Cross-Border Catch-Up: Flexible Global Hiring—The Non-Resident Employer Approach [Podcast]

In this episode of our Cross-Border Catch-Up podcast series, Patty Shapiro (San Diego) and Shirin Aboujawde (London), both of whom are members of the firm’s Cross-Border Practice Group, discuss what it means to be a non-resident employer, including the benefits and challenges associated with employing staff abroad without establishing a legal entity. Shirin and Patty address key legal and compliance risks, such as the importance of adhering to local employment laws and managing tax liabilities. They also explore the flexibility that being a non-resident employer offers, such as the relative ease of hiring employees in foreign markets without the lengthy process involved in setting up or dismantling a local entity.

Navigating Ethical and Legal Complexities in Insider Lease Agreements in the Context of Bankruptcy

Insider lease agreements, where a property owner leases assets to a related entity, are prevalent in real estate-based businesses. While these arrangements can offer tax advantages and liability protections, they also present intricate ethical and legal challenges, particularly in bankruptcy scenarios. This article delves into the nuances of insider lease agreements in the context of bankruptcy exploring ethical considerations, and providing best practices for attorneys and business owners.
Definition of ‘Insider’
Bankruptcy Code Section 101(31) defines an ‘insider’ to include relatives, general partners, and directors or officers of the debtor. Understanding this designation is critical, as insider transactions face heightened scrutiny and potential challenges from creditors and trustees.
David Levy, managing director at Keen-Summit Capital Partners, points out that courts apply various non-statutory tests to determine whether a party is an ‘insider’ in a lease agreement. He explains that factors like control, closeness of relationships, and financial influence are key indicators that could lead to heightened scrutiny in bankruptcy cases.
Understanding Insider Lease Agreements
An insider lease agreement occurs when a business owner leases property to a related entity, such as a subsidiary or an entity under common ownership. This structure can be advantageous, allowing for tax deductions and asset protection.
However, it can also create conflicts of interest, especially if the lease terms are not established at fair market value or if the arrangement favors insiders over creditors. Matt Christensen, Managing Partner at Johnson May, notes that insider lease agreements can significantly impact bankruptcy avoidance actions.
True Lease vs. Disguised Financing
It’s crucial to distinguish between a ‘true lease’ and a ‘disguised financing arrangement.’ A true lease involves the lessor retaining ownership of the asset, with the lessee having the right to use it for a specified period. In contrast, a disguised financing arrangement, though labeled as a lease, functions as a secured transaction where the lessee effectively owns the asset and the ‘lease’ serves as collateral for a loan.
Courts scrutinize the substance over form to determine the true nature of the agreement. For instance, a court might recharacterize lease agreements as security agreements based on factors like the lessee’s lack of termination rights and nominal purchase options.
Jonathan Aberman, partner at Troutman Pepper Locke, stresses that courts review insider transactions more rigorously in bankruptcy cases. He advises that ensuring fair market value and independent oversight in lease agreements is crucial to avoiding claims of self-dealing.
Fair Market Value (FMV) vs. Residual Value
Fair Market Value refers to the price at which an asset would change hands between a willing buyer and seller, neither under compulsion and where both have reasonable knowledge of relevant facts. Ensuring that lease terms reflect FMV is vital to prevent allegations of preferential treatment or fraudulent conveyance, especially in insider transactions.
Residual value is the estimated worth of a leased asset at the end of the lease term. Lessees may have options to purchase the asset at this value. Accurate estimation is essential to avoid disputes and ensure compliance with tax regulations.
Lease Provisions
Most leases have certain provisions in place to ensure that the lessor is protected in the event of bankruptcy or other unforeseen circumstances. Below are some common provisions and clauses included in leases:

Hell-or-High-Water Clauses: This clause stipulates that the lessee’s obligation to make payments is absolute and unconditional, regardless of any difficulties encountered. Such provisions are common in equipment leases to protect the lessor’s revenue stream.
Force Majeure Clauses: A Force Majeure Clause excuses parties from performance obligations due to extraordinary events beyond their control, such as natural disasters or government actions. The applicability of this clause depends on its specific wording and the unforeseen nature of the event. For example, during the COVID-19 pandemic, courts examined whether government-imposed restrictions triggered force majeure clauses in lease agreements.
Purchase Options: A Purchase Option grants the lessee the right to buy the leased asset at the end of the lease term, often at FMV or a predetermined price. The specifics of this option can influence the lease’s classification for accounting and tax purposes.
Maintenance and Return Conditions: Lease agreements typically require the lessee to maintain the asset in good condition and specify the state in which it must be returned. These terms protect the lessor’s residual interest and ensure the asset’s value is preserved.
Indemnity Provisions: Indemnity clauses obligate one party to compensate the other for certain losses or damages. In leases, lessees often indemnify lessors against liabilities arising from the asset’s use, mitigating the lessor’s risk exposure.

Ethical Considerations
Insider lease agreements raise myriad ethical considerations for the parties involved.
Conflicts of Interest
Insider lease agreements inherently risk conflicts of interest. Attorneys must ensure that such arrangements are transparent and that all parties provide informed consent. ABA Model Rule 1.7 addresses conflicts of interest, emphasizing the necessity for clear client relationships and the avoidance of representing parties with opposing interests within the same transaction.
Duty of Candor
Attorneys also have an ethical obligation to be truthful in dealings with tribunals and opposing parties. This duty is paramount when presenting insider lease agreements in legal proceedings, ensuring that all material facts are disclosed. ABA Model Rules 3.3 and 3.4 outline these responsibilities.
Transparency and Fair Dealing
Full disclosure of insider relationships and lease terms is essential to prevent legal disputes and uphold ethical standards. This transparency ensures that all parties, including creditors, are aware of potential conflicts and can assess the fairness of the transaction.
Samantha Ruben of Dentons’ Restructuring Insolvency and Bankruptcy practice points out that ethical considerations in insider leases can arise when fiduciaries prioritize personal interests over the business entity. She explains that in a distressed situation, these transactions may face higher levels of scrutiny and disclosure from the get-go can be key.
Conclusion
Insider lease agreements, while beneficial in certain circumstances, must be handled with care to avoid ethical and legal pitfalls. By adhering to best practices, ensuring transparency, and complying with legal standards, attorneys and business professionals can mitigate risks and uphold ethical integrity in real estate transactions.

To learn more about this topic view Ethical Issues In Real Estate-Based Bankruptcies / Insider Lease Agreements. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested to read other articles about real estate-focused bankruptcy cases.
This article was originally published on here.
©2025. DailyDACTM. This article is subject to the disclaimers found here.

U.S. Tariffs on Steel and Aluminum: Navigating the Changing Landscape in 2025

The United States is actively using tariffs to achieve its economic and political goals. Whether or not you agree with this policy approach, as a participant in the global economy you had better pay careful attention to the changing landscape and how it affects your business. Producers, suppliers, and even consumers of steel and aluminum, which are essential elements of many commonly purchased items, are in no different of a position. 
Here is a brief history of recent executive actions impacting steel and aluminum imports into the United States:

In 2018, the Trump administration imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports for most countries to combat trade imbalances. Argentina, Australia, Canada, and Mexico were exempted, though Argentina was limited to a pre-defined quota on imports not subject to the tariffs.
Between 2020 and 2023, the Biden administration relaxed the tariffs on steel and aluminum imports for certain countries (including Japan, the United Kingdom, Ukraine, and, for steel and aluminum articles, the European Union) by imposing a tiered quota system in which a stipulated quantity of goods could be imported at lower rates. Conversely, the Biden administration imposed higher tariff rates on products from Russia, and then in July 2024, additional melt and pour requirements for imports of steel from Mexico.
On March 12, 2025, President Trump reinstated the full 25% tariff on steel imports on all countries and raised tariffs on aluminum imports to 25% for all countries. That executive order eliminated the prior country-specific exemptions, thereby threatening a profound impact for participants in international trade, particularly those in manufacturing, construction, oil and gas, and other sectors that rely on steel and aluminum products.
On April 10, 2025, global markets let out a collective sigh as Trump announced a 90-day pause on most U.S. tariffs. Chinese products were specifically excluded from the temporary stay and a baseline import tariff of 10% was imposed for most countries. There were a few other notable exceptions to the 90-day pause (more on that below). 

What are the implications for your business, and what should you do?
The widespread and temporary halt on reciprocal tariffs for foreign importers on most goods will expire on July 9, 2025. Two noteworthy exclusions from temporary pause are tariffs on steel and aluminum imports and that is not expected to change anytime soon. Tariff rates for those two industries remain at 25%, except for China, which is now at 125%. It is recommended that importers of steel and aluminum into the U.S. consider taking one or more of the following actions:

Evaluate Contract Risk – The terms of your company’s existing agreements may provide relief from the impact of tariffs. At a minimum, you should understand how the new trade laws or governmental actions allocate risk among the contract parties and your relative rights when new tariffs are imposed. Bradley’s Construction Practice Group recently issued a blog post on tariff-related requests for equitable adjustments in U.S. government contracts. Rights to renegotiate pricing are also sometimes addressed in private party agreements. We advise that you review your existing price adjustment provisions, surcharging clauses, force majeure clauses, termination clauses, and other contractual terms addressing legal excuses for performance. Private companies should also consider whether to add tariff-specific contractual mitigation measures before signing their next service or supply agreement and whether to modify their existing terms and conditions related to the sale of steel or aluminum products.
Consider Changing Your Production Processes – Try to take advantage of the specific tariff exclusion for steel and aluminum derivative articles. The key is that the derivative articles of steel must be melted and poured or, if aluminum, must be smelted and cast in the U.S. prior to their processing in a third country.
Consider Any Benefits Under Trump’s “America First Investment Policy” – Under Trump’s America First Investment Policy, the plan is to create a “fast-track” process that encourages large investments (over $1 billion) from U.S. partners, while imposing conditions to ensure that investors do not collaborate with specifically identified foreign nations, such as the People’s Republic of China. While the details of the investment policy are still being formulated, the long-term aim is for companies that are not perceived as working against the economic security of the United States to benefit from quicker approvals and clearer regulatory processes, leading to faster business growth and a more predictable and favorable investment environment. While this does not directly reduce the impact of steel and aluminum tariffs, now, more than ever, may be an opportune time to invest in the construction of that large Texas steel mill that your board of directors has long considered.
Consider Raising Contract Prices – While often a last resort for most businesses, sometimes the only way to deal with higher production costs is to share those tariff-related costs with your customers in the form of increased prices. This is especially true for smaller businesses. Timing and proper notice are critical when changing prices. Ideally, notice of increased prices should be provided within 30 days of the new tariffs going into effect.

Buying Assets in Bankruptcy: Opportunities, Risks, and Strategies

Introduction
Acquiring assets from a bankrupt company presents unique opportunities for investors, business owners, and legal professionals. Understanding the intricacies of a Section 363 sale process, the role of a stalking horse bidder, and the dynamics of bankruptcy sales is crucial for navigating these complex transactions successfully.
What Makes Bankruptcy Asset Sales Unique?
Section 363 of the US Bankruptcy Code allows a debtor (the company or person in bankruptcy) to sell assets outside the ordinary course of business, typically through a court-approved auction process. This mechanism enables the sale of assets “free and clear” of existing liens, claims, and encumbrances, providing buyers with a clean title.
The section 363 sale process is a public auction. The debtor must market the assets and sell them through a court-approved auction process.
This process benefits buyers by offering:

Expedited Transactions: Bankruptcy courts often prioritize swift asset sales to maximize value and reduce administrative expenses.
Transparency: The auction process’s public nature ensures that all interested parties have access to information, promoting fair competition.
Legal Protections: Court approval of the sale minimizes the risk of future disputes over asset ownership.

However, potential buyers must conduct thorough due diligence to understand the specific terms and any possible exceptions that might affect the sale.
Benefits of Buying Assets in Bankruptcy
Purchasing assets through a bankruptcy sale can offer several advantages:

Discounted Asset Prices: Assets are often sold at reduced prices due to the distressed nature of the sale.
Acquisition Free of Liens: Buyers can acquire assets free and clear of most prior claims. James Sullivan, partner at Seyfarth Shaw, notes that assets bought out of bankruptcy are often priced lower than when purchased through a typical M&A transaction and are acquired free and clear of virtually all liens, claims, and interests burdening the assets.
Court-Supervised Process: The involvement of the bankruptcy court provides a structured environment, reducing the risk of undisclosed liabilities.
Opportunity for Strategic Expansion: Buyers can acquire valuable assets, intellectual property, or business units that align with their strategic goals.

The Role of the Stalking Horse Bidder
A stalking horse bidder is an initial bidder chosen by the debtor to set the baseline bid for the assets. This arrangement establishes a minimum price, encouraging other potential buyers to participate in the auction. The stalking horse bidder often negotiates certain protections, such as break-up fees, to compensate for the risks associated with being the initial bidder.
Often in section 363 sales, there will be an initial ‘stalking horse’ bidder that will perform the initial due diligence on the assets to be sold and enter into an asset purchase agreement with the debtor for the sale of the property, subject to the possibility of higher and better offers being accepted at the auction.
Break-up fees are payments made to the stalking horse bidder if another bidder wins the auction. These fees compensate the initial bidder for the time and resources invested in setting the floor price. The debtor and the stalking horse bidder negotiate these bid procedures and may seek and receive input from others, including secured creditors. Richard Corbi of Corbi Law notes that a bidder might not win the assets despite all their upfront effort if the auction gets competitive.
The Auction Process & Competitive Bidding
The auction process in a bankruptcy sale is designed to maximize the value of the debtor’s assets. Key steps include:

Bid Procedures Approval: The debtor proposes bidding procedures, which must be approved by the bankruptcy court. These procedures outline the requirements for potential bidders and the rules governing the auction.
Marketing the Assets: The debtor markets the assets to attract potential buyers, providing necessary information to facilitate due diligence.
Submission of Qualified Bids: Interested parties submit bids that comply with the approved procedures by a specified deadline.
Auction Conducted: If multiple qualified bids are received, an auction is held where bidders can increase their offers competitively.
Selection of Winning Bid: The debtor, in consultation with creditors and subject to court approval, selects the highest and best offer, considering factors beyond just the purchase price.
Court Approval: A sale hearing is conducted where the court reviews the process and approves the sale to the winning bidder.
Closing the Sale: Following court approval, the transaction is finalized, and the assets are transferred to the buyer.

It’s important to note that the ‘highest and best’ offer isn’t solely determined by the monetary value. Cliff Katz explains that other considerations include the ability to close promptly, contingencies, and the impact on stakeholders.
Risks and Challenges of Bankruptcy Sales
While bankruptcy asset purchases offer attractive opportunities, they come with inherent risks:

Due Diligence Constraints: The expedited nature of bankruptcy sales can limit the time available for thorough due diligence.
Potential for Overbidding: Competitive auctions may drive prices higher than anticipated, potentially reducing the expected value proposition.
Regulatory Approvals: Certain transactions may require approvals from regulatory bodies, which can introduce delays or complications.
Successor Liability Concerns: Although assets are sold free and clear, certain liabilities, such as environmental obligations or union contracts, may transfer to the buyer under specific circumstances.
Financing Challenges: Securing financing for distressed assets can be more complex, requiring lenders to be familiar with bankruptcy processes.

Jonathan Friedland explains that potential buyers of distressed companies often have the ability to influence whether the target company files bankruptcy at all, “Bankruptcy is just one tool among many that are available to a financially distressed company, and many transactions happen in the context of an Article 9 sale, a receivership sale, or an assignment for the benefit of creditors.” Friedland notes that “these other venues each have their relative pros and cons as compared to purchase through bankruptcy.” Editors’ Note: for more information on business bankruptcy alternatives, read Buying Operating Assets from a Distressed Seller and Dealing with Corporate Distress 18: Buying & Selling Distressed Businesses.
Private Sales in Bankruptcy
Not all bankruptcy asset sales involve public auctions. In some cases, a debtor may pursue a private sale, negotiating directly with a buyer without a competitive bidding process. This approach can be advantageous when:

Time Is of the Essence: Private sales can be faster, avoiding the time-consuming auction process.
Limited Market Interest: If the pool of potential buyers is small, a private sale may be more practical.
Confidentiality Concerns: Private negotiations can keep sensitive information out of the public domain.

However, private sales still require court approval, and the debtor must demonstrate that the sale serves the best interests of the estate and its creditors.
Special Considerations for Foreign Buyers
Foreign investors interested in acquiring US assets through bankruptcy should be aware of additional considerations:

Regulatory Compliance: Transactions may be subject to review by the Committee on Foreign Investment in the United States (CFIUS), especially if they involve sensitive industries.
Currency Exchange Risks: Fluctuations in exchange rates can impact the overall cost of the investment.
Legal Representation: Engaging US-based legal counsel is essential to navigate the complexities of the US bankruptcy system.
Tax Implications: Understanding the tax consequences in both the US and the investor’s home country is crucial for effective planning.

Conclusion: Is a Bankruptcy Purchase Right for You?
Acquiring assets through bankruptcy can be a strategic move, offering access to valuable assets at potentially discounted prices. However, it’s essential to approach such opportunities with a clear understanding of the process, associated risks, and legal implications. Engaging experienced legal and financial advisors is crucial to navigating the complexities of bankruptcy.

To learn more about this topic, view Advanced Bankruptcy Transactions / Purchasing Assets in Bankruptcy. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested in reading other articles about purchasing distressed assets.
This article was originally published here.
©2025. DailyDACTM, LLC. This article is subject to the disclaimers found here.

The BR International Trade Report: April 2025

Welcome to this month’s issue of The BR International Trade Report, Blank Rome’s monthly digital newsletter highlighting international trade, sanctions, cross-border investment, geopolitical risk issues, trends, and laws impacting businesses domestically and abroad. 

Recent Developments
United States implements universal baseline tariffs while pausing reciprocal tariffs—except against China. 

On April 2, President Trump announced reciprocal tariffs on almost all imports into the United States, which his administration rolled out in two phases:

On April 5, imports from all countries became subject to a 10 percent baseline tariff.
On April 9, the tariff rate increased for imports from 56 countries and the European Union, countries with which the United States has determined it has the largest trade deficits.  This included a 34% tariff on Chinese goods.

Later, in response to China’s retaliatory tariffs of 34% on U.S. goods (see below), President Trump levied an additional 50% in tariffs on Chinese goods, which China then matched.
On April 9, President Trump announced a 90-day pause on implementation of the second wave of reciprocal tariffs noted above, except with respect to import of Chinese goods, which saw a further increase in tariffs to 125%.
Notably, certain products are excluded from the new tariff program, including items subject to Section 232 tariffs and articles that comply with United States-Mexico-Canada Act (“USMCA”) preferential origin rules. See our alert for more details.

Global trading partners react to United States reciprocal tariffs. In the aftermath of President Trump’s reciprocal tariffs announcement, U.S. trading partners have taken differing approaches to President Trump’s new tariffs. 

Some, like Israel, India, and Vietnam, reportedly have contacted the White House to negotiate a deal. When President Trump announced on Truth Social that he was postponing the tariffs, he claimed that more than 75 countries have reached out to negotiate.   
China, in stark contrast, announced retaliatory tariffs of 34 percent, expanded its export controls, and vowed to “fight to the end.”  In response, President Trump increased the U.S. tariff on Chinese goods.  After a series of escalating moves, at press time, the U.S tariff on Chinese goods stood at 145% (125% for reciprocal tariffs plus a 20% tariff related to the fentanyl crisis), while China is imposing a 125% retaliatory tariff on U.S. goods.
Meanwhile, the European Union reportedly is doing both: authorizing retaliatory tariffs on around €22 billion of imports of U.S. goods into Europe, while offering a “zero for zero” tariff deal for cars and other industrial products.  In response to the Trump Administration’s pause on reciprocal tariffs, the EU has paused its retaliatory measures.

China, Japan, and South Korea meet to discuss possible free trade agreement. On March 30, the three countries held their first economic talks in years, agreeing to “closely cooperate for a comprehensive and high-level” dialogue on a free trade agreement to promote “regional and global trade.” Chinese state media took things a step further, claiming that the countries had agreed to coordinate their response to U.S. tariffs, which South Korea described as “somewhat exaggerated” and which Japan denied.
White House releases public summary of the Report to the President on the America First Trade Policy. On April 3, the White House publicized a summary of various U.S. government agencies’ April 1 report to President Trump on the implementation of his “America First” trade policy, although the summary did not provide definitive details regarding the report’s contents. The summary notes that the report examined a range of China-related trade actions, as well as “simpler, stricter, and more effective” export controls and possible expanded U.S. government review of outbound U.S. investment into China.
President Trump orders new CFIUS review of Nippon Steel’s proposed acquisition of U.S. Steel. On April 7, President Trump called for the Committee on Foreign Investment in the United States (“CFIUS”) to conduct a de novo review of the proposed acquisition of U.S. Steel by Japan’s Nippon Steel. President Trump’s directive comes after former President Joe Biden blocked the acquisition of U.S. Steel prior to his departure from the White House. 
European Union considering joining Canada in World Trade Organization case against U.S. steel and aluminum tariffs. On March 12, Canada filed a request for consultations at the World Trade Organization (“WTO”), alleging that U.S. steel and aluminum tariffs are “inconsistent with the United States’ obligations under the [General Agreement on Tariffs and Trade 1994].” Reports indicate that the European Union may join Canada’s complaint as the economic “bloc has a ‘substantial trade interest’ in the issue.” The dispute complaint is largely symbolic in nature, as since 2019, the WTO’s appellate body has been nonfunctioning. 
Coalition government formed in Germany amid economic uncertainty.  The German center-right Christian Democratic Union (“CDU”), led by Chancellor-in-waiting Friedrich Merz, and the center-left Social Democratic Party (“SPD”) reached an agreement to form a coalition government.  The need for a centrist coalition was driven by uncertainty regarding American tariffs and the continuation of the Ukraine War, along with an impetus to keep the Alternative for Germany (“AfD”) party out of power.  Merz has touted the agreement as evidence that Germany will be a reliable and capable force in Europe.
Democratic Republic of the Congo seeks critical minerals deal with the United States. Representative Ronny Jackson (R-TX) met with Democratic Republic of the Congo (“DRC”) President Felix Tshisekedi in late March to discuss a potential critical minerals deal between the countries. The potential deal comes as the DRC seeks to secure funding to contain the conflict with the Rwandan-backed M23 rebels in its east. Massad Boulos, President Donald Trump’s senior advisor for Africa, indicated that the White House had reviewed a minerals agreement between the United States and the DRC and that President Trump and Boulos had “agreed on a path forward for its development.” 
President Trump extends TikTok sale deadline. On April 4, President Donald Trump announced that he would pause the upcoming ban of TikTok, set for April 5 under a law that President Biden signed last year requiring divestiture of TikTok’s U.S. operations, for another seventy-five days. The extension comes after representatives of ByteDance, TikTok’s parent, reportedly told the White House that the Chinese government would not approve a sale of the company without negotiations over tariffs. President Trump has suggested that he may lower tariffs on U.S. imports of Chinese-origin items if Beijing approves the sale. 
Impeached South Korean President Yoon Suk Yeol removed from office. On April 4, South Korea’s Constitutional Court voted unanimously to remove Yoon Suk Yeol, the country’s impeached president, from office for his December 2024 martial law declaration. South Korea will hold a snap presidential election on June 3, 2025.

In Case You Missed It…
Liberation Day: President Trump Unveils Global, Reciprocal Tariffs – What You Need to KnowBlank Rome partner Joanne E. Osendarp,  of counsel Timothy J. Hruby, senior counsel Alan G. Kashdan, and associates Brenden S. Saslow, Rachel D. Evans, and Christopher A. Kimura authored this alert assessing the recently announced global tariffs initiated by the Trump administration. 
Read More > >
Christopher A. Kimura also contributed to this article. 

Texas Legislature Takes Steps to Extend and Expand Research and Development Credit

The 89th Texas legislative session—which runs from Jan. 14 through June 2—has been active. One of the most awaited items on the tax front is whether the state will extend and modify the Texas Research and Development Credit (R&D Credit), which is currently set to expire on Dec. 31, 2026.
Senate Bill 2206 and House Bill 4393
Sens. Paul Bettencourt, Joan Huffman, and Rep. Charlie Geren introduced Senate Bill 2206 and its house companion House Bill 4393 (together referred to as the R&D Bills) in March 2025. The Finance Committee unanimously approved Senate Bill 2206 on April 9 and the bill will now move to the full Senate for consideration. House Bill 4394 was referred to the Ways and Means Committee on April 1.
Per Sens. Bettencourt and Huffman’s analysis, the goal of Senate Bill 2206 is “to extend the franchise tax credit beyond the current Dec. 31, 2026, expiration date and to make the administration of the credit more efficient for both taxpayers and the Comptroller of Public Accounts of the State of Texas (comptroller) by adhering more closely to the federal R&D credit, thereby leveraging the work of the Internal Revenue Service and reducing the demand on resources of the comptroller.” 
If passed, the R&D Bills would generally allow for the expiration of Texas’ current regime, instead creating a separate R&D Credit program via the new Subchapter T. Here is an overview of some of the most significant changes the R&D Bills would create:

Extension of the R&D Credit Beyond Dec. 31, 2026. The current version of the R&D Bills seeks to extend the credit beyond its current expiration date. Although the R&D Bills do not include a specific sunset date, they also do not specifically insure the program’s longevity. It is worth noting that the business industry advocated for specific assurances regarding the credit’s duration, arguing that strong economic investment in research and manufacturing would grow twofold by removing any tax advantage end date. 
Repeal of the R&D Sales Tax Exemption. The current versions of the R&D Bills do not include a sales tax exemption, purporting to address administrative difficulties that have been experienced under the current regime. Under the existing R&D Credit, the sales tax and franchise tax credits are mutually exclusive, and taxpayers must choose either one or the other (i.e., a taxpayer many only take either (1) a sales and use tax exemption on the purchase, lease, rental, storage, or use of qualified research property, or (2) a franchise tax credit based on qualified research expenses). The R&D Bills would eliminate this choice, maintaining only the franchise tax credit. 
Adherence to the Federal R&D Credit. The R&D Bills would also create a program that adheres more closely to the federal R&D credit. This is a significant change, which is intended to simplify administration of the R&D Credit in Texas. Currently, Texas’ R&D Credit uses a separate calculation that does not align with the federal R&D credit program. 
Increase in Expenditures. Additionally, the R&D Bills propose increasing the taxpayer’s allowable research and development expenditures from 5% to 8.722% for franchise tax credit purposes. Generally, R&D programs in other states allow for research and development expenditures ranging between 5% to 27%.

GT Insights
A study by Rice University’s Baker Institute, published on March 13, found that a strong R&D Credit program may generate over 113,000 jobs in the state by 2035. Likewise, the study concluded that over $13 billion dollars may be generated with a strong program, including a total investment boost of 0.25% during the first year. 
Business representatives have voiced their enthusiastic support that Texas continue to have a strong R&D Credit incentive program. Senate Bill 2206 and House Bill 4393 are first steps towards making that a reality by expanding the R&D Credit and avoiding its expiration. 

What Every Auto-Sector Company Should Know About … the New Automotive Tariffs

On April 3, 2025, President Trump issued the full details of the automotive tariffs, including the exact Harmonized Tariff Schedule (HTS) subheadings to which the automotive tariffs apply. This completed the implementation of the automotive tariffs, first announced on March 26, 2025, which established comprehensive 25% tariffs on imported automobiles (sedans, sport utility vehicles, crossover vehicles, minivans, and cargo vans) as well as light trucks. A review of the subheadings contained in the newly announced Annex to the proclamation shows that it also covers over 150 auto parts categories, including most of the parts and components used in automobile production. The Annex includes tariff codes for electrical automotive parts, engines, transmissions, power trains, lithium-ion batteries, and other major components, along with commonly imported parts such as tires, shock absorbers, and brake hoses.
These tariffs took effect on April 3, 2025 for completed automobiles; for automobile parts, the tariffs will start collection on May 3, 2025 (with a carveout for USMCA-certified parts, which will be exempt until a collection mechanism is finalized). The one-month delay is intended to give the U.S. government time to work out rules to exempt the value of automotive parts that contains U.S.-made materials, which will not be subject to the tariffs.
These new automotive tariffs are not occurring in a vacuum. Indeed, they come at the same time as the implementation of expanded 25% Section 232 duties on steel and aluminum (which are widely used in automobiles); global and reciprocal tariffs on nearly all countries worldwide of between 10% and 49% (since paused for 90-days, but still applied at 10%); additional China-specific tariffs of 145% (on top of early Section 301 tariffs of up to 25%, thus implementing tariffs starting at to 170% for China); and 25% duties on Canada and Mexico (partially suspended for USMCA-compliant goods). Although the automotive tariffs are specifically exempted from the global and reciprocal tariff measures, in all other cases the duties “stack,” adding to the cumulative financial burden on importers.
The net result is a massive increase in tariffs for automotive goods imported into the United States, which will have a major impact on the entire automotive sector, which is an industry dependent on a complex international supply chain. To help automotive companies understand the impact of these tariffs, we are presenting a summary of the current status of the tariffs, as well as Frequently Asked Questions that we are receiving from various clients.
Automotive Tariffs: What We Know So Far
As a starting point, it is important to understand how the automotive tariffs fit into the overall tariff structure that has grown up over the last two months. Here are the groupings of tariff announcements to understand the context of tariffs:

Chapter 1-97 Pre-Existing Tariffs: These are the tariffs that have existed for decades, generally in the range of 0%–7%. These tariffs continue to apply, as all tariffs “stack” on top of the normal tariffs.
Section 301 Tariffs: These tariffs were imposed just on Chinese-origin goods in the first Trump administration. About half of trade with China is exempt from these tariffs (the so-called “List 4B”); the other half of imports from China pay a tariff of between 7.5% and 25%. These tariffs lasted through the Biden administration and stack on top of the Chapter 1-97 tariffs for China alone.
Section 232 Sectoral Tariffs: The third set of tariffs are the sectoral tariffs imposed under Section 232 on specific products. These sectoral tariffs fall into three buckets:

First, there are 25% tariffs imposed on steel and aluminum, payable on products from anywhere in the world. The tariffs extend to certain identified steel and aluminum derivative products (i.e., products in identified Harmonized Tariff Schedule (HTS) subheadings that contain a lot of steel or aluminum). The only carveout here is for products that use steel and aluminum that are “melted and poured” or “smelted and cast” within the United States. For derivative products, only the value of the steel or aluminum is subject to the additional 25% tariff.
Second, there is a 25% tariff imposed on automobiles and most automotive parts. For the automotive tariffs, there currently is a pause in their implementation for parts and components that are USMCA-compliant. By May 3, 2025, the Department of Commerce will establish a system to calculate non-U.S. content, which will be subject to the 25% tariff rate for both automobiles and automotive parts.
Third, certain sectors will be subject to forthcoming sectoral tariffs. The U.S. government already has initiated investigations into copper and lumber. President Trump has indicated there is a strong likelihood that the same will occur for semiconductors and pharmaceutical products.

IEEPA 25% Canada and Mexico Tariffs: The fourth set of tariffs are the 25% tariffs imposed on Canada and Mexico relating to what President Trump characterizes as their role in not exerting sufficient efforts to halt the flow of fentanyl and unauthorized immigrants int to the United States. These tariffs are suspended for any goods that are USMCA-compliant.
IEEPA 20% China Tariffs: This fifth set of 20% tariffs is related to what President Trump characterizes as the Chinese government’s failure to halt the shipment of fentanyl precursors into the United States.
IEEPA Global and Reciprocal Tariffs: The final set is the largest set of tariffs by far, which include (1) 10% global tariffs imposed on the entire world and (2) reciprocal tariffs, which are calculated based mostly on the level of the trade deficit with each country. The calculated ranges for these tariffs go from 10% (countries subject only to the global tariffs, like Singapore and the United Kingdom), up to 49%. Due to the Trump administration’s response to China’s retaliatory tariff, the current level of these tariffs against China is 125%, which when combined with the IEEPA 20% tariffs gives China a net increase of 145%, over and above pre-existing Section 301 tariffs that were imposed in the first Trump administration.

Importantly, although the reciprocal tariffs are currently paused for 90 days, this pause does not impact the automotive tariffs, which remain in place. This new round of automotive tariffs isn’t based on fresh findings; instead, as a way to implement these tariffs quickly, the Trump administration is leaning on the Section 232 auto-sector investigation and report produced during President Trump’s first term. While that investigation concluded that automotive imports were “weakening our internal economy” and posed a threat to national security, President Trump directed the USTR to pursue trade deals to mitigate the threat rather than imposing tariffs. Now, in his second administration, President Trump is carrying through on the tariffs that he did not impose in his first administration.
Here’s how the new tariff regime is structured:

25% tariffs apply to automobiles and automotive parts listed in Annex A to the Federal Register order.
USMCA-eligible automobiles and automotive parts qualify for a reduced tariff, as the tariff only applies to non-U.S. content. Importers may submit documentation to the Commerce Department detailing the value of U.S. content, which is defined as parts that are wholly obtained, entirely produced, or substantially transformed in the United States. The 25% tariff applies only to what remains (i.e., the non-U.S. portion).
USMCA-eligible parts are not subject to the new tariffs until a method is established (by Commerce and CBP) for applying the duty to the non-U.S. content value. This mechanism must be in place by May 3, 2025. Thus, tariffs on USMCA-eligible parts are currently set to zero.
Knock-down kits and parts compilations are excluded from the tariff.
The 90-day pause will allow domestic producers and industry groups to petition the Commerce Department to include additional auto parts under the tariff regime, citing rising import levels and national security concerns. Commerce will create a process within 90 days for domestic automakers or industry groups to request that additional auto parts be brought under the tariff umbrella, where there is an argument that rising import levels pose a threat to national security.
Any autos or parts entering foreign-trade zones (FTZs) on or after April 3, 2025, must enter under privileged foreign status unless eligible as domestic status. This locks in the dutiable classification of the goods in the form in which they were imported. In effect, this means that any such products would have to pay any automotive duties even if processed into a different good in the FTZ.
Consistent with the other special tariffs imposed during the current Trump administration, no duty drawback will be available for the automotive tariffs.
Customs and Border Protection (CBP) is directed to closely monitor U.S. content claims closely. If CBP determines that an importer has overstated the U.S. content, the full 25% tariff will apply to the entire value of the vehicle or part model, retroactive to April 3, 2025, and prospectively, until the issue is resolved and verified.
The proclamation does not include any information on treatment of goods in transit, goods imported using Temporary Importation under Bond (TIB), or the impact or application of temporary duty exemptions. The Department of Commerce and/or CBP may likely issue additional implementing instructions to cover these gaps.

Although coverage of the automotive proclamation extended to automotive parts, it was not until April 2, 2025, that the critical Annex listing the automotive was released, along with CBP guidance regarding the fully assembled automobile provisions. The Annex provides three new elements to the Presidential Proclamation:

The Annex expands the list of automobiles and automobile parts that fall within the scope of the automotive tariffs.
The Annex confirms the USMCA exemption for parts until a process is finalized for applying the tariff to non-U.S. content.
The Annex confirms the Section 232 automobile and automobile parts tariffs do not stack with the global and reciprocal tariffs.

The list of automobiles covered is all inclusive, and covers automobiles falling within the following HTS subheadings:

8703.22.01
8703.23.01
8703.24.01
8703.31.01
8703.32.01
8703.33.01
8703.40.00
8703.50.00
8703.60.00
8703.70.00
8703.80.00
8703.90.01
8704.21.01
8704.31.01
8704.41.00
8704.51.00
8704.60.00

To accommodate the additional duties, new Chapter 99 subheadings have been introduced in the HTS for different classifications of vehicles and parts, including passenger vehicles and light trucks from all countries:

The HTS is expanded to include a new Chapter 99 subheading of 9903.94.01 for all entries of passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and light trucks from all countries.
A new Chapter 99 subheading of 9903.94.02 is established for all entries covered in the above codes that are not passenger vehicles or light trucks, or where the “U.S. content” of passenger cars and light trucks are exempt from tariffs eligible for preferential treatment under the USMCA. Use of this second subheading requires prior approval by the Secretary of Commerce to take advantage of the preferential tariff treatment.
A new Chapter 99 subheading of 9903.94.03 applies 25% tariffs to the non-U.S. content for USMCA-certified passenger vehicles and light trucks.
A new duty-free Chapter 99 subheading of 9903.94.04 is created for exempt passenger vehicles and light trucks manufactured “at least 25 years prior to the year of the date of entry from the tariffs.”

The list of automotive parts and components also is very broad, basically covering nearly all automotive parts and components, covering HTS subheadings under Chapters 40, 70, 73, 83, 84, 85, 87, 90 and 94. Entries subject to these automotive tariffs are to be filed under new Chapter 99 subheading 9903.94.05. Importers should use subheading 9903.94.06 for all entries of articles classifiable under these HTSUS subheadings that (i) are eligible for special tariff treatment under the USMCA (other than automobile knock-down kits or parts compilations) or (ii) are not parts of passenger vehicles and light trucks. While USMCA-certified passenger vehicles and light trucks remain in the scope of the new automotive tariffs for non-U.S. content, USMCA-certified automobile parts receive a full exemption from the scope of the tariffs. The full list of HTS subheadings is found in the published Annex.
It can be difficult to parse how the various tariffs work together, as well as when they take effect. To aid importers in understanding these two issues, a summary of the operation of the tariffs is as follows. In each case, the “total duty amount” assumes that the normal Chapter 1-97 tariffs (i.e., tariffs existing before President Trump took office) are at the 2.5% standard duty rate.

Automotive Tariff Summary

Source
Part Status
Automotive Tariff
Implementation
Total Duty Amount

Canada / Mexico
USMCA Compliant
In Annex
+25%, but reduced by U.S. content
Temporarily duty-free until Commerce establishes U.S.-origin process
0% today; will become 25%, but only on non-US-origin content value

Not in Annex
No change
No change
0%

Non-USMCA Compliant
In Annex
+25% tariff
Mary 3, 2025
52.5% (as written) (27.5% previously)

Not in Annex
No change
No change
27.5%

China
In Annex
+ 25% tariff
May 3, 2025
72.5% (as written) (47.5% previously)

Not in Annex
No change
No change
81.5% (47.5% previously)

Korea
In Annex
+ 25% tariff
May 3, 2025
25% (2.5% previously)

Not in Annex
No change
No change
2.5% + reciprocal tariff rate

Rest of World
In Annex
+ 25% tariff
No change
27.5% (2.5% previously)

Not in Annex
No change
No change
2.5% + reciprocal tariff rate

Automotive Tariffs: Open Questions
The one thing that is clear is the automotive tariffs are not impacted by the 90-day pause; they are moving ahead along the schedule announced in the original automotive tariff proclamation. Beyond that, just as is true with the other new tariffs, the automotive tariffs leave a lot of open questions, including the following:

The auto parts tariffs begin on May 3, 2025, but USMCA-compliant parts are exempt until the Secretary of Commerce, in consultation with CBP, establishes a process to apply tariffs to non-U.S. content. Will the calculation of the U.S.-origin content for partial tariff relief use the USMCA rules of origin or establish a new set of calculations?
What type of documentation will importers need to provide to support the U.S.-origin calculation? Will it involve a certification process like the USMCA regional content calculations?
How is the U.S.-origin content to be calculated when goods cross the border multiple times?
The Federal Register notices states companies or importers will need to submit documentation directly to the Secretary of Commerce that identifies the amount of U.S. content in each vehicle for approval. How will this process work? How quickly will that review take given the large number of applications that are likely to flood in from automotive companies?
The Annex covers automotive computers that fall under the four-digit heading associated with general computer products such as laptop computers. How will this tariff be implemented for automotive computers, when there is no separate code for “automotive” computers?
The proclamation directs the Commerce Department to establish a process within 90 days for domestic producers to request that other parts imported be targeted. How will this process work?
Will importers have to apply both the substantial transformation test and the USMCA rules to demonstrate compliance? That dual-track approach of applying both rules regarding imports from Canada and Mexico already has arisen for Section 301 duties, as importers have had to apply USMCA rules for Chapter 1-97 tariffs and marking requirements, while applying substantial transformation rules to determine the country of origin for purposes of Section 301 tariffs. A similar outcome could occur here.
Will negotiations by other countries impact the scope of the automotive tariffs? How will such changes be reflected in the automotive tariffs?
What will happen at the end of the 90-day reciprocal tariff pause?

Customs has been issuing new Cargo System Message Service messages to give updates to the importing community regarding how to handle import-related issues flowing out of the new tariffs. We expect the same to happen with the new automotive tariffs. We will continue to update our tariff FAQs to provide timely answers as new information becomes available.

What Every Multinational Company Should Know About … the Pause in the Reciprocal Tariffs

The recent announcement of a pause in the rollout of reciprocal tariffs has created some confusion — and some hope — for multinationals and importers around the world. While the announcement hopefully presages a bit of calm and the potential lowering of tariffs in what has become a rapidly escalating trade war, the reality is far more complex. This article outlines what every importer needs to know about the scope and implications of the pause and why, for many importers and companies that depend on imports, the risk of a tariff-induced disruption is likely to remain an importing certainty for the reasonably foreseeable future.
What’s Paused — And What’s Not
As a starting point, here are the groupings of tariff announcements to understand the context of tariffs:

Chapter 1-97 Pre-existing Tariffs: These are the tariffs that have existed for decades, generally in the range of 0%–7%. These tariffs continue to apply, as all tariffs “stack” on top of the normal tariffs.
Section 301 Tariffs: These tariffs were imposed just on Chinese-origin goods in the first Trump administration. About half of trade with China is exempt from these tariffs (the so-called “List 4B”); the other half of imports from China pay a tariff of between 7.5% and 25%. These tariffs lasted through the Biden administration and stack on top of the Chapter 1-97 tariffs for China alone.
Section 232 Sectoral Tariffs: The third set of tariffs are the sectoral tariffs imposed under Section 232 on specific products. These sectoral tariffs fall into three buckets:

First, there are 25% tariffs imposed on steel and aluminum, payable on products from anywhere in the world. The tariffs extend to certain identified steel and aluminum derivative products (i.e., products in identified Harmonized Tariff Schedule (HTS) subheadings that contain a lot of steel or aluminum). The only carveout here is for products that use steel and aluminum that are “melted and poured” or “smelted and cast” within the United States. For derivative products, only the value of the steel or aluminum is subject to the additional 25% tariff.
Second, there is a 25% tariff imposed on automobiles and most automotive parts. For the automotive tariffs, there currently is a pause in their implementation for parts and components that are USMCA-compliant. By May 3, 2025, the Department of Commerce will establish a system to calculate non-U.S. content, which will be subject to the 25% tariff rate for both automobiles and automotive parts.
Third, certain sectors will be subject to forthcoming sectoral tariffs. The U.S. government already has initiated investigations into copper and lumber. President Trump has indicated there is a strong likelihood that the same will occur for semiconductors and pharmaceutical products.

IEEPA 25% Canada and Mexico Tariffs: The fourth set of tariffs are the 25% tariffs imposed on Canada and Mexico, relating to what President Trump characterizes as their role in not exerting sufficient efforts to halt the flow of fentanyl and unauthorized immigrants int to the United States. These tariffs are suspended for any goods that are USMCA-compliant.
IEEPA 20% China Tariffs: This fifth set of 20% tariffs is related to what President Trump characterizes as the Chinese government’s failure to halt the shipment of fentanyl precursors into the United States.
IEEPA Global and Reciprocal Tariffs: The final set is the largest set of tariffs by far, which include (1) 10% global tariffs imposed on the entire world and (2) reciprocal tariffs, which are calculated based mostly on the level of the trade deficit with each country. The calculated ranges for these tariffs go from 10% (countries subject only to the global tariffs, like Singapore and the United Kingdom), up to 49%. Due to the Trump administration’s response to China’s retaliatory tariff, the current level of these tariffs against China is 125%.

The headline news is that reciprocal tariffs are on hold — but only for 90 days, not for China, and only in certain respects. Here’s what’s in and what is out:

All Reciprocal Tariffs (except for China) Are Paused: This means countries hit with high “reciprocal” tariffs based on their trade surpluses with the United States will be engaged in a mad-dash set of negotiations with the Trump administration over the next 90 days. The White House has reported that over 50 countries already have contacted the administration to begin discussions.
The Global 10% Tariff is Not Paused: Despite initial confusion, this tariff remains fully in effect for virtually every country except Canada and Mexico, which represents what appears to be a favored status for these two countries, which have received multiple carveouts from different tariffs.
China is Explicitly Excluded from the Pause: Not only do the original Section 301 tariffs remain in place, but additional China-specific tariffs are now pushing rates up to 125% or more for Chinese-origin goods. The 125% reciprocal rate announced for China, for example, does not include the separate 20% tariffs related to fentanyl precursor exports. Because these reciprocal tariffs stack with the prior Section 301 tariffs and the 20% fentanyl-related tariffs, many Chinese imports are now subject to tariff rates of 170% or higher.
Sectoral and Special Tariffs Continue Unabated: It’s critical to understand that this pause does not affect sector-specific tariffs. Section 232 tariffs on steel, aluminum, and automobiles (25%) remain fully in force. Fentanyl/immigration-related tariffs on Canada and Mexico remain technically in effect, but most USMCA-compliant goods are currently exempt, meaning more than half of trade in the North American region avoids these tariffs. Further, nothing in the pause slows down ongoing investigations for future Section 232 tariffs on copper or lumber, which may be joined by investigations into semiconductors, pharmaceuticals, or other sectors.

In short, the reciprocal tariff pause leads to the following current set of tariffs:

China: 145% tariff on many goods, plus existing Chapter 1-97 tariffs and applicable Section 301 tariffs.
Rest of the World: 10% global tariff, plus existing Chapter 1-97 tariffs. Reciprocal tariffs are in place but suspended for 90 days.
Canada and Mexico: Exempt from the 10% global tariff, but subject to 25% IEEPA tariffs for goods that are not USMCA-compliant.
Sectoral and Special Tariffs: Unaffected by the pause and thus subject to Section 232 duties on steel, aluminum, automobiles, and automotive parts. Because of a carveout in the global and reciprocal tariff announcements, items that fall within these tariffs are subject only to the 25% Section 232 tariffs and not the global and reciprocal tariffs.

Fifteen Key Implications for Importers and Companies That Depend on Imported Materials
The reciprocal tariffs pause was a major change in the tariff environment. Although importers might view this as a welcome development, the tariff environment remains tricky, as tariffs remain very high, the length of the pause is only 90 days, and the ability of importers to make long-term plans is sharply impaired. In trying to determine how to move ahead, importers should keep the following 15 key principles in mind:

Principle #1: —This is Not a Trade War De-escalation: Despite the sign of a potential off-ramp to permanently higher tariffs, the reciprocal tariff pause should not be viewed as a dialing down of the trade war until we see concrete evidence of negotiated and lowered long-term tariffs. Several trade economists have noted that due to the expanded China tariffs, the average U.S. tariff rate actually increased following the pause announcement, leaving tariffs at around the level of tariffs that applied during the Great Depression, due to the infamous Smoot-Hawley Tariff Act of 1930.
Principle #2 — Tariffs Still in Place Are Enormous: Tariff rates are still very high, even after the reciprocal tariff pause. As a rough approximation, U.S. imports totaled $3.3 trillion last year. A 10% tariff, even taking into account the certain coming decline in imports, implies a $300 billion tax increase. Adding in steel, aluminum, automotive tariffs, and residual North American tariffs takes the total over $400 billion, and this is before accounting for the new China tariffs. Add it up, and CBP is collecting well over a billion dollars per day in duties, all assessed against the importer of record (which is generally the U.S. company), underscoring the scale of the impact.
Principle #2 — The Trade War Has a Sharper China Focus: Though initially broad-based, the trade war is now clearly pivoting toward China, which is the only country with triple-digit tariff rates. With China and the United States comprising 40% of global GDP, the escalation in tariffs between these two economies introduces significant systemic risk to global trade. Further, in addition to being the only country to impose significant retaliatory tariffs, China is showing little willingness to negotiate lower tariff rates, which would likely require it to make major changes in how its economy functions.
Principle #3 — There’s Still Room to Hit China Harder: Though it may appear that the administration has now imposed the maximum pressure on China and that no further escalation is realistically possible, this assumption is incorrect. The U.S. government has plenty of tools left regarding China, including:
Coordinated Pressure: As part of negotiations with other countries, it is likely that the Trump trade officials will push other countries to take coordinated actions against China. These countries will have every incentive to do so, because there are major concerns that Chinese companies will pivot their exports from the U.S. to other regions.
Tariffs on Chinese-origin Components: The U.S. also could impose tariffs on Chinese-origin content on imports from any country to hit Chinese parts and components. This means that even goods assembled elsewhere could be targeted, as long as their components are of Chinese origin. This also would sharply limit China’s options to replace its U.S. sales with other countries’ sales and could lead to China retaliating by restricting exports of things like rare earth ore, which are essential for modern electronics — a step it has been reluctant to take.
Secondary Sanctions: Like those used with Venezuelan petroleum, the U.S. could impose secondary sections relating to China. These could increase tariffs on countries that trade with China as a means of pressuring countries to decouple from China.
Principle #4 — Fortress North America?: The favorable treatment of Canada and Mexico, including exemptions from the global 10% tariff and exemptions from other tariffs for USMCA-compliant goods, suggests a strategic pivot. Even though Mexico and Canada were initial targets for special 25% tariffs, it appears these targets were mostly aimed at creating negotiating leverage regarding fentanyl and unauthorized immigration. Since then, repeated carveouts for these countries signal a growing effort to strengthen North American regional ties. This is especially apparent when compared to the treatment of other partners like the EU or Korea, which have seen no such relief. For example, even though Korea has a free trade agreement with the U.S. (KORUS) and thus maintains very-low tariff rates on imports from the United States, Korea did not receive any type of carveout and also received a relatively high reciprocal tariff number.

This treatment of Canada and Mexico suggests that within the USMCA review, it may still be possible to devise a modified USMCA that rebalances trade within North America without imploding the entire arrangement. Mexico’s proposal to match U.S. tariffs on China could form the basis for a revised USMCA with broader regional integration and a combined barrier to Chinese parts and components and Chinese investment within the USMCA region.

Principle #5 — The Automotive Sector Still Faces Major Disruption: Automotive tariffs remain a flashpoint, with ripple effects across the U.S.-Canada-Mexico supply chain. These tariffs will continue to be a major upheaval to the largest U.S. manufacturing sector. These tariffs also are inextricably linked to the 2026 USMCA review. Because of the integrated U.S.-Canada-Mexico automotive supply chains, it is impossible to divorce the upcoming 2026 USMCA review from the automotive sector, as it is the main determinant of the trade deficit with Mexico. One likely area of compromise will be for limitations on Chinese investment in North America and the use of Chinese-origin parts and components. Chinese investment in Mexico, and the use of Chinese-origin parts and components in Mexico, has been a major trend over the last six years as Chinese companies have reacted to the Section 301 tariffs imposed in the first Trump administration. The utility of this strategy likely will be curtailed in the USMCA review.
Principle #6 — Lobbying Will Be Intense: It is likely that all or nearly all countries will negotiate. Industries will jockey to receive favorable treatment for their own concerns. Thus, with global tariffs on the table, expect a surge of special-interest activity, as industries and companies race to secure carveouts, exemptions, or favorable tariff treatment. Negotiations will open a free-for-all of companies and industries pushing to get favored status.
Principle #7 — The China Situation is Uncertain: Supply chains can’t shift overnight. Companies report that for many items, like such basic parts as capacitors or resistors, no alternative sourcing exists outside of China. Even if relocation were possible, it could take years and raise permanent costs. With China being the only country that has implemented major retaliation, and with both sides potentially digging in for an impasse, there may be a long and uncertain path toward resolution. As this creates major uncertainty as to the best coping strategy for multinationals, many U.S. manufacturers may have no choice but to suddenly start paying double or more for many parts and components and to look to pass these costs onto consumers.
Principle #8 — Tariffs Attack the Core of U.S. Manufacturing Models: Many U.S. manufacturers rely on global parts and components for domestic assembly. The business strategies of multinationals often depend on purchasing parts and components through carefully thought-out international supply chains and then adding value and further manufacturing in the United States. These carefully engineered supply chains took decades to build, and tariffs threaten to upend entire business strategies, not just margins.
Principle #9 — Uncertainty Is the Biggest Business Risk: A common theme we see when engaging in tariff risk-planning exercises with clients is the difficulty of reacting to rapidly changing tariff announcements and the uncertainty of not knowing which countries will end up with high or low tariffs. This leads to delayed investments, frozen M&A, and general paralysis. Companies are spending resources on cost-passing strategies and supply chain triage, not growth.
Principle #10 — Tariffs Are a Major Tax on Profits: Tariffs will have a huge impact on profitability. Across multiple tariff modeling exercises, one constant emerges: Profit hits of 40% or more are not unusual. While some U.S.-based manufacturers will benefit, they are the exception, not the rule.
Principle #11 — Retaliation is (Temporarily) Off the Table: The EU and others have announced they will not retaliate (other than retaliating against steel and aluminum tariffs, as previously announced) — for now — given the decision to pause the reciprocal tariffs. This puts the focus squarely on negotiating reciprocal tariff reductions, not escalation, for the next 90 days.
Principle #12 — The 10% Tariff May Be Here to Stay: The Trump administration seems to view the global 10% tariff as a long-term revenue measure, potentially offsetting the cost of extending the Trump-era tax cuts. It also appears to be viewed as the “price of admission” for companies to sell into the U.S. market. Thus, it preliminarily appears that the 10% tariff will be difficult for countries to negotiate away. One exception might be countries with free trade agreements, particularly Canada and Mexico, which may roll this into overall renegotiated terms for the FTA.
Principle #13 — Reciprocal Tariffs Are Unlikely to Fully Disappear: The reciprocal tariffs are based on trade deficits, not actual tariff barriers. This is why countries like Switzerland and Korea, which impose very low tariffs on imports, were still hit hard with major reciprocal tariff numbers. The administration appears to view any trade deficit as discriminatory, including through such foundational foreign attributes as maintaining a VAT (which generally exempts exports from paying any VAT, which President Trump views as an export subsidy). Thus, reciprocal tariffs may decline to take into account the equalization of tariff rates but not vanish because of the breadth of the perceived extent to which foreign governments are viewed as discriminating against U.S. exports to their countries. Importers should plan on longstanding global tariffs at 10%, as well as heightened reciprocal tariffs, but at rates left to be negotiated.
Principle #14 — Plan for Permanence, Not Pause: Though much remains uncertain regarding the U.S. trade landscape, importers should plan for permanence, not pause. Although it is tempting to think the tariffs might disappear after the Trump administration leaves town, all of the Section 301 tariffs and 232 tariffs that were imposed in the first Trump administration stayed in place through the Biden administration. Importers should be looking to build flexibility, resilience, and agility into their supply chain and should be risk planning how they would negotiate a permanent end to low tariff rates, even if the eventual rates are not known. The reciprocal tariff pause is a breather to allow for negotiations to drop foreign trade barriers, but the trade war continues.
Principle #15 — Customs Compliance and Accuracy in Import Operations is Critical: In a high-tariff environment, it is essential to have complete accuracy in all imports, as errors very quickly can result in large underpayments, associated interest, and penalties. Further, the Trump tariff proclamations have directed that Customs focus on ensuring full collection and compliance with the new tariff requirements, often directing that Customs impose penalties at the maximum level allowed without considering any mitigating factors. As a result, it is essential that importers carefully review the accuracy of all import-related information they submit, especially for the critical areas of determining the correct country of origin and valuation of the product. This is especially important when importing goods made in third countries using Chinese parts and components, as these goods could be considered to still be Chinese in origin and thus subject to the ultra-high Chinese tariffs, unless they were substantially transformed in the third country. Since Customs will be carefully scrutinizing all imports for potential underpayments of the new tariffs, importers should be doing the same.

Our white paper on “Managing Import and Tariff Risks During a Trade War” outlines a 12-step plan to provide practical steps to help importers navigate the tariff and international trade risks in the current tariff and trade environment, while the companion white paper on “Managing Supply Chain Integrity Risks” provides practical advice to deal with heightened supply chain risks pertaining to goods imported into the United States, including the increasing use of detentions by Customs.

Caring For Your Pet – Is a Pet Trust Right for Me?”

This Friday, Apr. 11, is National Pet Day — the perfect time to think about your furry, scaly, or fishy loved ones in the context of your estate plan! Who will take care of your pets? What happens if the person you want to take care of your pets doesn’t want to take care of them? What kind of guidelines and funds will be available to the person(s) taking care of your pets?
Most people remember the story of Leona Helmsley – the hotel magnate who left the bulk of her $12,000,000 estate to her Maltese, Trouble. And New Jerseyans may remember philanthropist Geraldine Rockefeller Dodge, renowned for her love of dogs, who in 1939 founded St. Hubert’s Animal Welfare Center. BUT – you do not need to have millions to provide care for your pets after your demise!
Not Bacon the Bank
People spend anywhere from $500 to $5,000 (depending on the pet) per year on their pets for regular expenses – food, veterinary care, grooming, toys, etc. Depending on your pet’s lifespan, your furry friend may require upwards of $50,000 for adequate care! A pet trust is ideal for anyone who wants to ensure that their dog, cat, gerbil, goldfish, or other pet is well cared for after his or her death.
Fetching the Right People
New Jersey law recognizes pet trusts as a formal way to provide care for your pet. You may create a pet trust during life or as part of your Last Will and Testament. A pet trust names a trustee who is responsible for overseeing the funds placed into the pet trust. This trustee may or may not be the same person as the caregiver who is responsible for the physical care and comfort of the pet.
Paws in the Right Direction
The pet trust can provide guidance to the caregiver and the Trustee. This is especially important if your pet has health issues that require specific medications or feeding requirements. Your pet trust can also set forth who should take care of your pet if your chosen caregiver does not want that responsibility. Many nonprofit organizations will either provide care for your pet or help your personal representative or trustee find them a suitable home.
Dog-gone it!
You can also name a remainder beneficiary of your pet trust who will receive the funds upon your pet’s death (if excess funds remain in the trust). It is important to keep Inheritance Tax in mind as you plan your pet trust – New Jersey may consider the trust a Class D beneficiary, subjecting the trust to Inheritance Tax rates of 15% or 16%. With proper planning, however, you can mitigate the tax burden of the trust so that your funds go to your desired purpose – caring for your pet.

Trade Update: Navigating Trump Administration Tariffs – Reciprocal Tariffs and Further Developments

Since early 2025, the Trump administration has imposed a series of broad sector- and country-specific tariffs. These measures were significantly expanded on April 2, 2025, with the announcement of a global tariff regime grounded in the principle of reciprocity. However, some of these new reciprocal tariffs were soon paused on April 9, 2025. Further, reciprocal tariffs on China were raised to an unprecedented 125%.
As global trade tensions continue to rise and many countries have already begun to introduce retaliatory tariffs on the U.S., it will be critical to monitor how increased duty rates will impact your company’s cross-border transaction activity, as well as to develop practical supply chain strategies to mitigate the impact of these fluid and dynamic trade disputes. Additional background on each of these tariff regimes is included below.
I. Targeted IEEPA Tariffs
Before proceeding to describe the reciprocal tariff regime which was announced on April 2, 2025 pursuant to the International Emergency Economic Powers Act (“IEEPA”), it is important to note that on April 9, 2025, the Trump administration announced that application of reciprocal tariffs announced on April 2, 2025 to apply respectively to 57 named countries, have been suspended from application for 90 days, except in the case of retaliating countries, including China. The global baseline tariff of 10% announced on April 2, 2025, however, has not been suspended and will be applicable. IEEPA tariffs announced in 2025 prior to April 2 are also not affected by this suspension, nor are Section 232 based sectoral tariffs.
On April 2, 2025 pursuant to the IEEPA, President Trump declared a national emergency arising from the foreign trade and economic practices of other countries and their impact upon the U.S. He proceeded to announce a new global tariff program, with heightened U.S. tariffs calculated by reference to the trade deficit maintained between the U.S. and individual foreign countries. This program introduces a global baseline tariff of 10% ad valorem on all imported goods, effective April 5, 2025, with higher, country-specific rates for 57 individual countries coming into effect on April 9, 2025 (see these specific rates in Table 1 below).
On the same day, the administration announced the elimination of the de minimis exemption for Chinese imports, which previously allowed duty-free entry for low-value shipments under $800. This change, effective May 2, 2025, aims to close loopholes exploited by e-commerce platforms to bypass tariffs.
Importantly, this new global tariff program does not replace or supersede the tariff increases announced previously by the Trump administration since the beginning of 2025, and adopted pursuant both to the IEEPA and to Section 232 of the Trade Expansion Act of 1962 (Section 232). The reciprocal tariff program announced on April 2, 2025 delineates tariff increases that will be added to the increases previously announced pursuant to the IEEPA. However, for imports of goods subject to Section 232 sectoral tariff increases, the reciprocal tariffs announced on April 2, 2025 will not be additively applied to increase the overall tariff rate for the imports.
Previously announced IEEPA based increases include a 25% tariff on imports of goods from Mexico and Canada, with exceptions including imports of goods that qualify for duty-free importation pursuant to the United States-Mexico-Canada Free Trade Agreement (USMCA). They also include a 20% tariff on imports of nearly all goods from China.
Additional IEEPA based increases include the so-called “secondary tariff” regime, announced on March 24, 2025, which imposed 25% tariffs on all goods from any country that has been determined to import Venezuelan oil, whether directly from Venezuela or indirectly through third parties, effective April 2, 2025.
II. Section 232 National Security Tariffs
Again, these tariffs adopted under the IEEPA apply separately to tariff increases adopted pursuant to Section 232. These include the following:
1. Steel and Aluminum
In February 2025, the Trump Administration announced updated 25% tariffs on steel and aluminum products pursuant to Section 232, targeting all countries. The updated Section 232 tariffs went into effect as of March 12, 2025 – and CBP has since published guidance on impacted HTS classifications for steel, aluminum, and related derivative products. On April 2, 2025 a tariff of 25% was added under this authority for imports of beer and empty aluminum cans.
2. Automobiles and Related Parts
On March 26, 2025, President Trump issued a new Section 232 proclamation imposing a 25% tariff effective April 3, 2025 on imported passenger vehicles (sedans, SUVs, crossovers, minivans, cargo vans) and light trucks, as well as key automobile parts (engines, transmissions, powertrain parts, and electrical components). On April 2, 2025 this proclamation was updated to include nearly 150 additional auto parts categories that will be subject to a 25% tariff beginning on May 3, 2025.
3. Pending Section 232 Investigations
On February 25, 2025 and March 1, 2025, the White House announced two new Section 232 investigations into (i) copper, and (ii) timber and lumber imports – which may result in additional tariff actions.
III. Noteworthy Impacts
China
On April 9, 2025, President Trump announced that, due to China’s application of retaliatory tariffs in response to the reciprocal tariffs he announced on April 2, 2025, the reciprocal tariff on almost all imports from China to the U.S. would be set at 125%. The previously announced IEEPA tariff of 20%, plus any base HTS tariff and/or Section 301 tariff previously announced, would be added to this minimum rate. However, imports of goods subject to Section 232 sectoral tariffs are exempt from the application of IEEPA tariffs. This means that imports of steel, aluminum, and automobiles from China subject to Section 232 tariffs, will only be subject to a 25% tariff in addition to any base HTS tariff.
Southeast Asia
A number of southeast Asian countries were also hit particularly hard by the specific reciprocal tariff regime. This includes Vietnam (46%), Cambodia (49%), and Thailand (37%). Since the increased tariffs implemented during President Trump’s first administration on China, many Chinese companies had set up manufacturing in these countries to avoid these tariffs. Increased tariffs on southeast Asian countries are likely a response to that circumvention. However, again, these country-specific reciprocal tariffs were suspended for 90 days on April 9, 2025. Thus, these countries will at least temporarily be subject to the 10% global baseline tariff. Imports from the countries subject to Section 232 sectoral tariffs are exempt from this IEEPA based global baseline tariff.
E.U.
Imports from the E.U. were not hit with tariffs as high as those on China and some southeast Asian countries. The E.U. was hit with a relatively smaller country-specific reciprocal tariff rate of 20% on April 2, 2025. This additional reciprocal tariff will be applied in addition to any base HTS tariff. However, any imports subject to Section 232 sectoral tariffs are exempt from this reciprocal tariff increase. Even though the E.U. has announced its intention to retaliate against applied U.S. tariffs, the temporary suspension for non-retaliating countries announced on April 9, 2025 has been confirmed to include the E.U. Thus, during this suspension the E.U. will be subject to the 10% global baseline tariff instead of the 20% country specific reciprocal tariff.
Canada/Mexico
Imports from Canada and Mexico were exempted from any new specific reciprocal IEEPA tariffs and are not subject to the global tariff of 10% announced on April 2, 2025. They are, however, still subject to the previously announced 25% IEEPA tariffs on both countries, with the important exception that imports qualifying for duty-free treatment under the USMCA will continue to enter the U.S. duty-free. Imports from both countries are also subject to any base HTS tariff and/or Section 301 tariff previously announced. Again, however, imports subject to Section 232 sectoral tariffs are exempted from the 25% IEEPA tariffs.
The Section 232 auto and auto parts tariffs are of particular significance to both countries, due to the close integration of the auto manufacturing supply chain among the USMCA members. Importers of Mexican and Canadian automobiles covered under the USMCA will be given the opportunity to certify their U.S. content, which will not be subject to tariffs. However, the Section 232 based 25% tariff applies to the non-U.S. content of the vehicle. Further, after May 3, 2025, auto parts covered by the USMCA will also be subject to a 25% tariff on the non-US content of these parts.
FTAs
Pursuant to the reciprocal tariff order, imports from countries with which the U.S. has free trade agreements (FTAs) are subject to the newly imposed reciprocal tariffs. This means that products previously benefiting from reduced or zero tariffs under FTAs will now incur the additional reciprocal tariffs as outlined in the order. Although again, this impact is subject to the suspension of country-specific reciprocal tariffs for non-retaliating countries announced on April 9.
IV. Supply Chain Strategies and Key Takeaways
Tariffs have been and will continue to be a focal point of the Trump Administration’s global trade policy, whether in pursuit of economic security, national security, or as a broader negotiation tactic. The tariff landscape is evolving rapidly and subject to constant evolution and change – and accordingly, companies and importers should take the following steps as soon as possible:

Evaluate your supply chain and diversify suppliers to mitigate tariff costs;
Reevaluate product designs and manufacturing operations to establish favorable country(ies) of origin;
Negotiate tariff cost-sharing provisions in supply and distribution contracts to mitigate effect of increased tariffs; 
Explore options to utilize “first sale” pricing for the transaction value of imported goods, potentially leading to lower import duties;
For related party transactions, reassess transfer pricing strategies and structuring of relationships for opportunities to mitigate the effect of tariffs;
For outbound products, identify potential new costs to customers and distributors associated with retaliatory tariffs implemented by third-countries;
Closely monitor evolving negotiations and regulatory changes for new exclusions, exemptions, or carve-outs that may impact your cross-border transaction activity;
Utilize free trade agreements or free trade zones where practicable; and
Consistently audit and document HTS classifications and country of origin determinations for imported goods to ensure customs compliance, timely duty payments, and efficient responses to requests for information issued by CBP.

Table 1

Countries and Territories
Reciprocal Tariff, Adjusted

Algeria
30%

Angola
32%

Bangladesh
37%

Bosnia and Herzegovina
36%

Botswana
38%

Brunei
24%

Cambodia
49%

Cameroon
12%

Chad
13%

China
34%

Côte d`Ivoire
21%

Democratic Republic of the Congo
11%

Equatorial Guinea
13%

European Union
20%

Falkland Islands
42%

Fiji
32%

Guyana
38%

India
27%

Indonesia
32%

Iraq
39%

Israel
17%

Japan
24%

Jordan
20%

Kazakhstan
27%

Laos
48%

Lesotho
50%

Libya
31%

Liechtenstein
37%

Madagascar
47%

Malawi
18%

Malaysia
24%

Mauritius
40%

Moldova
31%

Mozambique
16%

Mozambique
45%

Namibia
21%

Nauru
30%

Nicaragua
19%

Nigeria
14%

North Macedonia
33%

Norway
16%

Pakistan
30%

Philippines
18%

Serbia
38%

South Africa
31%

South Korea
26%

Sri Lanka
44%

Switzerland
32%

Syria
41%

Taiwan
32%

Thailand
37%

Tunisia
28%

Vanuatu
23%

Venezuela
15%

Vietnam
46%

Zambia
17%

Zimbabwe
18%

Dan Joyner, Scott A. Jones, Angela Ennis, and John McCullough contributed to this article.

Louisiana Industrial Ad Valorem Tax Exemption Program (ITEP) – New Rules and Executive Order

On March 20, 2025, Governor Landry issued Executive Order No. JML 25-033 and Louisiana Economic Development (LED)/Board of Commerce and Industry promulgated new rules (beginning at p. 366) which make changes to Louisiana’s Industrial Tax Exemption Program (ITEP). 
The changes, in part, recognize Governor Landry’s view of the importance of the ITEP as an economic development tool to encourage capital investment in Louisiana manufacturing projects. Among other changes, businesses with existing ITEP contracts under the 2017 and 2018 ITEP Rules may “opt out” of the jobs, payroll, and compliance components regardless of whether the contract is up for renewal. 
Businesses with existing ITEP contracts under the old rules may want to consider opting out of the jobs, payroll, and compliance components of those contracts. The “Opt-Out” Amendment Form may be filed via LED’s Fastlane NextGen. 
Among other changes, businesses with existing ITEP contracts under the 2017 and 2018 ITEP Rules may “opt out” of the jobs, payroll, and compliance components regardless of whether the contract is up for renewal.

Payroll Tax, Amnesties and Related Developments for Health Practices

Health practices across Australia have been paying increasing attention to their potential exposure to payroll tax. The importance of doing so continues, particularly with new legislation bringing some further certainty.
Payroll tax has become a critical compliance and business decision-making issue for medical, dental and allied health practices. Despite intentions to have a harmonised approach, the various states have different approaches to the legislation and enforcement; further legislated differences exist regarding the applicable wages threshold before payroll tax is applied to a business.
Exceptions or amnesties exist in some states where practices meet certain criteria. Audit and enforcement activity remain as available measures to the authorities to enforce the legislation in each jurisdiction, and that activity continues.
Key Take-Aways
Health practitioners should:

Review specific legislation and rulings applicable to the states(s) in which they operate; 
Determine what amnesties or relief are available under their contractual arrangements with practitioners; 
Assess the merits of voluntary disclosure and associated potential benefits (where available); 
Review the advantages and disadvantages of their current contractual relationship with practitioners from both a payroll tax and nonpayroll tax perspective; and
Seek legal advice to ensure they take steps appropriate to their circumstances.

Snapshot – Payroll Tax Relief for Health Practices in Australia
A range of amnesties and concessions apply from state to state for the health sector, some of which require practices to opt-in and make critical, and potentially far-reaching, disclosures to the revenue authorities. 
Practices should consider whether doing so is suitable in their particular circumstances and interests, having regard to all their circumstances (and not just in respect of payroll tax).

Payroll Tax Wage Thresholds
Payroll Tax Relief for Health Practices

New South Wales

Wages threshold: AU$1.2 million

General practitioners:

From 4 September 2023 to 3 September 2024, a 12-month pause on payroll tax audits (or the application of penalty interest) for general practitioner (GP) practices. More recent announcements have confirmed payroll tax on payments to contracted GPs before 4 September 2024, will be exempt.
From 4 September 2024, a rebate is available for practices where at least 70% (80% in metropolitan Sydney) of GP services are bulk billed. The rebate will apply by excluding the amount of payroll tax that would have applied to the relevant amounts paid to GPs.

Queensland

Wages threshold: AU$1.3 million

General practitioners:

Wages paid by a medical practice to a GP are exempt from payroll tax, following recent amendments to the Payroll Tax Act 1971 (Qld). These enshrine the amnesty previously available to GPs since 1 December 2024, under an administrative arrangement.

Dental practitioners:

A limited amnesty is available for payments to contracted dentists from 1 July 2018 to 30 June 2025, PROVIDED, the practice must have (among other things) registered for payroll tax and made voluntary disclosure to the Queensland Revenue Office by 30 June 2025.

Victoria

Wages threshold: AU$900,000

General practitioners:

Up to 30 June 2025, relief may be available for any payments to contracted GPs by practices which have not paid payroll tax for their contracted GPs (or received advice that payroll tax was payable) before 30 June 2024.
From 1 July 2025, under new legislation in Victoria, exemptions will apply for wages paid or payable to GPs, although limited to payments relating to bulk-billed consultations.

South Australia

Wages threshold: AU$1.5 million
Tax is applied to total wages less a deduction of up to AU$600,000.

General practitioners:

From 1 July 2018 to 30 June 2024, an amnesty is available for this period for payments to contracted GPs where practices registered for payroll tax and made voluntary disclosure to RevenueSA.
From 1 July 2024, an exemption is now available for payments relating to bulk-billed consultations.

Medical specialists and dentists:

Up to 30 June 2024, no similar exemption or amnesty is available to medical specialists or dental practices for the period after 30 June 2024. However, retrospective relief is available to specialists or dental practices who registered with RevenueSA prior to 30 June 2024.

Australian Capital Territory

Wages threshold: AU$2 million

General practitioners:

Up to 30 June 2023, unpaid payroll tax has been waived on payments to GPs prior to 30 June 2023.

From 1 July 2023 to 30 June 2024:
An amnesty is available for this period for payments to contracted GPs where the practice:

Registered for payroll tax by 29 February 2024
Bulk billed at least 65% of GP attendances.
Registered for MyMedicare.

Tasmania

Wages threshold: AU$1,250,001
Tasmania has not announced any amnesties or concessions.

Northern Territory

Wages threshold: AU$1.5 million
The Northern Territory has not announced any amnesties or concessions.

Western Australia

Wages threshold: AU$11 million
Western Australia does not levy payroll tax on payments to contractors.

Queensland Legislates Permanent Relief for GPs
On 20 February 2025, the Queensland Parliament passed new legislation enshrining relief from payroll tax for payments to any contracted GPs. This goes beyond the administrative relief or more limited legislated exemptions in other states. It does not offer assistance to practices beyond GPs, though outside the legislation there remains a more limited amnesty for Queensland dentists until 30 June 2025 (subject to some conditions). 
It remains to be seen whether other states and territories will follow suit. Some have applied similar amnesties administratively but have not yet legislated to make those changes permanent. Others have legislated more limited exemptions, e.g., GP practices that bulk bill.
Payroll Tax and “Relevant Contractor” Provisions for Health Practices
Historically, though clearly no longer, industry and revenue authorities generally operated on the basis that certain contracting arrangements between practice owners and nonemployee practitioners did not attract payroll tax. This was particularly the case for clinics offering facilities and services to practitioners operating their own independent businesses. In those arrangements, clinics would usually collect patient fees (or Medicare entitlements) on behalf of those practitioners and remit the balance of those funds to the practitioners after deducting service fees charged by the clinic. 
However, while the underlying legislation has not changed, the recent decisions in Optical Superstore Pty Ltd v Commissioner of State Revenue and Thomas and Naaz v Chief Commissioner of State Revenue questioned whether (or when) payroll tax should apply under the extended “relevant contractor” provisions existing in most states’ legislation. 
Practice owners face the task of assessing whether they have an exposure to payroll tax and what might be done to mitigate it (while being mindful of important anti-avoidance provisions). Key questions for practice owners are whether: 

The practitioner is providing a service to the practice; 
There is a relevant payment from the practice to the practitioner “in relation to the performance of work”;
The business exceeds the applicable threshold for payroll tax (which can include consideration of other “grouped” businesses); and
Any exemptions or exceptions apply.

Broader Contracting Issues
While payroll tax issues have been a key recent focus for practices in revisiting their commercial and legal arrangements with practitioners, it is important to consider other (nonpayroll tax) issues relevant to those arrangements.
For some practices, the perennial question of whether a practitioner potentially has entitlements as an employee or an independent contractor are still relevant. While High Court decisions in 2022 (briefly) restored the focus on the written contractual terms (with some exceptions), the effect of those were largely undone by federal legislation that commenced in August 2024 to re-instate the previous “multi-factorial” test. 
It is critical to have regard to other potential obligations (superannuation, leave entitlements etc.) in assessing the type of contractual arrangement to be entered into, and how it is to be implemented. 
More Changes on the Horizon
More change at state and federal levels remains possible from potential new legislation and anticipated court decisions, namely:

The various state governments and revenue authorities can be expected to consider their positions regarding payroll tax for contractors, particularly in light of the recent legislative changes in Queensland.
In New South Wales, a Parliamentary inquiry has commenced to undertake a broader review of the legislated contractor provisions. The inquiry’s terms of reference indicate a focus on on-demand and “gig economy” workers, but the inquiry may have broader implications for how health practices and other businesses contract and establish payment arrangements with practitioners.
In September 2024, Uber Australia Pty Ltd (Uber) successfully challenged its liability for payroll tax in New South Wales in relation to payments made to drivers. The Supreme Court of New South Wales concluded that the payment from Uber to drivers was not taxable for payroll tax purposes, taking a narrower interpretation of the legislation than in some other recent decisions (such as, in a case involving a medical practice, Thomas and Naaz Pty Ltd). However, Revenue NSW appealed that decision. The appeal has yet to be heard, and the result will be keenly followed nationally.