New $500 Billion Treasury Loan Programs Under the CARES Act Provide COVID-19 Relief for Private Sector Business

The CARES Act (H.R. 748) was signed into law on March 27, 2020. In a Client Alert issued that day, we summarized the Act’s provisions in Title I relating to its appropriation of $350 billion for small business loans.

COVID-19 Relief: Understanding SBA Loan Opportunities Under the CARES Act

On March 11, 2020, President Trump announced in a national address that the SBA would be making $50 billion in low-interest loans available to small businesses impacted by the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) greatly exceeds the President’s initial pledge by appropriating $350 billion for “Paycheck Protection Loans” for small businesses—including up to $10 million per company for companies with fewer than 500 employees. The Act also makes $10 billion available to the SBA’s existing Economic Injury Disaster Loans for companies impacted by COVID-19, and modifies the rules for those loans is several ways. At the time of this publication, the CARES Act (H.R. 748) has been passed by both chambers of Congress and is expected to be signed by President Trump on March 27, 2020. We summarize below the Act’s major provisions related to these two types of SBA loan opportunities.

New York Regulation Defines Required Mortgage Forbearance and Bank Fee Waivers for COVID-19 Financial Hardship

With the spread of the novel coronavirus (COVID-19) throughout the country, as described in earlier client communications, federal and state officials at every level are issuing guidance and directives advising financial institutions on how to handle situations in which the pandemic prevents individuals from repaying loans. New York Governor Andrew Cuomo issued Executive Order No. 202.9 (EO 202.9), dated March 21, 2020, containing a broad requirement for forbearance and relief from banking fees for those experiencing financial hardship as a result of COVID-19. EO 202.9 is operative until April 20, 2020. EO 202.9 has been implemented in an Emergency Regulation issued by NYSDFS on March 24, 2020, Emergency Relief for New Yorkers Who Can Demonstrate Financial Hardship as a Result of COVID-19, 119 NYCRR 3 (the DFS Regulation). The DFS Regulation applies to “Regulated Institutions,” defined as “any New York regulated banking organization under New York Banking Law and any New York regulated mortgage servicer entity subject to the authority of the Department.”

New Coronavirus Legislation Fixes Real Estate Glitch from 2017 Tax Act

On March 25, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a third legislative attempt to address the economic effects of the COVID-19 pandemic. The House is expected to take up the legislation on Friday, March 27. Included in the CARES Act is a retroactive amendment to the bonus depreciation rules, which should now finally allow taxpayers to claim 100% bonus depreciation for “qualified improvement property.”

Stay at Home Massachusetts: Nonessential Services Closed

Following his earlier declaration of a state of emergency, on March 23, 2020, Massachusetts Governor Charlie Baker issued an emergency order instructing all businesses and organizations in the Commonwealth that do not provide “COVID-19 Essential Services” to close their physical locations. The emergency closure went into effect at 12:00pm on March 24, 2020 and remains in place until 12:00pm on April 7, 2020. To slow the alarming spread of the novel Coronavirus (COVID-19), Order No. 13 further restricts movement within the community by prohibiting indoor gatherings of more than ten people. In tandem, Governor Baker also directed the Department of Public Health (DPH) to issue a “stay-at-home” advisory.

New Jersey State and Local COVID-19 Orders

One of New Jersey’s most well-known sons, Frank Sinatra, famously proclaimed, “I did it my way.” In response to the grave threat COVID-19 presents to life and health, Governor Phil Murphy has taken steps to insure that, for the time being, localities in New Jersey cannot follow in Ol’ Blue-Eyes’ footsteps.

Maryland Extends COVID-19 Closures to Nonessential Businesses

On March 23, 2020, Maryland Governor Larry Hogan mandated the closure of all nonessential businesses by executive order effective as of March 23, 2020 at 5 p.m. A person who knowingly or willfully violates the order may be subject to imprisonment of up to one year or a fine of up to $5,000, or both. As with the governor’s prior executive orders prohibiting large gatherings and directing business closures in response to COVID-19, the March 23 order suspends any statute, rule, or regulation of a state agency or political subdivision that is inconsistent with the order.

U.S. Merger Review in the Time of Coronavirus

Both U.S. antitrust enforcement agencies—the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division (DOJ)—are changing their approach to civil enforcement and merger review during the coronavirus pandemic.

New York State Enacts Mandatory Sick Leave Law with Job Protection During COVID-19 Quarantine

On March 18, 2020, Governor Andrew Cuomo signed Senate Bill S8091 into law to provide sick leave and job protection for New York workers during the COVID-19 crisis. Under the new law, effective immediately, companies cannot fire or penalize employees who are unable to work while subject to “a mandatory or precautionary order of quarantine or isolation due to COVID-19.” The order must be issued by the state of New York, the department of health, local board of health, or any governmental entity with authority to issue such orders. The job protection lasts for the duration of the period that employees are self-isolating under a mandatory or precautionary order. Employees who are able to work remotely while under the “stay at home” orders and who are asymptomatic or not yet diagnosed are not covered by the new law.

New York Bankers Must Consider Forbearance, Other Consumer Protection in Response to COVID-19

With the spread of the novel coronavirus (COVID-19) throughout the country, New York Governor Andrew Cuomo issued Executive Order No. 202.9 (“EO 202.9”), dated March 21, 2020, containing a broad requirement for forbearance and relief from banking fees for those experiencing financial hardship as a result of COVID-19. EO 202.9 is operative until April 20, 2020.

California Executive Power and Industrial Facilities in the Wake of COVID-19

The COVID-19 pandemic has rapidly become one of the world’s most serious public health challenges, and has caused unprecedented disruption to industries in the United States and across the globe. Industries doing business in California have felt the impacts more acutely than most, as the state has become one of the nation’s “hotspots” for new COVID-19 cases. These impacts have sparked numerous efforts by state and local authorities in California to attempt to address the virus, encompassing everything from suspension of all public gatherings, to mass cancellation of sports and entertainment events, to citywide quarantines.

COVID-19 Pandemic Will Soon be Impacting Compliance with and Enforcement of Environmental Laws

Remote work and other impacts to company workforces from the novel coronavirus pandemic are likely to result in practical limitations on usual environmental, health and safety compliance programs and activities across a wide variety of industries. We are already seeing see some regulatory agencies issuing new guidance and orders with implications for compliance and enforcement, and it is worth noting that regulatory agencies will also likely be impacted by their own workforce capacity issues in this environment.

COVID-19: IRS and States Extend Tax Deadlines

On March 20, the IRS issued Notice 2020-18 announcing that federal income tax payments and payments due on April 15 may be deferred until July 15. Notice 2020-18 supersedes Notice 2020-17, issued just two days earlier. States are quickly aligning with the IRS’s extension of time, with California already adopting similar relief. The relief is intended to ease an imminent payment burden and create liquidity, but high income individual taxpayers may disproportionately benefit from the deferral because they are most likely to pay final 2019 and 2020 estimated tax payments on April 15, whereas a large proportion of individual taxpayers actually receive refunds after filing their returns.

COVID-19: Analysis of H.R. 6201, the Families First Coronavirus Response Act

On March 18, 2020, the U.S. Senate passed H.R. 6201, the Families First Coronavirus Response Act, following U.S. House of Representatives action on the legislation several days earlier. President Trump is expected to sign the bill into law immediately.

President Trump Invoked the Defense Production Act: What Are the Implications?

Earlier today, President Trump invoked the Defense Production Act, codified at 50 U.S.C. §§ 4501 et seq., in response to the COVID-19 pandemic. The Act’s implementing regulations, found at 15 C.F.R. §§ 700.1 et. seq., promulgate the Defense Priorities and Allocations System (DPAS). Congress enacted the Act in 1950 to address the short supply of essential goods during the Korean War. The Act allows the federal government to require domestic industries to provide essential goods and services needed for the national defense.

Scenarios Government Contractors May Face During the COVID-19 National Emergency

On March 13, 2020, President Trump declared that the outbreak of COVID-19 constituted a national emergency. Government contractors will face a number of scenarios—some familiar and some not—as a result of the outbreak. In this client alert, we raise four possible factual scenarios contractors are likely to encounter. We then analyze how contractors facing these scenarios can (1) best protect themselves from liability for schedule delays they may experience, and (2) best position themselves to recover for their attendant cost growth.

COVID-19: Congress and Federal Regulators Tell Financial Institutions to Prepare for Coronavirus Changes

With the spread of the novel coronavirus (COVID-19) throughout the country, regulators and Members of Congress have begun advising financial institutions on how to handle situations in which the pandemic prevents individuals from repaying loans.

M&A in the Time of COVID-19

As novel coronavirus (COVID-19)—characterized by the World Health Organization on March 11, 2020 as a pandemic—continues to spread across the globe, companies and transaction participants are grappling with increased risk and uncertainty posed by the virus. This note identifies a few ways in which the developing outbreak may present challenges, both fundamental and practical, to the deal-making process and timelines. It also offers an analysis of how the virus may impact negotiations around that mainstay of M&A lawyering, the “material adverse change” (MAC) clause.

COVID-19 Emergency Funding and Tax Relief: Assessing Federal Opportunities

One thing is certain about how Washington policymakers will respond to the coronavirus (COVID-19) outbreak: there will be spending, both in the form of tax relief and through direct federal funding.

COVID-19: Prepare Now to Maximize Insurance Recoveries

As COVID-19 continues to spread and to halt much of the global economy, by now many businesses have already been affected and others are taking the necessary steps to prepare for if and when the virus affects them.  The first step, as always, is to see to the physical and mental health and safety of your personnel. Right behind it, however, should be taking stock of the impacts and communicating losses to your insurance companies. The key questions as you plan your recovery are: What insurance covers your losses? Have you identified all the policies that may respond? How do you measure and document losses—especially lost profits—to the insurers’ satisfaction? Is there coverage for supply chain disruptions? And are there any government funds, such as FEMA or CARES Act assistance, available to aid your recovery?

Mitigating Employment Law Risks as COVID-19 (Coronavirus) Spreads

As coronavirus disease 2019 (abbreviated “COVID-19”) spreads worldwide, businesses in the U.S. face practical and legal employment challenges as they take measures to further the immediate goal of preventing the spread of physical infection to and within their workforces.

As Coronavirus Spreads, Businesses Must Be Prepared for a Crisis All Their Own

As of today, there are reportedly more than 90,000 confirmed cases of COVID-19, with the virus having reached every continent except Antarctica. As corporate America wrestles with the unfolding implications of coronavirus, here are three essential crisis management tips to ensure business continuity:

EPA’s Wide-Ranging Rule on Perfluoroalkyl Substances

The United States Environmental Protection Agency (EPA or the Agency) has taken another step toward regulating perfluoroalkyl substances (PFAS). Specifically, on February 20, 2020, EPA issued a pre-publication version of a Supplemental Proposed Rule that could affect a host of businesses that traditionally have not had to concern themselves with Toxic Substances Control Act (TSCA) compliance and enforcement. The proposal concerns a subcategory of PFAS known as “Long-Chain Perfluoroalkyl Carboxylates and Perfluoroalkyl Sulfonates” (collectively, LCPFAC) under TSCA. Perfluorooctanoic acid (PFOA) and perfluorooctane sulfonic acid (PFOS), two of the most problematic PFAS substances, are among the chemicals that would be regulated.

IRS Issues Anticipated Guidance on Section 45Q Carbon Capture Credits

On February 19, 2020, the Internal Revenue Service issued long anticipated guidance to help businesses understand how legislation passed in 2018 impacts those claiming carbon capture credits pursuant to Section 45Q. The guidance addresses the definition of “beginning of construction” and provides a safe harbor for partnership allocations of the credit. This guidance takes a first step toward accelerating slow-moving projects, with more detailed rules to come.

Private Funds Litigation/Regulatory Year in Review and 2020 Outlook

Introduction
Private funds continue to live in an age of heightened litigation risk and an emboldened Securities & Exchange Commission (SEC). Firms should take steps to mitigate risks—including documenting oversight, observing corporate formalities, creating and implementing strong internal controls, and adequately training professionals who serve as directors.

Substantial Transformation of the FAR Trade Agreements Clause

BACKGROUND

The Buy American Act is the basic source of restrictions on the federal government’s purchases of foreign-produced products. As implemented through a Presidential executive order and regulations, the law imposes a “price preference” for purchases of U.S. origin goods, which can be 6% (for non-Defense procurements) to 50% (for Defense procurements). The application of the Buy American Act is modified when the United States is obligated by an international agreement—either the World Trade Organization (WTO) Government Procurement Agreement (GPA) or a free trade agreement such as the NAFTA—to accord non-discriminatory treatment to the goods of specific foreign countries. In those cases, when the procurement is being made by a covered agency and the value of the procurement is above the applicable threshold, no price preference is applied and the foreign good is evaluated in the same manner as U.S. goods. Those modifications are implemented under the authority of the TAA, which implements U.S. obligations under trade agreements.

DC’s UPL Law Regulations Present Choices and Challenges for Employers

Universal Paid Leave Benefits Become Available in July
On July 1, 2020, the District of Columbia’s Department of Employment Services (DOES) will begin administering paid leave benefits as part of the Universal Paid Leave Amendment Act. These benefits—called variously Universal Paid Leave (UPL) or Paid Family Leave (PFL) benefits—will permit eligible employees working in the District to receive partial wage replacement benefits from the D.C. government for qualifying absences from work. Lower-wage employees may receive 90% of their average weekly wage—up to $840 per week. Employees who are paid more than 150% of minimum wage will receive larger benefits checks, although reflecting a smaller percentage of their earnings, up to a maximum of $1,000 per week. The benefits will be funded through a 0.62% payroll tax imposed on covered employers that went into effect on July 1, 2019.

DoD Has Released Model Volume 1.0 of the Cyber Maturity Model Certification Framework

DoD has released the highly anticipated final Model Version 1.0 of the Cybersecurity Maturity Model Certification (CMMC) framework. As we have reported in client alerts in December 2017, May 2018, October 2018 and December 2019, the development of the CMMC framework is part of DoD’s efforts to enhance the protection of sensitive data within the Federal supply chain. The CMMC framework adds a verification and audit component to DoD’s cybersecurity requirements. It is anticipated that all contractors throughout the DoD supply chain will need to reach some level of CMMC certification if they are to receive future DoD contracts and subcontracts.

Highlights of the CLEAN Future Act Proposal from the House Energy and Commerce Committee

The Chairman of the House Energy and Commerce Committee has released a “discussion draft” of the committee’s climate bill. The legislation is over 600 pages long, but the Committee has also released a summary of this legislation, which is entitled the Climate Leadership and Environmental Action for our Nation’s Future Act or the CLEAN Future Act. Here are some highlights.

Deployment of SMRs: Key Market Trends for Consideration

Any strategy for the successful deployment of small modular reactors (SMRs) must thoroughly consider the current trends affecting the burgeoning market for SMRs. In 2019, the three major trends shaping this market were the large number of SMR designs, interest in SMRs in both mature and emerging markets, and factors impacting SMR financing.

10 Recommended Steps to Take Following Receipt of a Notice of Proposed Debarment or Suspension

For government contractors, a debarment immediately renders them ineligible for government contracting and, in turn, cuts off revenue, leading to potential irreparable harm. For individuals facing debarment, the effect is equally as dire, as most government contractors will immediately terminate an employee who has been proposed for debarment, or at a minimum, place the employee on leave pending a resolution. With such high stakes, those who find themselves in the crosshairs of such proceedings inevitably have questions. What should I do if I am debarred, and how does debarment affect me? How will my reputation be impacted by debarment? What can I do to avoid debarment? Unfortunately, adequate answers can be difficult to find.

U.S. Expands Secondary Sanctions to Iran’s Industrial Sectors

On January 10, 2020, the United States imposed additional sanctions on Iran in the wake of recent tensions between the countries and the continuing broader “maximum pressure” campaign on Iran. Specifically, President Trump signed Executive Order 13902 (E.O. 13902) authorizing the imposition of secondary sanctions on certain transactions involving Iran’s construction, mining, manufacturing, and textiles industries. This follows Executive Order 13871 from May 2019, which authorized secondary sanctions on Iran’s iron, steel, aluminum and copper sectors. Concurrently with the issuance of E.O. 13902, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) added to the Specially Designated Nationals and Blocked Persons List (SDN List) several major Iran-related metal and mining companies, Chinese and Seychelles entities plus a related vessel involved in the Iranian metals trade, and Iranian regime officials.

Compliance in 2020 – Key Takeaways from the ITAR Cloud Rule

On December 26, 2019, the Department of State published in the Federal Register an interim final rule amending the International Traffic in Arms Regulations (ITAR) to define “activities that are not exports, reexports, retransfers, or temporary imports,” and specifically to clarify that the electronic transmission and storage of properly secured unclassified technical data via foreign communications infrastructure does not constitute an export. The rule also defines “access information” and revises the definition of “release” to address the provision of access information to an unauthorized foreign person.

Key Takeaways from CFIUS Final Rules Implementing FIRRMA

On January 13, 2020, the U.S. Department of the Treasury issued two final rules for the Committee on Foreign Investment in the United States (CFIUS) implementing the Foreign Investment Risk Review Modernization Act (FIRRMA), which was enacted on August 13, 2018. The final rules largely adopt the proposed rules published on September 17, 2019, with several key clarifications and modifications. As discussed previously, FIRRMA has resulted in two separate rulemakings that expand CFIUS’ jurisdiction to include (i) certain non-controlling investments in U.S. businesses engaged in critical technology, critical infrastructure, and sensitive personal data, and (ii) certain real estate transactions. The final rules will be published in the Federal Register on January 17, 2020 and will go into effect February 13, 2020 (Effective Date), with one exception described below. We anticipate that the Treasury Department will publish a separate rule concerning filing fees soon.

Civilian Board of Contract Appeals Releases 2019 Annual Report

Earlier this week, the Civilian Board of Contract Appeals (CBCA) released its Fiscal Year (FY) 2019 report. The CBCA docketed 418 new matters in FY 2019, which represents a modest increase from the 409 docketed in FY 2018. Prior to FY 2018, the CBCA had experienced docket decreases for each of the previous three years. For only the second time since FY 2014, however, the number of new cases docketed during the year exceeded the number of appeals the CBCA resolved. This latter statistic indicates that matters may proceed more slowly during 2020.

Proposed NEPA Regulations Would Streamline Analysis and Eliminate Cumulative Impacts

On January 10, 2020, the White House Council on Environmental Quality (CEQ) issued a Notice of Proposed Rulemaking (85 Fed. Reg. 1684) announcing major proposed revisions to the regulations implementing the National Environmental Policy Act (NEPA). The revisions propose sweeping streamlining and modernizing changes to the environmental review and permitting process for federal projects, including many infrastructure and energy projects. Most significantly, the proposal would eliminate the need to study a project’s cumulative or indirect environmental effects; exclude many projects from NEPA review; and shorten the time for completing NEPA review and approvals. The proposed changes mark the first comprehensive update to the NEPA regulations in over 40 years.

Spending Deal Provides Long-Term Extension for Biodiesel Tax Credit

On Dec. 20, 2019, President Trump signed into law a new spending deal that includes an historic five-year extension of the biodiesel blenders tax credit. The deal reinstates the blenders tax credit for biodiesel and renewable diesel retroactively from its expiration on Jan. 1, 2018, through Dec. 31, 2022. The legislation also includes a “special rule” that directs the Treasury Department to develop a one-time claims process to speed payment of the credit for years 2018 and 2019, when it lapsed.

District Court Overturns OFAC Fine Against Exxon

On December 31, 2019, the U.S. District Court for the Northern District of Texas overturned a $2 million fine imposed by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) against ExxonMobil Corp., and its U.S. subsidiaries ExxonMobil Development Company and ExxonMobil Oil Corp. (collectively, “Exxon”). This marked a rare court decision overturning an OFAC sanctions penalty. The Court’s decision focused not on the subject of the sanctions but addressed whether OFAC had provided proper notice of its sanctions requirements.

Commerce Department Publishes Interim Final Rule Controlling Geospatial Imagery Software for Training AI

Companies anxiously awaiting the release of “emerging technology” export control rules now have an initial interim rule indicating how the Department of Commerce Bureau of Industry and Security (BIS) is likely to proceed. Specifically, the interim rule related to software for training AI appears to be a narrowly tailored rule covering a specific type of AI software related to specific national security concerns involving geospatial imagery. While there are some questions on the scope of what is covered by “geospatial imagery,” comments on the rule due on March 6 will allow industry to provide input and hopefully obtain formal clarification once the final rule is issued. Additionally, the interim rule highlights that the new “emerging technology” rules will not be a “one and done” but rather a rolling series of rules on specific technologies warranting control.

New York Guidance on Listing Digital Assets

On December 11, 2019, DFS published a proposal to create a public list of approved virtual currencies and a self-certification methodology for holders of NY Bitlicenses and New York trust companies approved to engaged in a virtual currency business (together, VC Licensees) to offer to New York consumers virtual currencies without the need for additional approvals of the DFS.

Environmental and Regulatory Highlights of the Fall 2019 Unified Agenda of Regulatory Actions

In late December, the Office of Management and Budget (OMB) released the “Fall 2019 Unified Agenda of Regulatory Actions” just a few days before the Calendar turned to the year 2020. (It should be noted that the Spring Agenda was not released until June 24, 2019.) Individual agency agendas were published in the Federal Register by several agencies and executive departments on December 26, 2019. The entire agenda, which is a survey of all current and projected rule-making actions that federal agencies and departments are planning over the next 12 months, is available at such government websites as regulations.gov. The Agenda provides valuable insights into the actions these agencies believe to be most important. This survey will largely concentrate on environmental regulatory developments, although other matters are worth noting.

SBA Issues Final Rule Impacting Small Business Regulations

On November 29, 2019, the U.S. Small Business Administration (SBA) issued an extensive final rule that made numerous revisions to its small business regulations, including limitations on subcontracting and compliance with small business subcontracting plans. (See 84 Fed. Reg. 65647-65666). This final rule, which becomes effective on December 30, 2019, implements provisions of the National Defense Authorization Acts (NDAA) of 2016 and 2017 and the Recovery Improvements for Small Entities After Disaster Act of 2015. The final rule makes multiple changes to the SBA’s regulations, the most significant of which are described below.

Significant Changes Ahead for California Employers, Effective January 1, 2020

The New Year will bring with it many new legal requirements for California employers. Although much of the focus has been on the passage of AB 5 and its new, onerous standards for independent contractor classification, there are numerous other laws that employers must be aware of and take measures to comply with in advance of their January 1, 2020 effective date.

DOJ Announces Government Procurement Collusion Strike Force

On November 5, 2019, the Department of Justice (DOJ) announced the formation of a new Procurement Collusion Strike Force (PCSF) focusing on deterring, detecting, investigating and prosecuting antitrust crimes, such as bid-rigging conspiracies and related fraudulent schemes, which undermine competition in government procurement, grant and program funding.

SBA Proposes Far-Reaching Rule to Revise and Clarify Many of Its Small Business Regulations

On November 8, 2019, the U.S. Small Business Administration (SBA) issued an extensive proposed rule that would make numerous revisions to its small business regulations, including the Mentor Protégé Programs, the current limits on the use of joint ventures, and the size status certification rules for orders issued under multiple award contracts. (See 84 Fed. Reg. 60846-60881.) This proposed rule is a direct response to President Trump’s January 30, 2017 Executive Order (No. 13771) designed to reduce unnecessary and burdensome regulations and to control costs associated with regulations. The SBA’s review of its regulations led to dozens of proposed regulation changes, the most significant of which are described below.

Name-and-Shame Proposal of Electric Regulators Highlights Need for Cyber Insurance

On August 27, 2019, FERC and NERC staffs issued a Joint Staff White Paper on Notices of Penalty Pertaining to Violations of Critical Infrastructure Protection Reliability Standards. In that White Paper, FERC/NERC staffs propose departing from FERC’s historical practice of withholding most material details regarding CIP Reliability Standard violations. FERC has recently signaled an appetite to depart from that practice by disclosing the names of a handful of allegedly violating electric utilities in response to Freedom of Information Act (FOIA) requests.

Federal Circuit Decision Addressing Salary Costs Associated with Lobbying Activities Has Broad Implications

Imagine the following hypothetical: You are a Government contractor with cost-reimbursement contracts where the Government pays the costs of performance. You know that you cannot ask the Government to pay for lobbying costs (e.g., the costs of consultants who work to influence the outcomes of elections or legislation, and the costs of political contributions). Indeed, applicable regulations specifically call out such costs as being unallowable. Accordingly, you identify them as such in your incurred cost proposal. Suppose you also have employees who oversee some of these unallowable activities and interact with the consultants engaging them. In fact, if not for these unallowable activities, you would not have incurred a portion of these employees’ salaries. Are such salary costs unallowable? And if they are, will you be subject to penalties for requesting that the Government reimburse you for these costs? These are the types of questions addressed by the U.S. Court of Appeals for the Federal Circuit in Raytheon Co. v. Sec. of Def., 2018-2371 (Oct. 18, 2019). The court’s conclusions—based on a questionable interpretation of FAR 31.001—upend what had been established precedent at the Armed Services Board of Contract Appeals (ASBCA) ruling these costs were not expressly unallowable.

DOE Proposes Procedures for the Imposition of Civil Penalties for Violations of Part 810

On October 3, 2019, the U.S. Department of Energy (DOE) issued a Notice of Proposed Rulemaking (NOPR) proposing procedures for imposing civil penalties for violations of DOE’s 10 CFR Part 810 regulations (Part 810). Part 810 implements section 57b.(2) of the Atomic Energy Act (AEA) (42 U.S.C. 2077) and controls the export of unclassified nonpublic nuclear technology.

Developments Highlight Secondary Liability Risks for Private Funds

In an age of heightened litigation risk and a motivated Securities & Exchange Commission (SEC), private funds need to be increasingly mindful of secondary liability risks, especially when evaluating costs and benefits of potential portfolio company ownership structures. Given the uncertainties, firms must take steps to mitigate such risks—including documenting oversight, observing corporate formalities, ensuring the creation and implementation of strong internal controls, and adequately training professionals who serve as directors.

All Eyes Are on Regulation of Digital Assets as Federal Agencies and Lawmakers Seek to Bring Clarity: Part 1—The SEC, Utility Tokens and Quarters

Digital assets such as tokens and virtual currencies continue to garner market interest and press coverage, but significant questions remain about their regulation—are digital assets securities, commodities, banking products, something else? How are their creators regulated, and what are the regulations and tax rules that apply to owners and intermediaries? The summer of 2019 has brought a few helpful clarifications. In this evolving regulatory environment, the U.S. Congress is discussing future legislative steps, and on July 30, 2019, the Senate Banking Committee held a hearing “Examining Regulatory Frameworks for Digital Currencies and Blockchain.”