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May 2018

Trump softens stance on trade with China…

President Trump’s surprising move to lift sanctions against Chinese tech giant ZTE signals a sharp change of direction from his previously bellicose stance on tough trade moves toward China.

"President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast," Trump tweeted. "Too many jobs in China lost. Commerce Department has been instructed to get it done!"

The Commerce Department slapped strong sanctions on ZTE because of its continuing business with North Korea and Iran, barring ZTE from using U.S.-made parts in its cellphones and other equipment. ZTE announced that it had shut down operations because of its heavy reliance on U.S. parts.

In exchange for lifting sanctions on ZTE, administration negotiators are expected to press China to relax tariffs on U.S. agricultural products and to allow Qualcomm, a U.S. technology company, to acquire a Chinese company, HXP Semiconductors.

While administration officials insisted that Trump’s move to help ZTE were part of the president’s negotiating strategy, it drew immediate criticism from Democrats and even some Republicans.

"One of the few areas where the president and I agreed, and I was vocally supportive, was his approach towards China," Senate Minority Leader Chuck Schumer. D-NY, said. "But even here he is backing off, and his policy is now designed to achieve one goal: Make China great again."

"The problem with ZTE isn't jobs & trade, it's national security & espionage," Sen. Marco Rubio tweeted Monday. "Any telecom firm in China can be forced to act as a tool of Chinese espionage without any court order or any other review process. We are crazy to allow them to operate in the U.S. without tighter restrictions.”

Others warned against reading too much into the ZTE situation.

"Just as Trump can zig via tweet, one should not be surprised when he zags with the same velocity," one trade expert said.

The massive federal tax bill gave to business, but also took away…

The Tax Cuts and Jobs Act (TCJA) enacted in December had lots of goodies for business, including a flat 21% tax rate, a 20 percent qualified business deduction for owners of pass-through entities, repeal of the corporate Alternative Minimum Tax and increased write-offs for capital spending.

But, business owners also lost several favored deductions and write-offs that won’t be there when they file their 2018 tax returns. The challenge right now is that the hastily written language in the massive tax bill still requires clarification by the Internal Revenue Service (IRS) of many key provisions in the new law.

Here’s a quick rundown:

Entertainment Costs: The 50% deduction for entertaining customers and clients is gone for any expenses incurred after Jan. 1, 2018. But, the IRS still must resolve whether that repeal applies to business meals. The new law appears to include those in entertainment costs.

Fringe Benefits: Employers can no longer deduct the cost of free parking, monthly transit passes and van pooling provided to employees, although employees can still receive them tax-free up to $260 a month. Employers reimbursing employees for the cost of job-related moving can no longer deduct the cost of this benefit, at least through 2025, when a number of the tax bill’s provisions expire.

Business Interest Expenses: Beginning in 2018, business deductions for interest expenses are limited under a formula that involves the sum of business interest income and 30% of adjusted taxable income. Small businesses (average annual gross receipts of $25 million or less in the three previous years) are exempt from this limitation. Check with your tax professional.

Net Operating Losses: Under the old law, net operating losses could be used to fully offset taxable income in carryback and carryforward years. Starting in 2018, a net operating loss can only offset 80 percent of taxable income and the carryback is gone except in certain situations.

Fines and penalties: Starting in 2018, fines and penalties are not deductible when they are imposed by a government entity. Exceptions include money paid to come into compliance, payments to satisfy a court order when the government is not a party and amounts paid for taxes due.

Settlements for sexual harassment or sexual abuse are no longer deductible if paid under a nondisclosure agreement.

ICE ramps up workplace inspections in pursuit of illegal workers...

U.S. Immigration and Customs Enforcement (ICE) agents have dramatically increased workplace inspections and audits in their pursuit of illegal workers, with the agency promising that the number of raids will more than triple this year compared to last year.

Figures released by ICE show that the agency opened more workplace investigations and made more arrests in the first seven months of the fiscal year, which began Oct. 1, than during the entire previous fiscal year.

The agency said it has opened 3,350 workplace investigations between Oct. 1, 2017 and May 4, 2018 compared to 1,716 investigations in all of fiscal 2017. Agency officials said the number of investigations would grow to more than 5,500 by the end of this fiscal year, and could increase to more than 15,000 a year if budgets permit.

The rapid growth of workplace investigations indicates a shift in strategy for the Trump administration, which in the past has focused more on border enforcement efforts.

EPA considers changing TSCA fee schedules...

The United States Environmental Protection Agency (EPA) is considering changes in the way it defines small businesses in setting industry user fees under the Toxic Substances Control Act (TSCA). Small businesses are entitled to an 80% discount on the fees charged to larger firms.

EPA acted after industry groups complained that the user fees EPA announced in February were too high.

The latest changes proposed by EPA would not reduce overall industry user fees because the TSCA law requires EPA to collect 25% of its annual chemical review costs from industry. EPA says it currently must collect $20.05 million in user fees, 25% of the estimated $80.2 million annual cost of the agency’s chemical review activities.

Under the original TSCA rules announced by EPA in February, small businesses entitled to the 80% discounts would include entities with annual sales of $91 million or less compared to the existing standard of $50 million in sales. The new proposals would either define a small business as a company with 500 or fewer employees or by using employee numbers set by the Small Business Administration (SBA), which vary by industry sector.

Under the new TSCA law enacted in 2016, EPA has authority to require payment from manufacturers and processors who are required to submit information by test rule, test order, or enforceable consent agreement; submit information related to their intent to manufacture a new chemical or significant new use of a chemical; or manufacture or process a chemical substance that is subject to a risk evaluation.

Because the proposed rules would mean more companies qualify as small businesses, EPA would have to increase the fees it collects from larger companies.

A completely new FTC will tackle antitrust and consumer protection issues…

With Senate confirmation of President Trump’s nominees for all five seats on the Federal Trade Commission (FTC), a completely new FTC faces complex antitrust policy questions and consumer protection issues, with a particular emphasis on data privacy and security.

The five new commissioners will replenish an FTC that has operated for more than a year with just two members. The five new members—three Republicans and two Democrats—are:

• Joseph Simons, the new FTC chairman and an experienced antitrust lawyer with prior FTC service.

• Christine Wilson, also an experienced practitioner who will join the FTC when the term of current commissioner Maureen Ohlhausen ends in September or sooner if Ohlhausen’s nomination to the U.S. Court of Federal Claims is approved.

• Noah Phillips, a long-time aide to Republican Senator John Cornyn.

• Rohit Chopra, a Democrat, who has worked in consumer financial protection.

• Rebecca Slaughter, a long-time aide to Senate Democratic Leader Charles Schumer.

The new FTC’s antitrust activity is expected to focus on healthcare industry mergers and pharmaceutical patents, areas which have taken up nearly 50% of the FTC ‘s attention in recent years. The new commissioners are also expected to increase the commission’s attention to technology industry mergers and potential antitrust activities. And the new FTC will pursue antitrust actions in cases where state regulations restrain competition.

In addition to the new commission members, the FTC is expected to appoint Andrew M. Smith, a lawyer who has represented Facebook and Equifax, to head the FTC consumer protection bureau, which is tasked with policing those and other companies involved in data privacy issues. According to news reports, Smith would recuse himself from investigations involving the companies he has represented while at the prominent DC law firm Covington & Burling.

Trump’s infrastructure plan appears dead for this year...

President Trump’s ambitious plan to spend $250 billion on infrastructure repairs to roads and bridges appears unlikely to win congressional approval this year.

The president’s plan called for the federal government to spend $250 billion in matching funds as a way to spur investment from private businesses and local governments, with the total spending on infrastructure totaling more than $1.5 trillion. Republicans immediately objected to the price tag, while Democrats decried the requirement that state and local governments provide most of the funds

Infrastructure was a key component of the president’s economic policy. But, the massive tax cut bill Congress passed in December coupled with the $1.3 trillion spending bill approved in March made major spending on infrastructure a non-starter for this year.

OSHA says all covered employers must submit electronic injury and illness reports…

After initially exempting employers in seven states from new electronic injury reporting requirements, the Occupational Safety and Health Administration (OSHA) now says all businesses with 250 or more employees—or companies in higher-risk industries with 20 or more workers—must comply with the reporting rules.

The new OSHA rule mandates that covered businesses in California, Maryland, Minnesota, South Carolina, Utah, Washington and Wyoming must now submit injury and illness reports for 2017. Those states had been exempted because the previous regulation applied only to employers under federal OSHA jurisdiction or those in states which had adopted rules for electronic reporting.

State officials in Washington and Wyoming quickly announced that employers in their states need not comply with the new OSHA rules because they intended to adopt state reporting plans in the near future. OSHA officials said they would try to resolve those differences.

Trump administration delays revised new rules for overtime pay…

In a surprise move, the Trump administration is delaying its revised proposal to overhaul overtime pay rules for “white collar” employees, which had been expected this spring, until next year.

The Labor Department’s original 2016 plan to increase the minimum salary level for employees to be exempt from overtime pay from $455 per week to $913 per week met with strong opposition and was overturned by a Texas federal court last year. As a result, the Labor Department asked for new public comments, with the comment period ending last September.

Now, the department has announced that a new plan won’t be ready until January at the earliest. There was no explanation for the delay.

The overtime rules impact which employees are exempt from being paid time and a half for hours worked over 40 in a workweek. The proposed rule would have extended overtime protections to 4.2 million workers not currently eligible under federal law. Workers who did not earn at least $47,476 a year ($913 a week) would have had to be paid overtime even if they're classified as a manager or professional.

In addition, the Labor Department would have increased the salary threshold every three years, with the threshold expected to reach $51,000 by January 2020.

NLRB is reconsidering its controversial quickie election rules…

The National Labor Relations Board (NLRB) will reconsider the Obama-era “quickie election” rule that permits union representation elections to be held in as few as 13 days after the filing of a representation petition.

The NLRB, which is finally controlled by a Republican majority and a general counsel with a management-side background, indicated it will soon issue a request for public comment and proposals for revising the election regulations. That process will lead to NLRB consideration of new rules early next year.

The Board indicated its plans in its agenda for the rest of the year. The same day that agenda was released, Sen. Bernie Sanders, I-VT, and Rep. Mark Pocan, D-WI, introduced legislation that would make it easier for employees to form unions. Named the Workplace Democracy Act, that bill would allow the NLRB to certify a union as the exclusive bargaining representative if a majority of eligible workers provided consent through a sign-up process.

Employers will have to wait until next year for new EEOC wellness rules…

Waiting for Senate confirmation of its new chairman and a new Republican member, the federal Equal Employment Opportunity Commission (EEOC) says it will be next year before it can complete an update of controversial Obama-era rules regarding employer-sponsored wellness programs.

The new timetable came after a federal judge in Washington, DC, told the EEOC that its original plan to revise the wellness rules by 2021 was unacceptable.

The wellness rules, which were finalized in 2016, allow employers to provide incentives of up to 30% of an employee’s health insurance premiums for workers who participate in wellness programs.

The American Association of Retired Persons (AARP) sued to block those rules, arguing that requiring employees to provide confidential medical information to participate in wellness programs wouldn’t be “voluntary,” as required by the Americans with Disabilities Act. Business groups opposed the rules on different grounds, claiming they violated Obamacare regulations by limiting incentives that employers could offer.