Tax Court Confirms Codified Economic Substance Doctrine Requires Threshold Relevancy Determination, Upholds 40% Strict-Liability Penalty
Patel v. Commissioner, 165 T.C. No. 10 (Nov. 12, 2025), gave the US Tax Court its “first opportunity to examine when the codified economic substance doctrine applies.” Patel at *16. The Tax Court made two key holdings:
Section 7701(o) requires a relevancy determination that “is not coextensive with the two-part test set forth in section 7701(o)(1)(A) and (B).” Patel at *17.
Adequate disclosure to reduce the 40% economic substance penalty imposed by sections 6662(b)(6) and (i) must be made at the time the return is filed and not at a later time. Patel at *30.
Relevancy determination
Section 7701(o) provides:
Sec. 7701(o). Clarification of economic substance doctrine.—
(1) Application of doctrine.—In the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—
(A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer’s economic position, and
(B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction.
While the Internal Revenue Service (IRS) endorses a seemingly limitless application of the codified economic substance doctrine, taxpayers contend that it does not apply to every transaction. Rather, the plain language of section 7701(o)(1) requires a threshold relevancy determination. If the economic substance doctrine is not relevant, the inquiry ends.
There are very few cases that have considered whether section 7701(o) requires a threshold relevancy determination. And those that have found that section 7701(o) does not impose a separate relevancy requirement. See Liberty Global, Inc. v. United States, No. 20-cv-63501, 2023 WL 8062792 (D. Colo. Oct. 31, 2023); Chemoil Corp. v. United States, No. 19-cv-6314, 2023 WL 6257928 (S.D.N.Y. Sept. 26, 2023). While Liberty Global was appealed to the US Court of Appeals for the Tenth Circuit – and many speculate the Tenth Circuit may clarify that there is a relevancy requirement – the Tax Court beat the appellate court to the punch.
The Tax Court’s holding had solid statutory support. The plain language of section 7701(o)(1) states: “In the case of any transaction to which the economic substance doctrine is relevant…” After quoting these words, the Tax Court stated, “we easily conclude that the statute requires a relevancy determination. To put it plainly—the statute says so, right there, on its face.” Patel at *17.
Adequate disclosure of transactions
The second key holding in Patel is that the taxpayers in the case are liable for a 40% penalty for engaging in a transaction that lacks economic substance that was not adequately disclosed. Section 6662(b)(6) imposes a 20% penalty on transactions that lack economic substance. This penalty is increased to 40% under section 6662(i) if the transaction is not adequately disclosed.[1]
In the current wave of economic substance challenges, it is unclear what constitutes adequate disclosure under section 6662(i) such that the 20% (instead of the 40%) penalty applies. Based on current audit activity, it’s not clear whether an adequate disclosure must be attached to the tax return or can be made at a later time – perhaps at the beginning of an audit.
Patel clarified this issue. The Tax Court found that adequate disclosure for purposes of section 6662(i) means that a statement is attached to a tax return or relevant facts or sufficient information is provided on the tax return “to enable [the IRS] to identify the potential controversy involved.” Patel at *30. Because the taxpayers in Patel did not attach such a statement or provide such information on their returns, the taxpayers did not make adequate disclosure. As a result, the Tax Court held that section 6662(i) applies to increase the penalty from 20% to 40%.
Practice points
While the taxpayers lost in Patel, the Tax Court’s relevancy determination may nevertheless help other taxpayers that are facing economic substance challenges. Taxpayers facing such challenges should consider developing arguments that the economic substance doctrine is not relevant to the transactions at issue. These arguments provide taxpayers with an additional defense.
The Tax Court’s 40% penalty determination is a good reminder of the importance of detailed disclosures at the time tax returns are filed. Easier said than done as it is not always easy to predict which transactions the IRS may challenge as lacking economic substance. Nevertheless, if there is a risk that certain tax planning – even long-respected tax planning transactions – may be challenged on economic substance grounds, taxpayers should consider making a protective disclosure with their returns.
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[1] Both the 20% and 40% penalties are strict-liability penalties that are not subject to any defenses, including reasonable cause.
Washington’s Four-Month Window- A Limited-Time Amnesty Program for International Sellers
Foreign companies selling into Washington State may have just received an unexpected gift. The Washington Department of Revenue has announced a temporary International Remote Seller Voluntary Disclosure Program, running from Feb. 1 through May 31, 2026—providing international businesses an opportunity to address tax compliance with reduced consequences.
Why This Matters Now
Companies headquartered outside the United States that have been selling into Washington without registering for state taxes may already be on borrowed time. Washington’s enforcement efforts have been ramping up, and discovery through normal audit procedures may result in a seven-year lookback period, interest, and penalties possibly reaching 39% of taxes due.
This voluntary disclosure program offers an alternative approach. Program Details
Instead of facing the potentially harsh reality of full penalties and extended lookback periods, qualifying international sellers may benefit from:
Shortened lookback periods: Four years plus the current year for business and occupation taxes, and 12 months for uncollected retail sales tax.
Penalty relief: Up to 39% in penalties may be waived, including a 5% assessment penalty, a 5% unregistered penalty, and a 29% late payment penalty.
Streamlined resolution: All unreported tax liability may be summarized in a single assessment.
Qualification Requirements
This program targets a specific group: foreign companies without current Washington tax registration. To qualify, a business must be headquartered outside the United States and who have not engaged with Washington—meaning no active registration, no prior contact from the Department of Revenue, and no history of tax evasion or misrepresentation in reporting tax liabilities.
The program offers a 15-day anonymous application window, allowing companies to test the waters before fully committing to disclosure.
The Clock Is Ticking
Washington is offering this program for four months, and applications are processed in order of receipt. Companies that submit complete applications—including detailed financial information, business activity questionnaires, and supporting documentation—will be prioritized over incomplete submissions.
Strategic Considerations
For international companies evaluating their options, this program presents a classic risk management decision. Companies may consider participating in Washington’s temporary program or continuing their current approach, recognizing that Washington continues to develop its enforcement capabilities.
Participating companies face a one-year lookback period and substantially reduced penalties. Those that do not participate and are subsequently discovered face the full weight of Washington’s enforcement powers: seven-year lookbacks, maximum penalties, and no negotiating leverage.
The 15-day anonymous application period offers an opportunity to gauge potential exposure without immediate commitment, though companies note that Washington has built in strict timelines throughout the process, and missing deadlines would mean forfeiting all program benefits.
Takeaways
While the state’s ability to enforce a judgement against a wholly foreign entity may depend on the facts and circumstances, foreign businesses selling directly into Washington should consider this opportunity. Washington’s limited voluntary disclosure program represents an opportunity for international sellers to resolve their tax obligations on potentially favorable terms. The narrow qualification criteria, strict deadlines, and complex application requirements, however, make the program sufficiently complex.
Foreign companies that have been operating in the gray areas of Washington’s tax requirements should evaluate whether to engage in the program before the amnesty period kicks off early next year.
The application window closes May 31, 2026. Companies considering participation may wish to act quickly to ensure they can meet all program requirements and deadlines.
New IRS Guidance Pinpoints How Individuals May Take Tax Breaks for Tips and Overtime
On November 21, 2025, the Internal Revenue Service (IRS) and the U.S. Department of the Treasury released guidance outlining how workers can calculate their tax deduction for tips and overtime pay for the 2025 tax year when their employer does not separately report the information. The guidance provides specific examples of how a tax deduction for tips or overtime pay would be determined in various scenarios with different types of payroll data available to employees.
Quick Hits
The IRS and Treasury Department recently published guidance to clarify how employees may calculate their tax deduction for tips and overtime pay for the 2025 tax year when they have limited information.
The guidance shows examples of common situations, such as a bartender with reported and unreported tips, a self-employed travel guide who received tips on digital payment apps, and a law enforcement employee who is paid overtime on a “work period” basis of fourteen days.
Under the 2025 budget reconciliation bill, workers who customarily and regularly receive tips can deduct up to $25,000 in tips from their income subject to federal income tax starting on January 1, 2025, through December 31, 2028. The deduction does not apply to workers earning more than $150,000 per year (for single filers) or $300,000 (for joint filers). The IRS issued a list of eligible tipped occupations, including bartenders, waitstaff, cooks, dishwashers, bakers, gambling dealers, dancers, musicians, concierges, hotel housekeeping staff, hairdressers, barbers, massage therapists, and nail technicians.
Similarly, workers can deduct up to $12,500 or $25,000, depending on their filing status, in overtime pay from their income subject to federal income tax, starting on January 1, 2025, through December 31, 2028. This deduction applies only with respect to the overtime premium required under the Fair Labor Standards Act (FLSA).
Reporting Requirements for Employers
To enable their employees to take individual tax deductions, employers are required to report qualified overtime compensation and tips on the employees’ Forms W-2. However, the IRS granted transition relief for this reporting requirement for tax year 2025, stating that employers will not be penalized for failing to report cash tips and overtime compensation in the manner required by the latest federal budget reconciliation bill. The IRS still encourages employers to make the information available to their employees in 2025 through an online portal, additional written statements, or (in the case of overtime compensation) in Box 14 of Form W-2.
Reporting Tips
The IRS guidance released for individual taxpayers instructs them on how to use the tax information and tips data already available to them to claim the individual tax deduction for cash tips when their employer does not provide a separate reporting statement for the cash tips.
For example, a restaurant server whose 2025 Form W-2, box 7, reports $18,000 in tips can deduct a total of $18,000 in income for tax year 2025.
Meanwhile, a bartender reports $20,000 in tips on Form 4070 and $4,000 of unreported tips on Form 4137, line 4. His Form W-2 reports $20,000 in box 1 and $15,000 in box 7. He can use either the $15,000 in box 7 of Form W-2, or the $20,000 of tips reported on Form 4070 in determining the amount of qualified tips for tax year 2025. Either way, he also can include his $4,000 in unreported tips from Form 4137, line 4, in the tax deduction.
If a self-employed travel guide received $7,000 in tips through digital payment apps, he can include that amount in calculating his tax deduction for tips, if he has a log that shows each date, customer, and tip amount.
Reporting Overtime
Similarly, the IRS guidance instructs employees on how to claim the individual tax deduction for qualified overtime compensation when their employers do not provide a separate reporting statement of qualified overtime compensation. “Qualified overtime compensation” is defined as overtime pay required under Section 7 of the Fair Labor Standards Act of 1938 (FLSA)—that is, pay for hours worked in excess of forty in a workweek, at a rate not less than one and one-half times the regular rate of pay.
Individual taxpayers must first make a reasonable effort to determine whether they are considered FLSA-eligible employees, which may include asking their employers about their status under the FLSA. The IRS then instructs FLSA-eligible individual taxpayers to calculate their own amount of qualified overtime compensation based on documents, such as earnings or pay statements, invoices, or similar statements that support the determination. Employees are instructed to use the available overtime payroll information and apply an FLSA overtime premium calculation to determine qualified overtime compensation.
For example, if an employee has a pay statement at year’s end that reports the aggregate overtime compensation paid at a rate of one and one-half times earned for work in excess of forty hours in a week, the employee may calculate qualified overtime compensation by dividing the aggregate overtime compensation amount by three to determine the FLSA premium that is considered qualified overtime compensation. The aggregate overtime compensation amount would be divided by four if the employee was paid at a two-times rate.
Meanwhile, a state government employee received compensatory time at a rate of one and a half hours for each overtime hour worked. She was paid $4,500 for compensatory time off based on her overtime. She can include $1,500, or one-third of these wages, to calculate the tax deduction for overtime pay.
Next Steps
To reflect the changes in the 2025 budget reconciliation bill, the IRS is still in the process of updating Forms W-2, 1099-NEC, 1099-MISC, and 1099-K. Therefore, no changes will appear on the 2025 Form W-2, Form 1099-NEC, Form 1099-MISC, or Form 1099-K.
The IRS has encouraged employers to provide tipped employees with occupation codes and separate accountings of cash tips to help them correctly claim the deduction for qualified tips for tax year 2025. Likewise, it has encouraged employers to provide employees with a separate accounting of overtime pay, allowing them to properly claim a deduction for qualified overtime pay for tax year 2025.
However, employees now have instructions from the IRS on how to calculate their own qualified overtime compensation and cash tips that are eligible for individual income tax deductions regardless of their employers’ tax information reporting.
The Continuing Impact of Tariffs, Trade Disruptions, and Federal Government Reopening on the U.S. Soybean Sector
The U.S. soybean industry remains a focal point in the intersection of American agriculture, global trade policy, and federal regulatory action. Ongoing trade tensions — particularly between the United States and China — have reshaped the global soybean value chain, while rising input costs, labor constraints, and regulatory uncertainty create additional pressures for farmers. In recent months, attention has turned toward how the reopening of the federal government — after extended funding uncertainty — may influence agricultural markets, regulatory decisions, and the broader operating environment for soybean farmers. The combined effect of trade policy, regulatory backlogs, and supply chain disruptions have created a complex landscape for growers heading into the 2026 planting season.
The U.S.-China trade dispute remains the most significant driver of soybean volatility. China historically purchased more than half of all U.S. soybean exports. Retaliatory tariffs and geopolitical friction have, however, caused dramatic declines. Recent U.S. Department of Agriculture (USDA) data show that U.S. soybean exports to China in 2025 (to date) totaled around 218 million bushels, down from nearly one billion bushels the prior year. Investigative reporting has also raised questions about whether China will meet its announced purchase commitments. Despite high-profile White House claims of pending deals, reporters found little empirical evidence of large-scale Chinese purchases materializing. Attempts by trade officials to secure new buyers — including recent diplomatic missions to Latin America, Africa, and Southeast Asia — have been met with cautious optimism but limited concrete commitments.
Farmer-facing organizations, including Farm Action, have also argued that trade instability exacerbates existing market concentration and vulnerabilities tied to soybean monoculture. Tariffs have increased the cost of imported fertilizers, chemicals, and machinery parts. This is particularly pronounced in the crop protection market. Simultaneously, CropLife has warned that China’s shifting trade commitments could reshape global crop-protection supply chains, potentially raising costs for U.S. farmers. Labor shortages in agriculture have sharpened due to shifting immigration policy and enforcement. Enforcement-first labor strategies have contributed to supply chain disruptions in food and agriculture, affecting harvesting, processing, and rural labor markets. Soybean farmers, though less labor-dependent than specialty crop growers, still rely heavily on seasonal labor for trucking, grain handling, and logistics. Reduced export demand and increased costs ripple into rural communities, affecting equipment dealers, grain elevators, restaurants, and local tax bases.
Experts have emphasized that prolonged trade instability exposes deeper structural weaknesses in U.S. agriculture. Soybean production has increased in the past 20 years, driven by decades of policy and market consolidation that can magnify vulnerability to export shocks and may leave farmers with fewer alternatives as transportation and marketing systems adapt to the increased national production volumes. Many soy farmers use a corn-soybean rotation (soy helps add natural nitrogen to the corn crop, which has a high nitrogen absorption rate.) Advocacy groups like Farm Action have raised concerns about the potential for increased vulnerabilities, calling for diversification incentives, and antitrust enforcement. A prolonged federal shutdown affects U.S. agriculture more severely than many other sectors. The reopening of the government — whether after a budget lapse or protracted funding delay — has both immediate and long-term impacts on the soybean industry.
Restoration of USDA Market Reporting and Data Integrity
While “critical” government jobs were still operational, much of the work that is key to supporting USDA was stalled or paused. During shutdowns, USDA halts critical functions, including:
World Agricultural Supply and Demand Estimates (WASDE) reports;
Export Sales Reporting (ESR);
Crop Progress reports; and
Loan and price support operations.
These data products guide global grain markets. Their absence increases price volatility and uncertainty. Upon reopening, USDA plays catch-up, but market participants often operate on stale or incomplete data — especially damaging in periods of already elevated trade uncertainty. Recent news coverage underscores how USDA data gaps have fueled confusion about China’s purchase commitments.
Resumption of Farm Service Agency (FSA) and Risk-Management Operations
The government shutdown impacted services that kept farmer-adjacent services running smoothly, which ultimately hampered soybean production, including:
Agriculture Risk Coverage (ARC)/Price Loss Coverage (PLC) and crop-insurance signups;
Loan processing;
Conservation program approvals; and
Disaster aid payments.
The shortfalls in funding to key programs ultimately delayed cash flow for farmers already absorbing export-related price shocks.
Restarting EPA Pesticide, Chemical, and Agricultural Approvals
While the U.S. Environmental Protection Agency (EPA) was not shutdown, key EPA functions were affected. Key EPA services that were impacted include:
Registration decisions (including herbicides, seed-treatment chemistries, and fumigants);
Renewable Fuel Standard (RFS) rulemaking;
Pesticide label updates and enforcement guidance;
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) complaint processing; and
Agricultural worker-protection activities.
EPA’s reopening is especially relevant; delays of even a few months can affect seed-purchasing plans and growers’ herbicide programs for the next planting season. EPA’s Agriculture News & Alerts page has repeatedly warned of program delays and backlog recovery each time a shutdown ends.
Resumption of Trade Diplomacy
While trade diplomacy continued during the government shutdown, many key foreign policy employees worked without support staff or reliable paychecks, and with far fewer resources. The reduced resources allotted to trade diplomacy affected:
Trade missions;
Negotiations with China, Mexico, and emerging soybean importers;
Embassy agricultural attaché reporting; and
Foreign Agricultural Service (FAS) market development programs.
This is directly relevant to U.S. efforts to secure new soybean buyers.In the days following reopening, diplomatic engagement typically spikes, as seen in recent U.S. appeals to China to stabilize agricultural relations ahead of high-level meetings.
Reopening of Immigration & Labor Functions
Shutdowns restrict U.S. Department of Labor (DOL) labor-certification processing and U.S. Department of Homeland Security (DHS) immigration workflows, constraining farm labor supply. A reopening allows the release of backlogged H-2A visa certifications and resets enforcement priorities — critical for soybean-adjacent industries like grain transport, storage, and processing.
Policy Outlook for 2026
As the government reopens and agencies work through backlogs, several themes will shape soybean-sector stability:
Trade diplomacy action remains the central uncertainty;
Input cost inflation may persist as global crop-chemical markets adjust to China’s procurement signals;
Calls for diversification and domestic crush expansion are likely to grow louder;
Labor and immigration policy will increasingly be viewed as agricultural policy, not separate issues; and
Trade gyrations affect already low crop prices for U.S. producers, which further impacts farmers’ ability to purchase equipment and inputs such as pesticides.
The U.S. soybean sector sits at the nexus of trade, regulatory policy, and global supply chain dynamics. Tariffs and retaliatory measures continue to disrupt export flows, while rising input costs and structural vulnerabilities challenge financial resilience. The reopening of the federal government adds another layer of complexity — restoring critical operations but also revealing how deeply agricultural markets depend on the continuity of federal agencies. As the 2026 season approaches, policymakers, regulators, and industry stakeholders will need to navigate a landscape shaped by trade uncertainty, regulatory backlogs, and evolving global demand. The resilience of American soybean farmers will depend on the effectiveness of these policy responses and the stability of the institutions that support them.
The Lobby Shop- Washington Reopens- The Fallout, the Politics, and What Happens Next [Podcast]
With the federal government reopened, Lobby Shop hosts Josh Zive, Paul Nathanson and Liam Donovan break down the political fallout and how both parties are repositioning. They then turn to the Virginia and New Jersey election results and what they signal for the 2026 midterms, assess ongoing redistricting battles and discuss how the economy—including inflation and tariff policy—may shape voter sentiment.
McDermott+ Check-Up- November 21, 2025
THIS WEEK’S DOSE
Congressional disagreements on addressing healthcare costs continue. The looming expiration of the enhanced advanced premium tax credits (APTCs) continues to be a major topic of discussion for lawmakers, with no bipartisan agreement in sight.
Numerous congressional hearings on healthcare. The Senate Finance Committee examined the rising cost of healthcare and the Senate Aging Committee analyzed domestic production of medicine. In the House, the Ways and Means Committee reviewed chronic disease prevention and treatment, the House Energy and Commerce Committee examined the risks associated with AI chatbots, and the Budget Committee held an oversight hearing on the Congressional Budget Office (CBO).
Senate advances nomination for HHS inspector general. The nomination of Thomas Bell to be inspector general of the US Department of Health and Human Services (HHS) was advanced through both the Senate Committee on Homeland Security & Governmental Affairs and the Senate Finance Committee, which means it is ready for full Senate consideration.
CMS issues guidance on Medicaid provider and MCO tax provisions of OBBBA. The Centers for Medicare & Medicaid Services (CMS) clarified two tax provisions, applicable to providers and managed care organizations (MCOs), included in the One Big Beautiful Bill Act (OBBBA).
CMS announces 2026 premiums and deductibles for Medicare Parts A and B. In 2026, Medicare Parts A and B premiums and deductibles will increase.
HHS advances caregiver support efforts. HHS announced new initiatives aimed at strengthening caregiver support and expanding the caregiving workforce.
DHS releases proposed rule on public charge determinations. The Department of Homeland Security (DHS) proposed rule would revise how immigration officers assess public-charge determinations, potentially affecting enrollment in programs like Medicaid.
CMS updates Medicare claims processing guidance. CMS’ updated guidance reflects the end of the government shutdown and the restoration of certain payment waivers and flexibilities.
CMS releases final CY 2026 ESRD rule. The final rule updates payment rates and policies under the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) for calendar year (CY) 2026.
CONGRESS
Congressional disagreements on addressing healthcare costs continue. With the record-setting 43-day government shutdown in the rearview mirror, the House and Senate were back in full swing this week, and the fast-approaching expiration of the enhanced APTCs kept healthcare affordability issues front and center. While part of the deal to reopen the government included Senate Majority Leader Thune’s (R-SD) promise of a floor vote on an enhanced APTC extension bill of the Democrats’ choosing by the second week of December, a path forward has yet to be determined. While Democrats have continued to advocate for a straightforward enhanced APTC extension, many Republicans appear to be in favor of an approach that sends money directly to consumers, such as through health savings accounts (HSAs). President Trump issued a statement to this end, and Republican lawmakers are also touting this concept, though the exact language and mechanics of such a proposal has yet to be put forward. Additionally, on the topic of HSAs, the Government Accountability Office (GAO) released a report following their interviews with nine HSA providers and other stakeholders looking at features of HSAs, how they are marketed, how HSA holders use their accounts, and the characteristics of individuals who use HSAs and other tax-advantage savings accounts. The issue of HSAs and APTCs was front and center at the Senate Finance Committee’s hearing on healthcare costs (see next story) and will likely remain so into December.
Numerous congressional hearings on healthcare. With both the House and Senate in session this week for the first time since mid-September, committees on both sides of the Capitol held a number of healthcare-focused hearings.
Senate:
Finance Committee hearing on healthcare costs. In this hearing, Republican members of the committee generally supported the concept of providing funds to individuals using HSAs instead of offering discounted coverage on the marketplace through the APTCs as a solution to rising healthcare costs. In contrast, Democratic senators, and the witnesses invited by the Democrats, argued that the extension of the enhanced APTCs is the crisis facing millions of Americans come January 1, 2026, and that needs to be the immediate focus. Democratic senators and some of the witnesses also agreed that longer-term health reforms aren’t possible before that date.
Aging Committee hearing on restoring trust in medicines. Witnesses in the Senate Aging Committee hearing shared the regulatory and financial barriers they face as US-based drug manufacturers, and expressed concerns with the increasing dependence on foreign-made medicines leading to drug shortages and threats to national security and patient health. Senators on the committee emphasized the importance of improving quality and reliability of the nation’s medical supply and asked the witnesses to identify policy changes would most benefit them and patients. Additionally, Chair Scott (R-FL) shared plans to introduce legislation that would require country-of-origin information on drug labeling to ensure patients know where their medications are coming from.
House:
Energy and Commerce Oversight and Investigations Subcommittee hearing on AI chatbots. During this hearing, committee members expressed concerns about the potential harmful effects AI chatbots could pose as they become increasingly popular. Their questions focused on issues related to mental health, child safety, and privacy, emphasizing the importance of mitigating the risks of misinformation and disinformation in AI chatbots. Witnesses shared insights on negative mental health outcomes from AI chatbots and emphasized that AI chatbots should not replace human relationships.
Ways and Means Health Subcommittee hearing on care coordination. During this hearing on chronic disease prevention and treatment, Democrats on the committee expressed concerns over Americans who might lose their health insurance because of the rise in health insurance premiums. They emphasized that without extending the APTCs, many Americans would not be able to access health services. Republican members of the committee emphasized that the ACA must be replaced and noted that HSAs would be an affordable option for people to access care. Both parties emphasized that telehealth services should be expanded and highlighted the benefits rural communities experience with telehealth.
House Budget Committee hearing with CBO director. This hearing included a focus on the recent cyberattack at CBO and calls for an independent audit, and many members focused their questions on CBO’s scoring of OBBBA’s healthcare provisions and the expiration of the enhanced APTCs. CBO Director Swagel noted that during negotiations for OBBBA, CBO had to decide between timeliness and transparency when releasing information. Now that the bill has been enacted, he affirmed CBO will release a more in-depth analysis on OBBBA in February 2026, including budget estimates. Democratic members expressed concerns about the enhanced APTCs’ expiration and asked Director Swagel about CBO’s analysis of OBBBA’s impact on the national debt and number of uninsured Americans. Chair Arrington (R-TX) indicated that the committee may hold a healthcare-related hearing in the future.
Senate advances nomination for HHS inspector general. This week the Senate Committee on Homeland Security & Governmental Affairs held a hearing to consider the nomination of Thomas Bell to be HHS inspector general. The committee then held a business meeting where they advanced his nomination by a vote of 8-7, along party lines. With the Senate Finance Committee also moving the nomination forward this week by a vote of 14-13 along party lines, it will now proceed to the Senate floor.
ADMINISTRATION
CMS issues guidance on provider and MCO tax provisions of OBBBA. In a Dear Colleague letter, the Center for Medicaid and CHIP Services (CMCS) provided guidance on implementing certain Medicaid provisions from the OBBBA.
Providers. Section 71115 of OBBBA specifies the requirements for an expansion or non-expansion state that “has enacted a tax and imposes such tax,” referring to the healthcare-related provider taxes. CMS’ guidance clarifies the definitions of “enacted” and “imposed” under new rules in the OBBBA. The guidance outlines that non-expansion states may maintain existing “hold harmless” arrangements, while expansion states must gradually reduce their thresholds starting in fiscal year 2028. CMS is also collecting data on current tax structures to support consistent application of the new thresholds and to inform future rulemaking and state planning.
MCOs. Section 71117 of OBBBA addresses provider tax waivers by tightening rules around the federal requirements that provider taxes be uniform and broad-based, meaning they must be applied at the same level and to all providers in the state. States have been allowed to seek CMS waivers if their tax structures were redistributive and not directly tied to Medicaid payments, but CMS grew concerned that this allowed states to tax Medicaid MCOs at higher rates than others. To close this loophole, Section 71117 empowered CMS to phase out non-compliant taxes through a transition period of up to three fiscal years. Before OBBBA was enacted, CMS had proposed a similar rule in May 2025, though it offered a more limited transition period – only for states whose waiver approvals were granted more than two years before the final rule’s effective date.
In this guidance, CMS also provides the following transition periods, which differ from the May proposed rule:
States with MCO taxes that use this loophole and received a waiver approval before the July 4, 2025, enactment of OBBBA will have until the end of the applicable state’s fiscal year ending in calendar year 2026.
States with all other taxes that use this loophole and received a waiver approval before the July 4, 2025, enactment of OBBBA will have until the end of the applicable state’s fiscal year ending in calendar year 2028, but no later than October 1, 2028.
While the information provided in the letter is preliminary in nature, CMS plans to release a rule with more formal guidance.
CMS announces 2026 premiums and deductibles for Medicare Parts A and B. Key changes for 2026 include:
Part B. The Part B standard monthly premium for 2026 will be $202.90, an increase of 9.7% over the 2025 Part B standard monthly premium of $185.00. The annual Part B deductible for 2026 will be $283.00, an increase of 10.1% over the 2025 Part B deductible of $257. CMS noted that the increase in the 2026 Part B standard premium and deductible is mainly due to projected price changes and assumed utilization increases that are consistent with historical experience. Additionally, CMS reported that as a result of reductions in payment amounts for skin substitutes finalized in the recent Medicare Physician Fee Schedule final rule, the 2026 Part B premium is about $11 less than it would otherwise have been.
Part A. The Part A monthly premium will be $565, an increase of 9.1% over the 2025 Part A monthly premium of $518. While most Part A enrollees do not pay a monthly premium for Part A coverage, certain individuals who do not qualify for premium-free coverage are eligible for coverage subject to a monthly premium and are therefore impacted by the premium increase for 2026. The Part A inpatient deductible will be $1,736, an increase of 3.6% over the 2025 deductible of $1,676. The 2026 cost sharing for inpatient stays that exceed 60 days will be $434 per day for days 61 – 90 and $868 per day for lifetime reserve days.
HHS advances caregiver-support efforts. During an event in which experts in caregiving and family caregivers discussed the financial and emotional challenges facing caregivers and their families, HHS highlighted the need to strengthen the workforce through financial support. Additionally, HHS Secretary Kennedy announced the Caregiver Artificial Intelligence Prize Competition and called upon innovators to develop AI caregiver tools that support family members, friends, and the direct-care workforce in providing safe, person-centered care at home, as well as AI caregiver workforce tools that help employers improve efficiency, scheduling, and training. The Administration for Community Living (ACL) will award innovators who can harness the power of AI to reduce the administrative burden on caregivers. The ACL will provide up to $2 million in prizes to 10 awardees over a three-year period to help scale the initiative.
DHS releases proposed rule on public-charge determinations. The proposed rule would change how immigration officers determine whether noncitizens are likely to become dependent on government assistance. Under federal immigration law, noncitizens applying for a visa, admission to the United States, or an adjustment of status to lawful permanent resident can be denied if they are deemed likely to become reliant on the government, known as being a “public charge.” The statute states that immigration officers, at a minimum, must consider an individual’s “age; health; family status; assets, resources, and financial status; and education and skills” when making a public-charge determination.
The proposed rule would rescind the 2022 final rule and give officers greater discretion to consider all statutory and case-specific factors when determining inadmissibility under the public charge standard. DHS also plans to develop new policy and interpretive tools to guide these determinations and is seeking public input on their design. DHS now estimates that the proposed rule could reduce federal and state spending on public programs by at least $8.97 billion annually, due to an expected disenrollment or forgone enrollment of about 950,000 individuals from programs such as Medicaid, the Children’s Health Insurance Program (CHIP), SNAP, Temporary Assistance for Needy Families, and Supplemental Security Income.
CMS updates Medicare claims processing guidance. CMS released updated Medicare claims processing guidance to reflect the end of the shutdown and the restoration of certain payment waivers and flexibilities, including Medicare telehealth flexibilities and the Acute Hospital Care at Home (AHCAH) waiver. In this guidance, CMS clarified that all telehealth claims are now payable if they meet applicable requirements and directed clinicians to resubmit returned or held claims. Similarly, hospitals participating in the AHCAH program may now resubmit claims for services on or after October 1, 2025. CMS also instructed the Medicare Administrative Contractors (MACs) to make adjustments to claims affected by the recent congressional action to retroactively restore lapsed programs, including low-volume hospital adjustment and the Medicare-dependent hospital program. CMS expects normal processing operations to resume shortly and advised providers to contact their MACs only if discrepancies arise.
Separately, CMS posted revised frequently asked questions (FAQs) on Medicare telehealth services. The FAQs state that the Medicare telehealth waivers and flexibilities now expire on January 30, 2026. Providers can submit Medicare telehealth claims for dates of service on or after October 1, 2025. CMS states in the FAQs that it will continue to pay telehealth claims in the “same way they had been paid before October 1, 2025. Telehealth flexibilities will apply retroactively as if there hadn’t been a temporary lapse in the application of the telehealth flexibilities through January 30, 2026.” CMS also discussed the issue of using a provider’s home address when the clinician provides telehealth services from their home, stating that “practitioners can provide telehealth services from their home and in many cases do not need to report their home address.”
CMS releases final CY 2026 ESRD rule. The rule finalizes the following:
The final CY 2026 ESRD PPS base rate is set at $281.71, an increase from the CY 2025 ESRD PPS base rate of $273.82. The final amount reflects the application of the wage index budget neutrality adjustment factor, the budget neutrality factor for the final non-contiguous areas payment adjustment (NAPA) (0.99860), and a final ESRD Bundled market basket update of 2.1%
CMS modifies the timeframe for Transitional Drug Add-on Payment Adjustment (TDAPA) eligibility to provide that a new renal dialysis drug or biological product must have been approved by the Food and Drug Administration within the past three years at the time of submission of the TDAPA application. This revised eligibility timeframe will apply for all new drugs and biological products for which a TDAPA application is submitted on or after January 1, 2028.
CMS will terminate the End-Stage Renal Disease Treatment Choices Model, ending December 31, 2025.
A fact sheet from CMS can be found here.
QUICK HITS
Republican House committee leaders release letter on Organ Procurement and Transplantation Network. Energy and Commerce Committee Chair Guthrie (R-KY) and Energy and Commerce Oversight and Investigations Subcommittee Chair Joyce (R-PA) sent a letter to CMS Administrator Oz requesting a briefing by December 1, 2025, to better understand HHS’ recent actions and ongoing work to enhance safety within the Organ Procurement and Transplantation Network.
House and Senate release 2026 legislative calendars. The House 2026 legislative calendar and the Senate 2026 legislative calendar show the days each chamber plans to be in session in the new year. While the calendars are generally similar, there are weeks in which one chamber will be in session while the other will be in recess. Additionally, both chambers will be out of session for most of October 2026, due to the approaching midterm elections.
HHS releases updated report on pediatric gender-affirming care. The previously published report is critical of pediatric gender-affirming care, focusing on the potential risks and long-term health impacts associated with treatments such as puberty blockers, hormones, and surgeries. This update shows that the report was peer-reviewed.
GAO releases report on Medicaid enrollment across state lines. The GAO found that the federal government and six states overpaid MCOs in fiscal year (FY) 2023 and recommends CMS implement controls to prevent duplicate Social Security numbers on marketplace policies receiving APTC benefits and require marketplaces and Medicaid/CHIP agencies to submit enrollment data for frequent interstate matching and resolve discrepancies to verify eligibility or terminate coverage.
NEXT WEEK’S DIAGNOSIS
Congress will be in recess next week for the Thanksgiving holiday. Lawmakers are set to return the week of December 1, 2025, at which time we expect the Senate’s plans to become clearer on timing for an APTC vote, along with potential progress on the next package of the nine remaining FY 2026 appropriations bills, which must be addressed prior to the new January 30, 2026, funding deadline.
IRS Releases Annual Increases to Qualified Retirement Plan Limits for 2026
On November 13th, the IRS released a number of inflation adjustments for 2026, including to certain limits for qualified retirement plans. The table below provides an overview of the key adjustments for qualified retirement plans.
Qualified Defined Benefit Plans
2025
2026
Increase from 2025 to 2026
Annual Maximum Benefit
$280,000
$290,000
$10,000
Qualified Defined Contribution Plans
2025
2026
Increase from 2025 to 2026
Aggregate Annual Contribution Limit
$70,000
$72,000
$2,000
Annual Pre-Tax/Roth Contribution Limit
$23,500
$24,500
$1,000
Qualified Defined Contribution Plans – Catch Up Contributions
2025
2026
Increase from 2025 to 2026
Catch-Up Contribution Limit for Individuals 50-59 and 64+
$7,500
$8,000
$500
Catch-Up Contribution Limit for Individuals 60-63
$11,250
$11,250
—
Roth Catch-Up Wage Threshold
—
$150,000
—
Other Adjustments for Qualified Plans
2025
2026
Increase from 2025 to 2026
Annual Participant Compensation Limit
$350,000
$360,000
$10,000
Highly Compensated Employee Threshold
$160,000
$160,000
—
Key Employee Compensation Threshold for Top Heavy Testing
$230,000
$235,000
$5,000
Big Law Redefined- Immigration Insights Episode 21 | Global Mobility in Motion- Trends, Strategies, and the Future of International Workforce Movement [Podcast]
In this timely podcast episode of the Immigration Insights series, host Kate Kalmykov, co-chair of Greenberg Traurig’s Global Immigration & Compliance Practice, sits down with Jason Rogers, Senior Partner at Newland Chase Advisory Services, to explore the dynamic landscape of global mobility and employee immigration.
Together, they discuss how technology, evolving visa regimes, and shifting international policies are transforming the way companies deploy talent across borders.
From the impact of recent U.S. immigration changes and rising costs, to emerging “hot spots” like Poland, the Middle East, Asia, and Latin America, this episode provides a comprehensive overview of the opportunities and challenges facing employers in today’s competitive race for global talent.
Jason and Kate also delve into the critical role of compliance, tax, local employment laws, and data protection, while considering how AI and digital innovation are shaping the future of workforce mobility.
Whether you’re an HR leader, legal professional, or business executive, this episode offers actionable insights into building business-friendly global mobility programs.
Foley Automotive Update – November 21, 2025
Analysis by Julie Dautermann, Competitive Intelligence Analyst Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more.
Key developments
Foley & Lardner’s 2025 Auto Trends Series, Driving the Future: Innovations, Regulations, and Strategies, will deliver actionable insights on critical topics, including regulatory changes, resilient supply chains, global competition, connected vehicle data, and talent strategies. Subscribe here to receive updates when new articles in this series are published.
U.S. new light-vehicle sales in November 2025 are projected to decline 5.2% year-over-year for a SAAR of 15.4 million units, according to a joint forecast from J.D. Power and GlobalData.
New vehicle inventory reached 2.97 million units at the start of November for an 88 days’ supply industrywide, according to analysis from Cox Automotive. This represents a 2.9% increase since the end of September, but a decline of 3.8% compared to November 2024.
A number of automakers are urging major suppliers to find permanent alternatives to Chinese semiconductors in response to the microchip supply disruption involving Chinese-owned, Netherlands-based Nexperia.
The Nexperia supply disruption serves as “a warning shot for global supply chains,” and dependence on China for certain raw materials and technology is likely to increase risk for global automakers, according to commentary from Moody’s and Gartner.
GM directed a number of its suppliers to eliminate the use of China-sourced parts by 2027, according to unnamed sources in Reuters.
Automakers and suppliers are increasingly shifting away from global just-in-time supply chains to prioritize “regional supply chain resiliency.”
On November 18, the National Association of Manufacturers (NAM) provided an assessment of recent trade developments that included framework agreements with four Latin American countries, a deal with Switzerland, updates on China’s rare earth export controls, and a new White House fact sheet pertaining to the U.S.-Korea deal.
The Wall Street Journal reports China is considering implementing a “validated end-user” system for certain rare earth exports, and this “could make importing certain Chinese materials more difficult” for U.S. companies that have both civilian and defense clients. China dominates the processing of rare earth elements globally.
Mexican President Claudia Sheinbaum’s plan to impose higher tariffs on certain Chinese imports has been delayed until at least December amid ongoing congressional debate.
The NAM submitted commentary to the Office of the U.S. Trade Representative concerning practical steps to strengthen the United States–Mexico–Canada Agreement (USMCA). In addition, NAM Vice President of International Policy Andrea Durkin plans to testify during the USTR’s public hearing December 3-5, 2025 regarding the operation of the USMCA.
OEMs/SUPPLIERS
A report published by MEMA Original Equipment Suppliers and consultancy Arthur D. Little includes an assessment of U.S. reshoring constraints and opportunities by auto parts category. The report also notes: “Labor remains the most visible pressure point, as higher wages (including benefits), limited availability, and persistent skills gaps raise costs relative to offshore peers. Automation offers a potential offset, but adoption below Tier 1 is constrained by high up-front investment requirements and limited integrator support.”
Crain’s Detroit reports automotive content at the Consumer Electronics Show in January is likely to emphasize products with near-term market applications over futuristic unproven technologies. The article also noted that certain major suppliers intend to skip CES 2026 amid efforts to reduce costs and maintain profitability.
Toyota CEO Koji Sato provided insights into how the company has achieved record sales and production despite tariffs and market uncertainty.
Honda reported its operating profit fell by 41% YOY for the six months ended September 30, 2025, and the automaker reduced its fiscal 2026 operating profit forecast by 21% due to expenses related to EVs, semiconductor shortages, and U.S. tariffs. Honda recorded 237.3 billion yen ($1.5 billion) in EV-related losses and expenses during the first half of its current fiscal year.
Ford became the second automaker after Hyundai to allow dealers to sell certified pre-owned vehicles through the Amazon Autos site in certain U.S. markets.
MARKET TRENDS AND REGULATORY
The CEOs of the Detroit 3 were invited to participate in a January 14, 2026 hearing before the U.S. Senate Committee on Commerce, Science and Transportation to discuss topics related to regulation and vehicle affordability.
The benchmark price for aluminum delivered to the U.S. recently hit a record high due to the impact of reduced inventories and import tariffs.
New-vehicle purchasing decisions were impacted by tariffs for 36% of consumers, according to the J.D. Power 2025 U.S. Sales Satisfaction Index (SSI) Study.
The U.S.-China Economic and Security Review Commission’s annual report to Congress warned China could exploit U.S. reliance on its supply chains, and noted that China “now possesses a hyper-charged, state-directed manufacturing base without historic parallel.” The report also urged policymakers to require industry disclosure of vulnerabilities to Chinese supply chains to better assess risk.
Autonomous Technologies and Vehicle Software
Waymo expanded its robotaxi service to highways in parts of San Francisco, Los Angeles, and Phoenix.
Tesla received a permit to operate ride-hailing services in parts of Arizona with a human safety monitor in the vehicle. The company also operates a ride-hailing pilot program in parts of Austin, Texas, with human safety drivers on board.
Amazon’s Zoox now offers free autonomous rides in parts of San Francisco as part of its early rider initiative, Zoox Explorer.
At Web Summit 2025 in Lisbon, Uber’s Chief Operating Officer discussed the opportunities and challenges associated with profitably commercializing autonomous vehicles. Developing software that supports safe autonomous driving was described as a problem that is “almost largely solved.” Challenges to commercialization include vehicle hardware costs, variable demand, and the inability of autonomous vehicles to respond to certain driving conditions.
Swedish autonomous truck company Einride plans to go public in a SPAC deal that is expected to raise $219 million. The company is seeking an additional $100 million of private investment in public equity to support growth.
HYBRID AND Electric Vehicles
New EV sales in October 2025 were estimated at 74,835 units in the U.S., representing a decline of 30% year-over-year.
Toyota plans to invest $912 million to increase the output of hybrid vehicles and components across five states, as part of a broader $10 billion investment over the next five years to support U.S. production. Toyota’s newly opened $14 billion battery plant in Liberty, North Carolina supplies batteries for the automaker’s hybrid models.
Tesla intends to accelerate a strategy to reduce the use of China-made components in U.S.-manufactured vehicles, according to a report in The Wall Street Journal.
Ford is reported to be evaluating whether to permanently end production of the electric F-150 Lightning pickup truck due to profit losses and changing market conditions.
Volkswagen and Rivian are considering selling EV technology developed by their joint venture to other automakers that could be used across a variety of powertrains. Separately, Volkswagen’s electric vehicle brand Scout Motors plans to establish its U.S. headquarters in Charlotte, NC.
BYD established a goal to sell up to 1.6 million vehicles outside of China in 2026.
Battery recycler Redwood Materials has begun operations at a $3.5 billion factory in South Carolina that will supply critical minerals for domestic supply chains. The company’s Nevada Campus produced more than 60,000 metric tons of materials last year.
Canadian EV battery recycling startup Lithion Technologies filed for creditor protection.
Navigating Recent US Tariff Changes: Supreme Court Challenge, International Trade Deals, and Duty Mitigation Considerations
Go-To Guide:
The U.S. Supreme Court (SCOTUS) heard oral arguments on Nov. 5 on the appeal of an Aug. 29 decision by the U.S. Court of Appeals for the Federal Circuit holding that the Trump administration (the “Administration”) exceeded its authority under the International Emergency Economic Powers Act (IEEPA) when imposing global reciprocal tariffs.
The United States has lowered the rate of the fentanyl-related tariff on China from 20% to 10%, effective Nov. 10.
The Administration has announced framework agreements with El Salvador, Argentina, Ecuador, and Guatemala, as well as a trade agreement with Switzerland and Liechtenstein.
The Administration also announced tariff exemptions for a number of agricultural products.
The Administration continues to make changes to the tariff regime, including modifications to country-specific tariff rates based on trade deals. The legality of certain tariffs also remains under the Supreme Court’s consideration.
On Sept. 9, SCOTUS agreed to fast track the Administration’s appeal of the Aug. 29 decision by the U.S. Court of Appeals for the Federal Circuit, which held that the Administration exceeded its authority under IEEPA in imposing broad reciprocal tariffs. Oral argument for the appeal took place on Nov. 5 and the Court may issue a decision before the end of 2025. If SCOTUS strikes down the IEEPA tariffs, importers may wish to track entries since March 2025, as there may be a process for businesses to recover refunds.
Following President Donald Trump’s meeting with Chinese President Xi Jinping on Oct. 30, the Administration lowered the fentanyl tariff on products of China from 20% to 10%, effective Nov. 10, per an executive order issued on Nov. 4.
New framework agreements have been announced with four Western Hemisphere trading partners – El Salvador, Argentina, Ecuador, and Guatemala. While the framework deals include commitments by each trading partner, the current tariff rates remain in place with tariff reductions (such as most favored nation treatment for certain goods that cannot be grown, mined, or naturally produced in the United States in sufficient quantities) forthcoming.
The Administration also announced a framework for a future trade agreement with Switzerland and Liechtenstein. Under the framework, Switzerland and Liechtenstein would pay a cumulative reciprocal tariff rate of no higher than 15%, which is the same treatment given to the European Union.
Additionally, a Nov. 14 executive order exempts a number of agricultural products from the “reciprocal” (country-specific) tariffs, including beef, chocolate, tomatoes, oranges, and coffee.
Considerations for Mitigation Strategies
There are numerous duty-mitigation and sourcing strategies importers might utilize to potentially blunt the impact of the country-specific and sectoral tariffs, including reducing the value of imported goods by taking all possible legal deductions and by using “first sale” in a multi-tier transaction that would shrink the value declared at entry by shaving off middleman profit and administrative expenses. Importers should consider carefully structuring the transaction value of merchandise entering the United States to its lowest possible amount, including reviewing warranty and royalty payments, design fees, and post-importation services.
In addition, importers might consider reducing all qualifying legal deductions, such as international and foreign inland freight, from the invoice value. Bonded warehouses may be a tool for duty deferral as duties are due only when the goods leave the warehouse and enter the commerce of the United States. Importers might also review the origin of imported products, which is based on the product’s essential character and in which country it is substantially transformed. A change in component sourcing or production steps might change the country of origin for U.S. Customs purposes. Finally, importers should review the classification of goods, as well as any applicable exemptions for such classifications.
Henry Scherck contributed to this article
The Tariff-Related Bullseye on D&Os
Directors and officers (D&Os) are leaders and often the public face of their respective organizations. With that spotlight, there can be a shadow that diminishes the glow and holds D&Os responsible when their companies fail. For those D&Os representing public companies, the potential exposure to federal securities litigation, specifically based on alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, is even greater.
Securities lawsuits against D&Os are often brought by shareholders who claim that D&Os withheld or misrepresented certain information that was publicly disclosed and the shareholders were damaged to the extent that the stock price was traded differently than if the proper disclosure of the information in question had been made. Questions about information disclosures, from accounting issues to cyber exposure, from environmental promises to claims of hiding sexual harassment, are some of the reasons D&Os are defendants in securities class actions. In 2025, with the change in the economic landscape based on federal tariffs, the disclosures made regarding how tariffs may impact a business is another issue that can cause a shadow on the D&Os.
Recent ComplaintsIn recent months, there have been four complaints, two against Dow Inc. (a securities class action1 and a shareholder derivative suit2) and one each against iRobot3 and Tronox Holdings4, involving allegations of D&Os making false and misleading statements regarding their companies’ financial health and ability withstand adverse market conditions, including comments regarding the impact of tariffs.
Prominently in the actions against Dow, the leadership is accused of overstating the company’s resilience to tariff-related pressures, while failing to disclose the true extent of negative industry trends. Specifically, it is claimed that Dow’s leadership made repeated public statements downplaying the risks and impacts of tariffs on the company’s operations. It is further alleged that Dow’s disclosures violated securities regulations by omitting known trends and uncertainties related to tariffs that were likely to have a material unfavorable impact on the company’s business
The iRobot complaint had a strong focus on termination of the Amazon acquisition, but it was also alleged that the company failed to adequately disclose the risks and uncertainties posed by tariffs, particularly U.S. tariffs on European Union imports, which were claimed to be material to iRobot’s financial outlook. The plaintiffs, citing tariffs as a factor in the company’s going concerns, was only revealed after a sharp stock price decline.
In addition, the complaint against the D&Os of Tronox Holdings claimed that the company’s executives made optimistic statements about the company’s demand, growth, and ability to manage macroeconomic and trade-related risks, including tariffs. However, the plaintiffs claimed that in reality Tronox was experiencing significant negative impacts from tariffs and related trade uncertainties, which contributed to declining sales and missed financial projections. It is alleged that the D&Os failed to adequately disclose these risks, such as those from tariffs, until after disappointing financial results forced a downward revision of guidance and a dividend cut.
AnalysisAll four of these actions are at their initial stages and there have been no significant developments in the litigations. These complaints, which all assert that the D&Os downplayed the material risks and potential impacts of tariffs on their respective companies, are additional examples of lack of transparency claims being filed against D&Os in 2025. Claims of D&Os failing to disclose risks are nothing new. Nor are corporate concerns on how tariffs may impact the financial outlook of an organization. These types of matters are typically covered under public company D&O policies.
However, tariffs have not been a pressing concern in corporate America for a variety of industries in many years, highlighting the changes in 2025 within a global landscape. As such, it is a risk that insureds and their D&O insurers may not have considered when selecting coverage last year. While there is still legal uncertainty about the tariffs and whether they can be implemented as proposed by the current administration, these four complaints put corporate disclosure about tariffs in the spotlight and may just be the start of a new type of complaints against D&Os. ____________________________________________________________________________________________
1 Sarti v. Dow Inc. et al., U.S. Dist. Ct, ED MI (25cv12744) filed on August 29, 2025.
2 Potter v. Fitterline, et al., U.S. Dist. Ct., ED MI (25-cv-12821) filed on September 5, 2025.
3 Savant v. iRobot Corp, et al., U.S. Dist Ct. SD NY (25-cv-5563) filed on July 7, 2025.
4 Keller v. Tronox Holdings Plc et al., U.S. Dist. Ct, D. CT (25-cv-1441) filed on September 3, 2025.
Florida Court Directs Department to Pay Up
When a taxpayer succeeds on a refund claim they are often entitled to interest on such refund. Unfortunately, departments of revenue sometimes take unlawful steps to prevent taxpayers from recouping such amounts. A recent decision of the First District Court of Appeal of the State of Florida (the “Court”) scolded the Florida Department of Revenue (“Department”) for taking such action. SEI Fuel Services, Inc. v. Fl. Dep’t of Revenue, No. 1D2024-2098 (Fla. Dist. Ct. App. Oct. 22, 2025).
The Facts: SEI Fuel Services, Inc. (“SEI”) double-paid its Florida motor fuel taxes. Realizing its error, SEI sought a refund of the double payment, which the Department denied despite acknowledging that SEI had in fact paid tax twice in error. On review, the Court determined that SEI was due a refund and ordered the Department to issue such refund. The Department issued a warrant for the refund amount but included no interest.
SEI “wasted no time” sending the Department a demand letter for the interest owed. The Department failed to respond to the letter, causing SEI to seek mandamus relief in Florida circuit court. However, the circuit court denied SEI’s request, concluding that it did not have jurisdiction to issue such an order. Undeterred, SEI appealed once again to the Court.
The Law: Florida law provides that interest “shall be paid on overpayments of taxes, payment of taxes not due, or taxes paid in error” so long as the refund application is timely and complete and contains the necessary information for the Department to pay such amounts, including “sufficient information… to permit mathematical verification of the amount of the refund.” Fla. Stat. § 213.255. Interest commences 90 days after a complete refund application has been filed and is paid until a date no more than seven days prior to the date of the issuance of the refund warrant. Id. at (4), (6); Fla. Admin. Code Rule 12.26.004(2)(b).
The Decision: Finding SEI’s “separate action for interest… ripe, due, and owing” the Court rejected the circuit court’s erroneous conclusion that it did not have jurisdiction. Turning to SEI’s refund application, which the Department never argued was incomplete, the Court easily concluded that SEI was owed interest on its refund claim. Accordingly, the Court reversed and remanded SEI’s case to the circuit court with directions to grant SEI’s petition for writ of mandamus and to determine the amount of interest owed.
The Takeaway: This case serves as a good reminder to taxpayers not only to check amounts received from states to ensure that they are accurate, but also to not be deterred when a state fails to respond to a proper refund request or demand letter. Departments of revenue generally waste no time in seeking interest on back due taxes. Taking a page out of the departments’ books, taxpayers should use their available resources to make sure that they are receiving their fair share of tax and interest owed by those same departments.