April 2023

Business News Digest

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We are continuing to monitor key trends, significant updates, and related news that may affect established and new/growing companies across a wide variety of industries. We want to make sure we touch upon issues that are of concern to you. We invite you to take a moment and let us know what you would like to hear more about in this newsletter. Click below to email our team of attorneys.

Featured Article

Taxpayers and Tax Preparers, Beware of Automated Notices of Deficiency

The IRS has stepped up its practice of issuing Notices of Deficiency without an audit. For example, if there is a mismatch between what was reported on a Form 1099 for a taxpayer and the income shown on the taxpayer's return, or the IRS computer fails to see the income shown on the Form 1099 was reported on the taxpayer's return, the IRS will issue an automated adjustment notice (called a CP-2000 notice), followed by an automated Notice of Deficiency (called a CP 3219A notice). There are many reasons a Form 1099 may not accurately reflect a taxpayer's income tax liability, and the IRS computer often gets it wrong.

Related Articles

The Right Approach to Investments in New Space Enterprises

The United States is in the midst of incredible growth in the New Space sector, from new low Earth orbit (LEO) satellite constellations and Earth sensing satellites to the development of novel in-space servicing, assembling, and manufacturing (ISAM) enterprises. Private companies are planning space stations and lunar and Mars missions.

New York Commercial Financing Disclosure Requirements

Providers of commercial financing that are subject to the New York State Commercial Finance Disclosure Law (CFDL) must provide disclosures to potential recipients of commercial financing at the time a specific offer of financing is extended to a recipient, pursuant to new regulations adopted by the New York Department of Financial Services (DFS). The disclosure requirements, which take effect on August 1, 2023, are like moves in other states to regulate commercial lending like consumer lending, including in California, Utah, and Virginia.

New York Governor Proposes Regulatory Overhaul for Investor-Backed Healthcare Transactions

The recently released New York State Executive Budget for 2024 includes proposed legislation that would significantly expand the state's regulatory authority over healthcare transactions. The bill introduces Article 45-A "Review and Oversight of Material Transactions." This article of the Public Health Law would provide the State Department of Health (DOH) increased regulatory oversight over healthcare transactions involving a change of ownership or control in physician practices, management service organizations under contract with healthcare entities, and any other healthcare facility or organization within New York. Currently such transactions are predominantly unregulated. The law proposes a regulatory review process that would subject transactions resulting in private investment in certain healthcare entities to DOH review. The bill presents a serious risk of not only increasing transaction costs associated with new regulatory hurdles, but also delaying the closing of transactions and exposing the parties to public scrutiny.

Proxy Materials and Annual Meetings under Maryland Law – 2023

As we enter the 2023 proxy season, we are sending our annual memorandum to call your attention to certain matters of Maryland law, some new and some continuing, relating to proxy materials and annual meetings about which we often receive questions. Because the same principles generally apply to both corporations formed under the Maryland General Corporation Law (the "MGCL") and to real estate investment trusts formed under the Maryland REIT Law (the "MRL"), we refer hereafter, unless otherwise noted, only to corporations (or sometimes companies). As in prior years, we are available to review draft proxy statements and other annual meeting materials (e.g., sign-in and remote communication procedures and scripts) for Maryland law compliance.

Corporate Governance Made Easier for New York Nonprofits

The New York Not-for-Profit Corporation Law (N-PCL) has been amended again, and this time, the amendments make decision-making easier for New York nonprofits. The new legislation, enacted in November 2022, (1) accommodates increased use by nonprofits of electronic portal technology for unanimous consent actions outside of Board and membership meetings; (2) allows a replacement Board member who is elected by the Board to serve for the full length of the unexpired term rather than the prior requirement of temporarily serving only until the next annual meeting; and (3) clarifies that conflicted Board members who leave a nonprofit's Board meeting can still be counted as present for maintaining quorum despite their recusal. These modernizing amendments, described in more detail below, reflect additional incremental steps taken over the past decade to reform corporate governance standards for nonprofit corporations incorporated in New York.

2023 Articles In Review

Preparing for Your 2023 Say on Pay Frequency Vote and Reporting Results

Many public companies will be required to include a "say on frequency" proposal at their 2023 annual meeting of stockholders. Since 2010, the Dodd-Frank Act has mandated that public companies submit, no less frequently than once every six calendar years, for a nonbinding shareholder vote, the question of whether a "say on pay vote" should be held every year, every two years, or every three years ("say on frequency"). Public companies (with certain exceptions) were first required to hold a say on frequency vote in 2011, and most held a second say on frequency vote in 2017 (which results in the next required vote being held in 2023).

2023 Revised Hart-Scott-Rodino Thresholds and Filing Fees

On January 23, 2023, the Federal Trade Commission (FTC) announced its annual adjustments to the filing thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). Because of this year's adjustments, transactions valued at more than $111.4 million and closing on or after February 27, 2023 may trigger an HSR filing. The expected closing date—not the date of an agreement—determines whether the new thresholds will apply. Failure to file an HSR Notification and Report Form is subject to a statutory penalty of up to $50,120 per day of noncompliance.

Comments and Challenges Welcome: FTC Proposes New Rule to Ban Non-Compete Agreements with Employees, Independent Contractors, and Volunteers

On January 5, 2023, the Federal Trade Commission (FTC)—the federal agency tasked with protecting consumers from unfair and deceptive business practices and enforcing antitrust laws—proposed a rule that, if enacted, will prohibit the use of non-compete clauses in agreements by employers with their employees, independent contractors, or volunteers in almost all circumstances. This rule would apply to numerous, but not all, nonprofit organizations.

FCC Proposes New Rules to Prohibit Digital Discrimination in Broadband Services

Broadband internet access service providers, and possibly broadband communications services and applications providers, will likely soon face additional regulatory restrictions on their services. The FCC has released a Notice of Proposed Rulemaking (NPRM), adopted at its December Open Commission Meeting, seeking comment on new rules prohibiting digital discrimination from access to broadband service.

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