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Regulatory Playbook
Inside analysis direct from Washington, DC
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Regulatory Playbook

Inside analysis direct from Washington, DC

Welcome to Pillsbury’s Regulatory Playbook, where you’ll find news and insights on the regulatory trends that are driving markets and shaping businesses. Here, Pillsbury’s market-leading regulatory group illuminates critical developments at the intersection of law and policy. If you need to know what’s happening, why it’s happening and how to respond, consult the Playbook.


Trending Issues

Revving Up: Eight States in Gear with Low-Carbon Fuel Standard Legislation

State low-carbon fuels programs are powerful drivers for the adoption of various low-carbon fuels, particularly renewable natural gas (RNG), renewable diesel and sustainable aviation fuel (SAF). For well over a decade, California has implemented its Low-Carbon Fuel Standard (LCFS), which was wildly successful in incentivizing the use and production of RNG, renewable diesel and SAF. In recent years, Oregon and Washington followed suit, and while these programs have a much smaller net impact on the demand for low-carbon fuels due to the respective sizes of those states, they have provided additional outlets for low-carbon fuels.

New CISA Rule Would Require Widespread Cyber Incident Reporting, Updated Timelines and Penalties for Critical Infrastructure Sector

At the end of March 2024, the Department of Homeland Security’s (DHS) Cybersecurity and Infrastructure Security Agency (CISA) released the long-anticipated Notice of Proposed Rule Making (NPRM) detailing how companies will have to comply with the Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA). The draft CIRCIA Rule (the Proposed Rule) will require virtually every owner/operator entity within one of 16 identified Critical Infrastructure sectors to report a cybersecurity incident within 72 hours and/or report within 24 hours a ransomware payment. Public comments about the Proposed Rule are due by June 3, 2024, and CISA expects to publish the Final Rule no later than October 4, 2025.

China Issues Rules to Clarify and Relax Cross-Border Data Transfer Controls

On March 22, 2024, the Cyberspace Administration of China (CAC) published the final version of the Provisions on Promoting and Regulating Cross-Border Data Transfers (Provisions), aiming to provide more clarity on the implementation of the Measures on Security Assessment for Data Export (Security Assessment Measures), effective beginning September 1, 2022, and the Measures on the Standard Contract for the Cross-border Transfer of Personal Information (SC Measures), effective on June 1, 2023, and other cross-border data transfer issues. As described in more detail below, the Provisions, among other things, set forth certain scenarios where the procedural regulatory requirements for data export are exempted, and clarify the identification of “important data” (Important Data) and thresholds for mandatory security assessment.

Recoupment Survives the Discharge Injunction Permitting Dollar-for-Dollar Recovery on a Prepetition Debt

From time to time, a debtor continues to have the right to receive benefits or payments from a non-debtor counterparty under the same contractual relationship or transaction after receiving a discharge of prepetition debt. The question then arises whether the discharge prevents the non-debtor counterparty from withholding a payment or benefit to satisfy that prepetition, now discharged, debt. A recent bankruptcy appellate panel ruling decided in the context of the recoupment of overpaid Social Security benefits suggests that under the appropriate facts, the answer is no.

When the Tigers Broke Free: A Primer on the Clemson/Atlantic Coast Conference Lawsuits

On March 19, 2024, Clemson University (Clemson) filed suit against its athletics conference, the Atlantic Coast Conference (ACC), in Pickens County, South Carolina. Clemson's lawsuit challenges two contractual obligations critical to the ACC’s stability as a premier collegiate athletics conference: (i) the ACC’s approximately $140 million fee to withdraw as a member of the conference, and (ii) the scope of member schools’ contractual granting of their media rights to the ACC as irrevocable through 2036, even if that school leaves the ACC. The following day, the ACC filed a countersuit in North Carolina asking the court to find exactly the opposite and grant other relief.

FCC Advances Its Space and Satellite Agenda

The Federal Communications Commission (FCC or Commission), in a flurry of 2024 activity, has sought to advance its space and satellite agenda by, among other things, adopting rules that allow satellite operators and terrestrial wireless providers to partner and deliver wireless coverage to areas difficult to reach with traditional ground-based wireless signals, proposing rules that would comprise the framework by which space stations are licensed to handle in-space servicing, assembly and manufacturing (ISAM), and clarifying orbital debris mitigation rules.

FTC Cracks Down on Business-to-Business Telemarketing and Seeks Input on Addressing Tech Support Scam Calls

The Federal Trade Commission (FTC) recently adopted amendments to the Telemarketing Sales Rule (TSR or Rule) that target deceptive business-to-business (B2B) telemarketing calls and enhance recordkeeping requirements applicable to telemarketers and sellers. The FTC also released a Notice of Proposed Rulemaking (NPRM or Notice) that seeks comment on a proposal to remove an exemption that, if adopted, would apply the TSR to calls initiated by a consumer in response to a technical support solicitation. The adopted amendments to the TSR will be effective 30 days after publication in the Federal Register. The recordkeeping requirements will be effective 180 days after publication in the Federal Register. Comments on the Notice will be due within 60 days of publication in the Federal Register.

SEC Adopts Long-Anticipated Rules for SPACs: Considerations for Market Participants and SEC Enforcement Objectives in the New Regulatory Environment

On January 24, 2024, the Securities and Exchange Commission (SEC) announced the adoption of final rules (the Final Rules) affecting the acquisition of private operating companies by publicly traded special purpose acquisition companies (SPACs) and related financing transactions (individually and collectively, de-SPAC transactions), largely aligning them with requirements of traditional initial public offerings (IPOs). The Final Rules, which go into effect on July 1, 2024, and the adopting release also provided new guidance from the SEC with respect to SPAC and de-SPAC transactions.

SEC’s Climate Disclosure Rules Likely to Collide with California’s Climate Disclosure Laws

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) finalized and adopted its controversial greenhouse gas (GHG) reporting and climate disclosure regulations after a review of over 24,000 public comments and two years of hot debate. These new SEC climate-related regulations will soon require publicly traded companies to disclose, among other things, financially “material” Scope 1 emissions (direct emissions from operations) and Scope 2 emissions (indirect emissions from energy use) in their annual reports and registration statements, and will also require registrants to provide information regarding a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, operations or financial condition. Pillsbury recently published an alert on the content and details of new SEC climate-related regulations, which can be found here.

Non-U.S. Companies on Alert: U.S. Government Issues Tri-Seal Compliance Note on Global Enforcement

On March 6, 2024, the U.S. Department of Justice (DOJ), U.S. Department of Commerce, and U.S. Department of the Treasury issued a Tri-Seal Compliance Note (the “Tri-Seal Note”) emphasizing the obligations of non-U.S. persons to comply with U.S. sanctions and export control laws. The Tri-Seal Note does not issue any new rules or regulations, but rather reiterates existing U.S. trade compliance obligations for non-U.S. persons, highlights recent enforcement actions, and provides recommendations to help mitigate risks.

President Biden and Senators Support the Ramp Up in IRS Audits on Corporate Aircraft

During President Biden’s State of the Union address on March 7, 2024, President Biden announced that he will eliminate tax breaks for corporate aircraft. A White House statement released the same day explains this agenda and states that President Biden will be “cracking down on corporate jet loopholes” in an effort to make high-net-worth individuals and large corporations “pay their fair share.”

Commercial Real Estate Partnership Cancellation of Debt Income

With $1 trillion in commercial real estate financing expected to mature in 2024, much of it with uncertain prospect of repayment, more real estate borrowers will be faced with the prospect of taxable cancellation of debt income (CODI). Cancelled debt generally results in CODI but, if the debt is cancelled in bankruptcy or the taxpayer is insolvent, an exception to CODI may apply. The bankruptcy and insolvency exceptions are tested at the individual partner level, not at the partnership level. CODI exceptions reduce other valuable tax attributes, such as property basis and loss or credit carryovers, which are especially complex in bankruptcy.

DoD Contractor Requirement to Disclose Greenhouse Gas Emissions Has Been Halted

On December 6, 2022, and January 4, 2023, we published two client alerts outlining the proposed greenhouse gas (GHG) emissions disclosure requirements and explaining the differences between the Scope 1, 2 and 3 GHG emission categories. As we previously described, FAR 23.001 defines GHG as carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride and sulfur hexafluoride. Under the proposed Federal Acquisition Regulation (FAR) regulation, virtually all federal contractors will be required to identify and report an inventory of their Scope 1 and Scope 2 GHG emissions, starting one year after a final FAR rule is issued. With limited exceptions, this requirement will apply to all government contractors who received $7.5 million or more in federal contract obligations in the prior fiscal year. Government contractors who do not qualify as small business concerns and who received more than $50 million in federal contract obligations in the prior fiscal year will also be required to report an annual inventory of their Scope 3 GHG emissions. To date, the final FAR rule has not been issued.

FCC Announces Consumer IoT Cybersecurity Labeling Program

Reflecting the growing concern with cybersecurity threats associated with Internet of Things (IoT) products, the Federal Communications Commission (FCC) adopted rules at its March 2024 meeting to implement a new Voluntary Cybersecurity Labeling Program. The new label— “U.S. Cyber Trust Mark”—will be affixed on wireless consumer IoT products that go through the voluntary review program to ensure that the products comply with baseline cybersecurity criteria established in the September 2022 NIST Report 8425.

Congress Sets Its Sights on Limiting Access to Chinese Biotech Companies

The BIOSECURE Act would prohibit federal agencies from contracting with, extending loans to, or awarding grants to, any company with existing or pending agreements with identified biotechnology companies. This limits funding to both the procurement of biotechnology companies and funding flowing to any entity using these technologies.

Treasury Department and IRS Issue Final Regulations and Other Guidance on the Direct Pay Election under Section 6417 of the Internal Revenue Code

Under Section 6417 of the Internal Revenue Code (IRC), “applicable entities” and certain electing taxpayers can elect to treat various renewable energy tax credits as payments against tax, essentially making those credits refundable as direct payments from Treasury (the “direct pay election”). Proposed and temporary regulations relating to the direct pay election were issued by Treasury and the Internal Revenue Service (IRS) on June 14, 2023, and were published in the Federal Register on June 21, 2023 (the “Prior Regulations”). After considering numerous comments submitted by interested parties with respect to the proposed regulations, Treasury and the IRS issued final regulations on the direct pay election on March 5, 2024, which were published in the Federal Register on March 11, 2024 (the “Final Regulations”).

SEC Adopts Long-Anticipated Final Rules on Climate-Related Disclosure Requirements

On March 6, 2024, the Securities and Exchange Commission (SEC) adopted final rules imposing new climate-related disclosure requirements on domestic and foreign registrants with respect to their annual reports and registration statements ( “Final Rules”). The Final Rules scaled back many of the proposals from 2022, including the elimination of certain aspects of the greenhouse gas (GHG) emission disclosure mandates, modification of the financial statement disclosure requirements, removal of some of the more granular disclosure requirements, extension of certain phase-in periods, and elimination of Scope 3 GHG emissions disclosure requirements.

FinCEN’s Proposed Rule to Regulate Investment Advisers: The Questions Industry Should Be Following

On February 15, 2024, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking to regulate specified investment advisers as “financial institutions” under the Bank Secrecy Act (BSA) (the “Proposed Rule”). Investment advisers have presented a target for anti-money laundering (AML) regulation for a decade, with an earlier 2015 rulemaking effort failing to advance. The 2021 U.S. Strategy on Countering Corruption again highlighted the investment adviser sector, and the Treasury Department’s 2024 Investment Adviser Risk Assessment helped inform the Proposed Rule.

U.S. Fish & Wildlife Service Rolls Out BGEPA General Permit, Streamlining Wind and Power Line Project Approvals

On February 12, 2024, the U.S. Fish and Wildlife Service (USFWS) published a final rule revising the eagle permit program under the Bald and Golden Eagle Protection Act (BGEPA). 89 Fed. Reg. 9920. The new rule streamlines the issuance of project-specific incidental take permits by establishing, for the first time, general permits for certain eligible wind energy generation and power line infrastructure projects. The rule, codified at 50 C.F.R. Parts 13 and 22, also improves the project-specific permitting process for those projects that would not otherwise qualify for the general permit by removing the requirement that permits include a specific take limit and third-party monitoring provisions for wind projects. The new permitting regime can potentially result in significant time and cost savings for eligible projects.

Congress Continues to Address AI in Bipartisan Fashion, Launching House AI Task Force as Latest Step

On February 20, Speaker Mike Johnson (R-LA-4) and Democratic Leader Hakeem Jeffries (D-NY-8) revealed the creation of a bipartisan Task Force on Artificial Intelligence, to be chaired by Congressman Jay Obernolte (R-CA-23) and Congressman Ted Lieu (D-CA-36).

U.S. Courts of Appeals Block Two Legal Efforts to Curb DEI Initiatives

The first week of March 2024 saw two U.S. Courts of Appeals separately block efforts to restrict initiatives designed to promote diversity, equity, and inclusion (DEI). Although each court decision was grounded in provisions of the U.S. Constitution, one ruling rested on the First Amendment in affirming a preliminary injunction against an anti-DEI statute, while the other applied Article III standing principles to affirm dismissal of an advocacy group’s challenge to a corporate initiative designed to increase its pipeline of diverse employees.

Conflicting Court Rulings on Subchapter V Eligibility Leave Small Businesses in Limbo

In 2019, Congress passed the Small Business Reorganization Act (SBRA), which created subchapter V to chapter 11 of the Bankruptcy Code. Subchapter V is designed to create a streamlined, efficient and cost-effective way for smaller businesses to reorganize in a way that increases the likelihood of investors retaining their ownership. For example, subchapter V eliminates the absolute priority rule and instead allows the debtor to confirm, over the objection of creditors, a plan whereby equity retains ownership so long as it does not unfairly discriminate and is fair and equitable.

Sweden’s NATO Membership Is Official! Significant Business Opportunities Now Available to Swedish Companies

On March 7, 2024, Sweden officially joined the North Atlantic Treaty Organization (NATO) after Hungary’s parliament cleared the last hurdle to Sweden’s membership. Sweden and Finland began pursuing NATO membership following Russia’s invasion of Ukraine in 2022. Finland joined NATO in April 2023. Sweden’s accession, however, was met with significant opposition from Hungary and Turkey based on geopolitical concerns. NATO is an alliance of over 30 countries committed to working together to guarantee the freedom and security of its members through various political and military means. The admission of Finland and Sweden into NATO is monumental because it represents the most significant expansion of the alliance since the addition of eastern European countries after the Soviet Union collapsed in 1991.

The Ayes Have It: Dartmouth Men’s Basketball Team Is the First Student-Athletes to Unionize

On March 5, 2024, the Dartmouth Men’s Basketball Team voted 13-2 in favor of being represented by SEIU Local 560 (the “Union”). This vote follows the decision issued by Region 1 of the National Labor Relations Board (NLRB) that student-athletes are “employees” within the meaning of the National Labor Relations Act, as discussed in detail in our prior alert.

With Federal Efforts Stalled, States Take the Lead in Regulating the Use of Artificial Intelligence in Political Advertising

In the two months since we published our article on the use of artificial intelligence in political advertising, efforts to legislate and regulate the use of such media at the federal level in Congress and at the Federal Election Commission have largely stalled. States, however, have stepped in to fill the void in advance of the November 2024 general election. With eight months to go before that election, at least 40 states have addressed the use of AI in political advertising, with dozens of bills pending in state legislatures and laws on the books in a handful of states.

Delaware Court of Chancery Invalidates Certain Board Control Rights Commonly Found in Stockholder Agreements

Last month, the Delaware Court of Chancery issued a strong reminder that (1) when prevalent market practice is pitted against statutory law, it is the statute that will prevail in Delaware courts, and (2) the bedrock of Delaware law is that the board of directors manages the business and affairs of a corporation, not the stockholders.

Another Brick in the Wall: NCAA Enjoined from Enforcing NIL Rules Prohibiting Student-Athletes from Negotiating with Third Parties

On February 23, 2024, U.S. District Judge Clifton Corker issued a preliminary injunction that prohibits the National College Athletic Association (NCAA) from enforcing any rules to the extent those rules “prohibit[] student-athletes from negotiating compensation for [name, image, or likeness (“NIL”)] with any third-party entity,” including boosters and booster-led collectives.