"Corporate Transparency Act: What Companies Need to Know and How to Comply"

Effective January 1, 2024, the Corporate Transparency Act and its corresponding regulations (the “CTA”) requires certain entities created or registered to do business in the United States to disclose certain company information to the Financial Crimes Enforcement Network, a bureau of the United States Department of Treasury. This information, referred to as Beneficial Ownership Information, must be filed online at the Financial Crimes Enforcement Network website.

Companies that are required to report are referred to as “Reporting Companies.” Generally, all companies are Reporting Companies unless they fit into one of the 23 exemptions provided by the CTA. The report requires certain information about the Reporting Company and its Beneficial Owners, as defined by the CTA.

For Reporting Companies formed prior to January 1, 2024, the report must be filed before January 1, 2025. For Reporting Companies formed in 2024, the report must be filed within 90 days of the Reporting Company receiving notice of its formation. Reporting Companies formed after 2024 will have 30 days from the Reporting Company receiving notice of its formation to file the report.

The report is only required to be filed one time. However, if there is any change to the required information, an updated report must be filed within 30 days of such change. These changes include, but are not limited to, the name of the company (including a new trade name), a change in Beneficial Owners, a change to a Beneficial Owner’s name, address, or unique identifying number (including a change to their driver’s license or other identifying document, in which case the Reporting Company will need to upload a new image of the identifying document).

A person who willfully violates the reporting requirements may be subject to civil penalties of up to $500 per day for each day the violation continues. They also may be subject to criminal penalties of up to two years in prison and a fine of up to $10,000.

If you need assistance determining whether your entity is a Reporting Company, who its Beneficial Owners are, or filing the report, the attorneys at Erickson Sederstrom can assist you in complying with these new federal requirements.

EPA’s New Plastics Rule Imposes Recordkeeping and Reporting Requirements for Ubiquitous Toxic Chemicals

On September 28, 2023, the Environmental Protection Agency (“EPA”) released its final Toxic Substances Control Act (“TSCA”) rule containing new reporting and recordkeeping requirements for the manufacture and sale of certain plastics known as PFAS. Section 7351 of the 2020 National Defense Authorization Act required the EPA to issue a TSCA rule requiring any person who has manufactured perfluoroalkyl or polyfluoroalkyl substances (“PFAS”) in any year since January 1, 2011, to report and maintain records regarding their use of PFAS. The EPA’s rule reaches not only manufacturers of PFAS themselves, but also manufacturers of goods that contain PFAS.

According to the Centers for Disease Control, PFAS are a group of chemicals used to make coatings and products that resist heat, oil, stains, grease, and water. Per- and Polyfluorinated Substances (PFAS) Factsheet | National Biomonitoring Program | CDC. Also known as "forever chemicals," PFAS are a concern because they do not break down in the environment and have caused widespread contamination of the environment. In animal studies, PFAS negatively affect growth and development, reproduction, thyroid function, immune system responses, and liver injury. An NHANES study found four PFAS in the blood samples of nearly all the people participating. According to a notice given by the Consumer Product Safety Commission on September 20, 2023, PFAS are used in many common goods, including "non-stick cookware; water-repellent and stain-resistant clothing, carpets and other fabrics; some cosmetics; some firefighting foams; and common home products such as cleaning supplies, waxes, coatings, adhesives, paints, and sealants." Federal Register :: Per- and Polyfluoroalkyl Substances (PFAS) in Consumer Products. Due to serious concerns about PFAS in drinking water, the EPA has also recently released new standards that limit certain PFAS in drinking water to the extremely low level of 4 parts per trillion. Per- and Polyfluoroalkyl Substances (PFAS) | US EPA.

The EPA’s proposed rule will require companies to report extensive information about PFAS in their merchandise. Companies would be required to provide information relating to “chemical identity, categories of use, volumes manufactured and processed, byproducts, environmental and health effects, worker exposure, and disposal." 2022-25583.pdf (govinfo.gov). Companies would have 18 months to report this information if they have any amount of an estimated 1,462 chemical substances in the PFAS group.

Critics consider the burden of the rule to be high, especially considering how the time and cost of compiling information spanning more than a decade will affect small businesses. The EPA estimates the burden on small businesses to be $875 million and asserts that this will not have a significant impact on small entities. Id. Nevertheless, the proposed rule addresses this criticism by allowing companies to report “not known or not reasonably ascertainable” if the circumstances are such that the burden is too high. Whether the burden imposed by the EPA is reasonable may be the subject of litigation in the coming months.

               Additionally, the EPA’s authority to issue such a regulation may be affected by the Supreme Court’s upcoming review of Chevron's deference in January 2024. Overturning Chevron would reign in the regulatory power of governmental agencies. The EPA’s proposed rule regarding PFAS reporting is currently open for public comment.

Additional Funding Enacted for Coronavirus Relief Programs

Last week, Congress passed and the President signed the latest legislation to provide additional funding for Coronavirus relief programs, the Paycheck Protection Program and Health Care Enhancement Act.
This legislation is now commonly known as “Phase 3.5” of legislative coronavirus stimulus and relief packages.

First, Phase 3.5 adds an additional $310 billion to the Paycheck Protection Program (“PPP”). Low interest, forgivable loans available through the PPP were quickly exhausted when first made available.

Phase 3.5 also adds an additional $50 billion for Economic Injury Disaster Loans (“EIDLs”) and expands the scope of eligible businesses. EIDLs are now available to certain agricultural entities with less than 500 employees.

$75 billion is provided to support health care facilities to help offset additional costs and expenses due to the coronavirus. Finally, $25 billion is provided to support increased testing.

Nebraska Supreme Court Upholds PSC Approval of Keystone XL Route

On August 23, the Nebraska Supreme Court issued its long-awaited opinion in the Keystone XL pipeline route approval case that was argued before the court in fall, 2018. Issued as In Re Application No. OP-0003 and cited as 303 Neb. 872, the opinion stems from a suit brought by landowners and advocacy organizations in opposition to the Nebraska Public Service Commission's decision in November of 2017 to approve the Mainline Alternative Route (MAR) for the Keystone XL Pipeline.

In a 59-page, unanimous decision, authored by Justice Funke, the Court stated:

"In summary, the PSC is an elected body created by the Nebraska Constitution to serve the public interest... the legislature determined that '[t]he construction of major oil pipelines in Nebraska is in the public interest...' The Legislature designated the PSC as the agency responsible for determining which pipeline route is in the public interest. After months of careful consideration, the PSC determined that the evidence showed that the MAR (Mainline Alternative Route) is in the public interest. Upon de novo review, we find there is sufficient evidence to support the PSC's determination that the MAR is in the public interest. The assignments of error are without merit."

While those who argued in favor of the project welcomed the news, those who have long opposed the project, like Bold Nebraska founder and current Chair of of the Nebraska Democratic Party, Jane Kleeb, issued comments stating the Legislature, or a new President in 2020 could seek to undo the opinion issued by the Supreme Court.

ERISA: A Plan Sponsor’s liability for an underfunded plan.

The 8th Circuit recently held that a defined benefit pension plan participant’s claim against a Plan Sponsor cannot move forward if an underfunded plan becomes overfunded during the course of litigation.  In Thole v. US Bank, National Association, et el, No. 16-1928 (October 12, 2017),  the 8th Circuit held that a defined benefit pension plan participant who alleges a breach of fiduciary duty and prohibited transaction claims under ERISA is unable to assert their claims if the plan subsequently becomes overfunded, even if the overfunding occurs after litigation has been filed.  

In Thole, the Plaintiffs were retirees of U.S. Bank and participants in the U.S. Bank Pension Plan (“the Plan”).  U.S. Bancorp was the Plan’s sponsor, while U.S. Bank was the Plan’s trustee.  Pursuant to the Plan document, the Compensation Committee and Investment Committee had authority to manage the Plan’s assets. The Compensation Committee was composed of U.S. Bancorp directors and officers.  The Compensation Committee designated a subsidiary of U.S. Bank as the Investment Manager with full discretionary investment authority over the Plan’s assets.

Plaintiffs brought an action against U.S. Bank, N.A., U.S. Bancorp, and multiple U.S. Bancorp directors challenging the defendants’ management of the Plan.  The Plaintiffs alleged that the defendants violated the Employee Retirement Income Security Act of 1974 (ERISA) by breaching their fiduciary obligations and causing the Plan to engage in prohibited transactions.  The Plaintiffs asserted that the ERISA violations caused significant losses to the Plan’s assets in 2008 and resulted in the Plan being underfunded.  Plaintiffs challenged the management of the Plan from September 30, 2007 to December 31, 2010. 

Plaintiffs alleged that the Investment Manager had invested the entire portfolio in equities managed by the Investment Manager.   Plaintiffs further alleged that because defendants put all the Plan’s assets in a single higher-risk asset class, the Plan suffered a loss of $1.1 billion.  The status of the Plan as underfunded at the commencement of litigation was not in dispute.  

Following the commencement of litigation U.S. Bank made voluntary contributions to the Plan in the amount of $311 million dollars.  These additional voluntary contributions resulted in the Plan becoming overfunded, with more money in the plan than was needed to meet its obligations. Defendants moved to dismiss the case asserting that Plaintiffs could no longer prove they had suffered any financial loss. The District Court dismissed the action, concluding that because the Plan was now overfunded, the Plaintiffs lacked a concrete interest in any monetary relief that the court might award to the Plan if the plaintiffs prevailed on the merits. On Appeal the 8th Circuit Court of Appeals affirmed the District Court’s decision.

In addition to the monetary relief sought by Plaintiffs, the Court also determined that the Plaintiffs’ injunctive relief claim against the Investment Manager could not move forward.  While ERISA provides that a plan participant or beneficiary may bring a civil action to enjoin any act that violates any provision of the Act or terms of the plan the Court held that plaintiffs must make a showing of actual or imminent injury to the Plan itself, and because the Plaintiffs could not show injury as the plan was overfunded injunctive relief was not appropriate. 

The Court’s holding allows a Plan sponsor to make additional contributions to a Plan even after litigation has commenced, increasing the burden on a Plaintiff to prove injury in such an action. 

Federal Grant Funds Available for Communities to Improve Airfare and Air Service.

          The Department of Transportation (“DoT”) today announced a solicitation of proposals from communities seeking federal grant money to assist with the improvement of the community’s airfare and air service. The DoT is offering a total of $10 million in grants under its Small Community Air Service Development Program (“SCASDP”) to be disbursed to up to 40 communities, consortia of communities, or a combination of either (“Communities”).

           The SCASDP grants are to be used to implement improvements of the Community’s airfare and air service. This year, the DoT has a total of $10 million available in fiscal year 2017 (October 1, 2017 to September 30, 2018) to distribute in the form of grants to up to 40 Communities in order to implement improvements proposed by the applicant. There is no limitation on the amount of the grant awarded, but past awards have ranged from $20,000 to $1.6 million. Of the 36 SCASDP applicants in 2016, only nine grants were awarded to Communities in seven states.

          Those Communities eligible to receive the grant include those with airports that are not larger than a small hub airport, have inadequate air carrier service or high airfares, and have an airport for their Community that exhibits a need for grant assistance. Groups of communities are eligible if they are working jointly to accomplish the same goal and fit into the aforementioned categories.

          Importantly, the grants cannot be used for capital improvements. So runway expansions or resurfacing, construction of new hangars, etc. are not eligible improvements under the SCASDP. While there are several available uses for the grants, one of the more interesting is that grants are available for an underserved airport to carryout measures that are deemed to be useful in improving air service regarding the cost of air service to consumers and the availability of that service. This includes improving marketing and promotion of air services.

          As in 2016, the DoT will give priority to those Communities where: airfares are higher than the average airfares for all communities; a portion of the cost of the activity contemplated by the community is provided from local, non-airport revenue sources; a public-private partnership has been or will be established to facilitate air carrier service to the public; improved service will bring the material benefits of scheduled air transportation to a broad section of the traveling public, including businesses, educational institutions, and other enterprises whose access to the national air transportation system is limited; the funds will be used in a timely manner; and multiple communities cooperate to submit a regional or multistate application to consolidate air service into one regional airport.

          Communities that are currently receiving air service under Essential Air Service (“EAS”) or Alternate Essential Air Service (“AEAS”) are not eligible for SCASDP grants. Grant applications must be submitted no later than December 15, 2017 by 4 p.m. eastern time.

          For more information on SCASDP, EAS, AEAS and other state and federal grant programs relating to aviation, or for assistance with the grant application and determining your Community’s eligibility, please contact Tiernan Siems with Erickson | Sederstrom.

U.S. Supreme Court Upholds Affordable Care Act’s Tax Credits – ACA Unchanged for Employers

The Supreme Court of the United States ruled in favor of the Patient Protection and Affordable Care Act’s (ACA) tax subsidies in States that utilize healthcare.gov rather than a State operated health insurance market. The dispute in the case of King v. Burwell was viewed by many observers and healthcare professionals as one that could have crippled the ACA had the Court ruled differently.  

At the center of the dispute in King were the words “established by the State.” According to a strict reading of the ACA, it appeared that the tax credits, so important to helping people with income below a certain level attain health insurance, were only available in States that had established their own health insurance exchange. The Plaintiffs, four individuals from Virginia, argued that the ACA was written to encourage States to develop their own health insurance exchanges and that the exclusion of tax credits for States that refused to do so was intentional. The Defendants, Federal Government representatives from Health and Human Services, the Department of the Treasury, and the Internal Revenue Service, argued a strict interpretation should not be adopted because it would result in absurd results when applied in other parts of the ACA. 

In a 6-3 decision, the Court agreed with the Defendants. The Court mentioned that although the plain language was clear, a strict reading was untenable when considering the structure and function of the ACA as a whole.  

In a strongly worded dissent, Justice Scalia, joined by Justices Thomas and Alito, noted that the decision effectively means that the plain language of a statute can be molded to the whims of the Court. “Words no longer have meaning if an [e]xchange that is not established by a State is ‘established by the state,’” wrote Justice Scalia (emphasis in original). The dissent goes on to note that  the Court has effectively rewritten the law and that perhaps the ACA should be known as “SCOTUScare,” rather than “Obamacare,” as it is currently known to some.  

This has been a momentous session for the Supreme Court. Just one day after its ruling in King v. Burwell, the Court mandated that all states allow and acknowledge same sex marriage in the case of Obergefell v. Hodges.  

Corporate entities should follow the political path of the ACA as it progresses.  While many of the constitutional challenges to the ACA have now been resolved, more than one of the presidential candidates have mentioned seeking to completely repeal the ACA if they are elected.  For more information on the Affordable Care Act, or other healthcare, labor, and employment issues, please contact Adam B. Kuenning with Erickson | Sederstrom.