Wisconsin Court of Appeals Finds Taxpayer-Funded College Grant Program to Be Unconstitutional
On February 26, 2025, the Wisconsin Court of Appeals, District II, determined that a program that provided taxpayer-funded educational grants to financially needy students of specific racial, national origin, and ancestry groups was unconstitutional.
Quick Hits
On February 26, 2025, a Wisconsin appellate court ruled that a taxpayer-funded educational grant program for minority students is unconstitutional, citing the U.S. Supreme Court’s decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA).
The court’s decision to halt the Minority Undergraduate Retention Program underscores the broader implications of the SFFA ruling, suggesting that race-based considerations in state-funded educational assistance programs may also violate the Equal Protection Clause of the U.S. Constitution.
Legal scholars and post-secondary institutions are closely monitoring the impact of the court’s decision and the federal government’s recent guidance, which indicates that the SFFA ruling could extend beyond university admissions to other areas, including employment-related decision-making.
Background
In April 2021, five Wisconsin taxpayers filed a lawsuit against the Higher Educational Aids Board (HEAB) and its executive secretary, Connie Hutchinson. HEAB and Hutchinson administer the Minority Undergraduate Retention Program, which was created by the Wisconsin legislature in 1985 to offer grants to certain undergraduate minority students. To be eligible for the grants, the students must be Black American, American Indian, Hispanic, or have ancestors who were formerly citizens of Laos, Vietnam, or Cambodia. In the case, Rabiebna v. Higher Educational Aids Board, the taxpayers claimed that the eligibility criteria (i.e., limiting eligibility to students of these specific racial or ethnic backgrounds) violated both the Equal Protection Clause of the U.S. Constitution and Article I of the Wisconsin Constitution.
The circuit court granted summary judgment in favor of the HEAB and Hutchinson. The taxpayers then appealed the decision. After the parties’ appellate briefs were filed, the Supreme Court of the United States issued its decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023). In SFFA, the Supreme Court ruled that two universities violated the Equal Protection Clause of the U.S. Constitution by considering an applicant’s race as part of the applicant’s admissions processes. Therefore, both parties in the HEAB case submitted additional briefing to the appeals court articulating the impact of the SFFA case on its review of the Minority Undergraduate Retention Program in Wisconsin.
The Decision
After evaluating the Wisconsin statutory language and considering the parties’ arguments, the appeals court reversed the circuit court’s ruling, finding instead that the Minority Undergraduate Retention Program violates the law. Notably, the court relied heavily on the SFFA opinion to support its conclusion, citing to it more than one hundred times in its fifty-three-page decision. The court’s analysis also closely tracked the overarching legal framework provided by SFFA. As a result of this decision, the HEAB and Hutchinson are currently enjoined from further administering the grant program and distributing any funds from it.
Implications of the Decision
Some legal scholars initially interpreted the Supreme Court’s SFFA decision narrowly, arguing that it was limited to university admissions policies. However, the HEAB opinion signals that some courts are willing to utilize SFFA’s Equal Protection analysis in other contexts where race is a consideration, including state-funded educational assistance programs. Indeed, the Wisconsin appeals court, citing to SFFA, emphasized that no state has the authority under the Equal Protection Clause to use race as a factor in offering “educational opportunities.” (Emphasis in original.)
The HEAB decision also appears to align with the U.S. Department of Education’s “Dear Colleague” letter dated February 14, 2025, which explicitly states that the SFFA decision “applies more broadly” than just to university admissions decisions. Given this letter and the recent confirmation of Linda McMahon as the new secretary of education, post-secondary institutions may want to consider closely monitoring developments in the federal government’s interpretations of the law post-SFFA, and its subsequent enforcement actions.
Finally, it appears that the SFFA decision will have impacts beyond the realm of education. For example, there are already cases pending in various jurisdictions around the country that cite to the SFFA case to challenge an employer’s consideration of race in hiring or other employment decisions. Therefore, employers may also want to consider following these cases, along with litigation over the Trump administration’s executive orders regarding diversity, equity, and inclusion, to see whether and how the SFFA decision is implicated and whether courts will extend SFFA’s reasoning to cover employment-related decision-making.
Alright, Alright, A Write-Off: Matthew Mcconaughey’s Push for Texas Film Tax Incentives
Texas has long been a hub for film and television production, offering diverse landscapes, a rich cultural backdrop, and some real characters. Back in 2007 the state implemented the Texas Moving Image Industry Incentive Program, which is administered by the Texas Film Commission under the Economic Development and Tourism Division of the Office of the Governor.[1] Allocations have continued to grow ever since.[2] Starting with $20 million in the first year,[3] it is now the largest in state history at $200 million with a 22.5% tax rebate.[4]
However, this funding is still below competitive states like Georgia and New Mexico.[5] If Senate Bill 1 (SB1), which was filed on January 22, 2025, is approved, then $498 million would be allocated “to revamp the Texas Film Incentive, making Texas the movie capital of the world.”[6] The incentive would consist of two parts: “$48 million in grants for small films and TV commercials, and up to $450 million in new tax credits, including Texas residency requirements for workers,” which Lt. Gov. Dan Patrick provides would give Texas $4 back for every $1 invested.[7]
In early 2025, a coalition of prominent actors—including Matthew McConaughey, Woody Harrelson, Renée Zellweger, Billy Bob Thornton, and Dennis Quaid—launched the “True to Texas” campaign.[8] This initiative features a commercial directed by True Detective creator Nic Pizzolatto, where the actors emphasize the economic benefits, such as job creation and local business growth, that could result from increased investment in the Texas film industry.[9]
This push is no surprise given the new film studios opening in the state, including a 546- acre studio in Bastrop.[10] Also, over the past few years, more hit productions, such as Taylor Sheridan’s Yellowstone, 1923, and Landman, have filmed in Texas.[11]
As of February 13, 2025, SB1 has been scheduled for a public hearing in the Senate Finance Committee.[12] Given that our firm has represented clients in some of the industry’s largest and most complex transactions in the entertainment industry and has worked on numerous deals utilizing tax incentives around the world, we continue to monitor the status of SB1 and standby ready to advise clients as needed.
FOOTNOTES
[1] Texas Moving Image Industry Incentive Program | Fort Bend Economic Development Council
[2] Film Subsidies – Texas Public Policy Foundation
[3] Film Subsidies – Texas Public Policy Foundation
[4] McConaughey, Harrelson channel ‘True Detective’ in Texas films ad
[5] McConaughey, Harrelson channel ‘True Detective’ in Texas films ad
[6] Lt. Gov. Dan Patrick: Statement on the State Budget Filed in the Texas Senate – Lieutenant Governor Dan Patrick
[7] Lt. Gov. Dan Patrick: Statement on the State Budget Filed in the Texas Senate – Lieutenant Governor Dan Patrick
[8] Dennis Quaid says Texas wants to be ‘New Hollywood’ in ad: photos
[9] Dennis Quaid says Texas wants to be ‘New Hollywood’ in ad: photos
[10] Bastrop film studio could produce $1.9B over 10 years and Bastrop reels in massive film studio and entertainment complex from California company
[11] McConaughey, Harrelson channel ‘True Detective’ in Texas films ad
[12] TX SB1 | 2025-2026 | 89th Legislature | LegiScan
A Delay in Exit Plans
There was much hope going into 2025 that we would see a rebound in the IPO market after a bit of a drought over the past few years. We left the uncertainty of the election behind us, and good news on the inflation and interest rate fronts were fueling a sense of hope that 2025 was going to be a great year for the IPO market. However, at almost three months into the new year, it is looking like that rebound might be delayed a little longer.
The Wall Street Journal reports that the market volatility we are currently seeing is going to make IPO pricing a “monumental challenge,” and the IPO recovery that venture investors have been waiting on is on hold. The market is reacting to the threats of tariffs and a trade war, as well as recent talks of a recession, and the WSJ says this is keeping some companies on the sidelines as they delay their exit plans.
Yahoo! Finance cites data from Dealogic indicating that the total value of US IPOs is up 62%, coming in at $10 billion as of March 11 – almost double the number of deals compared to the same period in 2024. However, this is still well lower than the kinds of numbers we were seeing in the boom of 2021.
There are some companies who have already gone public this year, with six venture backed IPO’s as of mid-March. And there are still some on track, at least as of now, for the second quarter. Klarna and CoreWeave both filed an IPO prospectus this month, but those plans could be derailed if the market continues its roller coaster ride. Others have already put their plans on hold.
And it is not just IPOs that are delayed – mergers & acquisitions (M&A) are also off to an extremely slow start this year despite expectations that there would be more robust activity this year. PitchBook data show that “US M&A volumes in January were the lowest they’ve been in 10 years, and February wasn’t rosy either.” They point to antitrust policy, market turmoil, and “price mismatches” as contributing factors here. The leadership at the DOJ and FTC also remains critical of Big Tech, so many of those players are sitting on the sidelines which has slowed down dealmaking considerably.
Only time will tell how the back and forth on tariffs will play out, but they are certainly having an impact on the market now and could have longer term impacts that further delay exit plans. A recent article in Forbes notes that the “market’s long-term response to tariffs depends largely on adaptability—how quickly companies can adjust supply chains, pass costs to consumers, or find alternative markets.” But how quickly companies can pivot remains to be seen, and timing will be critical for market stability and for transactions to resume.
There is certainly still hope that successful trade negotiations could end this tariff battle, but there are still fears about the current state of the economy and the potential for a recession. The world is watching closely to see how all of this shakes out, as is everyone sitting on the sidelines planning their next move.
Given that the pre-IPO planning process can be lengthy, and we know that better planning leads to better performance (and that lack of planning leads to poor results), companies and financial sponsors should be getting their ducks in a row for an anticipated IPO market window opening soon, perhaps as early as May 2025.
California Snags Former Resident for Tax Due on Stock Options
Many employees receive stock options as compensation from their employers. When receiving this type of compensation, the state tax implications may not be at the forefront of the employees’ minds, especially where it may be years between when the options are granted and when the options actually result in recognized income. However, failure to consider the state tax implications when stock options are granted may lead to unanticipated and sometimes costly consequences in this unsettled area of law. A recent opinion from the California Office of Tax Appeals (“OTA”) illustrates this point. Matter of Hall, 2025-OTA-113 (Cal. OTA Issued Dec. 13, 2024).
The Facts: Appellant served as president of Monster Beverage Company (“MBC”) from 2007 to 2013 and as chief brand officer of MBC in 2014. From 2009 to 2013, while Appellant was a resident of California, MBC granted Appellant non-qualified stock options (“NSOs”) and restricted stock units (“RSUs”). In December 2013, Appellant moved to Hawaii. Thereafter, in September 2014, the RSUs that Appellant received vested, and Appellant exercised his NSOs.
On Appellant’s 2014 California nonresident return, he reported none of the income that he recognized from the exercised NSOs and vested RSUs as California source income. Three years later, California commenced an examination of Appellant’s returns, during which it determined that the exercised NSOs and vested RSUs resulted in California source income because they were attributable to personal services performed by Appellant in the State. To determine the amount of income sourced to the State, California applied a ratio of California working days to total working days – resulting in a total tax assessment of $674,452 plus interest. Appellant appealed the assessment.
The Decision: In a nonprecedential opinion, the OTA first reviewed the taxability of NSOs and RSUs, identifying three critical points under California law: (i) income earned from the exercise of NSOs and the vesting of RSUs is treated as compensation for services; (ii) if an NSO does not have an ascertainable fair market value at grant, the grantee recognizes income in the taxable year the option is exercised; and (iii) taxable income from RSUs is generally taxable in the year the RSUs vest. Applying these points of law to Appellant, the OTA found “no dispute” that Appellant recognized income from the exercised NSOs and vested RSUs. Thus, the only issues remaining were: (1) whether the income Appellant recognized was subject to California income tax if Appellant was a nonresident at the time of exercise/vesting; and (2) if so, whether the State’s working day sourcing methodology was reasonable.
The OTA determined that it was “immaterial” that Appellant ceased being a California resident in 2014 because “the income from the NSOs and RSUs is treated as compensation for personal services… performed in California” between 2009 and 2013. Further, the OTA determined that the income at issue was reasonably sourced using the standard methodology of California working days to total working days – a methodology which the Appellant failed to argue, or show was incorrect.
Last, the OTA addressed Appellant’s claim that he was denied procedural and substantive due process because his ability to claim a credit for taxes paid in Hawaii was foreclosed because the statute of limitations to file such a claim in Hawaii had expired. The OTA determined it lacked jurisdiction over this claim, finding as a general rule that its jurisdiction is “limited to determining the correct amount of a taxpayer’s California [tax liability].”
The Takeaway: The Appellant would have benefited from considering the state tax implications and broader multistate issues of receiving stock options at the time of grant. If such consideration had been given, the Appellant could have at least tracked working days closely to avoid over-allocation to California and potentially timely sought a credit from Hawaii.
The importance of considering the state tax implications of stock options as compensation cannot be overstated, especially when considering that tax treatment varies by state. For example, when determining the portion of income from NSOs earned by nonresidents that is subject to tax, California looks to the taxpayer’s activities during the period from the grant of the NSOs to when they are exercised, while New York looks to the period from the grant to when the NSOs vest.
Taxpayers filing in various jurisdictions should take care to track their stock options, their working days, and consider credits for taxes paid in the various jurisdictions in a timely manner.
Tax Assessments: Minimum Evidentiary Foundation Required
When a taxpayer challenges an assessment issued by a state or local taxing authority, the taxing authority will typically assert that its assessment should be afforded a presumption of correctness, and the burden of proof is on the taxpayer to prove that the assessment is incorrect. While this is typically true, a presumption of correctness can only attach to an assessment if there is a rational basis and minimum evidentiary foundation for the assessment. While this should not be a high bar to cross for state or local taxing authorities, there are nonetheless times when they do not meet even these minimal requirements, and assessments are issued with no rational basis and no minimum evidentiary foundation.
A recent decision by the Alabama Tax Tribunal (“Tribunal”) highlights such an instance where local Alabama taxing authorities issued sales tax assessments that could not even satisfy these minimal requirements, and the assessments were voided without the company or a representative of the company even appearing at the trial. VV & Co., LLC v. City of Boaz; Docket No. City 23-1081-LP; VV & Co., LLC v. City of Albertville; Docket No. City 23-1082-LP (Ala. Tax Trib. Feb. 3, 2025). While it is never recommended that an appealing company not show up for its trial, the decision is a reminder that state and local taxing authorities are not unrestrained in their authority to issue assessments, and minimum requirements must be satisfied before the burden of proof shifts to a taxpayer to prove that an assessment is erroneous.
The two Alabama localities here engaged a third-party auditor that conducted a “desk audit” of the company that resulted in the sales tax assessments. In its appeal to the Tribunal, the company asserted that it did not do any business in the localities and that it only made wholesale sales of cars, and had no sales tax liability because it made no retail sales. At trial, the auditor from the third-party firm testified and the company did not appear. The auditor testified that the reason for the assessments was that the company had historically filed sales tax returns in the localities (several reporting zero sales), but beginning with the audit period, the company stopped filing returns. The assessments were calculated using estimation techniques based on the amounts reported on the company’s historic sales tax returns. The auditor further testified that neither locality had received any documents from the taxpayer indicating that the company made any sales in the localities during the audit period.
The Tribunal explained that while assessments in Alabama are “prima facie correct,” it is also “well established that the final assessments must be ‘based on a minimum evidentiary foundation.’” The Tribunal also noted that sales tax liabilities may only be estimated if “there is evidence reasonably establishing that the retailer conducted business and made sales during the period.” Finding that the “sole foundation” for the assessments issued by the localities was that the company “had filed tax returns at some point prior to the audit periods in issue but then stopped filing returns,” the Tribunal concluded that such reasoning was “insufficient to justify the final assessments,” and voided the assessments.
City’s Electric Slide Stumbles as Invalid Tax
We often focus on whether a levy is a tax masquerading as a fee because a state tax must be fairly apportioned under United States Constitutional precedent, while a fee is not so limited. Some “fees” can be quite material in amount, so it is important to have a second route of attack: challenge the levy as an improperly enacted tax. After improper enactment, the City of East Lansing (the “City”) lost badly to such a challenge. Heos v. City of East Lansing, Docket No. 165763 (Mich. Feb. 3, 2025).
The City of East Lansing realized that its budgeting was resulting in the City’s underfunding of its pension and other post-employment benefits obligations. To fill the gap, the City determined to charge a franchise “fee” for providers of electricity services and passed an ordinance to enact the levy – the levy was never voted on by City voters.
The franchise “fee” levy was negotiated into the franchise agreement for one of the City’s two electricity providers (the second provider refused to participate). The franchise agreement included a levy of 5% of revenue and was to be collected and remitted by the electricity system provider and placed on the bills of customers who receive and pay the energy bills. The provider was not liable for the levy itself, only for collecting and remitting it to the City.
Prior to the above-mentioned creative budgeting ordinance by the City, the “Headlee Amendment” to the Michigan Constitution was enacted. The Amendment prohibits units of local government:
from levying any tax not authorized by law or charter when [the Headlee Amendment was] ratified or from increasing the rate of an existing tax above that rate authorized by law or charter when [the Headlee Amendment was] ratified, without the approval of a majority of the qualified electors of that unit of Local Government voting thereon. Const 1963, art 9, § 31 (emphasis added).
As the Michigan Supreme Court aptly framed the issue: “Although the levying of a new tax without voter approval violates the Headlee Amendment, a charge that constitutes a user fee does not.” The Court observed with broadbrush that: “Generally a ‘fee’ is ‘exchanged for a service rendered or a benefit conferred, and some reasonable relationship exists between the amount of the fee and the value of the service or benefit.’ . . . A ‘tax,’ on the other hand, is designed to raise revenue.” This is as useful a distillation as the author has seen by a high court over the past nearly thirty years.
The Court explained with particularity that for a levy to be considered a fee, the levy must: (1) “have a regulatory purpose and not a general revenue-raising purpose[;]” (2) “be proportionate to the required costs of the service[;]” and (3) “be voluntary.”
A majority of justices found that (1) the City stated publicly that the fee had a revenue raising purpose to fill a budget gap and funds collected and remitted by the electricity service provider went into the general revenue fund to be used for any City purpose, (2) the fee was not “proportional to the costs the City incurred for granting [the electricity service provider] the right to provide electrical services to plaintiff[,]” and (3) the fee was not voluntary because, if the plaintiff did not pay the electric bill that contained the fee, the electric service was subject to being turned off. Applying those findings, the Court concluded that the levy was indeed a tax. Further, inasmuch as the City’s voters had never had the opportunity to vote on the levy, the levy failed as a tax on which a proper vote had not been conducted.
On a secondary issue, whether plaintiff electricity user was a taxpayer eligible to bring suit, a majority of justices answered in the affirmative. However, one justice wrote in dissent to conclude that the plaintiff was not a taxpayer (two justices did not participate in the decision).
The takeaway here is that if you are faced with a levy, ask what the levy is accomplishing and determine whether the levy is susceptible to challenge either as an unapportioned tax or, as in Heos, an improperly enacted tax.
Boosting Boston’s Housing: City & State Partner to Overcome Market Challenges
According to recent news coverage, about 30,000 housing units proposed for Boston are approved by the Boston Planning Department (BPD) yet unable to break ground due to market conditions. In response, the Wu administration, in partnership with the Commonwealth of Massachusetts, is advancing the following strategies to facilitate construction commencement: revising affordable housing agreements, providing direct public funding through a newly launched fund, and granting tax abatements, tax credits, and grants for office-to-residential conversions.
Revised Affordability
The Inclusionary Development Policy (IDP) originally created by a mayoral executive order in 2000, and now codified in Article 79 of the Boston Zoning Code, requires developers of market-rate housing projects to include a prescribed number of income-restricted housing units at prescribed affordability levels. The BPD prefers on-site IDP units, although compliance may be achieved by creating off-site units near the project or by paying into an IDP fund in an amount based on the project’s location in a high, medium, or low property value zone.
For stalled projects, the BPD and the Mayor’s Office of Housing (MOH) have been willing in certain circumstances to revise a project’s IDP commitments given the difficult financial environment and the urgency to build more housing. This strategy is not part of a formal program and does not follow rigid procedural rules.
Examples of recent proposals include:
A payment in lieu of half of the approved on-site IDP units based on the applicable property value zone and conditioned on building permit issuance within a specified timeframe, with the contributed amount being directed to an identified nearby affordable housing project; and
A commitment to deliver 4% instead of 18% on-site IDP units in an initial building, and to construct a separate project in close proximity with larger, more deeply affordable units, funded with proceeds from the sale or refinancing of the initial building.
In each case, affordable housing agreements with MOH were amended with a limited administrative process.
Momentum and Accelerator Funds
MassHousing is administering a newly created Momentum Fund, supplemented for Boston projects by the City of Boston’s Accelerator Fund, providing additional equity alongside private equity to improve the economics of stalled projects. The resulting noncontrolling investment would:
Comprise a quarter to half of the total ownership interests;
Be committed before construction financing closes;
Be funded when permanent financing closes; and
Be coterminous with the project’s senior loan up to 15 years.
The Momentum Fund is capitalized with $50 million as part of the Affordable Homes Act signed by Governor Healey in August 2024, and the Accelerator Fund is capitalized with $110 million proposed by Mayor Wu and approved by the Boston City Council in January 2025. MassHousing will review applications and handle underwriting, and will consult with the BPD on applications for projects in Boston.
To receive funds, projects must create at least 50 net new housing units, at least 20% of them income restricted at 80% AMI, and must demonstrate that they are energy code compliant and can commence construction within 6 months of the commitment of funds.
Resources for Office to Residential Conversions
Boston’s Downtown Residential Conversion Incentive Program supports downtown office-to-residential conversions in light of the post-pandemic decline in office utilization paired with businesses vacating Class B and C properties in favor of Class A properties. Eligible proposed conversions must be IDP and energy code compliant, and must commit to commence construction by December 31, 2026.
Developers under this program can obtain tax abatements of up to 75% at the standard residential tax rate for up to 29 years as memorialized in a Payment in Lieu of Taxes (PILOT) agreement, along with fast-tracked project impact review and reduced mitigation and public benefit commitments.
By the end of last year, 14 submitted applications to the Conversion Program representing 690 housing units resulted in 4 project approvals, with submissions and approvals continuing this year based on an extension of the program through December 2025.
Separately, the Commonwealth’s Affordable Housing Trust Fund has allocated a total of $15 million for grants to conversion projects of at least 70,000 square feet. This fund can provide up to $215,000 per affordable unit and up to a total of $4 million per project. The City of Boston will apply to the state for such funding on behalf of qualifying project applicants. As of early March 2025, about $7.5 million of the original pool is still available. In addition, the Affordable Homes Act establishes a tax credit program for qualified conversion projects covering up to 10% of total development cost to be administered by the Executive Office of Housing and Livable Communities (“EOHLC”). EOHLC is currently developing guidelines for implementation and is seeking input from developers and other interested parties.
DOL Expands Fiduciary Breach Correction Options
The United States Department of Labor (DOL) has updated its procedures for correcting certain fiduciary violations. This expansion allows employers to self-correct a broader range of errors, aligning the program more closely with the IRS’s recently updated correction procedures. If certain conditions are met, the new guidance allows for self-correcting some of the most common fiduciary violations, such as late contributions, late loan repayments, and inadvertent loan failures.
The DOL has long provided plan fiduciaries the option to use its Voluntary Fiduciary Correction Program (VFCP) to address various fiduciary violations. The program requires plan sponsors to both correct the fiduciary violation and submit an application to the DOL for approval. The core elements of the VFCP program remain unchanged. However, the DOL has expanded the program to include a self-correction component (SCC), which will allow plan sponsors to correct fiduciary violations without submitting an application to the DOL. Employers can begin using the new SCC provisions on March 17, 2025.
When Can SCC Be Used?
SCC is available for three fiduciary violations: failure to transmit contributions timely, failure to transmit loan repayments timely, and some inadvertent loan failures. Covered inadvertent loan failures include errors that could be self-corrected with the IRS under its Employee Plan Compliance Resolution System (EPCRS), which includes the most common loan failures.
What Are The Requirements?
To use the SCC program, several requirements must be satisfied:
If the violation caused lost earnings, those lost earnings must be calculated using the DOL’s lost earnings calculator and be less than $100.
Late contributions or loan payments must be made to the plan within 180 days following when the employer withheld the amounts.
Employers must complete and maintain a copy of the SCC Record Retention Checklist. Given the importance of complete and proper documentation, employers should seek assistance from legal counsel and other plan service providers.
Employers must file electronically with the DOL as part of the correction process. Under the traditional VFCP process, the DOL would issue a no-action letter. Under the SCC program, a no-action letter will not be issued, but an acknowledgment will be provided after the electronic filing is made.
Any correction amounts and costs related to the SCC process must be paid from the employer’s general assets, not from plan assets.
SEC Issues New Guidance on Self-Certification of Accredited Investor Status in Private Placements
On March 12, 2025, the staff of the Division of Corporate Finance (the staff) of the US Securities and Exchange Commission (the SEC) concurrently issued a no-action letter and interpretive guidance via new Compliance and Disclosure Interpretations (C&DIs) that helpfully clarify and expand the circumstances in which “accredited investor” status may be verified through investor self-certification when the minimum investment amount of an offering crosses applicable thresholds.
The private offering safe harbor afforded by Rule 506(c) of Regulation D (Rule 506(c)) under the Securities Act of 1933, as amended (the Securities Act), allows for the use of general solicitation and general advertising in connection with private placements, provided that, among other requirements, the issuer takes “reasonable steps” to verify that all of the participating purchasers qualify as “accredited investors” pursuant to SEC rules and regulations.1 This accredited investor verification requirement has historically been viewed as materially limiting the usefulness of the Rule 506(c) safe harbor, as the requirement has been understood to necessitate the undertaking of an oftentimes administratively burdensome manual verification process of each participating investor’s status and qualifications, including, for example, the collection and review of individual purchasers’ tax returns to confirm income eligibility thresholds had been met or requiring the engagement of third-party services to confirm ownership of assets (as relying solely on representations delivered by the investors themselves with respect to such qualifications and metrics was deemed insufficient in terms of conducting the “reasonable steps” verification process required by Rule 506(c)).
Significantly however, the recent no-action letter and C&DIs confirm that an issuer may now reasonably conclude in the context of an offering under Rule 506(c) that it has taken reasonable steps to verify a purchaser’s status as an accredited investor in circumstances where:
the purchaser has agreed to make a minimum investment of (i) $200,000 if the purchaser is a natural person or (ii) $1,000,000 if the purchaser is an entity (including, in each case, with confirmation from the purchaser that if such purchase is being made via a capital commitment, that such commitment is binding);
the purchaser provides representations both that (i) it is an accredited investor and that (ii) it is not receiving thirdparty financing in whole or in part with respect to the purchase; and
the issuer does not have any actual knowledge indicating that the purchaser is not in fact an accredited investor or that any of its provided representations (including as to the lack of thirdparty financing) are untrue.
Although the no-action letter and C&DIs, by simplifying the accredited investor verification process in certain circumstances, are expected to enhance the attractiveness of the Rule 506(c) exemption for issuers conducting private offerings, it is important to note that if a Rule 506(c) offering fails to qualify for the safe harbor for any reason, and the issuer has already engaged in general solicitation with respect to such offering (as would normally be permitted under Rule 506(c)), neither the exemption provided by Rule 506(b) of Regulation D (Rule 506(b)),2 which allows issuers to raise unlimited capital from accredited investors and up to 35 non-accredited investors (provided there has been no general solicitation or advertising), nor the general private placement exemption provided by Section 4(a)(2) of the Securities Act, for transactions not involving a public offering, would be available as fallback options with respect to the potentially busted securities law exemption – it is therefore crucial that issuers consult with counsel as early in the process as possible to ensure any potential offering is structured and conducted in a manner in which the availability of an exemption from registration is not called into question.
1 Rule 506(c)(2)(ii).
2 Issuers seeking to avoid burdensome accredited investor verification processes have historically turned to Rule 506(b) as the securities law exemption of choice – between July 1, 2020, and June 30, 2021 (the latest period for which data is available), issuers raised approximately $1.9 trillion under Rule 506(b), compared to $124 billion under Rule 506(c). https://carta.com/learn/private-funds/regulations/regulation-d.
What Every Multinational Company Should Know About … The Current Trump Tariff Proposals
Although we are only two months into the new administration, we have seen a dizzying array of new tariffs that have been proposed, imposed, revoked, suspended, and sometimes reimposed. It can be difficult for importers to keep up with all the proposals. So, as an aid to the importing community, we have put together an “evergreen” tariff article, which contains three key items for importers:
A table of the tariff proposals, including their current status[1] and the key importer issues for each;
A list of resources for importers looking for aids to cope with tariff and international trade uncertainty; and
A list of the most common questions we are receiving from clients regarding the new tariffs and their implementation.
We will be regularly updating these resources to reflect new tariff proposals and modifications, which are in some cases being updated or changed daily.
Where Are We on the Various Tariff Announcements?
At this point, we count 12 tariff initiatives that are proposed or in play. They range from broad-based tariffs that cover all goods from a certain country (Canada, China, and Mexico), tariffs that cover certain types of goods (aluminum and steel), promises of future tariffs (automotives, semiconductor, pharmaceutical, copper, and lumber), and promised retaliatory tariffs (European wine and alcoholic beverages). Further, although we have seen more tariff announcements in the first two months of the second Trump administration than we saw in the entirety of the first one, the largest tariff shoe is yet to drop: It is likely that the announced “Fair and Reciprocal” tariff rollout will dwarf the tariffs imposed to date, with the countries at the greatest risk of increased tariffs consisting of:
Countries that impose high tariffs. Notable examples include Argentina, Bangladesh, Brazil, Egypt, India, and Pakistan.
Countries that are viewed as heavily subsidizing their manufacturers. Depending on the particular type of products, examples include China (especially) as well as Australia, Canada, and the European Union countries.
Countries that are viewed as manipulating their exchange rate. The Department of Commerce already has issued a finding that Vietnam grants subsidies by manipulating its exchange rate, in a countervailing determination involving tires from Vietnam. As part of its semiannual report to Congress, the Treasury Department maintains a “monitoring list” of exchange rate policies that arguably confer subsidies. The November 2024 list included China, Germany, Japan, Singapore, South Korea, Taiwan, and Vietnam.
Countries that have put in place import barriers aimed at high-profile, high-volume products such as automobiles. While the United States maintains tariff levels of 2.5 percent for automobile imports, most of the rest of the world starts at 10 percent or higher.
We will be updating this article as new policies are announced, including the reciprocal tariffs. The state of play for each tariff is as follows:
Where Are We on the Trump Tariffs?
Tariff Proposal
Effective Date
Likely To Stick?
Likely To Increase?
Key Issues for Importers
2018 Section 301 Tariffs 83 FR 28710; 83 FR 40823; 83 FR 47974; 84 FR 43304
In force
Yes
Probably; likely to be equalized at top level and/or raised
Review HTS classifications to ensure accuracy, particularly for List 4B products; see “New 20% China Tariffs” below
2018 Aluminum/ Steel Tariffs 83 FR 11625; 83 FR 11619
Superseded as of 3/4/2025
N/A
N/A
N/A
New 20% China Tariffs 90 FR 11426
3/4/2025
Yes
Possibly
Use of Chinese parts and components for China+1 strategies; ensure substantial transformation of all products manufactured in +1 countries
25% Canada and Mexico Tariffs 90 FR 9113; 90 FR 9117
3/4/2025- 3/6/2025
Superseded as of 3/6/25
N/A
3/6/2025 (non-USMCA-Compliant goods) 90 FR 11429 90 FR 11423
Possibly
Possibly
Verify and document compliance (e.g., rules of origin, special rules for autos and textiles) for all claims of preferential treatment under USMCA; maintaining certificates of origin at time of entry. Consider Mexico duty-saving opportunities (e.g., IMMEX)
New 25% Aluminum/ Steel Tariffs 90 FR 9807; 90 FR 9817;
3/12/2025
Yes
Yes, by adding new derivative products
Monitor for new derivative products proposed for addition to steel and aluminum derivative products; verify potential HTS matches for aluminum and steel derivatives; look for Customs instructions regarding derivative products and apply
Reciprocal Tariffs
4/2/2025 (likely roll out in stages)
Yes
Unclear
Monitor; see above for list of high-tariff countries
Broad European Tariffs
Promised
Unclear
N/A
Monitor
25% Auto, Semiconductor, Pharmaceutical Tariffs
Promised
Yes
Subject to negotiation with Europe, Korea, Japan, and Mexico
Monitor; consider front-loading inventory for critical components
New Lumber Tariffs
Under study
Yes (if issued)
N/A
Monitor; consider front-loading inventory
New Copper Tariffs
Under study
Yes (if issued)
N/A
Monitor; consider front-loading inventory
200% Retaliatory Wine Tariffs
Threatened
No (if issued)
EU
Monitor; consider front-loading inventory
Future of USMCA
2026 review
Unclear
N/A
See Canada and Mexico Tariffs; monitor for expedited negotiations
Frequently Asked Questions
After presenting at numerous seminars and webinars, and in discussions with clients, we have noticed certain recurring questions. As an aid to the importing community, we have compiled a list of these, which include the following:
General
Do the tariffs stack?
Yes, all tariffs stack. This means an entry of steel from China would incur:
the normal Chapter 1–97 tariff;
the 25-percent Section 232 steel tariff;
the original Section 301 China steel tariff (up to 25 percent); and
the new 20-percent additional China tariff.
In addition, if the product is covered by an antidumping or countervailing duty order, then those duties also would stack.
Is the stacking compounded?
No. The tariffs add up without compounding. If both a 20-percent and a 25-percent tariff apply, then this results in a 45-percent increased tariff.
Are you seeing clients pursue a China +1 strategy to cope with the new tariffs?
Yes. Many clients have been pursuing a strategy of adding additional capacity outside of China since the imposition of the original Section 301 duties. These efforts appear to be accelerating, as there is a growing realization that high tariffs on China are the new normal. In this regard, it is important to note the original Section 301 tariffs remained in place even under the Biden administration. Further, China is likely to see the greatest amount of increased tariffs under the reciprocal tariff proposal because it hits so many categories — it heavily subsidizes its industries, it has been tagged as a currency manipulator by the Department of Treasury for years, and there are numerous countervailing duty findings by the Department of Commerce that provide a clear roadmap to identify subsidy programs.
One caution is that when companies move production out of China, they often continue to use Chinese-origin parts and components. Companies pursuing this strategy need to do a careful analysis to ensure they are “substantially transforming” the product by doing enough work and adding enough value in the third country to create a new and different article of commerce with a new name, character, or use, thus giving it a new, non-Chinese country of origin.
Will there be exceptions for goods like medical devices in the proposed tariffs?
Unclear. But the tariffs have veered toward being universal. Further, one of the purposes of the aluminum and steel tariff announcement was to wipe out the list of accumulated product-specific exceptions that had grown over the years. These factors work against an announcement of tariff-specific exceptions.
Are there any discussions relating to potential tariff relief for certain sectors (Defense, Navy, etc.)?
So far, the only somewhat industry specific reprieve has been the lifting of tariffs on USMCA compliant goods until April 2, 2025, as a result of the U.S. auto manufacturer concerns. While this is intended to apply to a lot of automotive imports, the lifting of the tariffs on USMCA compliant items is not exclusively tied to automotive imports. If discussions regarding tariff relief for other sectors have been occurring, they have not been announced.
Will the Executive Orders on tariffs be challenged in litigation?
Almost certainly, yes. But in general, the Court of International Trade and the Court of Appeals for the Federal Circuit tend to defer to the Executive in matters of international trade policy. Also, the imposition of special tariffs in the first Trump administration were generally upheld by the trade courts.
Have you heard of any plans to change Foreign Trade Zones (FTZ) laws?
In general, no. Specific tariff announcements, however, have contained provisions relating to the FTZs, such as stating any goods that go into Foreign Trade Zones need to enter in “privileged foreign status.” This means the duty rate is fixed at the time the goods enter the zone, meaning even if the goods are further manufactured within the FTZ, the duty will be based on the original classification when they entered the FTZ.
Steel and Aluminum Tariffs
How have the Section 232 aluminum and steel tariffs changed from the original 2018 version?
The aluminum tariffs increased from 10 to 25 percent.
All negotiated tariff-rate quotas for the EU, Japan and the United Kingdom, as well as the quotas negotiated with Argentina, Brazil, and South Korea, are no longer applicable. The previous exemptions for Australia, Canada, Mexico, and Ukraine no longer apply.
All product-specific exemptions that had been granted under the original aluminum and steel program are revoked.
The “derivative articles list” is considerably expanded.
Are Chapter 72 articles still subject to 25-percent tariffs?
Yes. Certain headings in Chapter 72 that were previously subject to the original Section 232 tariffs are still covered. All exclusions that previously applied to certain Chapter 72 products are now revoked.
Are iron products covered?
Based on the description of the covered products in the Executive Orders, carbon alloy steel products, not iron, are covered by the exclusions.
How should we treat imports that fall under the “derivative articles” HTS codes but do not actually contain any aluminum or steel?
In some cases, certain HTS classifications that are on the derivative aluminum and steel HTS classifications can cover types of products that may not contain any aluminum or steel. For example, certain types of metal furniture are covered, but if these are made out of a metal other than steel then they would not be covered even though they fall within an HTS that is listed in Annex 1 of the steel proclamation. In these cases, it would be appropriate to have the foreign producer include a statement on the commercial invoice to state that the product does not contain aluminum or steel, to support why the tariffs are not due on the entry.
After the elimination of the product-specific exemptions, are there any remaining exemptions?
The only exemption remaining is for derivative articles that are manufactured from steel melted/poured in the United States or aluminum smelted/cast in the United States. For such products, the importer should request a statement on the commercial invoice stating that the product contains aluminum smelted/cast in the United States or steel that was melted/poured in the United States. In case of Customs inquiry, it would be appropriate to include copies of steel mill certificates or aluminum certificates of analysis in the 7501 Entry Summary packet.
For derivative articles, is the 25-percent tariff paid on the full value of the article?
The Executive Orders state that the 25-percent tariff is paid on the “value” of the aluminum or steel “content” of the “derivative article.” There are, however, no instructions as to how this value should be calculated. In accordance with normal Customs requirements, the value should be calculated using a reasonable method that is supportable. This could potentially be based on a calculation from the foreign supplier. Frequent importers of derivative products should monitor CSMS announcements to see if CBP issues instructions on this issue.
Is duty drawback available for the aluminum and steel tariffs?
No, the Executive Orders state that duty drawback cannot be used.
Does Chapter 98 provide relief from the 25-percent aluminum and steel tariffs?
The Executive Orders do not list any Chapter 98 exceptions for the new tariffs. This is consistent with the original Section 232 tariffs, which also did not contain any Chapter 98 exceptions.
Will there be an exclusion process?
None has been announced or established. It is unlikely that the Trump administration would wipe out all product-specific exemptions only to build them back up again.
Could the list of “derivative articles” expand?
The Executive Orders directed the Department of Commerce to establish a process by May 11, 2025, to consider requests to add additional “derivative articles.” We anticipate that U.S. aluminum and steel manufacturers will aggressively use this process to push for additional excluded derivative products.
USMCA/Canada and Mexico Tariffs
Will the reciprocal tariffs replace the Canadian and Mexican tariffs? Or will they stack?
The reciprocal tariffs have not been announced yet. But because all of the other tariffs stack, there is a high likelihood that the reciprocal tariffs also will stack on top of the existing 25-percent tariffs rather than replace them where they overlap. Also, the 25-percent tariffs were announced as being imposed due to concerns about fentanyl and unauthorized immigration, which is an entirely separate issue from the tariff equalization that is the goal of the reciprocal tariffs.
How will tariffs effect the IMMEX/Maquiladora imports from Mexico?
Because the Maquiladora, Manufacturing, and Export Services Industry (IMMEX) Program is a figure of Mexican law, we anticipate Mexico will do all that it can to protect companies that operate using the Program. Although uncertain, as per previous experiences in imposing retaliatory measures, Mexico will most likely establish tariffs on US sumptuous goods and/or finished products, and hardly to raw materials used by IMMEX/Maquiladora companies.
Will the Canada and Mexico tariffs be lifted when the USMCA review occurs?
Unclear. We do note, however, that the United States lifted the prior aluminum and steel tariffs as part of the negotiation of the USMCA under the first Trump administration. The second Trump administration, however, is taking a much harder line on tariff and international trade issues.
Reciprocal Tariffs
What are reciprocal tariffs?
“Reciprocal tariffs” are intended to equalize tariff rates, such as when a foreign country imposes a higher tariff on the United States than the United States does for the same product category. Because the United States generally has low tariffs, this means that there are a great many HTS classifications that likely will increase, with the impact varying by country. Moreover, because the announcement of the coming reciprocal tariffs states that it will take into account any form of discrimination against U.S. companies or programs that favor foreign companies, then calculated reciprocal tariffs will likely be very high. For example, most countries have Value Added Taxes that rebate any VAT payments when goods are exported; the Trump administration has indicated that this would be considered a form of subsidy that should be counteracted with reciprocal tariffs. So would subsidized electricity, currency manipulation, and so forth. Adding these concepts on top of equalizing tariffs across HTS categories leads to likely major increases in tariffs.
When will they be announced?
The reciprocal tariff announcement is expected for April 2, 2025. The Trump Administration also announced that it would proceed to consider countries with major trade deficits with the United States first, so it is possible that April 2nd will be the start of a rolling set of reciprocal tariff announcements.
Force Majeure and Surcharges FAQs
The Foley Supply Chain team also has published a set of FAQs regarding contractual issues, which we are repeating here for convenience.
What are the key doctrines to excuse performance under a contract?
There are three primary defenses to performance under a contract. Importantly, these defenses do not provide a direct mechanism for obtaining price increases. Rather, these defenses (if successful) excuse the invoking party from the obligation to perform under a contract. Nevertheless, these defenses can be used as leverage during negotiations.
Force Majeure
Force majeure is a defense to performance that is created by contract. As a result, each scenario must be analyzed on a case-by-case basis, depending on the language of the applicable force majeure provision. Nevertheless, the basic structure generally remains the same: (a) a listed event occurs; (b) the event was not within the reasonable control of the party invoking force majeure; and (c) the event prevented performance.
Commercial Impracticability (Goods)
For goods, commercial impracticability is codified under UCC § 2-615 (which governs the sale of goods and has been adopted in some form by almost every state). UCC § 2-615 excuses performance when: (a) delay in delivery or non-delivery was the result of the occurrence of a contingency, of which non-occurrence was a basic assumption of the contract; and (b) the party invoking commercial impracticability provided seasonable notice. Common law (applied to non-goods, e.g., services) has a similar concept known as the doctrine of impossibility or impracticability that has a higher bar to clear. Under the UCC and common law, the burden is quite high. Unprofitability or even serious economic loss is typically insufficient to prove impracticability, absent other factors.
Frustration of Purpose
Under common law, performance under a contract may be excused when there is a material change in circumstances that is so fundamental and essential to the contract that the parties would never have entered into the transaction if they had known such change would occur. To establish frustration of purpose, a party must prove: (a) the event or combination of events was unforeseeable at the time the contract was entered into; (b) the circumstances have created a fundamental and essential change; and (c) the parties would not have entered into the agreement under the current terms had they known the circumstance(s) would occur.
Can we rely on force majeure (including if the provision includes change in laws), commercial impracticability, or frustration of purpose to get out of performing under a contract?
In court, most likely not. These doctrines are meant to apply to circumstances that prevent performance. Also, courts typically view cost increases as foreseeable risks. Official comment of Section 2-615 on commercial impracticability under UCC Article 2, which governs the sale of goods in most states, says:
“Increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance. Neither is a rise or a collapse in the market in itself a justification, for that is exactly the type of business risk which business contracts made at fixed prices are intended to cover. But a severe shortage of raw materials or of supplies due to a contingency such as war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost or altogether prevents the seller from securing supplies necessary to his performance, is within the contemplation of this section. (See Ford & Sons, Ltd., v. Henry Leetham & Sons, Ltd., 21 Com. Cas. 55 (1915, K.B.D.).)” (emphasis added).
That said, during COVID and Trump Tariffs 1.0, we did see companies use force majeure/commercial impracticability doctrines as a way to bring the other party to the negotiating table to share costs.
May we increase price as a result of force majeure?
No, force majeure typically does not allow for price increases. Force majeure only applies in circumstances where performance is prevented by specified events. Force majeure is an excuse for performance, not a justification to pass along the burden of cost increases. Nevertheless, the assertion of force majeure can be used as leverage in negotiations.
Is a tariff a tax?
Yes, a tariff is a tax.
Is a surcharge a price increase?
Yes, a surcharge is a price increase. If you have a fixed-price contract, applying a surcharge is a breach of the agreement.
That said, during COVID and Trump Tariffs 1.0, we saw many companies do it anyway. Customers typically paid the surcharges under protest. We expected a big wave of litigation by those customers afterward, but we never saw it, suggesting either the disputes were resolved commercially or the customers just ate the surcharges and moved on.
Can I pass along the cost of the tariffs to the customer?
To determine if you can pass on the cost, the analysis needs to be conducted on a contract-by-contract basis.
If you increase the price without a contractual justification, what are customers’ options?
The customer has five primary options:
1. Accept the price increase:
An unequivocal acceptance of the price increase is rare but the best outcome from the seller’s perspective.
2. Accept the price increase under protest (reservation of rights):
The customer will agree to make payments under protest and with a reservation of rights. This allows the customer to seek to recover the excess amount paid at a later date. Ideally, the parties continue to conduct business and the customer never seeks recovery prior to the expiration of the statute of limitations (typically six years, depending on the governing law).
3. Reject the price increase:
The customer will reject the price increase. Note that customers may initially reject the price increase but agree to pay after further discussion. In the event a customer stands firm on rejecting the price increase, the supplier can then decide whether it wants to take more aggressive action (e.g., threaten to stop shipping) after carefully weighing the potential damages against the benefits.
4. Seek a declaratory judgment and/or injunction:
The customer can seek a declaratory judgment and/or injunction requiring the seller to ship/perform at the current price.
5. Terminate the contract:
The customer may terminate part or all of the contract, depending on contractual terms.
[1] Please note that the implementation of the various tariff programs remains in flux, and thus the status of these program should be monitored closely. The included table is current as of the date of publication of this article.
Foley Automotive Update 19 March 2025
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.
Special Update — Trump Administration and Tariff Policies
Foley & Lardner partner Kathleen Wegrzyn addressed a number of FAQs regarding force majeure and price increases amid the current turbulent tariff landscape.
Key tariff announcements include:
President Trump on March 17 told reporters that “in certain cases, both” 25% sector-specific tariffs as well as unspecified “reciprocal tariffs” could apply on U.S. imports beginning April 2. U.S. imports that have been traded duty-free under the United States-Mexico-Canada Agreement (USMCA) are exempt — until April 2 — from the 25% tariffs on goods from Mexico and Canada that were announced on March 4.
Following the implementation of 25% tariffs on U.S. imports of steel and aluminum, Canada on March 13 imposed levies on C$29.8 billion in U.S. imported goods. This follows 25% tariffs on C$30 billion of products Canada announced on March 4.
Mexican President Claudia Sheinbaum thus far has not moved forward with a plans to apply retaliatory tariffs on U.S. imports.
The European Union intends to reinstate 2018 and 2020 countermeasures on April 1 against a range of U.S. goods, with a more extensive retaliatory tariff package planned for later next month.
China imposed tariffs on U.S. goods including large-engine vehicles, as well as export and investment controls on over two dozen U.S. firms after the Trump administration applied 20% duties on Chinese imports.
Automotive Key Developments
Analysis from S&P Global Mobility indicates the disruptive effects of 25% tariffs on all vehicle imports could potentially reduce North American production “by up to 20,000 units per day within a week.” S&P predicted a 50% probability for a tariff-related “extended disruption scenario” this year, during which certain high-profile vehicles “will slow or cease production.”
MichAuto and AlixPartners described volatile tariff policies as “crippling” and “debilitating” for the automotive industry and noted the ongoing uncertainty has already damaged OEMs’ and suppliers’ ability to make investment and product decisions.
Statements from MEMA and the American Automotive Policy Council emphasized the potential for significant cost increases for automakers, suppliers, and consumers resulting from the 25% tariffs on U.S. imports of steel and aluminum. In addition, a recent survey by the vehicle suppliers association found 97% of respondents had concerns regarding increased financial distress among sub-tier suppliers due to the announced tariffs, and over 80% of surveyed suppliers are exposed to steel and aluminum derivative tariffs.
Tariffs on steel and aluminum could raise costs up to$400 to $500 per vehicle on average, with the potential for greater impact on larger, aluminum-intensive vehicles such as the Ford F-150 pickup.
Relocating an assembly line between existing facilities can take up to eight months, and an automaker would likely need up to three years or longer to fully staff and significantly build out new U.S. manufacturing capacity.
Ford is reported to be amassing inventories of USMCA-compliant parts to mitigate the effects of tariffs, and the automaker has told its suppliers to keep shipping under existing terms, according to an update from Crain’s Detroit.
Automotive News assessed the exposure of certain EV brands to the impact of U.S. import tariffs.
University of Michigan economists projected U.S. new light-vehicle sales will reach 16.3 million units in 2025, while noting the projections have “substantial uncertainty” due to trade policy volatility. The economists also expect steel and aluminum tariffs to “raise production costs in the automotive supply chain,” and the levies could reduce Michigan’s employment by approximately 2,300 jobs by 2026.
Preliminary discussions concerning the renewal of the USMCA suggested a revised pact could result in higher tariffs for non-compliance, according to unidentified sources in The Wall Street Journal.
The Environmental Protection Agency on March 12 announced 31 deregulatory actions that include the reconsideration of the Biden administration’s emissions standards for light-duty, medium-duty and heavy-duty vehicles.
OEMs/Suppliers
While tariffs in the U.S., Canada, and the EU may continue to impede sales by Chinese automakers in the near term, market share is rising in emerging markets for Chinese brands that include BYD, Great Wall Motor, Chery Automobile, and SAIC Motor Corp.
Volkswagen intends to reduce production and headcount at its Chattanooga, Tennessee plant to support cost-cutting initiatives and in response to lower EV demand. Planned layoffs across VW Group have reached nearly 48,000 globally, including a 30% headcount reduction at its Cariad software unit by the end of this year.
Ford will invest €4.4 billion ($4.8 billion) in its German operations, in an effort to boost sluggish sales in Europe.
Nissan named Ivan Espinosa, currently serving as Chief Planning Officer, to succeed CEO Makoto Uchida, effective April 1.
Market Trends and Regulatory
U.S. new light-vehicle inventory reached 3 million units at the beginning of March, representing an 89-day supply industrywide, according to analysis from Cox Automotive.
The percentage of subprime auto borrowers at least 60 days past due on their loans reached 6.56% in January, representing the highest level in over 30 years, according to data from Fitch Ratings. The share of auto loans in serious delinquency across all borrower types was 2.96% in the fourth quarter of 2024, compared to 2.66% in Q4 2023 and 2.22% in Q4 2022.
Kelley Blue Book estimates that new-vehicle sales incentives were up 18.6% year-over-year in February 2025. The average incentive package last month reached 7.1% of average transaction price, or $3,392, compared to 6% of ATP in February 2024.
U.S. Senate Republicans introduced the Preserving Choice in Vehicle Purchases Act (S. 2090) to “prevent the elimination of the sale of motor vehicles with internal combustion engines” by limiting the Environmental Protection Agency’s issuance of certain Clean Air Act waivers.
GM has again applied with the Federal Deposit Insurance Corp. to establish an industrial bank, and this would enable the automaker to hold deposits and expand their financial offerings to consumers, dealerships, and employees. Stellantis and Ford have also recently submitted applications for banking licenses.
U.S. House lawmakers included language in an amendment to the Full-Year Continuing Appropriations and Extensions Act that effectively “removes the ability for any House members to use an expedited process” to compel a vote for the remainder of this calendar year on whether to terminate the national emergency declaration utilized as the basis to pursue tariffs on imports from Canada and Mexico. The “continuing resolution” (CR) to fund the federal government through the rest of the fiscal year 2025 was signed by the president on March 15, 2025.
Autonomous Technologies and Vehicle Software
Industry organizations, including the Alliance For Automotive Innovation, urged the Department of Transportation to establish a national framework to support the deployment of autonomous vehicles.
NVIDIA will collaborate with GM and Magna to advance next-generation vehicle technologies. NVIDIA has described artificial intelligence technologies in the auto industry as a “trillion-dollar opportunity.”
GM named Barak Turovsky, formerly of Cisco and Google, as its first Chief Artificial Intelligence Officer.
Ford announced tech veteran Mike Aragon will join the company as President, Integrated Services. The position is expected to support the automaker’s goals to boost revenue from software-enabled subscriptions and features.
Autonomous trucking startup Bot Auto plans to begin its first driver-out commercial freight pilot program in Texas this year, on routes between Houston and San Antonio. Houston-based Bot Auto was founded in 2023 by former TuSimple CEO Xiaodi Hou.
Electric Vehicles and Low-Emissions Technology
Over 50% of new EV purchases in the fourth quarter of 2024 were leases, and EVs accounted for nearly 20% of all new vehicle leases during the quarter, according to data from Experian released this month.
BYD plans to launch new charging technology on certain models in China next month that will enable 400 kilometers (249 miles) of range with five minutes of charge time, or roughly the same duration required to refuel comparable gas-powered models.
Cadillac intends to begin production of the electric 2026 Cadillac Escalade IQL in mid-2025 at GM’s Factory Zero electric vehicle assembly plant in Detroit.
Volkswagen recently debuted its ID Every1 electric minicar concept, and the low-cost EV will be the brand’s first model to use software from the automaker’s joint venture with Rivian.
Isuzu will invest $280 millionto establish a commercial EV plant in Piedmont, South Carolina.
UAW members ratified their first labor agreement at the Ultium Cells joint venture battery plant in Spring Hill, Tennessee.
SK On will supply Nissan with nearly 100 gigawatt-hours of batteries from 2028 to 2033, to support future EV models produced at the automaker’s Canton, Mississippi plant.
Stellantis will invest €38 million ($41 million) to produce EV engine parts at its Verrone transmissions plant in Italy.
Analysis by Julie Dautermann, Competitive Intelligence Analyst
Amendments to the Amparo Law
Para versión en español, haga clic aquí
On March 13, 2025, several amendments to the Amparo Law were published. These amendments intend to harmonize the Amparo Law with the recent modifications made to the structure and operation of the Federal Judicial System. The changes include:
Establishing that rulings in which amparo is granted against any law will only benefit the party who filed the respective lawsuit and cannot be extended to the rest of the persons. It is important that companies or individuals proceed in court against each authority or legislative act they consider unconstitutional.
Applying the new National Code of Civil and Family Procedures, which recently entered effect for the entire country, supplementarily to the Amparo Law.
Eliminating all references and attributions corresponding to the two Chambers of the Supreme Court as these were dissolved, and now the Supreme Court will only be integrated by a Plenum.
Eliminating references to the Federal Judiciary Board as the administrative and disciplinary officer of the Federal Judicial System replaced by the Judicial Administrative Body and the Court of Judicial Discipline.
Updating of the amounts owed in fines and eliminating references to the general minimum wage as a basis for calculation; Fines will now be calculated based on the Measurement and Updating Unit (Unidad de Medida y Actualización).
Using inclusive language in the wording of the various articles of the law.
Reforma a la Ley de Amparo
El 13 de marzo de 2025 se publicaron diversas reformas a la Ley de Amparo. Dichas reformas buscan armonizar esa ley con las recientes modificaciones que se hicieron a la estructura y funcionamiento del Poder Judicial de la Federación. Los cambios son, en esencia, los siguientes:
Se estableció expresamente que las sentencias en las que se otorga el amparo contra normas generales (leyes) solo beneficiarán a las personas que promovieron el juicio respectivo, por lo que el beneficio no se puede extender al resto de las personas, por lo tanto, es importante que las empresas o personas físicas acudan al juicio contra cada acto que consideren como inconstitucional.
Se hace referencia al nuevo Código Nacional de Procedimientos Civiles y Familiares mismo que recientemente entró en vigor para todo el País, lo anterior es relevante puesto que ahora dicho Código se aplicará supletoriamente a la Ley de Amparo.
Se eliminaron todas las referencias y atribuciones correspondientes a las dos Salas de la Suprema Corte puesto que éstas desaparecieron, siendo que ahora la Corte estará integrada solamente por un Pleno.
Se eliminan las referencias al Consejo de la Judicatura Federal como órgano administrativo y disciplinario del Poder Judicial ya que fue sustituido con el Órgano de Administración Judicial y el Tribunal de Disciplina Judicial.
Por lo que hace a las multas, éstas fueron actualizadas en montos y, además, se eliminaron las referencias al salario mínimo general como base para el cálculo, ahora dichas multas se calcularán con base en la Unidad de Medida y Actualización (UMA).
Se emplea un lenguaje inclusivo en la redacción de los diversos artículos de la ley.