February 2024

Business News Digest

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We monitor key trends, significant updates, and related news that may affect established and new/growing companies across a variety of industries. Help us help you and your business by telling us what topics our team can address in upcoming editions of the Business News Digest. Click below to email our team of attorneys.

Featured Articles

Maryland Tax Updates – January 2024

Tax Court Modifies Rushmore Method for Hotel Valuation. The Maryland Tax Court recently modified the traditional Rushmore income approach used to determine the fair market value (FMV) of the real estate component of a hotel. The Court modified the approach to allow the removal from net operating income (NOI) of income attributable to (1) start-up costs and (2) a return “on” and “of” furniture, fixtures, and equipment (FF&E). The challenge presented by using an income approach in valuing the real estate component of a hotel for real property tax purposes is that a hotel is a business that generates income through the provision of a variety of bundled facilities and services in addition to the real estate.

District of Columbia Set to Adopt Regulations to Implement New Tax Abatement Program to Incentivize Office-to-Residential Conversions

The District of Columbia published draft regulations to implement a new tax abatement program passed by the D.C. Council in 2023 to encourage office-to-residential conversions in the downtown area, including portions of Dupont Circle, West End, Foggy Bottom, Penn Quarter, Chinatown, and East End.

Related Articles

Fast-Approaching Deadlines for ACA Reporting and Similar State Reporting

This alert describes upcoming reporting deadlines under the Affordable Care Act (ACA) and under state laws that require similar reporting. Generally, reporting that relates to health coverage in one calendar year is due early in the following calendar year. With respect to health coverage in 2023, the ACA deadlines range from February 28, 2024 to April 1, 2024, and the state deadlines range from January 31, 2024 to April 30, 2024. All of the reporting discussed in this alert relates to health coverage in 2023

Court of Chancery Provides Further Guidance on Advance Notice Bylaw Amendments Amidst a Proxy Contest

In “a tale of wins and losses on both sides,” the Delaware Court of Chancery reiterated that advance notice bylaws adopted amid an approaching proxy contest are reviewed through the lens of enhanced judicial scrutiny to determine whether they are a reasonable and proportionate means to defend against potentially abusive and deceptive practices by activists or hostile acquirors, and held that certain provisions that the court found overbroad, ambiguous or ripe for subjective interpretation were not permissible. Kellner v. AIM ImmunoTech Inc., et al., C.A. No. 2023-0879-LWW (Del. Ch. Dec. 28, 2023).

ISS and Glass Lewis Release Proxy Voting Policy Changes for 2024

On December 19, 2023, Institutional Shareholder Services Inc. (“ISS”) released its updates to its Proxy Voting Guidelines. Somewhat unusually, ISS made only one change to its voting recommendation policies for U.S. public companies this year, related to shareholder proposals that would require future executive severance payments to be submitted to shareholders for ratification. ISS says it will evaluate such proposals on a case-by-case basis and will consider certain factors, including the company’s current change-in-control agreements, the existence of problematic compensation features, and recent compensation controversies.

Protecting Closed-End Investment Companies under Maryland Law

Closed-end investment companies registered under the Investment Company Act of 1940, as amended (the “1940 Act”), have proven to be a product sought by many investors, especially individuals.1 Despite their appeal to long-term investors, closed-end funds have been subjected to persistent attack over many years by arbitrageurs and some stockholder activists with very different objectives from long-term investors.

New Nursing Home Transparency Rules and Their Impact on Real Estate Owners

There has been increasing government interest in obtaining ownership information with respect to the class of commercial real estate comprising nursing facilities. Specifically, the government is focused on nursing home facilities owned by private equity firms and real estate investment trusts (REITs) because of a perceived difference in quality outcomes. Between 2015 and 2020, there were almost 190 private equity deals related to nursing facilities, compared with 116 between 2010 and 2014. The total value of the deals also grew from $1 billion between 2010 and 2014 to $5 billion between 2015 and 2019.

Proxy Materials and Annual Meetings under Maryland Law – 2024

As we enter the 2024 proxy season, we are providing 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.

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