The Big Six Items That Family Offices Need to Consider in 2025
Across all industries, family offices and their owners and management teams face rapidly evolving challenges, opportunities, and risks in the dynamic environment that is 2025. Here are six issues that family offices should consider and be mindful of this year.
1. Impending Sunset after December 31 of Temporarily Doubled Federal Estate, Gift and Generation-Skipping Transfer Tax Exemption — or Maybe Not?
In 2025, the Internal Revenue Service (IRS) increased the lifetime estate and gift tax exemption to $13.99 million per individual ($27.98 million per married couple). Clients who maximized their previous exemption ($13.61 million per individual in 2024), can now make additional gifts of up to $380,000 ($760,000 per married couple) in 2025 without triggering gift tax. Clients who have not used all (or any) of their exemption to date should be particularly motivated to make lifetime gifts because, under current law, the lifetime exemption is scheduled to sunset.
Since the 2017 Tax Cuts and Jobs Act, the lifetime exemption has been indexed for inflation each year. Understandably, clients have grown accustomed to the steady and predicable increase in their exemption. However, absent congressional action, if the exemption lapses, the lifetime estate and gift tax (and generation-skipping transfer tax) exemption will be cut in half to approximately $7.2 million per individual ($14.4 million per married couple) at the start of 2026. That being said, as a result of the Republican trifecta in the 2024 election, it is very plausible that the temporarily doubled exemption may be extended for some additional period of time as part of the budget reconciliation process, which allows actions by majority vote in the Senate (with the vice president to cast the deciding vote in the event of a tie). This is in contrast to the ordinary rules of procedure that require 60 votes out of 100 in the Senate for Congressional action. But there are no assurances that such an extension will occur, and any legislation may not be enacted (if at all) until very late in the year.
To ensure that no exemption is forfeited, clients should consider reaching out to their estate planning and financial advisors to ensure they have taken full advantage of their lifetime exemption. If the exemption decreases at the start of 2026, unused exemption will be lost. Indeed, absent Congressional action to extend the temporarily doubled exemption, this is a use-it-or-lose-it situation.
2. Buy-Sell Agreements and Their Role in Business Succession Planning
The death, disability, or retirement of a controlling owner in a family-controlled business can wreak havoc on the entity that the owner may have spent a lifetime building from scratch. If not adequately planned for, such events can lead to the forced sale of the business out of family hands to an unrelated third party.
A buy-sell agreement is an agreement between the owners of a business, or among the owners of the business and the entity, that provides for the mandatory purchase (or right of first refusal) of an owner’s equity interest, by the other owners or by the business itself (or some combination of the two), upon the occurrence of specified triggering events described in the agreement. Such triggering events can include the death, disability, retirement, withdrawal or termination of employment, bankruptcy and sometimes even the divorce of an owner. Buy-sell agreements may be adapted for use by all types of business entities, including C corporations, S corporations, partnerships, and limited liability companies.
Last June, in Connelly v. United States, the US Supreme Court affirmed a decision of the Eighth Circuit Court of Appeals in favor of the government concerning the estate tax treatment of life insurance proceeds that are used to fund a corporate redemption obligation under a buy-sell agreement. The specific question presented was whether, in determining the fair market value of the corporate shares, there should be any offset to take into account the redemption obligation to the decedent’s estate under a buy-sell agreement. The Supreme Court concluded that there should be no such offset. In doing so, the Supreme Court resolved a conflict that had existed among the federal circuit courts of appeal on this offset issue.
As a result of the Supreme Court’s decision, buy-sell agreements that are structured as redemption agreements should be reviewed by business owners that expect to have taxable estates. In many cases it may be desirable instead to structure the buy-sell agreement as a cross-purchase agreement.
For further information, please see our article that addresses the Connelly decision and its implications: US Supreme Court Affirms the Eighth Circuit’s Decision in Favor of the Government Concerning the Estate Tax Treatment of Life Insurance Proceeds Used to Fund a Corporate Redemption Obligation.
3. Be Very Careful in Planning With Family Limited Partnerships and Family Limited Liability Companies
The September 2024 Tax Court memorandum decision of Estate of Fields v. Commissioner, T.C. Memo. 2024-90, provides a cautionary tale of a bad-facts family limited partnership (FLP) that caused estate tax inclusion of the property transferred to the FLP under both sections 2036(a)(1) and (2) of the Internal Revenue Code with loss of discounts for lack of control and lack of marketability. In doing so, the court applied the Tax Court’s 2017 holding in Estate of Powell v. Commissioner, 148 T.C. 392 (2017) — the ability of the decedent as a limited partner to join together with other partners to liquidate the FLP constitutes a section 2036(a)(2) estate tax trigger — and raises the specter of accuracy-related penalties that may loom where section 2036 applies.
Estate of Fields illustrates that, if not carefully structured and administered, planning with family entities can potentially render one worse off than not doing any such planning at all.
4. The IRS Gets Aggressive in Challenging Valuation Issues
The past year and a half has seen the IRS become very aggressive in challenging valuation issues for gift tax purposes.
First, in Chief Counsel Advice (CCA) 202352018, the IRS’s National Office, providing advice to an IRS examiner in the context of a gift tax audit, addressed the gift tax consequences of modifying a grantor trust to add tax reimbursement clause, finding there to be a taxable gift. The facts of this CCA involved an affirmative consent by the beneficiaries to a trust modification to allow the trustee to reimburse the grantor for the income taxes attributable to the trust’s grantor trust status. Significantly, the IRS admonished that its principles could also apply in the context of a beneficiary’s failure to object to a trustee’s actions, or in the context of a trust decanting.
Next, in a pair of 2024 Tax Court decisions — the Anenberg and McDougall cases — the IRS challenged early terminations of qualified terminable interest property (QTIP) marital trusts in favor of the surviving spouse that were then followed by the surviving spouse’s sale of the distributed trust property to irrevocable trusts established for children. While the court in neither case found there to be a gift by the surviving spouse, the Tax Court in McDougall determined that the children made a gift to the surviving spouse by surrendering their remainder interests in the QTIP trust.
5. The Show Continues: The CTA No Longer Applicable to US Citizens and Domestic Companies
After an on-again-off-again pause of three months beginning in late 2024, the Corporate Transparency Act (CTA) is back in effect, but only for foreign reporting companies. On March 2, the US Department of the Treasury (Treasury) announced it will not enforce reporting requirements for US citizens or domestic companies (or their beneficial owners).
Pursuant to Treasury’s announcement, the CTA will now only apply to foreign entities registered to do business in the United States. These “reporting companies” must provide beneficial ownership information (BOI) and company information to the Financial Crimes Enforcement Network (FinCEN) by specified dates and are subject to ongoing reporting requirements regarding changes to previously reported information. To learn more about the CTA’s specific requirements, please see our prior client alert (note that the CTA no longer applies to domestic companies or US citizens, and the deadlines mentioned in the alert have since been modified, as detailed in the following paragraph).
On February 27, FinCEN announced it would not impose fines or penalties, nor take other enforcement measures against reporting companies that fail to file or update BOI by March 21. FinCEN also stated it will publish an interim final rule with new reporting deadlines but did not indicate when the final rule can be expected. Treasury’s March 2 announcement indicates that the government is expecting to issue a proposed rule to narrow the scope of CTA reporting obligations to foreign reporting companies only. No further details are available at this time, but domestic reporting companies may consider holding off on filing BOI reports until the government provides additional clarity on reporting requirements. Foreign reporting companies should consider assembling required information and being prepared to file by the March 21 deadline, while remaining vigilant about further potential changes to reporting requirements in the meantime.
On the legislative front, earlier this year, the US House of Representatives passed the Protect Small Businesses from Excessive Paperwork Act of 2025 (H.R. 736) on February 10, in an effort to delay the CTA’s reporting deadline. The bill aims to extend the BOI reporting deadline for companies formed before January 1, 2024, until January 1, 2026. The bill is currently before the US Senate, but it is unclear whether it will pass in light of the latest updates.
6. Ethical and Practical Use of AI in Estate Planning
The wave of innovative and exciting artificial intelligence (AI) tools has taken the legal community by storm. While AI opens possibilities for all lawyers, advisors in the estate planning and family office space should carefully consider whether, and when, to integrate AI into their practice.
Estate planning is a human-centered field. To effectively serve clients, advisors develop relationships over time, provide secure and discrete services, and make recommendations based on experience, compassion, and intuition.
Increasingly, AI tools have emerged that are marketed towards estate planning and family office professionals. These tools can (1) assist planners with summarizing complex estate planning documents and asset compilations, (2) generate initial drafts of standard estate planning documents, and (3) translate legal jargon into client-friendly language. Though much of the technology is in the initial stages, the possibilities are exciting.
While estate planning and family office professionals should remain optimistic and open about the emerging AI technology, the following recommendations should be top of mind:
First, advisors must scrutinize the data privacy policies of all AI tools. Advisors should be careful and cautious when engaging with any AI program that requires the input of sensitive or confidential documents to protect the privacy of your clients.
Next, advisors should stay up to date on the statutory and case law developments, as the legal industry is still developing its stance on AI.
Finally, advisors should honor and prioritize the personal and human nature of estate planning and family advising. Over-automating one’s practice can come at the expense of building strong client relationships.
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Working Mothers: Workplace Travel Requirements Do Not Automatically Amount to Indirect Discrimination
Ms Perkins (the Claimant) was employed as head of Enforcement Local Taxation in the Helmshore office of MH Ltd’s enforcement company (the Company). The Company restructured its enforcement services so that work in Darlington, Epping and Birmingham transferred to Helmshore.
As a consequence of this change, Ms Perkins was told that she would have to travel to these other offices, prompting her to raise a grievance against that requirement. The Company stated that such travel could be limited to one day per month, but if this was refused the options were (i) enforcement of the changes; (ii) fire and rehire under a new contract; or (iii) redundancy. Ms Perkins confirmed that if her employment were terminated, she would advance down the redundancy route.
Ultimately, Ms Perkins was dismissed by reason of redundancy. Ms Perkins claimed:
unfair dismissal – contending it was not a genuine redundancy; and
indirect sex discrimination – claiming the travel requirement placed women with childcare duties at a disadvantage.
The Employment Tribunal (ET)
The ET upheld both of Ms Perkins’s claims, accepting that:
unfair dismissal – the real reason for dismissal was Ms Perkins’s inability to meet the travel demands, not redundancy; and
indirect sex discrimination – the travel requirement created a disadvantage for women with childcare responsibilities, and it was not proportionate to require significant travel to achieve the legitimate aim of business efficacy and staff morale.
The Company appealed.
The Employment Appeal Tribunal (EAT)
On appeal, the Company was successful for the following reasons:
unfair dismissal – the ET allowed Ms Perkins to challenge redundancy as the reason for dismissal despite her earlier concession; and
indirect sex discrimination – the ET failed to sufficiently analyse whether the childcare disparity applied specifically to Grade 3 Managers and instead relied on the existence of a childcare disparity (that is, women are more likely to be primary carers). The EAT found that the travel requirement was proportionate to the Company’s business aims.
Implications for Flexible Working
This case highlights important considerations for employers regarding flexible working, such as:
Proportionality of Requirements. Employers should ensure that any workplace requirements, such as travel, are necessary and proportionate, especially when they may disadvantage certain groups.
Childcare Disparity. Tribunals may “judicially note” that women are more likely to face childcare challenges, but employers should assess how such disparities apply within their workforce.
Flexible Working Requests. Employers must engage in meaningful consultation before imposing rigid requirements.
Design-Code Laws: The Future of Children’s Privacy or White Noise?
In recent weeks, there has been significant buzz around the progression of legislation aimed at restricting minors’ use of social media. This trend has been ongoing for years but continues to face resistance. This is largely due to strong arguments that all-out bans on social media use not only infringe on a minor’s First Amendment rights but, in many cases, also create an environment that allows for the violation of that minor’s privacy.
Although companies subject to these laws must be wary of the potential ramifications and challenges if such legislation is enacted, these concerns should be integrated into product development rather than driving business decisions.
Design-Code Laws
A parallel trend emerging in children’s privacy is an influx in legislation aimed at mandating companies to proactively consider the best interest of minors as they design their websites (Design-Code Laws). These Design-Code Laws would require companies to implement and maintain controls to minimize harms that minors could face using their offerings.
At the federal level, although not exclusively a Design-Code Law, the Kids Online Safety Act (KOSA) included similar elements, and like those proposed bills, placed the responsibility on covered platforms to protect children from potential harms arising from their offerings. Specifically, KOSA introduced the concept of “duty of care,” wherein covered platforms would be required to act in the best interests of minors under 18 and protect them from online harms. Additionally, KOSA would require covered platforms to adhere to multiple design requirements, including enabling default safeguard settings for minors and providing parents with tools to manage and monitor their children’s online activity. Although the bill has seemed to slow as supporters try to account for prospective challenges in each subsequent draft of the law, the bill remains active and has received renewed support from members of the current administration.
At the state level, there is more activity around Design-Code Laws, with both California and Maryland enacting legislation. California’s law, which was enacted in 2022, has yet to go into effect and continues to face opposition largely centered around the law’s alleged violation of the First Amendment. Similarly, Maryland’s 2024 law is currently being challenged. Nonetheless, seven other states (Illinois, Nebraska, New Mexico, Michigan, Minnesota, South Carolina and Vermont) have introduced similar Design-Code Laws, each taking into consideration challenges that other states have faced and attempting to further tailor the language to withstand those challenges while still addressing the core issue of protecting minors online.
Why Does This Matter?
While opposition to laws banning social media use for minors has demonstrated success in the bright line rule restricting social media use, Design-Code Laws not only have stronger support, but they will also likely continue to evolve to withstand challenges over time. Although it’s unclear exactly where the Design-Code Laws will end up (which states will enact them, which will withstand challenges and what the core elements of the laws that withstand challenges will be), the following trends are clear:
There is a desire to regulate how companies collect data from or target their offerings to minors in order to protect this audience. The scope of the Design-Code Laws often does not stop at social media companies, rather, the law is intended to regulate those companies that provide an online offering that is likely to be accessed by children under the age of 18. Given the nature and accessibility of the web, many more companies will be within the scope of this law than the hotly contested laws banning social media use.
These laws bring the issue of conducting data privacy impact assessments (DPIAs) to the forefront. Already mandated by various state and international data protection laws, DPIA requirements compel companies to establish processes to proactively identify, assess and mitigate risks associated with processing personal information. Companies dealing with minor data in these jurisdictions will need to:
Create a DPIA process if they do not have one.
Build in additional time in their product development cycle to conduct a DPIA and address the findings.
Consider how to treat product roll-out in jurisdictions that do not have the same stringent requirements as those that have implemented Design-Code Laws.
As attention to children’s privacy continues to escalate, particularly on the state level, companies must continue to be vigilant and proactive in how they address these concerns. Although the enactment of these laws may seem far off with continued challenges, the emerging trends are clear. Proactively creating processes will mitigate the effects these laws may have on existing offerings and will also allow a company to slowly build out processes that are both effective and minimize the burden on the business.
California Governor’s Executive Order on Disaster Unemployment Assistance for Child Care Providers in Los Angeles
On February 11, 2025, Governor Gavin Newsom issued an executive order to support childcare providers impacted by the recent wildfires in Los Angeles. This order ensures that those affected are aware of their eligibility for Disaster Unemployment Assistance (DUA) and receive the necessary support to apply.
In addition to supporting individual workers, the EDD offers several disaster-related services to employers affected by emergencies. These services are designed to provide financial relief and support business continuity during challenging times.
Employers directly impacted by a disaster can request up to a two-month extension to file their state payroll reports and deposit payroll taxes without penalty or interest.
The EDD collaborates with Local Assistance Centers and Disaster Recovery Centers established by the California Governor’s Office of Emergency Services (Cal OES) or federal authorities to provide comprehensive support to affected businesses.
Employers can also access information about Disability Insurance (DI) and Paid Family Leave (PFL) benefits for their eligible workers, ensuring that employees who are unable to work due to disaster-related reasons receive the necessary financial support.
The Dollars and Cents of Separation and Divorce: Understanding Post-Separation Support and Alimony in North Carolina
Before we dive into ways to prepare for your post-separation support and alimony case, it’s important to understand what these terms mean and your general eligibility for spousal support.
There are two types of spousal support in North Carolina:
Post‑separation support (PSS) is temporary financial support paid after separation and while an alimony claim is pending. If the parties are unable to agree on an amount of PSS or the supporting spouse refuses to provide financial support to the spouse in need, a spouse who needs financial support from the other spouse must request PSS from the Court. Typically, PSS continues until the parties reach an agreed upon resolution of the alimony claim or the Court rules on the spouse’s alimony claim. If the parties are unable to agree on an appropriate PSS award (typically a fixed amount paid monthly), the Court may award PSS based solely on the parties’ respective financial affidavits, discussed in more below, or the Court may conduct a hearing (review financial documents and take testimony from witnesses) before making a decision on PSS.
Alimony is financial support that continues for a period of months or years into the future. If the parties are unable to reach an agreement regarding an alimony claim, the Court will consider relevant testimony and other evidence in the context of an alimony hearing. If the North Carolina court is asked to make a decision on equitable distribution (i.e., property division) and alimony, it is not uncommon for the Court to first rule on equitable distribution issues and then make a decision on the alimony claim.
Who is eligible for Post-Separation Support and Alimony in North Carolina?
To be eligible for PSS and/or alimony, the spouse seeking PSS or alimony must show that they are a “dependent spouse” and that the other spouse is a “supporting spouse.”
A “dependent spouse” is a spouse who is currently unable to financially meet his or her own needs without the support of the other spouse or will be unable to maintain his or her accustomed standard of living, established prior to the date of separation, without financial contribution from the other spouse.
A “supporting spouse” is a spouse from whom a dependent spouse was relying upon to meet their needs during the marriage or is in need of support to currently meet their needs.
How will marital misconduct impact spousal support?
We cannot discuss your eligibility for spousal support without mentioning “illicit sexual behavior.” Committing “illicit sexual behavior” with a third party during the marriage and before the date of separation will have significant implications on your alimony case. On the other hand, for post-separation support, a court is able to use its discretion to determine whether to award PSS. Illicit sexual behavior includes almost every sexual act you can think of.
If a dependent spouse has committed acts of “illicit sexual behavior” during the marriage and prior to the date of separation, and the supporting spouse has not, then the dependent spouse is completely barred from receiving alimony.
If the supporting spouse has committed illicit sexual behavior, but the dependent spouse has not, then the court must require the supporting spouse to pay some amount of alimony.
If both spouses have committed illicit sexual behavior, then the Court can award alimony at its discretion.
There are other acts of marital misconduct, as that term is defined in N.C. Gen. Stat. 50-16.1A that can have an impact on your spousal support case, but none have the same mandatory implications as illicit sexual behavior.
With this basic understanding of PSS and alimony, let’s review several steps you can take to prepare for your post-separation support and alimony case.
Set reasonable expectations.
The amount and duration of PSS and alimony awarded in a case depends on various factors. The main factors are (1) the standard of living enjoyed by the parties on the date of separation, and (2) the length of the marriage.
We look at the lifestyle the parties enjoyed during the marriage – the neighborhoods they lived in, the vacations they took, savings and investment habits, etc. While the court will look to your standard of living established prior to the date of separation to determine an appropriate amount of spousal support, the Court must still find that the supporting spouse has the ability to pay the amount of spousal support requested by the dependent spouse. Generally, after the date of separation, a supporting spouse still earns the same amount of money as he or she did during the marriage, but you are now living in two separate households and with two separate sets of expenses.
The concept of supporting two households on the same income presents a unique dilemma for the litigants and the court. Except in cases involving very high-income spouses, it is impossible for a court to maintain, after separation, an identical standard of living to what was enjoyed during the marriage. The money must exist to provide for both households.
A supporting spouse must also set reasonable expectations, including how much a dependent spouse is actually able to earn immediately after separation and in the coming years. For example, a stay-at-home parent may need some time and job training to re-enter the workforce. In some jurisdictions, a court may find that a spouse who has been out of the workforce for twenty years doesn’t have the ability to earn income sufficient to support themselves, depending on their age.
We also look to the length of the marriage to assist us in determining an appropriate duration for the payment of spousal support. Generally speaking, the longer the marriage, the longer the period of alimony payments. Short-term marriages (lasting under five years) usually see the shortest duration of alimony payments.
Consider your court.
Setting reasonable expectations also means considering typical support orders rendered in your geographic region.
While the law remains the same throughout North Carolina, ultimately, the amount of spousal support awarded by a court, if any, is discretionary and varies between judges and districts.
Unlike for child support, there is no calculator or formula used to determine your potential post-separation support or alimony award, thus consultation with an experienced family law attorney is helpful in determining the amount of support that may be awarded.
Prepare a financial affidavit.
Regardless of whether you are a dependent or supporting spouse, your attorney will likely ask you to fill out a financial affidavit detailing your income and expenses (including expenses for minor children). A financial affidavit is basically a budget that will be used to determine your need for PSS and alimony or your ability to pay.
It is important to be as accurate as possible and capture all of your expenses by reviewing past bills, bank statements, credit card statements, and cash spending. Expenses such as utilities and food should be averaged over a period of time, usually one to three years, depending on the circumstances of your case.
Your financial affidavit should also include savings and investment contributions if you customarily contributed to these accounts during the marriage. The financial affidavit is not a wish list, but it should include all of your current and customary expenses.
It is equally important to notify your attorney of any expenses that you may incur in the future but that are currently covered by your spouse or a third party. Examples may include the imminent need for a vehicle, your own health insurance policy, or a place to live if you are temporarily living with a relative (including all expenses associated with maintaining separate housing). Financial affidavits vary by county and judicial district.
Seek employment, job training, or education.
Depending on your age, education, employment history throughout your life and during the marriage, and the ages of any minor children, a court may determine that you have the ability to be gainfully employed, and the court may expect you to seek employment.
For those who are able-bodied, working age, and capable of being employed, start inquiring into any necessary job training or educational programs that may help you secure gainful employment, including the cost of these programs, and discuss these options with your attorney.
With some exceptions, it is usually advisable to secure some sort of employment as soon as possible, as a court may impute income to a spouse if the court finds that a spouse is earning below their earning capacity in bad faith or in disregard of their duty to self-support. “Imputing income” is the court’s process of assigning income to you based on your earning potential, regardless of the amount you are actually earning. This is determined on a case-by-case basis and should be discussed with your attorney prior to taking action.
Maintain current earnings if employed.
When a supporting or dependent spouse attempts to change careers, deliberately fails to apply himself or herself to his or her business or employment, or intentionally depresses his or her income in an effort to avoid paying spousal support, a court may impute income to that spouse.
Any career change or employment change should be discussed with your attorney in advance. You should also be prepared to defend any decrease in your income occurring near or subsequent to the date of separation. This isn’t to say that you cannot change jobs or start a business during a divorce, but it is advisable to discuss life changes that will result in a change in your income with your attorney.
Seek support when necessary.
Many of our clients come to us with little experience managing finances and investments. In some cases, you may want to consider hiring a financial planner or a Certified Divorce Financial Analyst (CDFA) to help you with short and long-term financial planning, to help you with investment strategies, and tax consequences and tailor a financial plan to help you maintain and preserve your portion of the marital estate that will be distributed to you in the divorce process.
Corporate Transparency Act Reporting Obligations Effective Again With March 21, 2025, Deadline for Most Reporting Companies
On February 17, 2025, the US District Court for the Eastern District of Texas (EDTX) in Smith, et. al. v. US Department of the Treasury, et. al., entered an order staying the nationwide injunction on enforcement of the Corporate Transparency Act (CTA). With this ruling, the beneficial ownership information (BOI) reporting requirements promulgated under the CTA are back in effect.
In light of this court action, the Financial Crimes Enforcement Network (FinCEN) announced that, for most reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025. In its announcement, FinCEN noted that this new filing deadline may be subject to further modification, however, for now, existing reporting companies should begin preparations to file their required BOI reports by March 21, 2025.
Planning for Compliance
FinCEN’s new deadline of March 21, 2025 applies to all non-exempt reporting companies formed on or before February 19, 2025. Going forward, non-exempt reporting companies formed after February 19, 2025 will have 30 days from their formation to file their BOI reports.
Reporting companies should continue to closely follow developments related to the CTA. Specifically, note that Congress is considering a bill to extend the reporting deadline to January 1, 2026, but only for reporting companies in existence before January 1, 2024. Furthermore, in its announcement, FinCEN gave itself leeway to “assess its options to further modify deadlines.”
Recent Events in CTA Litigation
The EDTX’s February 17 order was based on the US Supreme Court’s order in McHenry v. Texas Top Cop Shop, Inc. issued January 23, 2025, which stayed a similar nationwide injunction issued in a different proceeding pending in the EDTX.
Below is a recap of CTA litigation developments leading up to this February 17 order:
On December 3, 2024, in Texas Top Cop Shop, Inc., et al. v. Garland, et al., a judge in the EDTX issued a nationwide preliminary injunction halting enforcement of the CTA and its implementing regulations.
On December 23, 2024, a motions panel of the US Court of Appeals for the Fifth Circuit granted an emergency motion for a temporary stay of that preliminary injunction, effectively reinstating the original filing deadlines for reporting companies under the CTA.
On December 26, 2024, a merits panel of the Fifth Circuit vacated the motions-panel stay that was issued on December 23, resulting in another pause on the CTA’s BOI reporting requirements.
On January 7, 2025, a different judge in the EDTX issued an order in the Smith v. U.S. Department of the Treasury case, imposing a separate nationwide injunction on CTA’s enforcement.
Following the Fifth Circuit’s December 26 order pausing the CTA’s BOI reporting requirements, the US Department of Justice (DOJ) filed with the Supreme Court seeking a stay of the nationwide injunction against the enforcement of the CTA issued in the Texas Top Cop Shop case, which the Supreme Court granted on January 23, 2025. However, the Supreme Court did not address the separate nationwide injunction that was issued in Smith, which meant that, until now, the enforcement of the CTA remained on hold.
On February 5, 2025, the US Department of Justice (DOJ) (on behalf of the US Treasury Department) appealed the EDTX’s January 7 order in the Smith, and concurrently filed a motion to stay the injunction pending the outcome of the appeal to the Fifth Circuit in light of the stay ordered by the Supreme Court on January 23, 2025.
As noted above, on February 17, 2025, the EDTX in Smith stayed its own January 7, 2025 order, pending appeal. Given this decision, FinCEN’s regulations implementing the BOI reporting requirements of the CTA are no longer stayed.
Maryland DOL Seeks to Delay Paid Family and Medical Leave Insurance Program
Enacted in 2022, the Maryland Family and Medical Leave Insurance (FAMLI) program covers all employers with Maryland employees and will eventually provide most of those employees with up to twelve weeks of paid family and medical leave, with the possibility of an additional twelve weeks of paid parental leave.
Following several prior delays, employee contributions were scheduled to begin on July 1, 2025, with benefits commencing one year later on July 1, 2026. However, the Maryland Department of Labor (Maryland DOL) is now proposing a delay until January 1, 2027, for deductions and January 1, 2028, for benefits, based on the need to focus on supporting Maryland businesses and their employees in light of the significant uncertainty arising from President Donald Trump’s many employment-related executive orders.
Quick Hits
Due to concerns about readiness and cost, the Maryland DOL is proposing to delay the start of employee contributions to the Maryland FAMLI program to January 1, 2027, and the commencement of benefits to January 1, 2028.
The FAMLI program, enacted in 2022, aims to provide up to twelve weeks of paid family and medical leave for most Maryland employees, with the potential for an additional twelve weeks of paid parental leave.
A state senator has introduced a bill to delay the FAMLI program’s effective dates, highlighting the business community’s concerns over the lack of final regulations and the program’s significant economic impact.
Where Are the Regulations Now?
The Maryland DOL’s FAMLI Division was directed to issue regulations to implement the FAMLI program. As we previously noted in our multipart series on the FAMLI program, the Maryland DOL has engaged in an unusually extended and inclusive rulemaking process, likely impacted by amendments and delays to the program that were enacted in each of the 2023 and 2024 Maryland General Assembly sessions. At this point, the Maryland DOL has issued two sets of proposed regulations, which we covered in Part II (General Provisions, Contributions, and Equivalent Private Insurance Plans) and Part III (Claims and Dispute Resolution) of our series. But other sections of the proposed regulations, including Enforcement, have yet to be issued.
Concerns About Implementation and a Proposed Delay
There have been significant concerns about the Maryland DOL’s readiness to implement this complex program, as well as its overall cost (approximately $1.6 billion) in the current economic climate. In fact, Maryland state Senator Stephen Hershey has proposed a bill, Senate Bill (SB) 355, that seeks to delay the effective contribution and benefits dates by two years. In a hearing on this bill before the Senate Finance Committee on February 5, 2025, Fiona W. Ong (the author of this article) testified about the business community’s concern that final regulations—and even entire sections of the proposed regulations—have yet to be issued only months before the first deadlines. For example, employers are supposed to begin filing a declaration of intent (DOI) to have an equivalent private insurance plan (EPIP) starting on May 1, 2025. But at this point, employers do not have final rules about creating a self-insured plan, and insurance companies do not have final rules on creating commercial plans (which would also need to be compliant with insurance laws and regulations).
The Maryland DOL acknowledges that legislative action is required to authorize the delay and, in its press release, states that it is working closely with leadership in the General Assembly to extend the implementation dates. It is unclear whether the General Assembly will use Senator Hershey’s bill or issue a new bill. But given the Maryland DOL’s public statements, it is almost certain that the delay will take place.
This is obviously a significant development for employers with Maryland employees, many of whom are concerned about the cost and impact of this program in which the state, and not the employer, grants the paid leave benefit.
Navigating New DOL Opinion Letters: Implications for Tip Pooling and Coordinating Paid Family Leave Benefits With FMLA Leave
On January 14, the US Department of Labor’s (DOL) Wage and Hour Division (WHD) published two opinion letters, FLSA2025-1, which addresses tip pooling under the Fair Labor Standards Act (FLSA), and FMLA2025-1-A, which provides guidance on how employers may coordinate paid family leave benefits with leave taken under the Family Medical Leave Act (FMLA).
FLSA2025-1: The Tip Pooling Letter
In restaurants and other service-based establishments, customer tips are often collected and pooled for employees to share. It is well understood that employees working in a management capacity cannot share in tip pools under the FLSA. FLSA2025-1 focuses on whether managers and supervisors can lawfully share in tips when they work in a non-management capacity. The following two scenarios were discussed in the letter:
Can a Team Lead or Assistant Team Lead who is a manager for purposes of the FLSA, but who clocks in and works a shift in a non-management capacity, participate in a tip pool for that particular shift?
Can a Shift Lead, who is not a manager for purposes of the FLSA, but who is the highest-ranking employee during a particular shift, participate in a tip pool during that shift?
Regarding Team Leads and Assistant Team Leads, the WHD determined that, if the manager in question qualifies as an exempt executive employee and, therefore, is primarily engaged in exempt-level duties, then they may not receive any tips from a tip pool. To permit an individual whose primary duty is management (based on their job as a whole) to receive tips from a tip pool simply because the employee happened to engage in non-management duties on a particular shift would circumvent the FLSA’s general prohibition against allowing managers to draw from employee tip pools.
However, the WHD found that if the Shift Leads in question do not qualify as exempt executive employees, then they may share in a tip pool, even on those shifts when they are the most senior employee working at the establishment. Unlike an exempt Team Lead or Assistant Team Lead, their primary duty is not management-level work. As such, allowing a non-exempt Shift Lead to share in a tip pool would not circumvent the goals of the FLSA.
The key takeaway from FLSA2025-1 is that employers should remain extremely cautious when it comes to allowing management-level employees to share in tip pools. If those employees qualify as exempt for overtime purposes, they should not be permitted to share tips even when they perform non-exempt tasks.
FMLA2025-1-A: Coordination of FMLA and Paid Family Leave Benefits
The second opinion letter, FMLA2025-1-A, focuses on the coordination of benefits employees receive from paid family leave programs with protected leaves of absence under the FMLA. A growing number of state and local governments have implemented paid family leave benefits where employees receive paid time off (PTO) for reasons such as personal medical issues, family care, and parental bonding. These plans vary widely in their scope and the duration of benefits they provide.
Under the FMLA, if an employee’s protected leave is unpaid, the employer may require the employee to use any accrued vacation, PTO, or sick time the employee may have. However, the rule has long been that, if the employee’s protected FMLA leave is paid through workers compensation or disability benefits, then the employer may not require the employee to use any of their accrued vacation, PTO, or sick time.
In FMLA2025-1-A, the WHD decided that employers are likewise prohibited from requiring employees to use accrued vacation, PTO, and sick time if they are on a protected FMLA leave while receiving compensation from a paid family leave program. For example, if the employee is on a 12-week FMLA leave and the first four weeks are paid through a state-law family leave program, the employer cannot require the employee to use their vacation/PTO/sick hours (although the employee and the employer may voluntarily agree to such an arrangement). However, for the last eight weeks of the FMLA leave, which are unpaid through the state benefits program, the employer can require the employee to use their accrued time off hours.
With the ever-expanding number of both paid and unpaid employee leave programs under state and local laws, it is important to stay abreast of how those rights interact with the rights under the FMLA. FMLA2025-1-A highlights when employers may lawfully require employees to use their accrued vacation, PTO, and sick hours, an issue that regularly causes confusion for many human resources and payroll professionals. It is thus an appreciated piece of guidance.
Aging Answers: Solo Senior Planning [Podcast]
Certified Elder Law Attorney Shana Siegel breaks down key steps for solo senior planning, from long-term care to protecting your independence. Joining her is Elder Care Strategist Adrian Allotey, founder of You Are Not Alone Elder Care, LLC, who shares real-life stories and practical advice.
FTC Announces Updates to COPPA Rule
On January 16, 2025, the Federal Trade Commission (FTC) issued a press release stating, “The updated [Children’s Online Privacy Protection Act (COPPA)] rule strengthens key protections for kids’ privacy online. By requiring parents to opt [into] targeted advertising practices, this final rule prohibits platforms and service providers from sharing and monetizing children’s data without active permission. The FTC is using all its tools to keep kids safe online.”
These changes are the first major updates to the rule since its inception in 2013. COPPA protects the online privacy of children under the age of 13. It imposes specific requirements on operators of websites or online services directed to children or that knowingly collect personal information from children. COPPA requires operators to obtain verifiable parental consent before collecting, using, or disclosing personal information from children under 13 and to provide clear and comprehensive notice of their information practices regarding children, including a link to their children’s privacy policy on their website or online service. The rule also requires operators to take reasonable steps to disclose children’s personal information only to third parties capable of maintaining its confidentiality, security, and integrity. COPPA also mandates that operators retain collected children’s personal information for only as long as necessary to fulfill the purpose of its collection and delete such information using reasonable measures to protect against unauthorized access or use.
COPPA also includes provisions related to the FTC’s ability to approve self-regulatory guidelines (known as Safe Harbor Programs), which allow operators to use alternative methods for obtaining parental consent, provided they meet the requirements of COPPA.
The amendments to the COPPA rule include:
An Expanded Definition of Personal Information: Now includes biometric and government-issued identifiers.
A New Definition of Mixed Audience Website or Online Service: These are websites or services directed to children, but do not target them as the primary audience and do not collect personal information from any visitor before determining if the visitor is a child.
Required Parental Consent for Data Disclosure: Operators must now obtain separate verifiable parental consent for disclosing a child’s personal information to third parties, such as for targeted advertising purposes.
New Methods for Verifiable Parental Consent: Expands the permissible methods, including knowledge-based authentications, submitting government-issued photographic identification, and using text messages with additional safeguards.
A Required Information Security Program: Operators are required to establish and maintain a written information security program appropriate to the sensitivity of the personal information collected from children. This program must be regularly tested and monitored.
Strengthened Data Retention Limitations: Operators must retain children’s personal information for only as long as necessary to fulfill a specific purpose and must maintain a publicly available written data retention policy.
More Accountability for Safe Harbor Programs: Comprehensive reviews of the operator’s privacy and security policies now required.
The FTC did not adopt proposed amendments to the rule related to limitations on using push notifications to children without parental consent or requirements for educational technology in schools. The changes to the rule will take effect 60 days after publication in the Federal Register (which has not yet occurred or been scheduled). Organizations subject to the final rule have one year to comply with the changes; however, compliance is required earlier in relation to COPPA Safe Harbor programs. To review the amendments, click here.
Video Game Maker to Pay $20 Million to Settle FTC COPPA Enforcement Action
Singapore-based Chinese video game developer Cognosphere, dba HoYoverse, known for “Genshin Impact,” a role-playing game involving collectible characters with unique fighting skills, has agreed to pay $20 million to settle Federal Trade Commission (FTC) allegations that it violated the Children’s Online Privacy Protection Act (COPPA) and deceived players about the cost of winning certain prizes.
Introduced in the U.S. in 2020, Genshin Impact was one of the first Chinese video games to go viral in this country.
The FTC alleged that the company collected children’s personal information without parental consent as required by COPPA. The FTC’s complaint stated that the company “shares device-related persistent identifier information and records of the player’s engagement, progress, and spending within the game with third-party analytics and advertising providers.”
Additionally, the game’s players pay real money for a virtual currency for the chance to win virtual prizes; however, the opportunities to win prizes are confusing and complicated and involve multiple types of in-game virtual currency with different exchange rates. The purchasing process obscures the reality that consumers must spend large amounts of real money to obtain 5-star heroes. As a result of the settlement, the company will introduce new age-gate and parental consent protections for children and young teens and increase its in-game disclosures related to its virtual currency and rewards for players in the U.S. In addition, it will also allow users to directly purchase content, using real money, from the game’s loot boxes and will cease misrepresenting the odds of loot boxes. The company must also restrict children under the age of 16 from purchasing loot boxes without parental consent.
A New Protected Category in Illinois: Family Responsibility
Effective January 1, 2025, Illinois protects from discrimination employees who provide personal care to family members. In so doing, Illinois joins several other states that provide a cause of action to employees who believe they face discrimination on the basis of “family responsibilities.”
The Law
House Bill 2161 amends Illinois’ existing Human Rights Act, the state’s version of Title VII of the Civil Rights Act of 1964. Prior to House Bill 2161, the Illinois Human Rights Act (“IHRA”) prohibited discrimination and harassment on the basis of actual or perceived race, color, religion, national origin, ancestry, age, sex, marital status, order of protection status, disability, military status, sexual orientation, pregnancy, unfavorable discharge from military service, citizenship status, or work authorization status. Now, effective in 2025, “family responsibilities” has been added to the list of protected categories.
The law defines family responsibilities as “an employee’s actual or perceived provision of personal care to a family member.” To define “family member” and “personal care,” the law references the existing definitions in the Illinois Employee Sick Leave Act. Under that law, covered family members are an employee’s child, stepchild, spouse, domestic partner, sibling, parent, mother-in-law, father-in-law, grandchild, grandparent, or stepparent. And “personal care” includes, but is not limited to, taking a family member to doctor appointments, tending to a family member’s medical, hygiene, nutritional, or safety needs, and providing emotional support to a family member with a serious health condition who is receiving inpatient or home care.
In addition to the discrimination and harassment protection, employees with family responsibilities, as defined under the law, also have protection from retaliation if they have made a report of discrimination on the basis of family responsibilities.
To guard against potential overbreadth of the law, Illinois added a provision that states employers are not obligated to “make accommodations or modifications to reasonable workplace rules for an employee based on family responsibilities” such as those related to leave, scheduling, productivity, attendance, absenteeism, timeliness, performance, and benefits. This is true, however, so long as these workplace rules are “applied in accordance with the [IHRA].” It is difficult to discern exactly how this limitation will interact with claims for familial responsibility discrimination, but this provision does make clear that the new law does not independently obligate employers to provide accommodations for familial responsibilities akin to, for example, the interactive process for disability discrimination claims, so long as the existing workplace rules are reasonable and enforced appropriately.
Steps Employers Should Take
Illinois employers should take note of this new protection for employees with family responsibilities and consider whether their actions or policies may be construed to discriminate on the basis of familial responsibilities – whether those responsibilities are actual or perceived. The law should also remind employers nationwide that the federal American with Disabilities Act provides protection to employees on the basis of their “association” with a disabled individual, such as a close family member or friend. Moreover, other states have laws with caregiver protections like Illinois – including Alaska, Delaware, Minnesota, and New York.
Employers should stay abreast of continued developments at the state and local level regarding familial and caregiver discrimination.