Blockchain+ Bi-Weekly; Highlights of the Last Two Weeks in Web3 Law: May 8, 2025
Senate Moves Forward with “GENIUS” Stablecoin Bill: May 2, 2025
Background: A revised version of the Senate’s bipartisan stablecoin bill — the “GENIUS Act” — has been introduced, with a floor vote expected before the Memorial Day recess. Key changes include a prohibition on stablecoin issuers offering “a payment of yield or interest” on their issued payment stablecoins, along with enhanced illicit finance provisions. The bill also bars the sale of stablecoins in the U.S. by non-U.S. entities and allows for issuance under state regimes, provided the regime “meets or exceeds” federal standards, as determined by a three-member review panel consisting of the Treasury Secretary, Federal Reserve Chair and FDIC Chair.Changes aimed at addressing concerns about DeFi were also included, though they appeared only in an unpublished draft. Possibly in response to those revisions or other outstanding concerns, a group of nine Democrats — generally considered supportive of crypto — sent a letter indicating they could not support the bill in its current form.
Analysis: The GENIUS Act represents the closest Congress has come to passing meaningful legislation on crypto in the U.S. However, challenges remain. One potential obstacle is the push by some lawmakers to link the stablecoin bill to broader market structure legislation, which is advancing in Congress but is not as far along. Industry advocates have pushed back on this proposed combination, warning that tying the two together could stall momentum — and, given the limited window for congressional action this session, could result in no bill being passed at all. Another hurdle is the apparent erosion of support among key Democrats. With 60 votes needed in the Senate to overcome procedural hurdles, bipartisan support is essential. A delay — or worse, the failure — of even this relatively “vanilla” legislation risks letting political dysfunction once again derail progress in the digital asset space.
Coinbase Files Amicus to SCOTUS Over IRS John Doe Subpoenas: April 30, 2025
Background: Coinbase has filed an amicus brief in support of a petition challenging the IRS’s use of John Doe summonses — which compel platforms to disclose user data without individualized suspicion. The case was brought by a Coinbase customer over the IRS seeking to compel Coinbase to turn over a broad swath of “John Doe” customer information without any probable cause that any particular user broke the law. This follows a similar brief filed earlier by the DeFi Education Fund. If the Court agrees to hear the case, it could have broad implications for financial privacy — not just in digital assets — and may lead the Court to revisit the scope of the Third-Party Doctrine.
Analysis: In the digital age, sharing financial or location data with a third party is often not voluntary, but required for basic participation in modern life. The Third-Party Doctrine, a legal rule that allows the government to access data you’ve shared with third parties without a warrant, was developed in an era before modern financial technology and many argue it no longer fits how people transact today. With a more privacy-sensitive court, this case presents a real opportunity to revisit the boundaries of government surveillance over financial data.
Briefly Noted:
Richard Heart SEC Matter Over: The SEC has announced it will not be amending its complaint against Hex founder, Richard Heart, after the case was previously dismissed on jurisdictional grounds. Regardless of views on project, there should be broad agreement that giving a podcast interview in the U.S. and using open-source code developed here are not sufficient grounds for asserting global regulatory jurisdiction.
Federal Reserve Retracts Supervisory Guidance: The Federal Reserve Board has retracted guidance that required banks to obtain their approval before implementing any activity that involved crypto, including basic or low-risk use cases. If stablecoin legislation passes, banks are expected to become more active in digital asset custody, providing safer options for customers, which should be in everyone’s best interest.
FTC Goes After “Crypto Trading” Venture: The FTC is going after a series of multi-level-marketing businesses that sold “crypto-trading” courses. Fraud of this type has always been more appropriate within the FTC’s domain, rather than what we’ve seen over the last few years with the SEC attempting to broaden its jurisdiction by classifying crypto assets as securities simply to bring them under the purview of the SEC’s anti-fraud powers.
Stablecoin Updates: A number of relatively minor stablecoin-related developments surfaced last week in addition to the Senate updates discussed above, including SoFi exploring its own issuance, Tether posting $1 billion in Q1 profits (with a U.S. expansion in the works), an expected vote in the Senate on the GENIUS Act before Memorial Day, and Visa working with Bridge for a stablecoin-backed payment card. Although each of these updates may seem incremental on their own, collectively they underscore the central role stablecoins now play in the digital asset ecosystem and the growing attention they’re receiving from both industry and regulators.
Treasury Presentation on Digital Money: Buried on page 98 of the Department of Treasury’s update to the Treasury Borrowing Advisory Committee was a surprisingly thoughtful primer on stablecoins and their potential impact on traditional banking. The timing is notable, as this update comes on the heels of Tornado Cash securing at least a partial victory with a federal court rejecting Treasury’s attempt to dismiss the Tornado Cash lawsuit on the grounds that the case was moot following revisions to the sanctions made after the lawsuit was filed. On this topic it’s worth listening to this Miachel Mosier chat about how Tornado wasn’t a complete victory.
Solana Policy SEC Submission: One of the first big published projects from the Solana Policy Institute is its recent submission to the SEC, “Proposing the Open Platform for Equity Networks” which is worth a read. Also recommended is this industry submission to the SEC regarding staking.
SEC Chair’s First Public Remarks on Crypto: In his first public comments since taking over, Chair Atkins emphasized the need for “practical, durable” rules and a more constructive relationship with the digital asset industry. While delivered at a roundtable hosted by the SEC’s Crypto Task Force, the remarks mark a notable shift in tone from the agency’s prior enforcement-first approach.
Galaxy Digital Moves for Public Listing: Galaxy Digital has confirmed plans to go public on Nasdaq, marking a major step for the firm, which originally filed an S-1 back in 2022. The move signals renewed confidence in both the regulatory environment for digital assets and broader public market conditions.
Digital Chamber Initial SEC Submission in Response to Request for Information: As previously discussed, the SEC’s Crypto Task Force has requested industry feedback on a wide range of questions related to the regulation of digital assets. The Digital Chamber of Commerce is coordinating a major response effort in partnership with leading law firms to provide detailed answers to each question. Polsinelli Blockchain+ attorneys are involved in several of these responses. The first response, led by Sidley Austin, was published last week.
Updated FIT21 Market Structure Bill Released: House Financial Services and Agriculture Committees have published an updated discussion draft of the crypto market structure bill, previously known as the Financial Innovation and Technology for the 21st Century Act (FIT21). We will have a larger update on the proposed legislation and a failed attempt at a joint hearing on digital assets in the House in our next Bi-Weekly update.
Conclusion:
The last two weeks suggest that while momentum is building toward a more structured regulatory environment for digital assets, there’s still a real risk that this historic opportunity could be squandered. We’ll be watching closely as these developments unfold and continuing to engage where it matters. We look forward to seeing many of you at Consensus.
GeTtin’ SALTy Episode 52 | Catching up on 2025 SALT Legislative Trends with Jared Walczak of the Tax Foundation [Podcast]
In this episode of GeTtin’ SALTy, host Nikki Dobay welcomes frequent guest Jared Walczak, Vice President of State Projects at the Tax Foundation, to discuss the whirlwind 2025 legislative sessions.
From income tax rate reductions in Kansas, Kentucky, and Montana to the capital gains surtaxes in Maryland and Washington, Jared provides an insightful analysis of the policy shifts that are shaping the tax landscape.
They delve into Washington State’s expansion of its sales tax to advertising services, raising sourcing and compliance concerns.
Jared also highlights the debate surrounding property tax relief as states grapple with rising home values.
The episode wraps up with a lighthearted coffee-versus-Diet-Mountain-Dew discussion.
Tune in to hear about current tax policy challenges, creative solutions, and the complex interplay between state and local tax decisions!
European Union Adopts 16th Package of Sanctions Against Russia
In a bid to further increase the pressure on Russia, the Council of the European Union has adopted additional measures which have been introduced in its 16th sanctions package. The new measures amending the framework Council Regulation (EU) 833/2014 are found and included in Council Regulation (EU) 2025/395 (EU’s 16th Package). They target systemically important sectors of the Russian economy, including energy, trade, transport, infrastructure and financial services.
Additional Listings
An additional 48 individuals and 35 entities have been targeted by asset freezes and travel bans. The EU’s 16th Package adds new criteria for listing individuals and entities that are part of support or benefit from Russia’s military-industrial complex. This is in addition to any entities or individuals who are active in sanctions circumvention, maritime or Russian crypto assets exchanges.
Anti-Circumvention Measures
An additional 74 vessels, bringing the total number of listed vessels to 153, have been added. These vessels are part of the shadow fleet or contribute to Russia’s energy revenues.
Trade Measures
Ban on Primary Aluminium Imports
The EU’s 16th Package also adopts further restrictions on the trade of goods and services. An aluminium import ban on EU imports of primary aluminium from Russia has been included. The exception to this is that it includes a “phase-in period” permitting the import of 275,000 tons over a 12-month period.
Export Bans
Export restrictions have been added which target 53 new companies, which include 34 companies outside of Russia and which support Russia’s military-industrial complex.
Dual-use export restrictions have been extended to additional items in order to cut Russia’s access to key technologies, including the following:
Dual-use chemical precursors to produce chloropicrin and other riot control agents used as chemical weapons by Russia in violation of the Chemical Weapons Convention.
Software related to computer numerical control machine tools used to manufacture weapons and video game controllers used by the Russian army to pilot drones on the battlefield.
Chromium ores and compounds due to their military applications.
Additional export restrictions on industrial goods, such as steel products, fireworks and certain minerals and chemicals, have been included.
Energy Measures
The EU’s 16th Package prohibits temporary storage or the placement under free zone procedures of Russian crude oil or petroleum products in EU ports, which was, until now, allowed if the oil complied with the price cap and went to a third country. This prohibition will inflict additional costs on the transport of Russian oil.
The package extends the prohibition to provide goods, technology and services for the completion of Russian liquefied natural gas projects to also crude oil projects in Russia, such as the Vostok oil project.
The package extends the existing software ban to restrict the export, supply or provision of oil and gas exploration software, which includes drilling processes, geological inspections and reservoir calculations, to Russia.
Infrastructure Measures
With immediate effect, a full transaction ban on specific Russian infrastructures—ports and airports which are believed to have been used to transport combat-related goods and technology or to circumvent the oil price cap by transporting Russian crude oil via ships in the shadow fleet—have been included in this latest package as they contribute to Russia’s military efforts.
The restrictions are broadly drafted and will apply to any transactions with relevant ports and airports (as listed in Annex XLVII of the EU’s 16th Package), even if there is no direct transaction with the port authorities themselves.
Transport Measures
One of the most notable changes under Article 5ae of the EU’s 16th Package is the imposition of a full flight ban which provides for the possibility to list any third-country airline operating domestic flights within Russia or supplying, selling, transferring or exporting, directly or indirectly, aircraft or other aviation goods and technology to a Russia air carrier or for flights within Russia.
If listed in Annex XLVI of the EU’s 16th Package, these air carriers, as well as any entity owned or controlled by them, will not be allowed to land in, take off from or fly over EU territory.
The flight ban will not apply to the following:
• In the case of an emergency landing or an emerging overflight.• If such landing, take-off or overflight is required for humanitarian purposes.
Financial Measures
An additional 13 Russian banks and three non-Russian banks, namely Bank BelVEB, Belgazprombank and VTB Bank (PJSC) Shanghai Branch (due to their use of the system for Transfer of Financial Messages of the Central Bank of Russia), have been either disconnected from the Society for Worldwide Interbank Financial Telecommunication international payment system or subjected to a transaction ban, intensifying financial isolation of Russia.
The European Union has also extended a transaction ban to allow it to target financial institutions and crypto asset providers circumventing the oil price cap so as to further isolate Russia’s financial network.
Measures Against Disinformation
To combat media manipulation and distortion of events, further restrictive measures have been placed on broadcasting activities. Eight additional media outlets, namely EADaily, Fondsk, Lenta, NewsFront, RuBaltic, SouthFront, Strategic Culture Foundation and Krasnaya Zvezda, have had broadcasting suspended because they are under the permanent control of Russian leadership and participate in spreading misinformation and propaganda.
Concluding Remarks
These increased enforcement efforts and highlighted sanctions are not just symbolic but impactful. As the European Union strengthens its sanctions framework and expands enforcement efforts, businesses must proactively assess their compliance strategies to mitigate legal and operational risks.
Navigating Tariffs in Construction Contracts: Creative Strategies for Owners and Contractors
Introduction: Steering Through the Storm of Tariff Uncertainty
Tariffs on critical construction materials—steel, aluminum, lumber, and more—are roiling project budgets and schedules, leaving owners and contractors adrift in a sea of cost uncertainty. As tariff negotiations remain murky and unresolved, these financial headwinds are likely to persist, threatening the stability of ongoing and future projects. Yet, within this storm lies a chance to chart a steadier course. By embedding strategic, tariff-savvy provisions in construction contracts, owners and contractors can shield their projects from volatility and seize control of their financial destiny. This article explores creative strategies to address tariff challenges, empowering stakeholders to navigate uncertainty with confidence.
Strategic Contract Provisions to Mitigate Tariff Risks
Carefully crafted contract language is the cornerstone of managing tariff-related uncertainties. Below are innovative strategies to consider when negotiating and drafting construction agreements, designed to balance risk allocation and maintain project viability:
1. Incorporate Material Cost Escalation Provisions
Tailored material escalation clauses allow for adjustments to the contract sum when tariffs significantly increase material costs post-contract execution. Such a clause limits relief to tariffs enacted after the contract is signed, ensuring that only unforeseen regulatory changes trigger adjustments. This incentivizes contractors to lock in pricing early while protecting owners from absorbing pre-existing tariff burdens.
2. Require Fair and Timely Notice of Tariff Impacts
To prevent disputes over tariff-related claims, contracts should mandate prompt notification of tariff impacts. A sophisticated strategy is to require contractors to identify tariff-driven cost increases within a short window (e.g., 7-14 days) of a tariff’s enactment or application to a project. This “fair notice” provision ensures owners receive early warnings, enabling proactive budget adjustments or alternative sourcing strategies. Contractors benefit from clear timelines, reducing the risk of waived claims due to delayed reporting.
3. Embed Tariffs in Change Order Processes
Change orders are a natural mechanism for addressing tariff impacts. Consider explicitly including tariff-related cost increases within the definition of permissible change orders. Contracts can require contractors to submit detailed documentation—such as supplier invoices, tariff notices, or government regulations—to substantiate claims. This transparency builds trust and streamlines owner approval. For owners, consider setting a threshold for tariff-related change orders requiring owner approval, such as 5% of a subcontract’s value or a specific scope division. This balances flexibility with oversight, ensuring significant cost increases are vetted.
4. Cap Total Tariff Adjustments
To manage financial exposure, contracts can impose a cumulative cap on tariff-related cost adjustments, such as $500,000 across the project (excluding subcontractor errors or omissions). With this approach, owners gain predictability, while contractors retain a pathway for relief within reasonable limits. Also, considering pairing the cap with a shared savings clause, where cost savings from tariff reductions (e.g., repealed tariffs) are split between the parties, incentivizing collaboration.
Conclusion: Building Resilience Through Collaboration
Tariffs are an unavoidable reality in modern construction, but they need not derail projects. By integrating thoughtful, tariff-specific provisions into construction contracts, owners and contractors can manage risks collaboratively and creatively. From escalation clauses and fair notice requirements to change order thresholds and cost caps, these strategies empower stakeholders to navigate tariff uncertainties with confidence. Proactive contract drafting remains a powerful tool for ensuring project success in an unpredictable economic landscape.
The Benefits of a Proactive Approach to Family Office Tax Planning
As the financial landscape changes with each passing day, high-net-worth families realize the importance of being ahead of the tax planning curve. This strategy, especially in family offices, helps to ensure proper management of financial resources, wealth preservation, and growth. Families that can foresee changes and institute strategic measures will be better positioned to deal […]
Not What You Think: Some Trump Tariffs Exempt Your Goods from Other Trump Tariffs
Some importers are finding, to their surprise, that the Trump Administration’s 25% tariffs on aluminum and steel create an exemption from the 125% tariffs on Chinese goods.
The Trump tariff agenda has been complex, to say the least. But as with any complex system, it is important to pay attention to the details.
The detail we focus on today is that goods subject to the 25% Section 232 steel and aluminum tariffs, regardless of the steel and aluminum content, are exempt from the “reciprocal” tariffs imposed under the International Emergency Economic Powers Act (IEEPA). For imports from most countries, this is a bad thing (since the IEEPA tariff is currently 10% for most countries, so the 25% Section 232 tariff is much worse). But for goods from China (which are subject to a 125% reciprocal tariff), the 25% steel and aluminum tariffs are actually a relief.
This outcome is unlike most of the other Trump Administration tariff programs, which may be additive with one another in certain circumstances. Here is the rare case where it may be beneficial to have two tariffs that could potentially apply to your goods.
Here is how it breaks down:
The original reciprocal tariff order exempted Section 232 goods. These tariffs were issued by Executive Order (EO) 14257 on April 2, 2025. The reciprocal tariff EO contained the following provisions:
Goods from virtually all countries were subject to a “reciprocal” tariff at what was referred to as the “baseline” tariff rate of 10% ad valorem (i.e., 10% of the declared value of the goods).
Among other exemptions, articles subject to the Section 232 steel and aluminum tariffs were exempt from the 10% baseline rate. Sec. 3(b) of the EO states that “the following goods as set forth in Annex II to this order, consistent with law, shall not be subject to the ad valorem rates of duty under this order: . . . (ii) all articles and derivatives of steel and aluminum subject to the duties imposed pursuant to section 232 [as amended].”
The baseline tariffs were intended to be raised to higher levels on a country-specific basis (as listed in Annex I of the order) on April 9, 2025.
President Trump’s April 9, 2025 “pause” order maintained 10% reciprocal tariffs on most countries, but imposed a 125% reciprocal tariff on Chinse goods. The order left untouched the critical provision exempting Section 232 goods from all reciprocal tariffs.
Guidance issued by U.S. Customs and Border Protection (CBP) on April 4 and modified on April 9, 2025 clarifies that the Section 232 goods remain exempt from the reciprocal tariffs. The guidance provides as follows:
EXCEPTIONS:
“Until further notice, for all imported merchandise that is entered for consumption [after certain effective dates], then one of the following HTSUS secondary classifications must be declared, to specify the particular exception pursuant to which the reciprocal tariff in heading 9903.01.25 [the 10% tariff] or 9903.01.43 – 9903.01.76 [the country-specific tariffs] does not apply to the imported articles that are excluded from the additional ad valorem duties:…”
One of the exceptions is goods that fall under HTS “9903.01.33: Articles of iron or steel, derivative articles of iron or steel . . . of any country, subject to Section 232 actions.”
Further CBP guidance issued on April 10, 2025 provided additional clarity exempting Section 232 steel and aluminum articles from the 125% China reciprocal tariff. It states:
“GUIDANCE: Imported products of China. . . other than those that fall within the identified exceptions included in [the April 9, 2025 guidance], entered for consumption, or withdrawn from warehouse for consumption [after effective date], are subject to the following HTSUS classification and additional ad valorem duty rate: 9903.01.63: Articles the product of China, including products of Hong Kong and Macau, will be assessed an additional ad valorem rate of duty of 125%.”
HTS 9903.01.33 falls under an identified exception in the April 9, 2025 guidance.
CBP FAQs issued on April 28, 2025 further clarify that goods subject to the 25% Section 232 steel and aluminum tariffs, regardless of the steel and aluminum content, are wholly exempt from the 125% tariff currently applied to imports from China.
Are importers expected to pay the reciprocal tariff on the value not declared as the steel content – and how would that be determined? Would the importer need to report an additional line for the non-steel value that may be subject to the reciprocal tariffs?
No, articles and derivatives of steel and aluminum subject to Section 232 duties are excluded from the reciprocal tariffs; pursuant to heading 9903.01.33, HTSUS. Refer to 90 FR 15041 (Apr. 7, 2025) and CSMS # 64680374 and # 64701128.
In looking at Annex III examples below, is the interpretation correct that the entire value is exempt from reciprocal tariffs and the country rate would not apply regardless of the iron, steel or aluminum content (as applicable in the derivative product)?
Examples:
(vii) The additional duties imposed by headings 9903.01.25, 9903.01.35, 9903.01.39, and 9903.01.43-9903.01.77 shall not apply to derivative iron or steel products provided for in headings 9903.81.89, 9903.81.90, 9903.81.91, 9903.81.92 and 9903.81.93.
(ix) The additional duties imposed by headings 9903.01.25, 9903.01.35, 9903.01.39, and 9903.01.43-9903.01.77 shall not apply to derivative aluminum products provided for in headings 9903.85.04, 9903.85.07, 9903.85.08 and 9903.85.09
Correct, in the scenarios above, the entire value is exempt from the reciprocal tariffs.
Taken together, the Executive Orders and related CBP guidance establish that if an article from China is subject to the 25% steel and aluminum tariff, it is exempt from the 125% reciprocal tariff for articles from China.
Moreover, depending on the type of article, the 25% Section 232 steel and aluminum tariff will either apply to the entire value of the article or only to its steel or aluminum content. We described how the Section 232 steel and aluminum tariffs apply in previous blog post. This means that in most cases the 25% tariff will only apply to the value of the steel or aluminum content, and not to the entire value of the good.
We note that other tariffs still apply (and apply to the whole value of the imported good). For example, all goods of China are still subject to the 20% tariff imposed March 3, 2025 related to the Fentanyl economic emergency. Additionally, there are tariffs on certain steel products from China under Section 301.
One further twist is what to do when the imported article is identified on the Section 232 steel and aluminum tariff order (by Harmonized Tariff number) but actually contains no steel or aluminum. Would those goods be exempt from the reciprocal tariff? That depends on what the term “regardless of the iron, steel or aluminum content”in the CBP FAQ means. On its face, “regardless” could be taken to mean that the article could contain zero percent iron or steel. If that article is nonetheless listed in the Section 232 order, and also is a product of China, some importers are taking the position that such an article is exempt from the China reciprocal tariff and also draws zero Section 232 duty (because the 232 duty applies only to the steel or aluminum content). The risk here is whether CBP might consider the article with zero aluminum or steel not to be “subject” to the 232 duty, even though it is listed in the Section 232 order.
We also note that importers always bear the duty of “reasonable care” in declaring the correct classification, value, origin, tariff program applicability, and all other aspects of the importation, under penalty of law. Therefore, it is crucial to ensure accuracy in these matters.
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IRS Announces 2026 Limits for Health Savings Accounts, High-Deductible Health Plans, and Excepted Benefit HRAs
The Internal Revenue Service (IRS) recently announced (see Revenue Procedure 2025-19) cost-of-living adjustments to the applicable dollar limits for health savings accounts (HSAs), high-deductible health plans (HDHPs), and excepted benefit health reimbursement arrangements (HRAs) for 2026. All of the dollar limits currently in effect for 2025 will change for 2026, with the exception of one limit. The HSA catch-up contribution for individuals ages 55 and older will not change as it is not subject to cost-of-living adjustments.
In Depth
The table below compares the applicable dollar limits for HSAs, HDHPs, and excepted benefit HRAs for 2025 and 2026.
HEALTH AND WELFARE PLAN LIMITS
2025
Δ
2026
HDHP – Maximum annual out-of-pocket limit (excluding premiums)
Self-only coverage
$8,300
↑
$8,500
Family coverage
$16,600
↑
$17,000
HDHP – Minimum annual deductible
Self-only coverage
$1,650
↑
$1,700
Family coverage
$3,300
↑
$3,400
HSA – Annual contribution limit
Self-only coverage
$4,300
↑
$4,400
Family coverage
$8,550
↑
$8,750
Catch-up contributions (ages 55 and older)
$1,000
=
$1,000
Excepted Benefit HRA
Annual contribution limit
$2,150
↑
$2,200
Next Steps
Plan sponsors should update payroll and plan administration systems for the 2026 cost-of-living adjustments and incorporate the new limits in relevant participant communications, such as open enrollment and communication materials, plan documents, and summary plan descriptions.
Credit Suisse Services AG Pleads Guilty to $4 Billion Tax Evasion Scheme
Credit Suisse Services AG Pleads Guilty to Tax Crimes, Agrees to Pay Over $510 Million in U.S. Settlement. Credit Suisse Services AG has pleaded guilty to conspiring to help U.S. taxpayers conceal more than $4 billion from the Internal Revenue Service through at least 475 offshore accounts. The plea marks the culmination of an extensive […]
2026 Inflation-Adjusted Health and Welfare Plan Limits
On May 1, 2025, the IRS released Rev Proc 2025-19 which updated for 2026 the limits applicable to certain health and welfare plans, including the following key limits:
2026 Limit
2025 Limit
Health FSA – Maximum contributions
$4,400 (self-only)
$8,750 (family)
$4,300 (self-only)
$8,550 (family)
HDHP – Minimum Deductible
$1,700 (self-only)
$3,400 (family)
$1,650 (self-only)
$3,300 (family)
HDHP – Maximum Out of Pocket
$8,500 (self-only)
$17,000 (family)
$8,300 (self-only)
$16,600 (family)
Maximum employer excepted benefit HRA contribution
$2,200
$2,150
These 2026 limits are effective for HSAs for calendar year 2026, and for excepted benefit HRAs for plan years beginning in 2026.
Medicare Drug Price Negotiation Program: The Inflation Reduction Act “Pill Penalty” and Other IRA Reforms on the Horizon for 2026
When Congress adopted the Inflation Reduction Act (IRA) in 2022, creating the Medicare Drug Price Negotiation Program (MDPNP), the bill did not receive support from any Republican senators.
In 2025, the question remains what Congress and the current administration will do with the MDPNP, and we are starting to find out.
On April 15, 2025, President Trump issued Executive Order 14273, entitled “Lowering Drug Prices by Once Again Putting Americans First.” This comes on the heels of the release of the Final CY 2026 Part D Redesign Program Instructions (“Program Instructions”) by the Centers for Medicare and Medicaid Services (CMS) on April 7—concurrent with the CY 2026 Announcement of Medicare Advantage Capitation Rates and Part C and D Payment Policies (see our recent blog post on the latter.)
Executive Order 14273 includes a number of provisions addressing the IRA, including:
Within 60 days, the Secretary of the Department of Health and Human Services (HHS) shall propose and seek guidance on the MDPNP for 2028 and manufacturer effectuation of the Maximum Fair Price (MFP) under the program in 2026, 2027, and 2028.
HHS is also directed to work with Congress (no specified time frame) to align the treatment of small molecule prescription drugs, which are subject to an earlier negotiation time period, with that of biological products. This will end the so-called “pill penalty”, “ending the distortion that undermines relative investment in small molecule prescription drugs,” the executive order states.
Within one year, the Secretary is to develop a rulemaking plan and select for testing a payment model to obtain better value for high-cost prescription drugs and biologicals covered by Medicare, including those not subject to the MDPNP.
In an April 15 Fact Sheet, the White House says that the order “delivers lower drug prices for Medicare and the seniors who rely on it by…[improving] the Medicare Drug Pricing Negotiation Program in order to eclipse the 22 [percent] in savings achieved in the program’s first year.”
We discuss Executive Order 14273 and the Part D Redesign Program Instructions as they relate to the IRA, below.
Room for Improvement?
As a result of the IRA, Medicare negotiates directly with drug companies to improve access to Medicare Part B (medical benefit) and Part D (prescription drug benefit) covered drugs. Prices negotiated for the initial ten drugs are slated to go into effect on January 1, 2026. CMS announced in March that it has signed agreements with drug manufacturers for the next 15 drugs in the MDPNP, effective January 1, 2027.
While keeping the program in place, Executive Order 14273 requires that the guidance developed by the Secretary 1) improve MDPNP transparency; 2) prioritize the selection of prescription drugs with high costs to the Medicare program; and 3) minimize any negative impacts of the MFP on pharmaceutical innovation within the United States. The overarching policy is to optimize federal health care programs, intellectual property protections, and safety regulations “to provide access to prescription drugs at lower costs to American patients and taxpayers.”
The directive for the Secretary to work with Congress to end the pill penalty comes from a differential in the IRA’s price-fixing model: Small molecule drugs are eligible for selection to the MDPNP seven years after Food and Drug Administration (FDA) approval, and the price control goes into effect at year nine. Biologics, meanwhile, are eligible for selection 11 years after FDA approval, and the price control goes into effect at year 13.
Congressman Gregory F. Murphy, M.D. (R-NC) has already introduced bipartisan, bicameral legislation to address the problem. H.R. 1492, the “Ensuring Pathways to Innovative Cures (EPIC) Act” simply equalizes the negotiation period in the Social Security Act so that both small molecule drugs and biologics are eligible for selection after 11 years.
“According to a University of Chicago policy brief, due to the 9-13 disparity, 188 fewer small molecule medicines will come to market,” Murphy’s press release states, adding that small molecule funding has dropped by 70 percent since the IRA was introduced in 2021.
Even if the directive for the Secretary and Congress to work together to modify the MDPNP is a simple task, this work will be “coupled with other reforms to prevent any increase in overall costs to Medicare and its beneficiaries,” according to E.O. 14273.
Part D Redesign Program Instructions
The Final CY 2026 Part D Redesign Program Instructions provide guidance regarding 1) the implementation of IRA changes to the defined standard Medicare Part D drug benefit and 2) the successor regulation exception to the IRA that permits formulary substitutions for selected drugs, which relates to both the Part D program and the MDPNP.
The former includes, for 2026, an increased annual out-of-pocket (OOP) threshold of $2100 (up from $2000 in 2025); changes to the liability of enrollees, sponsors, manufacturers, and CMS; and the establishment of the selected drug subsidy program, which lowers Part D sponsor liability on the negotiated price of the selected drug. The IRA allows Part D sponsors to remove a selected drug from their formularies if removal would be permitted under § 423.120(b)(5)(iv) or any “successor regulation”; the Program Instructions identify updated provisions at §423.120(e)(2)(i), (f)(2), (3), and (4) as the “successor regulation.”
CMS has highlighted other key policies of the Program Instructions—including Prescription Drug Plan (PDP) meaningful difference thresholds (10 to 15 percent); a simplified creditable coverage determination methodology, and more—in a summary of key changes preceding the instructions and in a Fact Sheet of April 7, 2025.
Takeaways
The current administration’s defense of the MDPNP in a brief filed in February indicated a likelihood that President Trump was going to maintain the MDPNP while aiming to achieve even higher savings, to outshine the Biden administration. This has proven to be largely true. Interested parties should remain on the lookout for Secretary Robert F. Kennedy’s rulemaking seeking public comment on the MDPNP by June 15 and be prepared to comment if impacted.
Cannabis ESOPs Provide Solutions for Operators
As we enter Q2 of 2025, the cannabis industry has become increasingly pessimistic about the elimination of Section 280E of the Internal Revenue Code, whether via rescheduling or otherwise. Rescheduling appears unlikely in the foreseeable future, and certain members of the Senate have filed a bill that would make 280E continue to apply even if rescheduling were to occur
Cannabis ESOPs (employee stock ownership plans) can provide a structure to avoid 280E, as well as federal and state income tax, entirely.
At its most simplistic level, an ESOP transaction allows the company’s owners to sell their stock to an ESOP trust (the “Trust”) and to defer capital gains taxation of the sale proceeds. The Trust then owns the stock with the company’s employees as beneficiaries of the Trust. The ESOP transaction is financed in multiple ways, including through the use of cash on hand, third-party debt, and providing promissory notes to the sellers. Significantly, the company’s tax savings can be used to pay down the transaction debt. Given the scarcity of debt financing or institutional capital available to the cannabis industry, the ability to finance the sale of the company with tax savings is an enormous benefit.
There are multiple advantages of an ESOP, including:
Eliminates not only 280E, but nearly all federal and state income taxes. The money saved can be used to fund the purchase price paid to the selling owners, as well as for R&D, expansion, payment of other long-term debt, and so on.
An important tool for cashing out long-term investors. With the lack of capital to fund the M&A markets for cannabis companies, in many circumstances an ESOP transaction is the only viable means to provide investors with an exit and a return on their capital.
ESOPs provide employees with a feeling of ownership in the company, which studies have shown increases employee retention and productivity.
The ESOP structure allows present management to continue directing and running the business while simultaneously providing an exit for other owners.
ESOPs enable cannabis company owners to sell their ownership with the capital gains taxes either eliminated or greatly deferred.
Selling shareholders can receive warrants in the restructured company, enabling participation in the company’s economic gains as a tax-exempt entity.
Cannabis ESOPs are perhaps the only option to circumvent Section 280E’s harsh impact, avoid most federal and state income taxes, and provide company owners with a tax-advantaged exit opportunity. The Blank Rome Cannabis team and ESOP team have closed hundreds of ESOP-related transactions, including ESOP transactions for cannabis companies, across the United States.
Preparing for USTR 301 Fees on Chinese Vessels
Concluding its Section 301 Investigation into “China’s Targeting the Maritime, Logistics, and Shipbuilding Sectors,” the United States Trade Representative (USTR) issued an updated notice of action on April 17. USTR initially issued a proposed action to impose fees on Chinese vessels in the amount of $1 million or $1.5 million per port call. USTR issued the updated notice following President Donald Trump’s April 9 Executive Order 14269, “Restoring America’s Maritime Dominance” (90 Fed. Reg. 15635).
The updated fees will be imposed starting October 14. The fees are structured under four annexes, with Annex I and Annex II being particularly relevant to intermediaries, non-vessel-operating common carriers (NVOCCs), and freight forwarders. Each vessel will be charged only on the initial port call and cannot be charged more than five times per year.
Annex I: Chinese-Owned and Chinese-Operated Vessels
Vessels owned or operated by Chinese entities will be subject to fees based on their net tonnage. The fee starts at $50 per net ton in 2025 and will incrementally increase to $140 per net ton by 2028. Importantly, the fee is assessed at the first US port of entry, regardless of subsequent port calls within the United States.
Annex II: Chinese-Built Vessels
For vessels that are not Chinese-owned or Chinese-operated but are Chinese-built, fees are assessed based on the higher of two metrics:
Net Tonnage: Starting at $18 per net ton and increasing to $33 per net ton over three years.
Container-Based Fee: Starting at $120 per container and increasing to $250 per container over three years. (While the USTR was ambiguous on this point, this per-container fee is likely on a per Twenty-foot Equivalent Unit basis.)
Vessel operators are required to report the number of containers discharged at US ports or with an ultimate destination in US customs territory.
Exemptions and Fee Remissions
Certain vessels are exempt from these fees, including:
Vessels with at least 75% US ownership.
Small vessels under specific size thresholds.
Vessels engaged in short sea shipping (voyages under 2,000 nautical miles).
Additionally, operators can receive fee remissions for up to three years if they order and take delivery of US-built vessels of equivalent or greater capacity within that period.
Annex III: Foreign-Built Car Carrier Vessels
For all foreign-built car carrier vessels, fees are assessed at $150 per Car Equivalent Unit capacity.
Annex IV: Liquefied Natural Gas (LNG) Vessels
One percent of vessels transporting LNG exports must be US-flagged, US-operated starting in 2028, and then in 2029, must be an increasing percentage US-built, US-flagged, and US-operated, increasing to 15% in 2047.
Annex V: Tariffs on Ship-to-Shore (STS) Cranes and Cargo-Handling Equipment from China
Finally, USTR proposed duties on STS cranes and cargo-handling equipment. Comments are due May 19.
Next Steps: Update Your Rules Tariff Terms and Conditions
To adapt to these new fees, it is crucial for freight forwarders and NVOCCs to update their rules tariff terms and conditions. By doing so, you can ensure that these fees are passed through to the appropriate parties, minimizing financial exposure and maintaining operational efficiency.