IRS Workforce Reductions: Delays and Increased Legal Challenges
A May 2 report from the US Treasury Inspector General for Tax Administration (TIGTA) found that as of March, the Internal Revenue Service (IRS) workforce had fallen by 11,443 employees, or 11%, due to probationary employee terminations and deferred resignations. This drastic reduction in the IRS workforce came amid cuts from the Trump Administration’s Department of Government Efficiency (DOGE).
According to the TIGTA report, the IRS lost 3,623 revenue agents, or 31%, representing almost one-third of its tax auditors. The TIGTA report notes that further IRS workforce reductions are in progress. The TIGTA report was released the same day as President Donald Trump’s Fiscal Year 2026 Discretionary Budget Request, which called for a nearly $2.5 billion cut to the IRS budget for FY2026.
On May 6, while appearing before the US House of Representatives Appropriations subcommittee, Treasury Secretary Scott Bessent defended the president’s budget request for FY2026 and stated that “collections” remains a priority for the agency. Bessent stated that the IRS intends to “enhance collections” and meet its revenue goals via “smarter IT” and the “AI boom.”
For taxpayers, the impact of IRS budget cuts and mass reductions in the IRS workforce could lead to longer wait times for assistance, delays in audits and responses to taxpayer filings, and increased legal challenges. Further, a staffing shortage could lead the IRS to issue more Notices of Deficiency rather than allowing disputes to be resolved through the IRS Independent Office of Appeals. This would compel more taxpayers to challenge assessments in US Tax Court.
At the American Bar Association Tax Section’s 2025 May Tax Meeting, former Acting Commissioner of the IRS Douglas O’Donnell noted that the reduction in IRS personnel is unprecedented and will result in diminished capabilities in return processing, the processing of refunds, telephone assistance, taxpayer assistance centers, and the Taxpayer Advocate Service as well as lengthier examination time frames.
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Appeals Court Rejects AstraZeneca’s Challenge to Medicare Drug Price Negotiation Program
A federal appellate court has handed down the first appellate-level decision addressing the merits of drug manufacturers’ challenges to the Inflation Reduction Act of 2022’s (IRA) Medicare Drug Negotiation Program (Negotiation Program). On Thursday, May 8, 2025, a three-judge panel of the Third Circuit affirmed the district court’s rejection of AstraZeneca’s constitutional and regulatory challenge to the Negotiation Program. The Third Circuit’s decision is significant because that court has appellate jurisdiction over five of the nine cases challenging the Negotiation Program. The three-judge panel in AstraZeneca has also been assigned to each of the four remaining cases in that circuit. Although AstraZeneca’s case was the narrowest of the five Third Circuit cases, the court’s opinion could shed light on what is to come in the remaining cases.
Constitutional Violation
The Third Circuit rejected AstraZeneca’s sole constitutional claim arguing that the Negotiation Program violates AstraZeneca’s procedural-due-process rights under the Fifth Amendment. AstraZeneca had argued that the Negotiation Program unconstitutionally deprived AstraZeneca of its property right to sell its drugs at a market rate. The Third Circuit, in line with the district courts that have addressed the issue, disagreed, holding that AstraZeneca has no property right to sell its products nor demand government reimbursement at specific prices. The court also dismissed AstraZeneca’s argument that the Negotiation Program does not allow sufficient judicial review of the government’s price-setting decisions. The court was unpersuaded by AstraZeneca’s analogy to a Supreme Court case analyzing the scope of judicial review for a World War II-era rent-control law. The fact that Part D plans, which are private parties, are the recipients of the drugs, the Third Circuit said, does not mean that the government is setting prices for private-market transactions here.
APA Violations
The court of appeals also dismissed AstraZeneca’s Administrative Procedures Act (APA) challenges to CMS’s Negotiation Program Guidance. AstraZeneca argued that CMS guidance outlining the bona fide marketing standard and choosing to aggregate different products approved under different NDAs and BLAs is unlawful. The Third Circuit agreed with the district court that it lacked jurisdiction over AstraZeneca’s claims because AstraZeneca had not adequately shown that it has or will imminently suffer a cognizable Article III injury in fact as a result of CMS’s guidance. Unlike Novo Nordisk, who had multiple products grouped together for negotiation based on the same active moiety, AstraZeneca faced only an alleged risk that its products would similar be grouped together. Further, the Third Circuit said that AstraZeneca failed to submit concrete evidence that CMS’s guidance has or is currently causing AstraZeneca to change anything about how it is operating its company. The court therefore did not address the merits of the alleged APA violations.
What Comes Next?
Five other challenges are pending before appeals courts in the Third and Second Circuits. AstraZeneca was argued on the same day, and before the same three-judge panel, as Bristol Myers Squibb’s and Johnson & Johnson’s appeals. The same panel earlier this spring also heard appeals from Novo Nordisk’s and Novartis’s challenges, which were also both rejected by the district courts on similar grounds to those in AstraZeneca. The opinions in those cases may follow shortly. Once those rulings are issued, the Third Circuit will have weighed in on nearly all the arguments manufacturers have lobbed at the Negotiation Program. The Second Circuit heard arguments in Boehringer Ingelheim’s challenge in April and will likely issue a ruling the coming months.
Meanwhile, we expect that AstraZeneca will seek the Supreme Court’s review. Even if the high court agrees to take up the case, it will likely not hear arguments and issue a decision until late in 2025 or even in 2026 because it will soon enter its summer recess. That timing may also allow the justices to consolidate AstraZeneca with the remaining cases, offering them the opportunity to address all the various challenges at once. Because the Supreme Court has discretion to review only parts of a case, we may also see the manufacturers begin to whittle down their claims to home in on only those arguments that manufacturers believe are most likely to persuade the justices.
Belgian DPA Finds Broad Tax Information Transfers to IRS Unlawful
The Belgian Data Protection Authority recently ruled that a Belgian government entity, FPS Finance, cannot transfer the personal data of “accidental Americans” to the IRS. According to the decision, the transfers needed to cease for several reasons.
The case was brought by a dual US-Belgian citizen, who, while a US citizen by birth, did not reside in the US or otherwise have any significant connections to the US (i.e., an “accidental American”). He argued that his personal information should not be transferred to the US, even though the US’s Foreign Account Tax Compliance Act requires all US citizens to report their tax information to the US to combat terrorism and prevent tax evasion. That law is enforced in Belgium through a 2014 bilateral treaty, which was entered into before the GDPR’s effective date. The Belgian tax authority argued that it could make the transfer under a GDPR exception (Article 96), which allows pre-GDPR international agreements, such as this one, to remain in place if they comply with the law in effect at the time. Thus, the Belgian DPA examined not only whether the transfer violated GDPR (as the individual argued) but also whether it violated the laws in existence at the time the treaty was signed.
The Belgian DPA found that the transfers did not comply with pre-GDPR law because the amount of information being transferred exceeded what was necessary to meet the specified purposes. Further, the FATCA was not compliant with current GDPR standards. The Belgian DPA also emphasized that FATCA, as implemented, lacked sufficient safeguards to protect the personal data of EU residents, especially those with tenuous or accidental ties to the US. The Belgian DPA gave FPS Finance a year to modify its transfer process. This included minimizing the amount of data transferred, conducting a data transfer impact assessment, and giving individuals more information about its data processing activities.
Putting it Into Practice: This decision is a reminder that there may an increase in scrutiny of data transfers to the US. While the facts in this case were narrow, we expect that there may be other, similar, decisions in the future.
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YA Global Heads to Appeals Court Over Tax Court Ruling on Offshore Fund’s U.S. Activities
Last month, YA Global Investments, LP (the “Fund”) filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit, seeking review of the U.S. Tax Court holding in YA Global Investments, LP v. Commissioner.[1] In November 2023, the Tax Court held that this Cayman Islands fund was engaged in a U.S. trade or business through an agency relationship with its U.S. investment manager, Yorkville Advisors (YA), and failed to withhold tax on income that was effectively connected with its U.S. trade or business (ECI) and allocable to its non-U.S. partners. Further, the Tax Court determined that the Fund was a dealer in securities subject to the Section 475 mark-to-market rules.[2] Our prior summary of the case is available here.
This appeal reopens the discussion on agency principles, the characterization of a U.S. trade or business, and the Section 475 dealer definition. The Tax Court found YA to be the Fund’s agent primarily because the investment management agreements designated YA as such. In determining that the Fund was engaged in a U.S. trade or business through YA’s activities, the Tax Court emphasized that YA’s fees tied to convertible debt and standby equity distribution agreement transactions from portfolio companies were compensation for services and exceeded returns on invested capital. The Tax Court also classified the Fund as a Section 475 dealer and its gains as ordinary income and ECI. It rejected the Fund’s claim that it had no customers and invested for its own account. Sponsors to credit funds with non-U.S. investors and their tax advisors continue to follow the case closely, as it could has significant implications on such credit funds.
[1] 161 T.C. 11 (2023). [https://www.foley.com/wp-content/uploads/2023/11/161-tc-no-11-YA-Global.pdf]
[2] All Section references are to the U.S. Internal Revenue Code of 1986, as amended.
Germany: Bureaucracy Out, Digital In? The New Government’s Plans for Labour and Employment
After long negotiations between the Christian Democrats and the Social Democrats, the parties agreed to establish a coalition to form the new government and Friedrich Merz was eventually elected on 6 May 2025 as new Chancelor of Germany. The coalition agreement published by the parties offers insight into their agenda. While not the primary focus of the agreement, there are several initiatives that aim to address certain labour and employment issues of relevance to the German market.
Streamlining the future of work
The coalition agreement outlines several key initiatives designed to enhance Germany’s competitiveness as a business hub, particularly by furthering digitalisation and streamlining bureaucracy. This commitment is also reflected in their plans for addressing L&E-related issues:
Promoting qualified immigration, particularly by digitalising processes in an effort to accelerate the recognition of professional qualifications from other countries
Further reducing the written form requirements in employment law, e.g. for contracts under the Part-Time and Limited Term Employment Act (Teilzeit- und Befristungsgesetz). For further details on the previous changes that took effect in January 2025, please refer to our recent blog post on the Bureaucracy Relief Act.
Digitalisation of collective labour rights
Collective labour law is particularly impacted by the effort to digitalise employment processes:
Enabling the use of online works council meetings (Betriebsratssitzung) and works meetings (Betriebsversammlung) as an alternative to in-person meetings
Implementing an optional digital voting process for the works council elections in 2026
Right to digital access, i.e. the right to use existing digital communication channels as an alternative to the notice board for advertising among others collective labour events and opportunities
Improving Flexibility
The new government is also seeking to implement a change to the Working Hours Act (Arbeitszeitgesetz) that would allow for maximum weekly instead of daily working hours. The current position is a daily maximum of eight (or in exceptions, ten) working hours.
To comply with the EU Working Time Directive, a maximum of 48 weekly working hours would generally be permitted. Exceptions would have to be made for certain workers, e.g., for those working nightshift. Additionally, a new concept is required to allow for the increase in flexibility while still ensuring the workers’ health, safety and adequate rest time. The coalition agreement does not provide any specifics as to how this will be achieved.
According to coalition parties, the adjustment is intended to enhance the compatibility of family and work. However, while the new regulations would not constitute an increase in weekly working hours, they are likely to benefit employers by allowing for more flexible schedules due to the decreased regulations. Examples could be agreeing on a permanent 4-day week with no reduction in pay or the option to offset short-term spikes in workload by ordering work for more than 10 hours a day. Once these changes are implemented, employee handbooks or works agreements referencing maximum working hours may require changes to comply with the new regulations.
The parties also plan to implement an obligation to digitally record working hours for employers. Following the implementation, a transition period will be established during which small and mid-size companies will be exempt from the new requirements. However, the obligation does not extend to trust-based working hours. Therefore, the decision to pursue this option remains at the discretion of employers.
A further initiative aimed squarely at increasing productivity is exempting overtime income of full-time employees from income tax. The definition of overtime in this context is any working time that exceeds 34 hours in the case of employees with a CBA, or 40 hours in the case of employees without a CBA.
If employers offer bonuses to part-time employees for increasing their working hours, these bonuses remain tax-free according to the parties’ plans. It remains to be seen how the coalition will deal with attempts to exploit such bonuses.
Allowing for a smooth transition after reaching retirement age
Many employers and employees are interested in maintaining their existing employment relationship after the employee reaches the standard retirement age. However, given the restrictions in the Part-Time and Limited Term Employment Act, most flexible solutions are not viable. In most cases, employers are currently only able to establish long-term employment relationships that do not adequately address the challenges associated with such employment.
The coalition agreement now includes a plan to lift the ban on pre-employment after reaching the standard retirement age in the Part-Time and Limited Term Employment Act. This would allow employees to remain in a familiar work environment while transitioning to a reduced or limited role within their organisation. Lifting the ban would be a welcome change for both parties to an employment relationship as it would provide reliable planning and legal certainty.
The effort to encourage individuals to remain in the workforce after reaching the standard retirement age also includes plans to exempt up to EUR 2,000 of such employees’ income from income taxes.
Strengthening unions
The coalition parties plan to make compliance with collective bargaining agreements a prerequisite for the awarding of federal contracts worth EUR 50,000 or more and for start-ups with “innovative services” in the first four years after their establishment for projects worth EUR 100,000 or more.
The parties also aim to enhance the appeal of trade union memberships by offering tax incentives for their members.
Other initiatives
While these initiatives are also part of the coalition agreement, how or even if they will be implemented is less certain for some than others:
Raising the minimum wage to EUR 15 per hour by 2026, which is explicitly labeled as something that may be feasible
Implementing a legal framework for AI at the workplace
Summary
The agreement encompasses a combination of measures that are favourable to employers and those that are principally intended to strengthen employee rights. However, none of them legally binding. Thus, the agreement is, in essence, a mere collection of potential initiatives. It is not feasible for it to be realised in its entirety within the next four years. Immediate action is therefore not required. Nevertheless, it provides the most comprehensive insight into the incoming government’s plans and as a result, what employers may expect in upcoming legislative periods.
Onshoring Pharma Ops: Reading Recent EO and Policy Tea Leaves
This week, underscoring a commitment to national security, the White House and the Food and Drug Administration (FDA) issued separate communications that aim to bolster domestic drug manufacturing while tightening oversight of foreign facilities. But they also raise questions about implementation, industry impact, and long-term effects. This is another step from the Department of Commerce Bureau of Industry and Security’s (BIS) Section 232 investigation into pharmaceuticals initiated on April 1, 2025. These developments, while unsurprising, should be viewed within the constellation of broader administration policy, and could make real progress on furthering the manufacturing onshoring agenda for the critical life sciences industry.
The Executive Order: Streamlining Domestic Manufacturing
Signed on May 5, 2025, the Executive Order titled “Regulatory Relief to Promote Domestic Production of Critical Medicines” aims to reduce barriers to building and expanding pharmaceutical manufacturing capacity in the United States.[1] The White House frames this as a national security imperative, citing estimates that new facilities can take 5 to 10 years to construct due to regulatory hurdles—a timeline deemed “unacceptable.” The order directs the FDA and the Environmental Protection Agency (EPA) to review and streamline regulations related to the approval of new and expanded manufacturing sites, eliminate “duplicative or unnecessary requirements,” and maximize “timeliness and predictability” in reviews.
The order also emphasizes early collaboration between the FDA and domestic manufacturers to support facilities before they come online. This could mean more pre-approval guidance or technical assistance, potentially reducing delays in licensure inspections. Additionally, the order calls for increased fees and inspections for foreign manufacturing plants, alongside stricter enforcement of active pharmaceutical ingredient (API) source reporting. The FDA is tasked with publicly disclosing the number of foreign inspections conducted, broken down by country and manufacturer, and considering a public list of non-compliant facilities.
This push for domestic production builds on Trump’s first-term efforts, such as Executive Order 13944 (August 6, 2020), which aimed to reshore essential medicines. The current order reflects a broader “America First” agenda, with the administration arguing that domestic facilities face more frequent and rigorous inspections than their foreign counterparts—a disparity they seek to address.
FDA’s Expanded Unannounced Inspections: Leveling the Playing Field?
On May 6, 2025, the FDA announced plans to expand unannounced inspections at foreign manufacturing facilities producing drugs, food, and medical products for the U.S. market. This builds on a pilot program launched under the Biden administration in India and China, which had stalled due to recent staff cuts. The agency’s goal is to ensure foreign facilities face the same level of scrutiny as domestic ones, addressing long-standing concerns about inconsistent oversight. The FDA emphasized that it can take enforcement actions—such as warning letters or import bans—against facilities that delay, block, or refuse these inspections.
FDA Commissioner Marty Makary, appointed under the Trump administration, underscored that these surprise inspections aim to align foreign oversight with domestic standards. The agency also plans to optimize inspector resources by reducing time spent in-country, allowing for more inspections without additional staffing. This is particularly significant given recent reports of layoffs and budget constraints at the FDA, which have strained its inspection capacity.
Context and Analysis: Opportunities and Challenges
These actions don’t exist in a vacuum. Since the inauguration, the FDA has undergone significant changes, reflecting the administration’s broader push to reduce bureaucracy, roll back regulations, and prioritize domestic interests. The appointment of Marty Makary as FDA Commissioner and Robert F. Kennedy Jr. as Health and Human Services Secretary has set a tone of aggressive reform. These changes suggest a dual focus: easing regulatory burdens for U.S. manufacturers while intensifying scrutiny of foreign ones. However, the FDA’s ability to execute these policies amidst staffing shortages and budget cuts remains a critical question.
Opportunities naturally reveal themselves. First, the Executive Order’s emphasis on streamlining regulations could significantly reduce the time and cost of building or expanding U.S. manufacturing facilities. The news cycle has been full of recent announcements—totaling in the multiple billions—by both large and small pharma companies making commitments to invest in U.S. manufacturing and research and development. Second, expanded unannounced inspections may deter foreign manufacturers from cutting corners, potentially reducing the competitive advantage of lower-cost production in countries like India and China. This could benefit U.S. contract manufacturing and development companies by narrowing the cost gap, but to be sure, could result in at least a short-term cost increase for manufacturers looking to move operations back home. Finally, the promise of pre-approval collaboration could help companies navigate complex—and sometimes confusing—regulatory requirements, reducing the risk of delays or rejections during licensure inspections.
But challenges are also plentiful. First, the FDA’s recent layoffs and budget constraints raise concerns about its capacity to conduct more foreign inspections or provide robust support for domestic manufacturers. The agency’s Office of Inspections and Investigations was already struggling with a 16% vacancy rate among investigators before these changes. It was reported that, as of September 2024, 42% of the 4,700 plants that manufacture drugs for the U.S. were overdue for inspection.[2] Second, higher inspection fees and stricter API source reporting could raise operating costs for foreign facilities, potentially leading to supply chain disruptions or price increases for U.S. consumers. Companies reliant on foreign APIs may need to reassess their sourcing strategies. Third, the White House’s foreshadowed tariffs on imported drugs could complicate the economics of foreign manufacturing, forcing companies to weigh the costs of relocating production to the U.S. against potential trade barriers. Finally, while streamlining domestic approvals is appealing, eliminating “duplicative or unnecessary” requirements risks weakening oversight. The opioid crisis, partly fueled by lax FDA standards in the past, serves as a cautionary tale.
Tariffs: Potential Impact and Twists
Further, tariffs continue to place economic pressure on foreign manufacturing. Large U.S. manufacturers have estimated tariff impacts of “a few hundred million dollars,” primarily due to tariffs on Chinese products (e.g., the International Emergency Economic Powers Act (IEEPA) 20% fentanyl tariff, the IEEPA 125% reciprocal tariff, Section 301 tariffs) as well as China’s retaliatory tariffs. As a result, manufacturers have begun to implement mitigation strategies. For example, companies are now beginning to invest more heavily in domestic R&D and manufacturing in order to meet U.S. product demand, while maintaining manufacturing facilities abroad to serve global demand.
In addition to the tariffs imposed by the statutory authorities listed above, on April 1, 2025, BIS initiated a Section 232 investigation under the Trade Expansion Act of 1962 into pharmaceuticals. This investigation focuses on the national security implications of importing pharmaceuticals and pharmaceutical ingredients, including finished generic and non-generic drug products, medical countermeasures, critical inputs like active pharmaceutical ingredients and key starting materials, and derivative products of these items. The investigation must conclude within 270 days. Following the investigation, the President has the authority to impose various trade restrictions, including tariffs on the investigated products.
Generally, these tariffs are typically additive. However, in a twist, the relationship between Section 232 tariffs and the 125% reciprocal tariff are exclusive of each other. For example, if a Chinese product is subject to a Section 232 tariff, it will not be subject to the 125% reciprocal tariff. This exclusivity might offer some relief to the pharmaceutical industry if Section 232 tariffs are imposed on certain Chinese pharmaceutical products and are set at a rate lower than 125%.
These developments may demand strategic adjustments, including but not limited to:
Reevaluate Supply Chains: this one is debatable, but it is as good a time as ever to assess reliance on foreign manufacturing and consider investing in U.S. facilities to capitalize on regulatory relief and mitigate tariff risks.
Strengthen Compliance Programs: prepare for unannounced inspections by enhancing quality control systems and ensuring accurate API source reporting. Non-compliance of course could lead to public shaming or import restrictions.
Engage with FDA Early: leverage the FDA’s offer of pre-approval support to streamline facility approvals. This could involve early consultations on emerging technologies or production line modifications. The FDA is not always the easiest to correspond with—especially recently—but the administration’s commitment to domestic manufacturing could yield a critical advantage over foreign entities when it comes to dealing with FDA.
Monitor Tariff Developments: With the administration promising more details on tariffs within weeks, companies should model the financial impact of potential trade policies and explore diversification strategies.
Looking Ahead: Balancing Speed, Safety, and Security
The administration’s FDA is charting a course that prioritizes domestic manufacturing and robust foreign oversight, but the path is fraught with challenges. Streamlining regulations could unleash innovation and strengthen the U.S. drug supply chain, but only if the FDA retains the expertise and resources to maintain safety standards. Expanded unannounced inspections are a step toward domestic parity, but their success hinges on adequate staffing and international cooperation. Meanwhile, the specter of tariffs looms large, potentially reshaping the economics of the global pharmaceutical industry.
As with everything recently, it is too early to say whether and to what extent these actions will have a meaningful impact, but the number of policy moves is growing to a critical mass. The coming months will reveal whether the FDA can deliver on these ambitious goals or if resource constraints and policy trade-offs undermine their impact. For now, manufacturers should stay proactive, aligning their strategies to the extent possible with the administration’s priorities while safeguarding compliance in an increasingly complex and uncertain regulatory environment.
FOOTNOTES
[1] Executive Order available here: Regulatory Relief to Promote Domestic Production of Critical Medicines – The White House
[2] Nearly 2,000 drug plants are overdue for FDA checks after COVID delays, AP finds | The Associated Press
Julian Klein also contributed to this article.
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Beltway Buzz, May 9, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
DOL to Rescind 2024 Independent Contractor Regulation? The U.S. Department of Labor (DOL) is backing away from the Biden-era independent contractor regulation finalized in January 2024. More specifically, the DOL’s Wage and Hour Division (WHD) has issued guidance (Field Assistance Bulletin No. 2025-1, “FLSA Independent Contractor Misclassification Enforcement Guidance”) instructing its field staff to “no longer apply the 2024 Rule’s analysis when determining employee versus independent contractor status in FLSA investigations.” The DOL will be taking this position while it reconsiders the 2024 Rule, “including whether to rescind the regulation.” In the meantime, DOL investigators are instructed to rely on Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA). Finally, the guidance notes that “the 2024 Rule remains in effect for purposes of private litigation.” The first Regulatory Agenda of the second Trump administration—expected sometime in June or July of this year—should provide stakeholders with a clearer picture of the DOL’s intentions regarding a potential rescission of the 2024 independent contractor rule.
Bipartisan Paid Family Leave Bill Introduced in House. In January 2024, the Buzz discussed the U.S. House of Representatives’ bipartisan Paid Family Leave Working Group’s four-pillar paid leave framework. This week, Representatives Chrissy Houlahan (D-PA) and Stephanie Bice (R-OK), who co-chair the working group, introduced the More Paid Leave for More Americans Act. The legislation combines two pillars of their framework, the Paid Family Leave Public Partnerships Act and the Interstate Paid Leave Action Network Act. Here is how it would work:
Paid Family Leave Public Partnerships Act. This portion of the bill would offer DOL grants to states that establish paid family leave programs. To be eligible for such grants, states would be required to:
provide eligible employees with at least six weeks of paid leave for the birth or adoption of a child;
provide wage replacement between 50 percent and 67 percent based on employees’ income, with a cap equal to 150 percent of the state’s average weekly wage;
enter into a partnership with a private entity—such as an insurance carrier—to administer the benefits; and
participate in the to-be-created Interstate Paid Leave Action Network (I-PLAN).
Interstate Paid Leave Action Network Act (I-PLAN Act). This aspect of the More Paid Leave for More Americans Act would help states reduce the variances between the programs that have led to the current “patchwork” of paid leave compliance requirements. The I-PLAN would be tasked with establishing an agreement that will “[c]reate a single policy standard with respect to all participating States to facilitate easier compliance with and understanding of paid leave programs across States[.]” In other words, the I-PLAN aspect of the bill will strive to seek uniformity between states on key paid family leave terms such as employee eligibility, family member, intermittent leave, etc.
The More Paid Leave for More Americans Act still has a long way to go before becoming law. But the bipartisan nature of the bill is an optimistic sign for its supporters.
EEOC Personnel News. Recent nominations and hiring decisions shed some light on where the U.S. Equal Employment Opportunity Commission (EEOC) is heading from a policy perspective:
Commissioner Appointment. President Donald Trump nominated Brittany Bull Panuccio to serve on the Commission. Panuccio is currently an assistant U.S. attorney in Florida and previously served as an attorney at the U.S. Department of Education. If confirmed, Panuccio would join Acting Chair Andrea Lucas to form a Republican majority on the Commission. Current Commissioner Kalpana Kotagal is the only Democrat on the Commission. Further, Panuccio’s confirmation would return a functioning quorum to the Commission and would likely allow Acting Chair Lucas to move forward with her regulatory—and subregulatory—agendas. D’Ontae D. Sylvertooth and Sean J. Oliveira have the details.
Chief of Staff. Acting Chair Lucas has selected Shannon Royce as her chief of staff. Royce is an attorney and former president of the Christian Employers Alliance. Lucas has announced that one of her top priorities is “protecting workers from religious bias and harassment.”
Bill Would Provide Tax Break on Overtime Pay. The Buzz has discussed President Trump’s desire to limit the taxes that workers pay on tips and overtime earnings. Bills have already been introduced in the U.S. Congress to address the “no tax on tips” issue. This week, Republican legislators turned to the overtime issue by introducing the Overtime Wages Tax Relief Act. The bill would allow workers to deduct up to $10,000 ($20,000 for those filing jointly) of income derived from working overtime for each taxable year. The deduction begins to phase out when income reaches $100,000 for individuals or $200,000 for married couples. Republicans may try to include this bill in their larger reconciliation tax reform package.
OFCCP Layoffs Arrive. President Trump’s rescission of Executive Order 11246 eliminated the affirmative action requirements for federal contractors, and, in turn, most of the operations of the Office of Federal Contract Compliance Programs (OFCCP). Many OFCCP employees were subsequently offered a deferred resignation option or placed on administrative leave. This week, most of OFCCP’s remaining employees received notice that they would be laid off, effective June 6, 2025. According to reports, this is more than 300 employees (according to its fiscal year 2025 budget justification, OFCCP has about 490 employees). OFCCP will reportedly maintain one regional office in Dallas, Texas.
A Pope-ular Guest. At the Buzz, no news is more significant than labor and employment policy developments. But for the rest of the world—particularly for Catholics—the selection of Chicago-born Cardinal Robert Prevost as Pope Leo XIV was the news of the week. Some American politicians, such as Senators Mark Kelly (D-AZ) and John Hoeven (R-ND), expressed excitement and optimism about the selection of an American-born Pope. But at this early hour, there aren’t any plans to invite the new pontiff to address Congress. Indeed, it is a rare event. On September 24, 2015, Pope Francis delivered an address to a joint session of Congress, the only Pope to ever do so. It was probably no coincidence that three of the most powerful politicians at the time—Vice President Joe Biden, Speaker of the House John Boehner, and House Democratic Leader Nancy Pelosi—were all Catholic.
What’s At Stake When it Comes to Medicaid Cuts?
As we are well into the 2nd quarter of 2025, Medicaid policymakers face a significant challenge: staring down the 800-pound gorilla in the room. The proposed budget released by President Trump focuses on areas of discretionary funding, rather than the mandatory spending in programs like Medicare and Medicaid.
The recently passed House budget resolution proposes federal Medicaid cuts of up to $880 billion over the next decade. The Healthcare Budget Reconciliation mark-up will likely take place the second week of May, with Speaker Johnson suggesting he would like to take a vote before Memorial Day.
To put that number into perspective, $880 billion represents 6% of state taxes per resident and nearly one-fifth (19%) of what states spend per student on education. For states, which must balance their budgets, this would be a substantial fiscal burden.
Two key proposals still in play to address spending levels in Medicaid include:
1. Reducing or eliminating supplemental Medicaid payments, and
2. Placing caps on the federal share of funding for the 40 states that expanded Medicaid under the Affordable Care Act (ACA).
This analysis focuses on the first issue—supplemental payments—because Florida did not expand Medicaid under the ACA and is therefore more directly affected by potential changes to supplemental funding.
All states except Alaska use provider taxes to help fund Medicaid. Ambulances, health plans, hospitals, intermediate care facilities for people with developmental disabilities (ICF/DDs), and nursing homes are the common beneficiaries. Florida uses provider taxes in numerous categories, including nursing homes and hospitals. The state also uses local government tax bases to support specific programs to draw down additional federal dollars for hospital funding, including for the Low-Income Pool (LIP), which supports hospital uncompensated care, and the Hospital Directed Payment Program (DPP), which helps offset some of the unfunded costs of caring for more than four million Florida Medicaid enrollees. The state benefit to use these types of funding mechanisms is to reduce the Medicaid burden on state revenue and shift that to local government or the providers themselves instead.
As more states transition to managed care and reliance on supplemental payments increased, the Centers for Medicare and Medicaid Services (CMS) updated its rules. CMS required directed payments be tied to the use and delivery of services under the managed care contract, be equally distributed to specified providers under the managed care contract, advance at least one goal in the state’s managed care quality strategy, and not be conditioned on provider participation in intergovernmental transfer (IGT) agreements.
However, even with these changes to the supplemental payment programs, Federal concerns over whether “states are covering their fair share of Medicaid” remain. Drastically altering or removing these programs all together could drastically impact the State.
If the Federal government cuts or removes these programs, Florida could lose up to $6 Billion in its healthcare economy. However, the increasing difficulty in accessing care is a growing concern, leading to higher costs. Access to care is already getting harder in many areas. Just this year, 15 hospitals have closed across the country. In 38 states, people are on waitlists for Medicaid home and community-based services.
There is undoubtedly waste in the Medicaid program nationwide. US healthcare spending increased by 7%, the overall inflation rate is 3.8%, and the pace is unsustainable. Practical considerations for the legislature will be complex if there is a drastic cut, as the state did not expand Medicaid, leaving options like eliminating optional benefits (e.g., pharmacy benefits) or reducing provider payment rates.
Over the 15 years since the ACA passed, healthcare costs have continued to rise while access to care remains problematic. One important lesson from the past decade should be that access to insurance does not equate to access to care. Instead, we need to examine where costs have ballooned over the past decade and explore systematic change, rather than simply cutting provider funding in an entitlement program to deliver care at lower costs.
Blockchain+ Bi-Weekly; Highlights of the Last Two Weeks in Web3 Law: May 8, 2025
Senate Moves Forward with “GENIUS” Stablecoin Bill: May 2, 2025
Background: A revised version of the Senate’s bipartisan stablecoin bill — the “GENIUS Act” — has been introduced, with a floor vote expected before the Memorial Day recess. Key changes include a prohibition on stablecoin issuers offering “a payment of yield or interest” on their issued payment stablecoins, along with enhanced illicit finance provisions. The bill also bars the sale of stablecoins in the U.S. by non-U.S. entities and allows for issuance under state regimes, provided the regime “meets or exceeds” federal standards, as determined by a three-member review panel consisting of the Treasury Secretary, Federal Reserve Chair and FDIC Chair.Changes aimed at addressing concerns about DeFi were also included, though they appeared only in an unpublished draft. Possibly in response to those revisions or other outstanding concerns, a group of nine Democrats — generally considered supportive of crypto — sent a letter indicating they could not support the bill in its current form.
Analysis: The GENIUS Act represents the closest Congress has come to passing meaningful legislation on crypto in the U.S. However, challenges remain. One potential obstacle is the push by some lawmakers to link the stablecoin bill to broader market structure legislation, which is advancing in Congress but is not as far along. Industry advocates have pushed back on this proposed combination, warning that tying the two together could stall momentum — and, given the limited window for congressional action this session, could result in no bill being passed at all. Another hurdle is the apparent erosion of support among key Democrats. With 60 votes needed in the Senate to overcome procedural hurdles, bipartisan support is essential. A delay — or worse, the failure — of even this relatively “vanilla” legislation risks letting political dysfunction once again derail progress in the digital asset space.
Coinbase Files Amicus to SCOTUS Over IRS John Doe Subpoenas: April 30, 2025
Background: Coinbase has filed an amicus brief in support of a petition challenging the IRS’s use of John Doe summonses — which compel platforms to disclose user data without individualized suspicion. The case was brought by a Coinbase customer over the IRS seeking to compel Coinbase to turn over a broad swath of “John Doe” customer information without any probable cause that any particular user broke the law. This follows a similar brief filed earlier by the DeFi Education Fund. If the Court agrees to hear the case, it could have broad implications for financial privacy — not just in digital assets — and may lead the Court to revisit the scope of the Third-Party Doctrine.
Analysis: In the digital age, sharing financial or location data with a third party is often not voluntary, but required for basic participation in modern life. The Third-Party Doctrine, a legal rule that allows the government to access data you’ve shared with third parties without a warrant, was developed in an era before modern financial technology and many argue it no longer fits how people transact today. With a more privacy-sensitive court, this case presents a real opportunity to revisit the boundaries of government surveillance over financial data.
Briefly Noted:
Richard Heart SEC Matter Over: The SEC has announced it will not be amending its complaint against Hex founder, Richard Heart, after the case was previously dismissed on jurisdictional grounds. Regardless of views on project, there should be broad agreement that giving a podcast interview in the U.S. and using open-source code developed here are not sufficient grounds for asserting global regulatory jurisdiction.
Federal Reserve Retracts Supervisory Guidance: The Federal Reserve Board has retracted guidance that required banks to obtain their approval before implementing any activity that involved crypto, including basic or low-risk use cases. If stablecoin legislation passes, banks are expected to become more active in digital asset custody, providing safer options for customers, which should be in everyone’s best interest.
FTC Goes After “Crypto Trading” Venture: The FTC is going after a series of multi-level-marketing businesses that sold “crypto-trading” courses. Fraud of this type has always been more appropriate within the FTC’s domain, rather than what we’ve seen over the last few years with the SEC attempting to broaden its jurisdiction by classifying crypto assets as securities simply to bring them under the purview of the SEC’s anti-fraud powers.
Stablecoin Updates: A number of relatively minor stablecoin-related developments surfaced last week in addition to the Senate updates discussed above, including SoFi exploring its own issuance, Tether posting $1 billion in Q1 profits (with a U.S. expansion in the works), an expected vote in the Senate on the GENIUS Act before Memorial Day, and Visa working with Bridge for a stablecoin-backed payment card. Although each of these updates may seem incremental on their own, collectively they underscore the central role stablecoins now play in the digital asset ecosystem and the growing attention they’re receiving from both industry and regulators.
Treasury Presentation on Digital Money: Buried on page 98 of the Department of Treasury’s update to the Treasury Borrowing Advisory Committee was a surprisingly thoughtful primer on stablecoins and their potential impact on traditional banking. The timing is notable, as this update comes on the heels of Tornado Cash securing at least a partial victory with a federal court rejecting Treasury’s attempt to dismiss the Tornado Cash lawsuit on the grounds that the case was moot following revisions to the sanctions made after the lawsuit was filed. On this topic it’s worth listening to this Miachel Mosier chat about how Tornado wasn’t a complete victory.
Solana Policy SEC Submission: One of the first big published projects from the Solana Policy Institute is its recent submission to the SEC, “Proposing the Open Platform for Equity Networks” which is worth a read. Also recommended is this industry submission to the SEC regarding staking.
SEC Chair’s First Public Remarks on Crypto: In his first public comments since taking over, Chair Atkins emphasized the need for “practical, durable” rules and a more constructive relationship with the digital asset industry. While delivered at a roundtable hosted by the SEC’s Crypto Task Force, the remarks mark a notable shift in tone from the agency’s prior enforcement-first approach.
Galaxy Digital Moves for Public Listing: Galaxy Digital has confirmed plans to go public on Nasdaq, marking a major step for the firm, which originally filed an S-1 back in 2022. The move signals renewed confidence in both the regulatory environment for digital assets and broader public market conditions.
Digital Chamber Initial SEC Submission in Response to Request for Information: As previously discussed, the SEC’s Crypto Task Force has requested industry feedback on a wide range of questions related to the regulation of digital assets. The Digital Chamber of Commerce is coordinating a major response effort in partnership with leading law firms to provide detailed answers to each question. Polsinelli Blockchain+ attorneys are involved in several of these responses. The first response, led by Sidley Austin, was published last week.
Updated FIT21 Market Structure Bill Released: House Financial Services and Agriculture Committees have published an updated discussion draft of the crypto market structure bill, previously known as the Financial Innovation and Technology for the 21st Century Act (FIT21). We will have a larger update on the proposed legislation and a failed attempt at a joint hearing on digital assets in the House in our next Bi-Weekly update.
Conclusion:
The last two weeks suggest that while momentum is building toward a more structured regulatory environment for digital assets, there’s still a real risk that this historic opportunity could be squandered. We’ll be watching closely as these developments unfold and continuing to engage where it matters. We look forward to seeing many of you at Consensus.
GeTtin’ SALTy Episode 52 | Catching up on 2025 SALT Legislative Trends with Jared Walczak of the Tax Foundation [Podcast]
In this episode of GeTtin’ SALTy, host Nikki Dobay welcomes frequent guest Jared Walczak, Vice President of State Projects at the Tax Foundation, to discuss the whirlwind 2025 legislative sessions.
From income tax rate reductions in Kansas, Kentucky, and Montana to the capital gains surtaxes in Maryland and Washington, Jared provides an insightful analysis of the policy shifts that are shaping the tax landscape.
They delve into Washington State’s expansion of its sales tax to advertising services, raising sourcing and compliance concerns.
Jared also highlights the debate surrounding property tax relief as states grapple with rising home values.
The episode wraps up with a lighthearted coffee-versus-Diet-Mountain-Dew discussion.
Tune in to hear about current tax policy challenges, creative solutions, and the complex interplay between state and local tax decisions!
European Union Adopts 16th Package of Sanctions Against Russia
In a bid to further increase the pressure on Russia, the Council of the European Union has adopted additional measures which have been introduced in its 16th sanctions package. The new measures amending the framework Council Regulation (EU) 833/2014 are found and included in Council Regulation (EU) 2025/395 (EU’s 16th Package). They target systemically important sectors of the Russian economy, including energy, trade, transport, infrastructure and financial services.
Additional Listings
An additional 48 individuals and 35 entities have been targeted by asset freezes and travel bans. The EU’s 16th Package adds new criteria for listing individuals and entities that are part of support or benefit from Russia’s military-industrial complex. This is in addition to any entities or individuals who are active in sanctions circumvention, maritime or Russian crypto assets exchanges.
Anti-Circumvention Measures
An additional 74 vessels, bringing the total number of listed vessels to 153, have been added. These vessels are part of the shadow fleet or contribute to Russia’s energy revenues.
Trade Measures
Ban on Primary Aluminium Imports
The EU’s 16th Package also adopts further restrictions on the trade of goods and services. An aluminium import ban on EU imports of primary aluminium from Russia has been included. The exception to this is that it includes a “phase-in period” permitting the import of 275,000 tons over a 12-month period.
Export Bans
Export restrictions have been added which target 53 new companies, which include 34 companies outside of Russia and which support Russia’s military-industrial complex.
Dual-use export restrictions have been extended to additional items in order to cut Russia’s access to key technologies, including the following:
Dual-use chemical precursors to produce chloropicrin and other riot control agents used as chemical weapons by Russia in violation of the Chemical Weapons Convention.
Software related to computer numerical control machine tools used to manufacture weapons and video game controllers used by the Russian army to pilot drones on the battlefield.
Chromium ores and compounds due to their military applications.
Additional export restrictions on industrial goods, such as steel products, fireworks and certain minerals and chemicals, have been included.
Energy Measures
The EU’s 16th Package prohibits temporary storage or the placement under free zone procedures of Russian crude oil or petroleum products in EU ports, which was, until now, allowed if the oil complied with the price cap and went to a third country. This prohibition will inflict additional costs on the transport of Russian oil.
The package extends the prohibition to provide goods, technology and services for the completion of Russian liquefied natural gas projects to also crude oil projects in Russia, such as the Vostok oil project.
The package extends the existing software ban to restrict the export, supply or provision of oil and gas exploration software, which includes drilling processes, geological inspections and reservoir calculations, to Russia.
Infrastructure Measures
With immediate effect, a full transaction ban on specific Russian infrastructures—ports and airports which are believed to have been used to transport combat-related goods and technology or to circumvent the oil price cap by transporting Russian crude oil via ships in the shadow fleet—have been included in this latest package as they contribute to Russia’s military efforts.
The restrictions are broadly drafted and will apply to any transactions with relevant ports and airports (as listed in Annex XLVII of the EU’s 16th Package), even if there is no direct transaction with the port authorities themselves.
Transport Measures
One of the most notable changes under Article 5ae of the EU’s 16th Package is the imposition of a full flight ban which provides for the possibility to list any third-country airline operating domestic flights within Russia or supplying, selling, transferring or exporting, directly or indirectly, aircraft or other aviation goods and technology to a Russia air carrier or for flights within Russia.
If listed in Annex XLVI of the EU’s 16th Package, these air carriers, as well as any entity owned or controlled by them, will not be allowed to land in, take off from or fly over EU territory.
The flight ban will not apply to the following:
• In the case of an emergency landing or an emerging overflight.• If such landing, take-off or overflight is required for humanitarian purposes.
Financial Measures
An additional 13 Russian banks and three non-Russian banks, namely Bank BelVEB, Belgazprombank and VTB Bank (PJSC) Shanghai Branch (due to their use of the system for Transfer of Financial Messages of the Central Bank of Russia), have been either disconnected from the Society for Worldwide Interbank Financial Telecommunication international payment system or subjected to a transaction ban, intensifying financial isolation of Russia.
The European Union has also extended a transaction ban to allow it to target financial institutions and crypto asset providers circumventing the oil price cap so as to further isolate Russia’s financial network.
Measures Against Disinformation
To combat media manipulation and distortion of events, further restrictive measures have been placed on broadcasting activities. Eight additional media outlets, namely EADaily, Fondsk, Lenta, NewsFront, RuBaltic, SouthFront, Strategic Culture Foundation and Krasnaya Zvezda, have had broadcasting suspended because they are under the permanent control of Russian leadership and participate in spreading misinformation and propaganda.
Concluding Remarks
These increased enforcement efforts and highlighted sanctions are not just symbolic but impactful. As the European Union strengthens its sanctions framework and expands enforcement efforts, businesses must proactively assess their compliance strategies to mitigate legal and operational risks.
Navigating Tariffs in Construction Contracts: Creative Strategies for Owners and Contractors
Introduction: Steering Through the Storm of Tariff Uncertainty
Tariffs on critical construction materials—steel, aluminum, lumber, and more—are roiling project budgets and schedules, leaving owners and contractors adrift in a sea of cost uncertainty. As tariff negotiations remain murky and unresolved, these financial headwinds are likely to persist, threatening the stability of ongoing and future projects. Yet, within this storm lies a chance to chart a steadier course. By embedding strategic, tariff-savvy provisions in construction contracts, owners and contractors can shield their projects from volatility and seize control of their financial destiny. This article explores creative strategies to address tariff challenges, empowering stakeholders to navigate uncertainty with confidence.
Strategic Contract Provisions to Mitigate Tariff Risks
Carefully crafted contract language is the cornerstone of managing tariff-related uncertainties. Below are innovative strategies to consider when negotiating and drafting construction agreements, designed to balance risk allocation and maintain project viability:
1. Incorporate Material Cost Escalation Provisions
Tailored material escalation clauses allow for adjustments to the contract sum when tariffs significantly increase material costs post-contract execution. Such a clause limits relief to tariffs enacted after the contract is signed, ensuring that only unforeseen regulatory changes trigger adjustments. This incentivizes contractors to lock in pricing early while protecting owners from absorbing pre-existing tariff burdens.
2. Require Fair and Timely Notice of Tariff Impacts
To prevent disputes over tariff-related claims, contracts should mandate prompt notification of tariff impacts. A sophisticated strategy is to require contractors to identify tariff-driven cost increases within a short window (e.g., 7-14 days) of a tariff’s enactment or application to a project. This “fair notice” provision ensures owners receive early warnings, enabling proactive budget adjustments or alternative sourcing strategies. Contractors benefit from clear timelines, reducing the risk of waived claims due to delayed reporting.
3. Embed Tariffs in Change Order Processes
Change orders are a natural mechanism for addressing tariff impacts. Consider explicitly including tariff-related cost increases within the definition of permissible change orders. Contracts can require contractors to submit detailed documentation—such as supplier invoices, tariff notices, or government regulations—to substantiate claims. This transparency builds trust and streamlines owner approval. For owners, consider setting a threshold for tariff-related change orders requiring owner approval, such as 5% of a subcontract’s value or a specific scope division. This balances flexibility with oversight, ensuring significant cost increases are vetted.
4. Cap Total Tariff Adjustments
To manage financial exposure, contracts can impose a cumulative cap on tariff-related cost adjustments, such as $500,000 across the project (excluding subcontractor errors or omissions). With this approach, owners gain predictability, while contractors retain a pathway for relief within reasonable limits. Also, considering pairing the cap with a shared savings clause, where cost savings from tariff reductions (e.g., repealed tariffs) are split between the parties, incentivizing collaboration.
Conclusion: Building Resilience Through Collaboration
Tariffs are an unavoidable reality in modern construction, but they need not derail projects. By integrating thoughtful, tariff-specific provisions into construction contracts, owners and contractors can manage risks collaboratively and creatively. From escalation clauses and fair notice requirements to change order thresholds and cost caps, these strategies empower stakeholders to navigate tariff uncertainties with confidence. Proactive contract drafting remains a powerful tool for ensuring project success in an unpredictable economic landscape.