opinion.”
The opinion focuses on two exemptions to the MSCSL’s prohibition of THC but recognizes a third. THC, the psychoactive ingredient in cannabis, is illegal under the terms of the MSCSL, however, several exemptions to this prohibition exist. Two of these exemptions, forming the basis of the AG’s opinion, make an allowance for hemp products that have been approved for human ingestion and/or consumption by the FDA or products possessed or sold under Mississippi’s medical cannabis laws. The third exemption (mentioned briefly in the opinion) exempts “hemp,” as defined and regulated under the Mississippi Hemp Cultivation Act (MHCA), from the MSCSL. The MHCA defines hemp in a manner similar to the 2018 Farm Bill, stating that hemp includes all derivatives, extracts and isomers. While many have interpreted the third exemption as allowing the sale and possession of hemp as long as it meets the MHCA’s definition (an interpretation adopted across the country under the Farm Bill’s same definition of hemp), the Attorney General’s Office appears to take a different stance.
In a footnote, the attorney general seems to suggest that since the MHCA has not been fully implemented, the exemption referencing the act may not apply. This positioning points towards the attorney general’s stance being that unless a hemp product is approved for human consumption by the FDA or handled pursuant to Mississippi’s medical cannabis laws, its sale and possession are prohibited by the MSCSL – regardless of what the hemp cultivation act says. That said, the opinion reiterates that because the cultivation of hemp in Mississippi “is legalized, licensed, and controlled by federal law [and] this office cannot opine on questions of federal law [,]… to the extent federal law controls the issues presented in your request, a complete response is outside the scope of an official opinion.”
The opinion, while briefly referencing the MHCA, does not explain additional exemptions to the definitions of both THC and marijuana under the MSCSL for hemp. Again, the opinion generally acknowledges that hemp, as defined in the MHCA and 2018 Farm Bill, is not controlled under MSCSL. But because such analysis is, at least in part, controlled by federal law, the opinion ends its discussion with just these acknowledgments.
While the AG’s opinions are not considered binding precedent, this opinion undoubtedly garnered the attention of Mississippi’s consumable hemp industry and medical cannabis industry alike and rightly so. There’s also little doubt that the opinion will be used as support next legislative session when yet another hemp bill is introduced.
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California Senate Passes Nation’s First Bill for Accessibility Violation Cure Period
The California Senate recently passed legislation (Senate Bill No. 84) that would require a plaintiff to give a qualified business notice and 120 days to cure an accessibility violation before filing a lawsuit seeking statutory damages and attorneys’ fees. The bill would create the nation’s first true safe harbor for businesses with fifty or fewer employees who are willing and able to address any barriers to access in 120 days. The bill now heads to the California Assembly.
Quick Hits
The California Senate has passed SB 84, which mandates a 120-day notice and cure period for accessibility violations before a plaintiff can file a lawsuit seeking statutory damages and attorneys’ fees.
SB 84 aims to create a safe harbor for businesses with fewer than fifty employees, allowing them to address accessibility barriers within 120 days to avoid statutory damages and legal fees.
If enacted, SB 84 would provide a “fix-it-first” pathway for small California businesses, potentially influencing similar federal protections in the future.
Landscape of Disability Access in California
California has long occupied center stage in the national conversation on accessibility litigation. High statutory penalties, no-fault liability, and liberal fee-shifting rules have turned the Golden State into a magnet for plaintiffs’ lawyers who focus on “construction-related accessibility claims” under both the federal Americans with Disabilities Act (ADA) and parallel state statutes, such as the Unruh Civil Rights Act (Unruh). Senate Bill 84 (SB 84) represents Sacramento’s most consequential attempt in nearly a decade to recalibrate that landscape.
California Civil Code §§ 52 and 54.3 authorize minimum statutory damages of $4,000 per visit for accessibility violations—subject to trebling—plus mandatory attorney’s fees. Those generous remedies, combined with federal ADA claims, led to a wave of high-frequency lawsuits in California, many filed by professional plaintiffs. Small businesses frequently complained that a single missed sign or faded parking stripe could trigger five-figure settlements. Prior reforms tried to soften the blow, but largely preserved strict liability and allowed litigation to multiply. By 2024, legislators faced mounting pressure to extend genuine “fix-it first” opportunities and curb perceived litigation abuse. SB 84 is the legislature’s answer.
SB 84’s New Requirements, Protections, and Limitations
Under SB 84, a party intending to seek statutory damages would be required to first serve a detailed letter “specifying each alleged violation” on the defendant. A lawsuit for statutory damages may not be filed unless—or until—those alleged violations remain unremedied 120 days after service. If the business corrects every cited violation within the 120-day window, it owes no statutory damages, plaintiff’s attorney’s fees, or costs for those items. This is a true safe harbor, rather than the mere possibility of damages reduction under certain existing circumstances.
It is important to note that SB 84 would only apply to defendants that have fifty or fewer employees overall. Businesses with more employees would remain subject to pre-existing rules. SB 84 also does not limit an individual’s right to sue for an injunction and does not disturb a court’s equitable powers.
Key Takeaways
If passed, SB 84 would provide a genuine “fix-it-first” pathway for California businesses with fifty or fewer employees, rendering them immune from statutory damages and fees if they repair cited violations within 120 days.
SB 84 would only benefit businesses with fifty or fewer employees, although plaintiffs’ lawyers may provide notice to other businesses not knowing how many employees they have.
Consider designating a compliance officer (in-house or external) to triage any notice letter so they are not missed. A handful of plaintiffs already provide “pre-litigation” notice of alleged violations and clients overwhelmingly report never receiving the notice.
Under SB 84, the clock on the time to cure the alleged violations starts ticking from the date of service, not the date the recipient opens the mail.
Businesses may want to take swift action in response to a notice letter, because 120 days passes quickly. Some architectural violations can be resolved quickly, such as adding accessible parking signage or adjusting the toilet paper dispenser location. However, many violations take time to assess and correct, such as adding ramps or correcting excessive sloping. This is especially where landlord/tenant buy-in or permitting is required.
“Notice and cure” bills requiring advanced notice under the ADA are regularly introduced in the U.S. Congress. Passage of SB 84 in California could clear the way to there being some chance that federal protections may follow.
Update: Senate Bill 6–A Texas Bill Impacting Large Load Development in ERCOT
As previously reported, Sen. Phil King and Sen. Charles Schwertner introduced Texas Senate Bill 6 (SB6) in February 2025. After various amendments and updates, the bill has passed the Texas House and Senate and is now before Governor Greg Abbott for his approval. If not vetoed, this bill will directly impact large load customers (specifically, electricity consumers of more than 75 megawatts (MW), unless the Texas Public Utility Commission (the PUCT) determines that a lower threshold is necessary) and entities currently in or contemplating a co-location arrangement in the Electric Reliability Council of Texas (ERCOT) region. SB6, or any other bill passed by the legislature, can also become law without Governor Abbott’s signature.
The legislative purpose of SB6 is to ensure large load customers contribute to the recovery of interconnection costs, establish grid reliability protection measures, bring transparency and credibility to load forecasting, and protect customers from outages by requiring large loads to share the load shed obligation during times of shortage.
Interconnecting Large Loads
SB6 requires the PUCT to adopt standards for interconnecting large load customers in ERCOT “in a manner designed to support business development in [Texas] while minimizing the potential for stranded infrastructure costs and maintaining system reliability.” SB6 further provides that the standards apply “to customers requesting a new or expanded interconnection where the total load at a single site would exceed a demand threshold established by the [PUCT] based on the size of loads that significantly impact transmission needs” in ERCOT.
The PUCT’s standards must require (i) the large load customer to disclose to the interconnecting utility whether the customer is pursuing substantially similar requests that would result in a material change, delay, or withdrawal of the interconnection request; (ii) the large load customer to disclose to the interconnecting utility information about the customer’s on-site backup generation facilities (facilities not capable of exporting energy to ERCOT and that serve at least 50% of on-site demand); (iii) a flat study fee of at least US$100,000 to be paid to the interconnecting utility for initial transmission screening; (iv) a method for a large load customer to demonstrate site control for the proposed load location; (v) uniform financial commitment requirements for the development of transmission infrastructure needed to serve a large load customer—the standard must provide that satisfactory proof of financial commitment may include (a) security provided on a dollar per MW basis, (b) contribution in aid of construction, (c) security provided under an agreement that requires a large load customer to pay for significant equipment or services in advance of signing an agreement to establish electric delivery service, or (d) another form of financial commitment acceptable to the PUCT; (vi) uniform requirements for determining when capacity that is subject to an outstanding financial commitment may be reallocated; and (vii) procedures to allow ERCOT to access any information collected by the interconnecting utility to ensure compliance with the standards for transmission planning analysis.
The purpose of many of these requirements is to provide ERCOT and the interconnecting utility with a better sense of which large load will move forward in the interconnection queue versus those that are duplicative or do not have the requisite site control or financial backing to move forward. The Texas Legislature recognized that these large loads are impacting ERCOT’s forecasting capabilities and that it is essential for ERCOT to have a better understanding of which large loads will and will not be built.
SB6 provides that, during an energy emergency alert, ERCOT may issue reasonable notice that large load customers with on-site backup generating facilities may be directed to either curtail load or deploy the customer’s on-site backup generation.
SB6 also directs the PUCT to establish criteria by which ERCOT includes forecasted large load of any peak demand in resource adequacy and transmission planning models and reports.
Co-Location
In addition to the interconnection standards addressed above, SB6 creates standards and requirements for the co-location of large load customers with existing generation resources. A co-location arrangement is an arrangement where generation and load are located near each other and the generation serves the load before the point of interconnection and without using the grid.
Under SB6, a power generation company, electric cooperative, or municipally owned utility must submit a notice to ERCOT before implementing a net metering arrangement between an operating stand-alone generation resource registered in ERCOT as of 1 September 2025 and a new large load customer. The provisions in this new Public Utility Regulatory Act section do not apply to a generation resource (i) that registered with a co-located large load customer at the time of energization (even if the load is energized at a later date), or (ii) where a majority interest is owned directly or indirectly as of 1 January 2025 by a parent company of the net metering customer.
ERCOT must study the system impacts of a proposed net metering arrangement and removal of the generation on the system. ERCOT must complete the study and submit the results to the PUCT with a recommendation by the 120th day after ERCOT received the request and associated information regarding the arrangement. The PUCT then would have 60 days from the date it receives the study results to approve, deny, or impose reasonable conditions on the proposed net metering arrangement (as necessary) to maintain system reliability. Such conditions may include (i) requiring customers to be held harmless for stranded or underutilized transmission assets resulting from the behind-the-meter operation, (ii) requiring the retail customer who is served behind-the-meter to reduce load during certain events, or (iii) requiring the generation resource to make capacity available to ERCOT during certain events. The PUCT is also permitted, if the conditions are not limited to a specific period, to review the conditions at least every five years to determine if they should be extended or rescinded. If the PUCT does not approve, deny, or impose conditions on the proposed net metering arrangement before the expiration of the 60-day deadline, then the arrangement is deemed approved.
Demand Management
In addition to interconnection and co-location requirements, SB6 requires ERCOT to ensure that each transmission and distribution utility, electric cooperative, and municipally owned utility serving a transmission-voltage customer interconnected after 31 December 2025 develops a protocol, including the installation of necessary equipment or technology before the customer is interconnected, to allow the load to be curtailed during firm load shed, unless it is a “critical load industrial customer” or the load is designated as a “critical natural gas facility.” ERCOT will also develop a reliability service to competitively procure demand reductions from large load customers subject to the new rules established by the PUCT.
Transmission Cost Allocation Methods Assessed
Finally, SB 6 requires the PUCT, by 31 December 2026, to evaluate whether the existing methodology used to charge wholesale transmission costs continues to appropriately assign costs for transmission investment. As part of this analysis, the PUCT must evaluate (i) whether the current four coincident peak method ensures that all loads appropriately contribute to the recovery of transmission costs, (ii) whether alternative methods to calculate wholesale transmission rates would more appropriately assign costs, and (iii) what portion of the costs related to access to and wholesale service from the transmission system should be nonbypassable. The PUCT is charged with evaluating whether the PUCT’s retail ratemaking practice ensures transmission cost recovery appropriately charges system costs to each customer class that causes those costs. The PUCT must begin this evaluation within 90 days of the earlier of either the governor’s signing of SB6 or 22 June 2025. After the PUCT completes its evaluation process, and no later than 31 December 2026, the PUCT must amend its rules to ensure wholesale transmission charges appropriately assign costs for transmission investment.
While SB6 has passed both Texas chambers and is projected to not be vetoed by the Governor, the PUCT will still have a lot of work ahead of it to implement the various provisions in the statute. This will give interested parties an additional opportunity to have their voices heard during the process to implement this legislation.
NYC’s Enhanced ESSTA Rules for Prenatal Leave Create Policy, Posting + Paystub Requirements for Employers
Takeaways
Changes to NYC’s paid prenatal leave requirement take effect 07.02.25.
They incorporate and enhance NYS prenatal leave protections that went into effect at the beginning of this year.
NYC employers should understand their obligations and implement the changes to policies, notices, and recordkeeping.
Consistent with the expanding attention afforded to prenatal health and workplace protections nationally, New York State implemented a new paid prenatal leave requirement as an amendment to the state sick leave law, which went into effect Jan. 1, 2025. New York City recently amended its rules related to the Earned Safe and Sick Time Act (ESSTA) to incorporate the state prenatal leave protections and add enhanced requirements.
NYS Paid Prenatal Leave Rights
Since Jan. 1, 2025, all private-sector employers in New York have been required to provide up to 20 hours of paid prenatal leave in a 52-week period to eligible employees, regardless of company size. The 52-week leave period starts on the first day the prenatal leave is used.
The prenatal leave entitlement is in addition to the statutory sick leave entitlement and other paid time off benefits provided by company policy or applicable law, and it applies only to employees receiving prenatal healthcare services, such as medical exams, fertility treatments, and end-of-pregnancy appointments. Spouses, partners, or support persons are not eligible to use prenatal leave.
Employers cannot force employees to use other leave first or demand medical records or confidential health information to approve prenatal leave requests. (See NYS Paid Prenatal Leave: Employers Must Manage a New Entitlement in the New Year.)
NYC ESSTA Rules Incorporating Prenatal Leave
The New York City Department of Consumer and Worker Protection issued amended rules on May 30, 2025, formally incorporating the state prenatal leave requirement into ESSTA. Changes and obligations related to prenatal leave, which are effective July 2, 2025, include:
Policy Requirements
The obligation to promulgate and distribute a policy related to ESSTA is expanded to require that such policy address paid prenatal leave entitlements. Under the rules, employers must distribute their written safe and sick time and paid prenatal leave policies to employees personally upon hire and within 14 days of the effective date of any policy changes and upon an employee’s request.
In essence, all NYC employers have an obligation to modify their current policy and reissue the revised policy to current employees.
Employee Notice of Rights, Posting
The Department also issued an updated Notice of Employee Rights that includes paid prenatal leave. The updated notice must be provided to new hires and to current employees when rights change (which is the case here), and employers must maintain a record of receipt by the employee. The notice also must be posted.
All NYC employers have an obligation to modify the notice required for new hires and reissue the notice to current employees.
Paystub Requirement
For each pay period in which an employee uses prenatal leave, the following information must be clearly documented on pay stubs or other documentation provided to the employee, such as a pay statement:
The amount of paid prenatal leave used during the pay period; and
Total balance of remaining paid prenatal leave available for use in the 52-week period.
Under updated agency FAQs, this information can be provided by an electronic system in certain instances. This requirement is similar to the existing requirement for notice of paid sick and safe time.
NYC employers should understand their obligations and implement these changes to policies, notices, and recordkeeping.