Week in Review

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Treasury and IRS propose tax deduction for “pass-through” businesses, SEC amends alternative trading systems regulations, and more…

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  • The U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations establishing a 20 percent tax deduction for “pass-through” businesses—businesses whose profits are passed through to the owners—including sole proprietorships, partnerships, and LLCs. The proposed regulations are slated to take effect in time for the 2018 tax filing deadline in April 2019.
  • The U.S. Securities and Exchange Commission (SEC) adopted amendments to its regulations of alternative trading systems (ATS)—trading platforms not required to register as “exchanges”—that trade National Market System (NMS) stocks. The amendments would require ATS that trade NMS stocks to disclose their manners of operation, operators, and the operators’ ATS-related activities. The amendments would also require ATS to make public filings to the SEC.
  • The California Air Resources Board (CARB) issued a report arguing that the federal government could not revoke the state’s ability to set emissions standards. Scott Pruitt, the former U.S. Environmental Protection Agency (EPA) Administrator, had stated that President Obama’s administration “set the standards too high” and sought to revise the standards. California Attorney General Xavier Becerra described EPA’s proposal as “a brazen and unlawful attack” while EPA spokesperson James Hewitt reportedly stated that acting administrator Andrew Wheeler “has pledged to work in earnest with the state of California to find a solution.”
  • The SEC reportedly contacted Elon Musk, CEO of Tesla, after he tweeted that he was “considering taking Tesla private.” The SEC sought to learn whether Musk’s Twitter comments were true, and if so, why he chose to announce such thoughts on social media. Musk’s actions may have violated the Securities Exchange Act of 1934, section 240.14e-8 which prohibits publicly traded companies from announcing plans to make a tender offer if there is intention to manipulate stock prices, insufficient resources to complete the transaction, or no intent to complete it.
  • The U.S. Trade Representative announced an additional 25 percent tariff on $16 billion of imported goods from China. President Trump tweeted that “tariffs are working big time,” although U.S. Senator Rand Paul (R-KY) asserted that “tariffs are taxes that punish American consumers and producers.”  In response, the Chinese State Council announced an equivalent amount of counter-tariffs, claiming that “China was forced to take the countermeasures” in order to reduce the impact on its civilians and to curb any further escalation of tariffs.
  • The U.S. Department of Justice (DOJ) filed its brief arguing that the U.S. District Court of the District of Columbia “clearly erred” in its decision to clear the AT&T-Time Warner merger. The DOJ claimed that it had established a “reasonable probability” that the merger would reduce competition and the District Court disregarded the merged firm’s increased bargaining power and the economic principle that corporations seek to maximize profit company-wide.
  • The U.S. Bureau of Consumer Financial Protection (BCFP), the United Kingdom’s (UK) Financial Conduct Authority, and 10 other international regulators announced the creation of the Global Financial Innovation Network (GFIN). The BCFP said that the GFIN is meant to streamline collaboration between regulators and innovative firms and will address developing regulatory frameworks in areas such as artificial intelligence, blockchain technology, and data protection.
  • The U.S. Department of the Interior announced plans to reverse a rule banning the use of pesticides and genetically modified organisms (GMOs) in national wildlife refuges. U.S. Fish and Wildlife Service (FWS) Principal Deputy Director Greg Sheehan stated that he was “reversing the decision to universally ban the use of genetically modified crops on refuges” and that pesticide use would be determined on a case-by-case basis. Jamie Rappaport Clark, president and CEO of environmental group Defenders of Wildlife, stated that “industrial agriculture has no place on public lands dedicated to conservation of biological diversity” and called the policy “an insult to our national wildlife reserves.”
  • The UK’s Medicines and Healthcare Products Regulatory Agency announced its intended participation in the Clinical Trials Regulation (CTR)—a unified European Union (EU) system of applications and reporting for clinical trials—planned for implementation in 2020. The agency stated that certain aspects of the CTR will require a successfully negotiated Brexit agreement, but affirmed that UK law will align with all parts of the CTR “that are within the UK’s control.” The agency also stated that it is “fully committed to continuing a close working relationship with the EU” no matter the outcome of Brexit negotiations.