Tax – Page 17 – Law Ivy

Missing Participants – New State Unclaimed Property Fund Option for Small Balances

Takeaways

On January 14, 2025, the DOL issued Field Assistance Bulletin (FAB) 2025-01, providing sponsors and administrators of ongoing defined contribution plans with a new option for missing participant balances of $1,000 or less: transfer to the state unclaimed property fund associated with the participant’s last known address.

President Trump Resets US Tariffs on Imports of Steel and Aluminum from All Countries

On 10 February 2025, President Trump announced that he was increasing tariffs on US imports of aluminum from 10% to 25% and ending various exemptions and exclusions to the US tariffs of 25% on imports of steel. The tariffs were first imposed in President Trump’s first term under the authority of Section 232 of the Trade Expansion Act of 1962, which permits the President to impose import restrictions (tariffs and/or quotas) based on an investigation and affirmative determination by the US Commerce Department that certain imports threaten to impair US national security. Section 232 tariffs on aluminum and steel were originally imposed by President Trump in 2018 and continued under President Biden.
This latest tariff action revokes agreements with Argentina, Australia, Brazil, Canada, the European Union, Japan, Mexico, South Korea, Ukraine, and the UK that had suspended tariffs on certain aluminum and steel products imported from those countries. It also terminates the company and product-specific exclusions that had been granted by the US Commerce Department since 2018. Accordingly, unless further changes are implemented, effective 12 March 12 2025 at 12:01 am Eastern Time all steel and aluminum products identified in the President’s proclamations will be subject to 25% tariffs. Further, such tariffs will be extended to certain “derivative” steel and aluminum products (i.e., products made by further manufacturing basic steel and aluminum shapes) not previously covered by Section 232 tariffs.
President Trump’s decision to reset and increase tariffs is based on finding that the original Section 232 tariffs were not being effective in addressing findings that the global steel industry suffered from massive overcapacity. According to the original investigation and the latest findings, this global overcapacity is primarily due to China’s policies to promote its aluminum and steel industries and the spillover effects this build-out was continuing to have on third country markets, which, in turn, were channeling their own excess aluminum and steel to the US market.
Notably, in his press conference announcing the tariffs, President Trump indicated that countries may have room to negotiate potential settlements or modifications of the tariffs – especially if they are able to achieve relatively balanced trade with the United States or otherwise demonstrate economic benefits to the United States from trade and investment. When asked about the return of tariffs to imports of steel and aluminum from Australia, the President noted that the US has enjoyed a moderate trade surplus with Australia primarily due to that country’s purchases of aircraft from the United States and that he was in discussions with Australia’s prime minister about the tariffs and other issues.
The President also signaled that the tariffs may be extended to additional downstream products made from aluminum or steel. Specifically, the President’s action calls on the US Commerce Department to establish a process for interested parties to request that additional derivative aluminum or steel products be subject to Section 232 tariffs. This process must be in place by 12 May 2025.
The impending reset of aluminum and steel tariffs underscores the importance for companies and investors in sectors that produce or utilize these products to assess the impact on their own supply chains, pricing, business plans, and contractual and customer relationships. Companies and investors should also consider options under US law and contractual agreements to mitigate the potential impacts of the tariffs.

Not Cool, Man: Senate Proposal to Expand 280E Taxes on Cannabis Businesses Even if Rescheduled

Anyone who thought that the momentum towards federal liberalization of marijuana would be a straight line found themselves with a cold dash of water to the face. Late last week Republican senators filed a bill, entitled the “No Deductions for Marijuana Businesses Act,” which would preserve a punitive federal tax policy that bars cannabis companies from taking ordinary business deductions, regardless of whether marijuana’s status as a Schedule I substance is ever changed.
Courtesy of Kyle Jaeger at Marijuana Moment:
Two GOP senators have introduced a bill that would continue to block marijuana businesses from taking federal tax deductions under Internal Revenue Service (IRS) code 280E — even if it’s ultimately rescheduled.
Sens. James Lankford (R-OK) and Pete Ricketts (R-NE) filed the “No Deductions for Marijuana Businesses Act” on Thursday to maintain the tax barrier for the industry, which has been eagerly following the ongoing administrative process of moving cannabis from Schedule I to Schedule III of the Controlled Substances Act (CSA) in large part because it would address their 280E challenges under current law.
While rescheduling isn’t a guarantee, and Drug Enforcement Administration (DEA) hearings on the proposal have been delayed, the senators are aiming to preemptively take the wind out of the industry’s sails.
The bill would amend the IRS code to say that, in addition to all Schedule I and Schedule II drugs, businesses that work with marijuana specifically would be barred from taking tax deductions that are available to other industries.

If enacted into law, this could be a fatal blow to a number of cannabis businesses that have ordered their business models around no longer having to pay 280E taxes following the presumptive rescheduling of marijuana.
Let’s be clear, I don’t think this legislation will become law. But friends should be honest with each other. There will not be some panacea that absolves marijuana operators of their tax burdens without a tremendous fight. And operators should, in my opinion, pay their taxes when due. The failure to do so could cause them tremendous pain down the road.

Calling All Apprentices: National Guidelines for Apprenticeship Standards Approved by DOL for Renewable Energy Projects

Nearly two and a half years after the Inflation Reduction Act of 2022 (IRA) became law, developers and contractors continue to adjust to the new normal for renewable energy projects: compliance with prevailing wage and apprenticeship requirements. As most renewable industry participants are aware, under the IRA, compliance with these requirements is necessary to realize the full value of federal investment tax credits, production tax credits, and commercial buildings’ energy efficiency tax deductions.
On January 13, 2025, the U.S. Department of Labor certified National Guidelines for Apprenticeship Standards, developed jointly by the Interstate Renewable Energy Council (IREC) and the Solar Energy Industries Association (SEIA). The first set of guidelines are for the occupation of construction craft laborer, but guidelines for other occupations commonly utilized by solar companies are under development.
The new guidelines establish a framework for developing registered apprenticeship programs that will have common standards to ensure that apprentices across the country receive a baseline of similar education and training, while also providing space for any specific training required by a geographic area. They are presented as “a blueprint for developing an apprenticeship program” and focus on the following eight components:

The Apprenticeship Approach – utilizes a time-based approach (as opposed to competency-based or hybrid) focusing on the apprentice’s skill acquisition through completion of on-the-job learning and related instruction tasks and corresponding hour requirements.
Term of Apprenticeship – establishes the duration — number of hours of on-the-job learning (2000 hours annually; 4000 hours total) and related instruction (144 hours annually; 300 hours total) — that must be completed by an apprentice to complete the program.
Ratio of Apprentices to Journey workers – uses a 1:1 apprentice-to-journey worker ratio (this may vary by project location and state law).
Apprentice Wage Schedule – provides a general template for wage increases at defined intervals as apprentices progress through the program and gain knowledge/skills (to be filled in by a registered apprenticeship program sponsor).
Probationary Period – notes that programs should require a probationary period that should not exceed the lesser of one year or 25% of the apprenticeship term (term to be filled in by a registered apprenticeship program sponsor).
Selection Procedures – notes that program sponsors have flexibility to determine selection procedures so long as they are consistent with general nondiscrimination obligations and federal Uniform Guidelines on Employee Selection Procedures (i.e., no discrimination based on race, color, religion, national origin, sex, sexual orientation, genetic information, disability or age, and compliance with equal opportunity requirements of Title 29 of the CFR, part 30).
Work Process Schedule for On-the-Job Learning – outlines a work process schedule for on-the-job learning tasks to be completed by apprentices to demonstrate proficiency that must be satisfied before a completion certificate can be awarded. For construction craft laborers, supervised work experience is devoted to safety and work habits (400 hours), use and care of tools/equipment (600 hours), construction activities (2,000 hours), preparation and quality assurance (600 hours), and code/drawing review and utilization (400 hours).
Related Instruction – describes coursework on theoretical and technical subjects to be completed by apprentices (minimum of 175 hours of core skill training and 125 hours of elective coursework). Solar-specific instruction in the elective section includes 20 hours for introduction to solar construction, 10 hours for solar site assessment study, 40 hours on solar design and installation, eight hours on utility vegetation management, four hours on erosion control, 20 hours on renewable energy systems, and eight hours on battery basics. It provides for other educational methods, including classroom/online/self-study courses for apprentices (each program must include at least 144 hours of related instruction annually).

Overall, the National Guidelines for Apprenticeship Standards provide additional, practical guidance and support for contractors committed to creating high-quality apprenticeship programs compliant with IRA requirements.

SECURE Act 2.0 Mandatory Automatic Enrollment Requirements for New Retirement Plans Guidance Released

One of the hallmarks of the SECURE 2.0 Act of 2022 (SECURE Act 2.0) legislation was to increase participation in retirement plans. On January 10, 2025, the Treasury Department and the IRS came one step closer when they announced the issuance of proposed regulations requiring automatic enrollment for new Code Section 401(k) and 403(b) retirement plans (Proposed Regulations). As background, the SECURE Act 2.0 added Code Section 414A, which provides that a retirement plan will not be qualified unless it satisfies certain automatic enrollment requirements under Code Section 414(w). These requirements:

Require automatic enrollment of employees with elective deferral contributions of at least 3% and no more than 10% in the first year of participation (with 1% increases between 10-15%)
Permit participants to withdraw their automatic elective deferrals within 90 days of their first elective deferral contributions being made
If no investment election is made, permit the automatic elective deferrals to be invested in qualified default investment alternatives (QDIAs)

The legislation, as originally enacted, provides that the automatic enrollment requirements do not apply to 1) retirement plans established before December 29, 2022; 2) retirement plans that have been in existence for less than three years; 3) governmental plans; 4) SIMPLE 401(k) plans; and 5) retirement plans with fewer than 10 employees. The Proposed Regulations provide additional regulatory guidance and clarification on issues such as eligibility for the automatic enrollment feature, contribution requirements, permissive withdrawals and investment requirements. The Proposed Regulations also incorporate previous IRS automatic enrollment guidance issued last year (provided in Notice 2024-2) with some modifications.
Highlights From the Proposed Regulations

Eligibility – Provides that an employer cannot exclude groups of employees, and the automatic enrollment requirements must apply to all employees eligible to elect to participate in the plan. However, an employer can exclude employees who already have an election on file (whether an election to contribute or to opt out) on the date the plan is required to comply with the automatic enrollment requirements.
Contribution limits – Clarifies how an employee’s “initial period” is determined for purposes of initial contributions. The initial period begins on the date the employee is first eligible to participate in the plan and ends on the last day of the following plan year. This is important for the application of the automatic escalation rule that requires the plan to automatically increase an auto-enrolled participant’s contribution percentage by one percentage point (up to 10%) each plan year following the employee’s initial period.
Plan mergers and spinoff – Generally, incorporates guidance provided in Notice 2024-2 regarding the application of the automatic enrollment requirement to plans that are the result of mergers but expands the guidance to address mergers involving multiple employer plans; incorporates the guidance in Notice 2024-2 regarding spinoffs. Importantly, the merger of two plans established prior to December 29, 2022, into one plan will not create a new plan subject to the automatic enrollment requirements.
New and small business – Provides that the automatic enrollment requirements should start on the first day of the first plan year that begins after the employer has been in existence for three years. Further, the 10-employee requirement is determined by the Consolidated Omnibus Budget Reconciliation Act (COBRA) regulations under Q&A-5, Treasury Regulation Section 54,4980B-2.
Multiple employer plans – Clarifies that if an employer adopts a multiple employer plan, the automatic enrollment requirements apply to the employer as if it adopted a single employer plan (i.e., they apply if adopted after December 29, 2022) regardless of when the multiple employer plan was adopted. This would not affect the employers who adopted the multiple employer plan on or before December 29, 2022.

The Proposed Regulations will not take effect until the first plan year beginning six months after the issuance of final regulations. However, the change in presidential administration (and related changes within the administrative agencies) casts uncertainty on whether these regulations will be finalized without further modifications or withdrawn all together. A plan sponsor should proceed in good faith to apply these rules until they are final.

2025 Compliance Guide for Employers in Mexico

Several Mexican employment-related laws will be implemented or amended in 2025, including the approval of the Chair Law (Ley Silla), the recognition of app-based couriers as employees and its derived obligations, the increase in the minimum wage, and the unit of measure used to calculate monetary amounts owed to the government in case of noncompliance.
Quick Hits

The minimum wage for 2025 is MXN $419.88 for the Free Zone of the Northern Border and MXN $278.80 for the rest of the country.
The unit of measure for 2025 is MXN $113.14 daily, MXN $3,439.46 monthly, and MXN $41,273.52 annually.
The Chair Law (Ley Silla) and legislation classifying app-based couriers as employees introduce new obligations for employers and will become enforceable in June 2025.

Obligations to Consider in 2025 for Compliance
Minimum Wage. On December 4, 2024, the National Commission on Minimum Wages (Comisión Nacional de los Salarios Mínimos or CONASAMI) approved a 12 percent increase to the minimum wage which entered into force on January 1, 2025.
Increase to Mexico’s Unit of Measure. On January 10, 2025, the National Institute of Statistics and Geography published in the Official Gazette of the Federation (Diario Oficial de la Federación) the daily, monthly, and annual updated values for the Unit of Measurement and Update (UMA). The UMA is the basis for calculating fines or other state and federal government duties. The new values will be effective on February 1, 2025, and will be as follows:

Daily = MXN $113.14 (approximately USD $5.65)
Monthly = MXN $3,439.46 (approximately USD $171.97)
Annual = MXN $$41,273.52 (approximately USD $2,063.67)

Risk premium update. Every February, employers must file with Mexico’s Social Security Institute (Instituto Mexicano del Seguro Social (IMSS)) an annual report recording all occupational diseases or work-related disability certificates issued to their employees. The report is used to calculate whether the risk premium should be updated (either by increasing or decreasing it).
IMSS electronic mailbox. The IMSS is giving more relevance to its digital mailbox to notify employers of any matter related to employees, payment of quotas, obligations, fines, etc. Although it is not mandatory to activate this portal, employers may want to have it enabled by February 1, 2025.
Profit-sharing payments (PTU). No later than March 31, 2025, all companies must file their annual tax returns. Employees are entitled to receive a prorated portion of the 10 percent of the employer’s fiscal year taxable income and the deadline to pay the portion is May 31, 2025.
Noncompliance with the requirements for PTU payments and/or formalities could result in fines for employers.
Federal and local elections. On Sunday, June 1, 2025, federal elections to select ministers, magistrates, and federal judges will take place, and the states of Durango and Veracruz will additionally elect different municipal positions. Hence, June 1, 2025, pursuant to the Federal Labor Law, will be a mandatory holiday.
Chair Law. On December 19, 2024, Mexico’s “Ley Silla” (Chair Law) was published in the Official Gazette of the Federation. This bill’s main obligations consist of: (i) having enough seats with a backrest for employees’ use, and (ii) avoiding prohibiting employees from taking seated breaks when the nature of the work allows it.
Employers have a 180-day period, as of the publication date, to comply with all the obligations stated in the legislation. Hence, dispositions will become fully enforceable by June 17, 2025.
Classification of app-based couriers as employees. On December 24, 2024, legislation classifying certain app-based couriers as employees was published in the Official Gazette of the Federation. According to the bill, depending on certain characteristics, couriers can be considered employees, and this recognition can lead to several obligations for applicable employers after a 180-day period from the date of publication. Hence, dispositions will become fully enforceable by June 22, 2025.
María José Bladinieres contributed to this article

Trump Tariffs 2.0: FAQs on How Your Contract Comes into Play [Video]

Video FAQ: Does your contract protect you?
The Trump administration’s tariffs have reshaped global trade—but how do they impact your contracts? From force majeure to price adjustment clauses, understanding these provisions is critical for protecting your business.

The Department of Labor (DOL) Adopts Self-Correction for Common Retirement Plan Fiduciary Breaches

For the first time since the DOL adopted its Voluntary Fiduciary Correction Program (VFC Program) in 2002, retirement plan sponsors will be able to utilize self–correction as an efficient means to correct their most frequent compliance failures – late transmittals of participant retirement plan contributions and retirement plan loan repayments.
The DOL finalized an update to its VFC Program adding the Self-Correction Component (SCC) for these fiduciary failures and, additionally, finalized an amendment to an existing prohibited transaction exemption (PTE) that provides excise tax relief for transactions that have been self-corrected.
The SCC feature and excise tax relief become effective on March 17, 2025.
The VFC Program –Section 409 of the Employee Retirement Income Security Act of 1974, as amended (ERISA), provides that retirement plan fiduciaries who breach the responsibilities, obligations or duties imposed on them may be personally liable for any plan losses resulting from such breach, and may be required to restore any profits to the plan that may have been made through the use of the plan’s assets.
The VFC Program aims to encourage plan sponsors to voluntarily correct breaches of certain fiduciary obligations under ERISA in return for relief from civil enforcement actions and, in some cases, penalties for breaches. To participate, plan sponsors must fully correct errors in accordance with procedures specified in the VFC Program and file an application with the DOL. The application submission requires a description of the breach and the corrective action taken, documentary proof of the corrective action and other specified information.
The VFC Program application process can be quite onerous and, in some cases, is akin to a DOL audit. As a result, some plan sponsors have been reluctant to use it and, instead, have corrected fiduciary breaches on their own.
Self-Correction Component –The new SCC option permits plan sponsors to correct eligible transactions without filing a VFC Program application. Moreover, when a plan sponsor utilizes the SCC, the updated VFC Program waives the existing requirement that plan sponsors notify plan participants and other interested persons of prohibited transactions, as well as the steps taken to correct them.
The SCC option, however, does require the self-corrector to electronically submit a SCC Notice using the new online DOL VFC Program web tool that includes the following information:

Self-corrector’s name and address;
Plan name;
Plan sponsor’s Employment Identification Number;
Principal amount;
Amount of lost earnings and the date paid to the plan;
Loss date; and
Number of participants affected by the correction.

After filing this notice, the plan sponsor will receive an email acknowledgment from DOL, but will not receive the “no action” letter that typically is received upon DOL’s approval of VFC Program application. The plan administrator is required to retain a “penalties of perjury” certification, and other documentation related to the correction. The “penalty of perjury” certificate must state that the plan is not under investigation and acknowledge receipt and review of the SCC notice. A plan fiduciary is required to sign and date the “penalties of perjury” certificate.
In order to be eligible for self-correction:

The lost earnings resulting from the delinquent contributions cannot exceed US$1,000;
Delinquent payments, including lost earnings, must be remitted to the plan within 180 days of the date payments are withheld from participants’ paychecks or received by the employer;
Neither the plan nor the self-corrector may be under investigation; and
Penalties, late fees and other charges related to the delinquent contributions must be paid.

Excise tax relief –In conjunction with the VFC Program update, the DOL amended PTE 2002-51 to expand excise tax relief to prohibited transactions eligible for self-correction under the updated VFC Program. The amendment provides relief from the 15 percent excise tax that DOL otherwise imposed when participant contributions and loan repayments are not timely remitted to a 401(k) plan. Relief is available if the plan receives an acknowledgment of self-correction from DOL and complies with other requirements of the VFC Program. Instead of paying the excise tax, the plan sponsor must contribute the amount equal to the excise tax to the self-corrected plan.
Excise tax relief will be available regardless of whether the plan has utilized the VFC Program or PTE 2002-51 in the past. Prior to this amendment, PTE 2002-51 generally was not available to plans that had utilized the VFC Program or the PTE for a similar type of transaction within the previous three years.
Additional Items to Note
The VFC Program update clarifies the existing transactions eligible for correction, expands the scope of certain transactions currently eligible for correction and simplifies certain administrative and procedural requirements for VFC Program participation and corrections. Notably, correction through the VFC Program does not relieve plans from reporting late participant contributions on Form 5500 or 5500-SF. Neither the update to the VFC Program nor the PTE amendment changes this reporting requirement.

Global Equity Plan Reporting Obligations for Calendar-Year 2025: Part One

Global equity plans are complex, and administration requires collaboration between various departments, including legal, human resources, payroll, and tax. Plan administrators (and their teams) should be aware of their reporting obligations with respect to international equity awards. Many reports can be submitted by the local entity’s payroll team; however, certain countries require separate standalone submissions.

In Depth

The following reference chart summarizes selected reporting requirements for equity plans with international grantees. This reference – part one of two – highlights year-end reports (i.e., reporting obligations for prior calendar-year 2024 activity) with deadlines through June 30, 2025. It also includes certain quarterly filings. This resource does not include initial registration/exemption applications, reports due upon equity grants, or other standard payroll/tax reports. Additionally, reporting obligations may differ if certain exemptions apply, if the company implements a recharge agreement, or if the local entity is involved with administration of the plan.

Country
Report Type
Award Types
Report Description
Frequency
Due Date

Philippines
Securities

All Equity Awards

Applies only to plans that have obtained a registration exemption from the Philippines Securities and Exchange Commission
Annually
January 10, 2025, for prior calendar year activity

Thailand
Securities

Options

Report option grants and exercises to the Thailand Securities and Exchange Commission
Annually
January 15, 2025, for prior calendar-year activity

China
Exchange Control

All Equity Awards

For State Administration of Foreign Exchange (SAFE)-registered plans, report plan activity via statutory form to the applicable SAFE office
Quarterly1
January 6, 2025, for prior calendar-quarter activity

Vietnam
Exchange Control

All Equity Awards

Report aggregate share value to the State Bank of Vietnam
Monthly2
January 12, 2025, for prior month activity

Saudi Arabia
Securities

All Equity Awards

Report plan activity via online portal or email inbox to Capital Markets Authority
Quarterly
As soon as administratively feasible following the end of Q4 2024 data

Malaysia
Tax

All Equity Awards

For each entity in Malaysia, report option exercises/RSU vesting via Form BT (Appendix C) to the Inland Revenue Board
Annually
February 28, 2025, for prior calendar-year activity

France
Tax

Tax-Qualified Options
Tax-Qualified Restricted Stock Units

For tax-qualified options that are exercised or restricted stock units that vest, distribute statement describing grant activity to employees. A copy must also be provided to the applicable tax office.
Annually
March 1, 2025, for prior calendar-year activity

Singapore
Tax

All Equity Awards

Distribute statement describing tax gains activity to employees via Form IR8A (Appendix A)
Annually
March 1, 2025, for prior calendar-year activity

Ireland
Tax

Option Awards

Report option-related activity via Form RSS1
Annually
March 31, 2025, for prior calendar-year activity

Tax

All Equity Awards, Excluding Options

Report all other equity-related activity via Form ESA
Annually

Japan
Tax

All Equity Awards

For Japanese affiliates that are 50%+ owned by a non-Japanese company or a Japanese branch of a non-Japanese company, report plan activity
Annually
March 31, 2025, for prior calendar-year activity

China
Exchange Control

All Equity Awards

For SAFE-registered plans, report plan activity via statutory form
Quarterly
April 3, 2025, for prior calendar-quarter activity

Singapore
Tax

All Equity Awards Eligible for Qualified Employee Equity-Based Remuneration Scheme

Submit application form for tax deferral eligibility to Comptroller of Income Tax
Annually
April 15, 2025, for prior calendar-year activity

Israel
Tax

All Equity Awards

Report plan activity via Israel Tax Authority online platform
Annually3
April 30, 2025, for prior calendar-year activity

SEC Issues Updated “Names Rule” FAQ

On January 8, 2025, the Securities and Exchange Commission’s (SEC) Division of Investment Management (Division) issued responses to certain frequently asked questions (FAQ) to the SEC’s 2023 adoption of amendments (Amendments) to Rule 35d-1 (Names Rule) under the Investment Company Act of 1940, as amended (Investment Company Act). The SEC’s Names Rule, originally adopted in 2001, requires a regulated investment fund to adopt a policy to invest at least 80 percent of the fund’s net assets (plus borrowings for investment purposes) in the types of investments or in investments in the particular industries, countries or geographic regions, suggested by such fund’s name (an 80 percent Investment Policy). The Amendments expanded the applicability of the 80 percent Investment Policy as described in our prior client advisory: SEC Adopts Amendments to ‘Names Rule’ Impacting Regulated Investment Funds.
The primary updates contained in the FAQ provide clarification regarding:

When and whether shareholder approval is needed in the event a regulated investment fund seeks to revise a pre-existing 80 percent Investment Policy or adopt a new one;
How the Names Rule applies to single-state tax-exempt funds and whether funds with the term “municipal” in their name are treated like tax-exempt funds under the Names Rule; and
Specific commonly used terms in regulated investment fund names that suggest a fund specializes in investments with particular characteristics.

These three areas are summarized in further detail below.
What circumstances require a fund to obtain shareholder approval before adopting or revising a fundamental 80 percent investment policy?
The Names Rule, as amended, requires a fund to provide 60 days’ prior notice to shareholders if there is any change to its 80 percent Investment Policy. However, if the 80 percent Investment Policy is a fundamental policy of the fund, explicit shareholder approval is required to revise such policy. Prior to the FAQ, the Names Rule and the Amendments were silent with respect to the circumstances in which shareholder approval would be required to adopt a new fundamental 80 percent Investment Policy and the types of revisions to a pre-existing fundamental 80 percent Investment Policy that would require shareholder approval.
The FAQ clarifies that shareholder approval is only required before adopting a new fundamental 80 percent Investment Policy if the new policy deviates from any of the fund’s other existing fundamental policies. Similarly, in the event a fund wishes to revise an existing fundamental 80 percent Investment Policy, shareholder approval is only necessary if the revisions to the existing policy represent a deviation from that original policy or any of the fund’s other existing fundamental policies.
To provide additional context as to what would constitute a deviation, the Division included a clarifying hypothetical where a fund with a fundamental 80 percent Investment Policy concerning equity investments which sought to revise the policy by adding reference to “growth” equity investments, would not be required to obtain prior shareholder approval to do so. This is because, in the Division’s view, while the revision references a specific type of instrument with particular characteristics, “growth” equity investments still fall under the broader category of equity investments expressed in the original policy, and thus would not be considered a deviation from it. Nevertheless, the Division emphasized that funds must also consider obligations beyond the Investment Company Act, such as state law or governing documents, that may require shareholder approval to adopt or revise a fundamental 80 percent Investment Policy.
Tax exempt funds
The FAQ also provides guidance on the Names Rule’s application to single-state tax-exempt funds. It notes that in instances in which a fund’s name suggests its distributions are exempt from both federal and state income tax (e.g., the Maryland Tax-Exempt Fund), such fund must either have a fundamental investment policy in place which provides for (i) the income from at least 80 percent of the value of the fund’s assets to be exempt from both federal income tax and the income tax of the state referenced in the fund’s name, or (ii) at least 80 percent of the distributed income from the assets that the fund invests in to be exempt from both federal income tax and the income tax of the state referenced in the fund’s name. Additionally, the FAQ clarifies that a security of an issuer located outside the state referenced in the single-state tax-exempt fund’s name may be included in the fund’s “80 percent investment basket” as long as the security pays interest that is exempt from both federal income tax and the tax of the state referenced in the fund’s name, and the fund reports in its prospectus that it may invest in tax-exempt securities of issuers located outside of the state referenced in the fund’s name.
The FAQ also confirms that funds with the term “municipal” or “municipal bond” in their names will be treated like tax-exempt funds under the Names Rule and will be expected to comply with Section (a)(3) of the Names Rule because the inclusion of such terms in a fund’s name indicates the fund’s distributions are exempt from income tax.
Specific terms commonly used in fund names
Lastly, the FAQ highlights several key terms commonly used in fund names and provides further insight as to the Names Rule’s application with respect to these terms.
Specifically, the FAQ clarifies the Division’s interpretation of the following terms:

“High-Yield” – The FAQ bifurcates funds that use the term “high-yield” in their name into two separate categories. The first applies to fund names which simply include the term “high-yield,” and the second applies to fund names which include the term “high-yield” in tandem with the terms “municipal” or “tax-exempt.” In the first case, the Division notes that the industry standard for the term “high-yield” generally denotes corporate bonds with lower credit ratings. Accordingly, in this case the Division interprets “high-yield” as referencing an investment with “particular characteristics,” meaning that funds with names employing such a term would be required to adopt an 80 percent Investment Policy specifically for corporate bonds with lower credit ratings. In the second case, the FAQ states that a fund would be required to adopt an 80 percent Investment Policy to invest in “municipal” or “tax-exempt” securities. However, due to the historical trend of funds that use the term “high-yield” in conjunction with “municipal” or “tax-exempt” in their names not always investing at least 80 percent of their assets in bonds that meet the funds’ high-yield rating criteria, the Division would permit a fund in this category to invest less than 80 percent of the value of its assets in bonds that meet the fund’s “high-yield” rating criteria. Additionally, the FAQ specifies that all funds using “high-yield” in their names, regardless of category, must still comply with the prohibition on materially deceptive or misleading names under Section 35(d) of the Investment Company Act.
“Tax-Sensitive” – The FAQ clarifies that funds with names that use the term “tax-sensitive” or some variation thereof (e.g., “tax-efficient,” “tax-advantaged,” “tax-managed” and “tax aware”) are not subject to an 80 percent Investment Policy with respect to such term because the Division interprets the term as describing the fund’s overall investment objectives rather than the particular characteristics of the investments composing the fund’s portfolio.
“Income” – The FAQ states that the use of the term “income” alone in a fund name does not require the fund to adopt an 80 percent Investment Policy, as the use of such term only indicates that a fund seeks to achieve current income as a portfolio-wide result. However, the adopting release for the Amendments indicates that if a term in a fund’s name could be reasonably understood to reference either a fund’s investments or a portfolio-wide result, such a fund would be required to adopt an 80 percent Investment Policy. Accordingly, the exact criteria are still unclear for when an 80 percent Investment Policy is required for a fund that has “income” in its name. The FAQ further explains that “income” used in the context of the term “fixed-income securities” would trigger the 80 percent Investment Policy requirement, as the Division would interpret the usage of such term in a fund name as sufficiently descriptive of an investment’s particular characteristics. While this provides some insight into the Division’s interpretation of the use of “income” in a fund’s name, the FAQ does not further elaborate on when the use of “income” would allude to fixed income securities.
“Money Market” – With respect to generic money market funds with names indicating that they invest in money market instruments (e.g., the “XYZ Money Market Fund”), the FAQ provides that such funds would not need to adopt an 80 percent Investment Policy to generally invest in money market instruments because adherence to Rule 2a-7 under the Investment Company Act already requires money market funds to invest solely in such instruments. However, the FAQ further clarifies that a fund using the term “money market” in its name would be required to adopt an 80 percent Investment Policy, so long as such fund name refers to specific money market instruments rather than simply using the generic term “money market.” To highlight this distinction, the FAQ includes the example of a fund with the name “XYZ US Treasury Money Market Fund” being required to adopt an 80 percent Investment Policy with respect to US Treasury securities.

Conclusion
As the December 11, 2025 Names Rule compliance date approaches, this FAQ should provide helpful guidance with respect to the Division’s interpretation of the usage of certain terms in fund names and the requirements that stem from usage of such terms. It is also important to note that these FAQs modify, supersede, or withdraw portions of FAQs released in 2001 in conjunction with the adoption of the Names Rule, and are inclusive of the Division’s reviews of no-action letters concerning adherence to the Names Rule. The Division released a useful chart highlighting the portions of the 2001 FAQs that have been modified, withdrawn or superseded, which can be found here. While these FAQs are helpful, uncertainty still remains regarding the timing of implementation of the Amendments in light of a recently issued Presidential executive order to delay the effectiveness of federal regulations that have not yet been enacted.
The SEC’s entire 2025 Names Rule FAQ is available here.

President Trump Issues New “10-to-1 Deregulation” Order

On January 31, 2025, President Trump signed an executive order titled “Unleashing Prosperity Through Deregulation.” This order mandates that federal agencies identify at least 10 existing rules, regulations, or guidance documents to repeal whenever they seek to introduce a new rule or regulation. Additionally, the order stipulates that the Director of the Office of Management and Budget (OMB) will ensure standardized measurement and estimation of regulatory costs. For fiscal year 2025, the total incremental cost of all new regulations must be significantly less than zero, accounting for offsets from the elimination of costs associated with the ten repealed regulations.
The executive order criticizes the costs of regulation, stating that overregulation discourages entrepreneurship, consumer choices, individual liberty, and harms small businesses. It references Executive Order 13771 which President Trump signed during his first term in which he required agencies to eliminate two regulations for each new regulation issued—a policy rescinded by former President Biden on his first day in office. The order notes that the Trump Administration had previously eliminated five and a half regulations for every new regulation issued.
The order also directs the Director of the OMB to provide agency heads with guidance on implementing the order, including standardizing methods for determining costs. Furthermore, it revokes OMB Circular No. A-4 (“Regulatory Analysis”) and reinstates the Memorandum of Agreement (MOA) between the Department of Treasury and the OMB from April 11, 2018, regarding the review of tax regulations under Executive Order 12866.

OMB Circular No. A-4 provided guidance to federal agencies on developing regulatory analysis, including assessing costs and benefits of regulatory actions. The revocation of this circular aims to streamline the regulatory process and reduce perceived burdens on businesses.
The MOA between the Department of Treasury and the OMB established a framework for reviewing tax regulations, ensuring economic analysis while maintaining timely tax guidance. Executive Order 12866, signed in 1993, set principles for regulatory planning and review, emphasizing the need for cost-benefit analysis and coordination among federal agencies.

This new executive order represents a significant shift in regulatory policy. Keller and Heckman will continue to monitor any new executive orders issued by the new administration that affect the federal government, particularly those related to the administrative state and regulated industries.

IRS Finalizes Treasury Regulations for Taxpayers Seeking Appeals Consideration

Go-To Guide:

The Internal Revenue Service (IRS or the Service) has released final regulations outlining when taxpayers may seek consideration from the IRS Independent Office of Appeals (Appeals) for “Federal tax controversies,” as defined below.
The final regulations clarify the statutory language of I.R.C. section 7803(e)(4), which states that the Appeals resolution process is “generally available to all taxpayers,” by providing 24 specific exceptions to Appeals consideration.
When denying Appeals consideration for taxpayers who received a notice of deficiency, the IRS must provide the taxpayer with a detailed explanation of the reason for the denial and allow the taxpayer to protest such denial, provided the relevant regulatory requirements have been met.

On Jan. 15, 2025, the IRS finalized proposed regulations implemented under I.R.C. section 7803(e) that provide guidance on the resolution of Federal tax controversies by Appeals. The final regulations clarify the statutory language of I.R.C. section 7803(e)(4), which states that the Appeals resolution process is “generally available to all taxpayers,” by providing specific exceptions to Appeals consideration. The final regulations also define what constitutes a “Federal tax controversy” and provide procedural and timing rules that must be met before Appeals consideration is available.
This GT Alert does not discuss every exception, nor does it provide the underlying rationale for the exceptions or the thought process behind the final regulations. For a full discussion, please see Resolution of Federal Tax Controversies by the Independent Office of Appeals, 90 Fed. Reg. 3,645 (Jan. 15, 2025) (to be codified at 26 C.F.R. pt. 301).
These regulations took effect Jan. 15, 2025. Treas. Reg. sections 301.7803-2 and 301.7803-3 apply to all requests for Appeals consideration received after Feb. 14, 2025.
‘Federal Tax Controversy’ Defined
While I.R.C. section 7803(e)(3) provides that Appeals’ function is to “resolve Federal tax controversies without litigation,” it does not define what constitutes a “Federal tax controversy.” Under Treas. Reg. section 301.7803-2(b)(2), a Federal tax controversy is:
…a dispute over an administrative determination with respect to a particular taxpayer made by the IRS in administering or enforcing the internal revenue laws, related Federal tax statutes, and tax conventions to which the United States is a party (collectively referred to as internal revenue laws) that arises out of the examination, collection, or execution of other activities concerning the amount or legality of the taxpayer’s income, employment, excise, or estate and gift tax liability; a penalty; or an addition to tax under the internal revenue laws.
Examples of Federal tax controversies include disputes over an IRS administrative determination concerning a taxpayer’s proposed deficiency, a taxpayer’s claim for credit or refund, or the tax-exempt nature of a particular organization, private foundation, or qualified employee plan.
Treas. Reg. section 301.7803-2(b)(3) provides that certain administrative decisions will still be treated as Federal tax controversies, notwithstanding the definition above. These include, for example, liabilities and penalties administered by the IRS outside of the Internal Revenue Code (e.g., FBAR penalties) or requests under the Freedom of Information Act.
Key Exceptions to Appeals Consideration
Treas. Reg. section 301.7803-2(c)(1)-(24) provides 24 Federal tax controversies specifically excepted from Appeals consideration. Some of these exceptions are discussed below and are referred to by their place within Treas. Reg. section 301.7803-2(c) (e.g., Treas. Reg. section 301.7803-2(c)(10) is referred to as “Exception 10”).
Exceptions 1 and 2 – Frivolous Positions and Resulting Penalties
Exceptions 1 and 2 provide that Appeals will not consider cases where the Service has made an administrative determination rejecting a taxpayer’s position as frivolous or where the IRS has assessed a penalty for asserting a frivolous position, making a frivolous submission, or providing false information.
Exception 10 – Taxpayers With Pending Criminal Cases
Under Exception 10, Appeals consideration is unavailable while a criminal prosecution or recommendation for criminal prosecution is pending against a taxpayer for a tax-related offense, other than with the concurrence of IRS Chief Counsel and the Justice Department, as applicable. This applies to any tax-related offenses for which a criminal prosecution (or recommended criminal prosecution) is pending and not only those that involve common facts or tax transactions.
Exception 12 – Certifications or Issuances of Seriously Delinquent Tax Debt
Where a taxpayer has a “seriously delinquent tax debt,” the Service will transmit a certification of the tax debt to the State Department to deny, revoke, or otherwise limit the taxpayer’s passport pursuant to I.R.C. section 7345. Under Exception 12, these certifications are not subject to Appeals consideration.
Exception 18 – Challenges Alleging a Statute is Unconstitutional
Appeals consideration is not available for any issue based on a taxpayer’s argument that a statute violates the U.S. Constitution, unless there is an unreviewable decision from a federal court holding that the cited statute is unconstitutional. An “unreviewable decision” is a decision of any federal court, regardless of where the taxpayer resides, that can no longer be appealed to any federal court because all appeals in a case have been exhausted or the time to appeal has expired and no appeal was filed.
Exceptions 19 and 20 – Taxpayer Arguments Concerning ‘Invalid’ Treasury Regulations, IRS Notices, or Revenue Procedures
Exceptions 19 and 20 specifically preclude Appeals consideration based on a taxpayer’s argument that a Treasury Regulation, an IRS Notice, or a Revenue Procedure published in the Internal Revenue Bulletin is invalid, unless there is an unreviewable decision from a federal court invalidating the regulation, notice, or procedure. Exceptions 19 and 20 do not preclude arguments other than the validity of a Treasury Regulation, IRS Notice, or Revenue Procedure, such as whether they apply to the taxpayer’s facts and circumstances.
Like Exception 18, the final regulations for Exceptions 19 and 20 do not require that the “unreviewable decision” be in the same judicial circuit as where the taxpayer resides.
Exception 21 – Cases or Issues Designated for Litigation or Withheld from Appeals
Exception 21 provides that Appeals consideration is not available for any case or issue designated for litigation or withheld from Appeals consideration in a Tax Court case. “Designated for litigation” means that the issue or issues in a case will not be resolved without a full concession by the taxpayer or by a decision of the court. Cases are designated for litigation by the Office of Chief Counsel or withheld in the interest of sound tax administration to establish judicial precedent, promote consistency, conserve resources, or reduce litigation costs for taxpayers and the Service.
Procedural and Timing Requirements
Treas. Reg. section 301.7803–2(e) states that taxpayers must submit a request for Appeals consideration in the time and manner prescribed and meet all procedural requirements for Appeals to consider a Federal tax controversy. In addition, there must be sufficient time remaining on the statutory limitations period. If a case is docketed in the U.S. Tax Court, if the Office of Chief Counsel has recalled the case from Appeals, or if Appeals has returned the case to the Office of Chief Counsel, further Appeals consideration will be unavailable if there is insufficient time for consideration.
One Opportunity for Appeals Consideration
Pursuant to Treas. Reg. section 301.7803-2(f)(1), if a Federal tax controversy is eligible for Appeals consideration and the requirements have been met, a taxpayer generally has one opportunity for Appeals consideration.
If there is insufficient time remaining on the limitations period for Appeals consideration, a taxpayer in receipt of a notice of deficiency can seek Appeals consideration after a petition has been filed with the Tax Court and the case is docketed, assuming the issue is not subject to an exception described in the final regulations.
Contesting a Denial of Appeals Consideration
I.R.C. section 7803(e)(5) requires the Service to follow special notification procedures if a taxpayer who has received a notice of deficiency requests referral of the Federal tax controversy to Appeals and that request is denied. The IRS must provide the taxpayer with a detailed description of the basis for the denial and allow the taxpayer to protest the denial, provided that the taxpayer meets certain requirements under Treas. Reg. section 301.7803-3(a).
In addition to the notice of deficiency, Treas. Reg. section 7803-3(a)(2)-(5) further requires that the issue may not be a frivolous position (consistent with Exceptions 1 and 2), cannot be for a matter for which the taxpayer has already sought (or received) Appeals consideration, and must include all matters or issues in the notice of deficiency.