Client Resources
Beneficial Ownership Reporting Requirements under the Corporate Transparency Act as of January 1, 2024
In 2020, Congress adopted the Corporate Transparency Act (the “CTA”) to strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use shell companies to launder money or hide assets. Unless a newly formed or existing entity in the U.S. can claim an exemption, the CTA will require that they report to the U.S. government specified information about themselves and their controlling persons and owners. The CTA will go into effect on January 1, 2024. Existing companies will have to report by the end of 2024, and newly formed companies will have to report shortly after formation (90 days if during 2024, or 30 days after 2024).
In 2020, Congress adopted the Corporate Transparency Act (the “CTA”) to strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use shell companies to launder money or hide assets. Unless a newly formed or existing entity in the U.S. can claim an exemption, the CTA will require that they report to the U.S. government specified information about themselves and their controlling persons and owners. The CTA will go into effect on January 1, 2024. Existing companies will have to report by the end of 2024, and newly formed companies will have to report shortly after formation (90 days if during 2024, or 30 days after 2024).
On September 29, 2022, the Financial Crimes Enforcement Network (“FinCEN”) issued the final rule (the “Rule”) implementing the CTA’s beneficial ownership information (“BOI”) reporting provisions. Among other things, the Rule details who must file a BOI report, what information must be reported, and when a report is due. On September 18, 2023, FinCEN released a Small Entity Compliance Guide explaining in detail the reporting requirements in the Rule.
Which companies must report?
The Rule applies to any domestic or foreign limited liability company (LLC), corporation or other entity that is registered to do business in any state or tribal jurisdiction.
The Rule requires a reporting company to report basic information about itself and its “beneficial owners.” These generally include any individuals who, directly or indirectly, either (1) exercise substantial control over the reporting company, or (2) own or control at least 25% of the ownership interests of the reporting company.
· “Substantial control” captures anyone who is able to make important decisions on behalf of the reporting company. This includes senior officers and directors, anyone with authority to appoint senior officers or directors, and anyone who has any other substantial control of the company through contractual arrangements, ownership of voting shares, or otherwise.
· “25% ownership” is determined based on economic ownership and control. In most cases, determining 25% ownership will be simple. However, if ownership is tiered, or held in a trust or through a mix of exempt and non-exempt entities, determining the 25% owners will require a more detailed analysis.
Exemptions:
Exemptions from the CTA reporting requirements are available for various entities, including (A) companies that have at least 20 full time employees in the U.S., and have filed U.S. federal tax returns reporting more than $5,000,000 in gross receipts or sales in the prior year, (B) government entities, (C) banks and other financial institutions, such as broker-dealers and registered investment companies, registered investment advisers, and insurance companies, (D) accounting firms, (E) tax exempt companies, and (F) reporting issuers under the Securities Exchange Act of 1934.
Further Information
Attorneys at our firm are available to assist with any questions you may have regarding the CTA and related legal guidance. For additional information, please contact the undersigned or any other attorney at our firm.
This summary has been prepared for general informational purposes only and does not constitute legal advice. It is intended only as a summary of the CTA and does not contain all details applicable to the CTA. This summary may be construed as attorney advertising.
SEC charges FinTech investment adviser Titan for misrepresenting hypothetical performance of investments (and other violations)
On June 13, 2022, the U.S. Supreme Court issued a long-awaited opinion on the scope of 28 U.S.C. § 1782 (“Section 1782”), unanimously holding that only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” for purposes of Section 1782.Thus, Section 1782 applications cannot be used to...
On August 21, 2023, the Securities and Exchange Commission (the “SEC”) announced the settlement of charges against Titan Global Capital Management USA LLC, a New York-based FinTech investment adviser (“Titan”), pursuant to Section 206(4)-1 (the “Marketing Rule”) under the U.S. Investment Advisers Act of 1940 (the “Advisers Act”). Among other things, Titan was charged with marketing its Titan Crypto strategy using misleading hypothetical performance. This case is the first reported by the SEC under the Marketing Rule, which became effective on May 4, 2021.
U.S. Supreme Court Holds that Section 1782 Discovery does not Apply to Private Foreign or International Arbitration Proceedings
On June 13, 2022, the U.S. Supreme Court issued a long-awaited opinion on the scope of 28 U.S.C. § 1782 (“Section 1782”), unanimously holding that only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” for purposes of Section 1782.Thus, Section 1782 applications cannot be used to...
On June 13, 2022, the U.S. Supreme Court issued a long-awaited opinion on the scope of 28 U.S.C. § 1782 (“Section 1782”), unanimously holding that only a governmental or intergovernmental adjudicative body constitutes a “foreign or international tribunal” for purposes of Section 1782.Thus, Section 1782 applications cannot be used to obtain discovery in aid of private arbitration proceedings abroad. The two consolidated cases before the Court both involved parties seeking discovery in the United States for the use in foreign private arbitrations, but involved different tribunals; one case involved a private commercial arbitration, while the other involved an ad hoc investment arbitration.
Corporate Transparency Act
On January 1, 2021, the Corporate Transparency Act (the “CTA ”) became law as the U.S. Senate voted to override former President Donald Trump’s veto of the National Defense Authorization Act of 2021. The CTA requires the U.S. Treasury Department to promulgate regulations implementing the CTA by January 1, 2022. The CTA constitutes a major shift in the U.S. anti-money laundering regime by requiring newly formed and existing U.S. entities that cannot benefit from an exemption to report certain beneficial owners to the U.S. government.
SEC Adopts New Marketing Rule for Investment Advisers
The Securities and Exchange Commission (the “SEC”) adopted, on December 22, 2020, a new Rule 206(4)-1 (the “New Marketing Rule”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The New Marketing Rule replaces both the existing Rule 206(4)-1, known as the advertising rule, and Rule 206(4)-3, known as the “solicitation rule”.
SEC Harmonizes Exempt Offering Rules
The Securities and Exchange Commission (the “SEC”) adopted a set of amendments to “harmonize registration exemptions, eliminating complexity and facilitating access to capital and investment while preserving or enhancing important investor protections,” according to the SEC’s press release. Click here to continue reading.
SEC Considering a Proposed Exemptive Order for Finders
On October 7, 2020, the Securities and Exchange Commission (the “SEC”) voted to propose a new, limited, conditional exemption from broker registration requirements for “finders” who help issuers raise capital in private markets from accredited investors. (See https://www.sec.gov/news/press-release/2020-248). Under Section 15(a)(1) of the Securities Exchange Act of 1934, finders and solicitors of investors are required to register as broker-dealers. Historically, the SEC has acknowledged that finders may be exempt from broker registration under certain very limited conditions, and the SEC staff from time to time has issued “no action” letters to such effect. However, to date the SEC has never provided general exemptions for finders. Because the broker-dealer registration requirements are onerous, the proposed rule is welcome news for would-be finders.
Please click here to read the entire article.
SEC Adopts Amendments to “Accredited Investor” and “Qualified Institutional Buyer” Definitions and Regulation S-K
On August 26, 2020 the SEC adopted amendments that broaden the definitions of “accredited investor” and “qualified institutional buyer” set forth in Rule 501(a) and Rule 144A, respectively, under the Securities Act of 1933, as amended (the “Securities Act”). In a separate release on the same day the SEC adopted amendments that modernize the description of business, legal proceedings and risk factor disclosures that registrants are required to make pursuant to Regulation S-K under the Securities Act. All amendments will become effective 60 days after publication in the Federal Register.
Click here to continue reading this document.
SEC Considering a Proposed Exemptive Order for Finders
On October 7, 2020, the Securities and Exchange Commission (the “SEC”) voted to propose a new, limited, conditional exemption from broker registration requirements for “finders” who help issuers raise capital in private markets from accredited investors. (See https://www.sec.gov/news/press-release/2020-248). Under Section 15(a)(1) of the Securities Exchange Act of 1934, finders and...
On October 7, 2020, the Securities and Exchange Commission (the “SEC”) voted to propose a new, limited, conditional exemption from broker registration requirements for “finders” who help issuers raise capital in private markets from accredited investors. (See https://www.sec.gov/news/press-release/2020-248).
Under Section 15(a)(1) of the Securities Exchange Act of 1934, finders and solicitors of investors are required to register as broker-dealers. Historically, the SEC has acknowledged that finders may be exempt from broker registration under certain very limited conditions, and the SEC staff from time to time has issued “no action” letters to such effect. However, to date the SEC has never provided general exemptions for finders. Because the broker-dealer registration requirements are onerous, the proposed rule is welcome news for would-be finders.
Wichtige Änderungen bei der Bearbeitung von deutschen Beibehaltungsgenehmigungsanträgen mit sofortiger Wirkung
Doppelte Staatsangehörigkeit - Voraussetzungen der Beibehaltung der deutschen Staatsangehörigkeit vor der US-Einbürgerung
Die Einbürgerung in die Vereinigten Staaten von Amerika unter Beibehaltung der deutschen Staatsangehörigkeit
Durch das zum 1. Januar 2000 in Kraft getretene Gesetz zur Änderung des Staatsangehörigkeitsrechts wurde für die in den USA lebenden Deutschen, die die US-Staatsangehörigkeit erwerben möchten, die Beibehaltung der deutschen Staatsangehörigkeit erleichtert.Wichtiger Hinweis: Wer durch Geburt in den USA die US-Staatsangehörigkeit und gleichzeitig durch Abstammung von einem deutschen Elternteil die deutsche Staatsangehörigkeit erworben hat, verfügt über beide Staatsangehörigkeiten, ohne dass es eines Antrages auf Einbürgerung oder auf Beibehaltungsgenehmigung bedürfte.
Bei einem Antragsteller, der seinen gewöhnlichen Aufenthalt im Ausland (USA) hat, wird insbesondere berücksichtigt, ob er fortbestehende Bindungen zu Deutschland hat und welche konkreten Nachteile er hat oder zu erwarten hätte, wenn er nicht als US-Amerikaner eingebürgert werden würde.
Das Verfahren ist erleichtert, wenn der Antragsteller das 60ste Lebensjahr vollendet und mindestens 10 Jahre in den USA gelebt hat oder jeden Alters ist und seit über 20 Jahren in den USA lebt, da er in diesem Fall ein erhöhtes Integrationsinteresse hat und nur die Bindungen zu Deutschland nachweisen muss.Anträge werden beim zuständigen deutschen Konsulat in den USA eingereicht. Zuständig für die Erteilung von Beibehaltungsgenehmigungen für im Ausland lebende Deutsche ist das Bundesverwaltungsamt (BVA) in Köln.Antragsverfahren: Der Antrag sollte (im Original und in einfacher Kopie) zusammen mit einem Anschreiben, das die Gründe des Antrags erklärt, die Nachteile einer Nichtannahme der US-Staatsangehörigkeit aufzeigt und die Bindungen zu Deutschland beschreibt, und den notwendigen Unterlagen, an die zuständige deutsche Auslandsvertretung in den USA gesandt werden. Von dort wird der Antrag mit einer Stellungnahme vom entsprechenden deutschen Konsulat an das BVA in Köln zur Entscheidung weitergeleitet.Leider haben sich die Voraussetzungen für eine deutsche Beibehaltungsgenehmigung kürzlich drastisch geändert, weil das BVA die maßgeblichen gesetzlichen Bestimmungen nunmehr deutlich enger auslegt. Dies gilt nicht nur für neue Anträge, sondern leider auch für bereits anhängige Anträge. Aufgrund des in Deutschland grundsätzlich geltenden Prinzips der Vermeidung der Mehrstaatigkeit und vermutlich auch aufgrund einer Flut von Anträgen, hat sich das BVA entschlossen, das bestehende Gesetz ab sofort sehr eng auszulegen und nur noch in solchen Einzelfällen eine Beibehaltung der deutschen Staatsangehörigkeit zu genehmigen, in denen der Antragsteller konkrete Nachteile nachweisen kann. „Konkrete Nachteile“ bedeutet, dass der Nachteil in zeitlichem und sachlichem Zusammenhang mit der Annahme der US-Staatsangehörigkeit stehen muss.Ab sofort werden nur noch die folgenden nachzuweisenden konkreten Nachteile akzeptiert, die der Antragsteller ohne die US-Staatsangehörigkeit hat, und die der Antragsteller überzeugend und dokumentarisch in seinem Antrag darlegen muss:Berufliche NachteileZahlreiche Stellenangebote in den USA fordern als Voraussetzung die US-Staatsangehörigkeit (z.B. Homeland Security, Post, Flughafenbodenpersonal). Bisher wurde dem Antragsteller eine Beibehaltungsgenehmigung erteilt, wenn er glaubhaft machen konnte, dass er aufgrund seiner Ausbildung und beruflichen Qualifikationen für eine solche Stelle qualifiziert ist. Nunmehr vertritt das BVA die Auffassung, dass dies nicht mehr ausreiche, weil derartige Stellenangebote nur künftige Erwerbschancen seien und keine schon verwirklichte Geschäftsbeziehung.Um einen beruflichen Nachteil vorzubringen, muss der Antragsteller nunmehr im Einzelfall nachweisen, dass der Nachteil in zeitlichem und sachlichem Zusammenhang mit der Annahme der US-Staatsangehörigkeit steht. Dies ist nur möglich, wenn z.B. der Arbeitgeber des Antragstellers schriftlich bestätigt, dass dem Antragsteller eine Position in der Firma angeboten wurde, für die er sich qualifiziert, die aber die US-Staatsangehörigkeit des Antragstellers verlangt. Sicherheitsqualifikationen in den USA beinhalten in der Regel auch die US-Staatsangehörigkeit. Alternativ könnte ein anderer US-Arbeitgeber eine solche konkrete Stelle anbieten.Aufenthaltsrechtliche NachteileDas US-amerikanische Aufenthaltsrecht erlaubt einem „Permanent Resident“ (Inhaber einer Green Card) sich bis zu 180 Tagen im Jahr außerhalb der USA aufzuhalten, ohne seinen Aufenthaltsstatus zu verlieren. Eine Rückkehrberechtigung bei längerem Aufenthalt außerhalb der USA erlaubt einen Aufenthalt bis zu zwei Jahren außerhalb der USA. Sie wird jedoch unproblematisch nur einmal erteilt und liegt im Ermessen der US-Behörde. Dieser Nachteil wird nunmehr nur noch anerkannt, wenn der Antragsteller dokumentiert, dass es konkrete Pläne des Arbeitgebers gibt, ihn für mehr als sechs Monate ins Ausland zu entsenden, oder der Antragsteller aus wichtigen nachzuweisenden privaten Gruenden die USA fuer einen laengeren Zeitraum verlassen muss.Erbrechtliche Nachteile bei einem Vermögen über $5 Millionen Sollte das Einzel- oder Ehegattenvermögen des Antragstellers über $5 Millionen liegen, wobei zur Vermoegensmasse alle Vermögenswerte in Höhe des aktuellen Marktwertes gehören, inklusive Immobilien, Inventar, Lebensversicherungen, Geldanlagen, Kraftfahrzeuge, Schmuck, Antiquitäten, 401K, sowie Witwen-/Witwerversorgungen aus Betriebsrenten, und der Antragsteller eine Aufstellung des Vermögens einreicht, aus der ersichtlich ist, dass das zu versteuernde Erbe über dem Steuerfreibetrag von $5 Millionen liegt, wäre ein vermögensrechtlicher Nachteil akzeptierbar. Dieser Nachteil wird akzeptiert, da das gemeinsame Vermögen der Ehegatten in voller Höhe, und nicht wie sonst üblich nur zur Hälfte, in die Erbmasse fließt, wenn der überlebende Ehegatte kein US-amerikanischer Staatsbürger ist. Steuerrechtliche Nachteile bestehen nur für Ehepaare und beinhalten nur ein Vermögen, das im gemeinsamen Besitz steht.Nachteile bei der Vergabe von StipendienNicht-US-amerikanische Studenten sind bei der Vergabe von Stipendien benachteiligt. Das BVA akzeptiert diesen Nachteil, wenn dieser dokumentarisch nachgewiesen werden kann.Sonstige NachteileUS-amerikanische Gerichte übertragen in Scheidungsfällen das Sorgerecht in der Regel dem US-Staatsangehörigen. Um eine bessere Chance zu haben, das Sorgerecht zu erhalten, sollte der deutsche Ehepartner daher die US-Staatsangehörigkeit annehmen, sofern er vor oder in einem Scheidungsverfahren steht. Bisher hat das BVA diesen Nachteil akzeptiert, stellt sich jetzt aber auf den Standpunkt, dass auch dieser Nachteil nur dann ein akzeptierbarer Grund ist, wenn eine Scheidung anhängig ist. Ansonsten könnten Vermögensausgleichnachteile oder Nachteile im Sorgerecht durch eine entsprechende Vereinbarung der Ehegatten zum jetzigen Zeitpunkt geregelt werden, um spätere Nachteile zu vermeiden.Jeder Einzelfall ist spezifisch und der Antragsteller hat ggf. andere wichtige Nachteile, die er nachweisen kann. Daher ist es wichtig jeden Antrag im Vorfeld zu analysieren.Weitere Dokumente: Neben dem Antrag auf Beibehaltung der deutschen Staatsangehörigkeit sollten folgende Dokumente eingereicht werden: Beglaubigte Kopie des deutschen Reisepasses (nur Fotoseite), beglaubigte Kopie der US-Aufenthaltsberechtigung, Lebenslauf, Ausbildungszeugnis, Beispiele für US-Stellenangebote und Beschreibung der Bindungen zu Deutschland.Die Bindungen zu Deutschland sollten die Namen, den Verwandtschaftsgrad und die deutsche Adresse aller Familienangehörigen beinhalten und ggf. auch enge Freunde und Geschäftspartner einschließen. Zudem können die Bindungen an Deutschland durch Nachweise über ein Bankkonto, Versicherungen, Rentenanwartschaften oder Immobilien in Deutschland belegt werden. Legen Sie dem Antrag ggf. Bankunterlagen, Auszüge aus dem Grundbuch, Grundsteuerbescheide oder Renten- und Versicherungsunterlagen bei.Bearbeitungsdauer: Momentan dauert die Bearbeitung einer Beibehaltungsgenehmigung bis zu 18 Monaten.Wichtiger Hinweis: Der Antrag auf die US-Staatsangehörigkeit sollte erst dann gestellt werden, wenn die Beibehaltungsgenehmigung ausgehändigt worden ist.Anschlussurkunde: Die Beibehaltungsurkunde ist nur für zwei Jahre gültig. Sollte der Antragsteller seine US-Staatsangehörigkeit nicht innerhalb der Gültigkeit der Urkunde erlangen, muss er eine sogenannte Anschlussurkunde beim BVA beantragen. Dieser Antrag sollte sechs Monate vor Ablauf der Beibehaltungsurkunde eingereicht werden und erfordert gesonderte Antragsformulare. Abzuwarten bleibt, ob das BVA die neue Rechtsauslegung auch für Anschlussurkunden anwendet.Gebühren: Die Gebühren (momentan EUR 255), die im Verfahren über die Erteilung einer Beibehaltungsgenehmigung zu entrichten sind, werden nach Eingang der Entscheidung des BVA mit gesondertem Schreiben angefordert. Sollte der Antragsteller seinen Antrag aufgrund der neuen Rechtsauslegung zurückziehen, fallen Gebühren von EUR 127 an. Bei einem rechtsmittelfähigen Ablehnungsbescheid fällt eine Gebühr von EUR 191 an.Wichtiger Hinweis: Die gültige Genehmigung der Beibehaltung der deutschen Staatsangehörigkeit muss vor dem Einschwörungstermin für die US-Staatsangehörigkeit ausgehändigt werden, um die deutsche Staatsangehörigkeit nicht zu verlieren! Die Beibehaltungsgenehmigung ist für zwei Jahre gültig und kann u.U. verlängert werden.Antrag auf US-Staatsangehörigkeit (N-400): Sobald die Beibehaltungsgenehmigung ausgehändigt wurde, kann der Antrag auf US-Staatsangehörigkeit beim United States Citizenship and Immigration Services (USCIS) eingereicht werden.Mit dem N-400 Antrag bei der zuständigen Behörde sollten die folgenden Unterlagen eingereicht werden: Kopien der Green Card und des deutschen Reisepasses (nur Fotoseite), zwei Fotos (siehe https://travel.state.gov/content/travel/en/passports/how-apply/photos.html), eine Kopie des Führerscheines und ein Scheck über $725 (momentane Gebuehr, die sich aendern kann) zahlbar an das „Department of Homeland Security“.Bearbeitungsverfahren: Abhängig vom US-Wohnort können Antragsteller mit Bearbeitungszeiten von 4-24 Monaten rechnen. Nach der Stellung des Antrags wird der Antragsteller aufgefordert, seine biometrischen Daten abzugeben, und dann zum Interview gebeten. Während des Interviews wird der Antragsteller, in den meisten Fällen, einer Englischprüfung unterzogen und auf seine Kenntnisse der amerikanischen Geschichte geprüft. Nach bestandenem Interview findet in den meisten Bundesstaaten eine Einschwörung statt. Bei der Erteilung der US-Staatsangehörigkeit muss der Antragsteller seine Green Card im Austausch mit der Einbürgerungsurkunde aufgeben. Danach sollte der Antragsteller sofort den amerikanischen Pass beantragen, da dieser sein neues Reisedokument für die Einreise in die USA ist.Gerne stehen wir für etwaige Fragen zu der Beibehaltungsgenehmigung und der amerikanischen Einbürgerung zur Verfügung.HILDE HOLLAND, Esq. | PartnerWUERSCH & GERING LLP100 Wall Street, 10th | New York, New York 10005212-509-4715 (direct) | 212-509-5050 (firm) | 212-509-9559 (fax)
hilde.holland@wg-law.com | www.wg-law.com
This article is intended to provide general information only on the matters resented. It is not a comprehensive analysis of these matters and should not be relied upon as legal advice.
SEC Proposes Amendments to Accredited Investor and Qualified Institutional Buyer Definitions
The Securities and Exchange Commission (the “SEC”) recently proposed amendments to the definitions of “accredited investor” in Rule 501(a) of Regulation D under the Securities Act of 1933, and “qualified institutional buyer” (QIB) in Rule 144A under the Securities Act. (See https://www.sec.gov/rules/proposed/2019/33-10734.pdf). The proposed rule would create additional categories of accredited investors, make the QIB categories more consistent with the accredited investor categories and codify some existing SEC staff interpretive positions relating to these definitions.Qualifying as an accredited investor is significant because accredited investors may participate in private investment opportunities not available to other investors, such as investments in startup companies and private investment funds. Qualifying as a QIB allows an investor to participate in certain investment opportunities available only to large institutional investors.
PROPOSED CHANGES TO “ACCREDITED INVESTOR” DEFINITIONS
The “accredited investor” definition is intended to identify financially sophisticated investors who can analyze investment opportunities with less government oversight. However, as the SEC notes in the proposed rule, in most cases the current accredited investor categories use “wealth” – measured by income level, net worth, or assets – as a proxy for sophistication. The proposed rule would create the following new categories of accredited investors – items (1) through (5) could be viewed as new exemptions for financially sophisticated investors who do not necessarily meet the current wealth thresholds, while items (6) through (8) could be viewed more as technical fixes to the rule:
1. Individuals who hold certain professional certifications, designations or credentials. These individuals would qualify as accredited investors without regard to any wealth requirements. The SEC would establish the exact certifications or designations satisfying this requirement from time to time through SEC order, and would make the list available on its website. This approach would allow the SEC to update the list without amending the definition. The SEC preliminarily expects that an initial SEC order accompanying the final rule would include FINRA Series 7 (licensed general securities representatives), Series 65 (licensed investment adviser representatives) and Series 82 (licensed private securities offerings representatives).
2. Registered investment advisers. SEC-registered investment advisers and state-registered investment advisers would qualify as accredited investors without regard to any wealth requirements.
3. Rural Business Investment Companies. USDA-licensed Rural Business Investment Companies would qualify as accredited investors without regard to any wealth requirements.
4. Knowledgeable employees. The proposed rule would create a new category for individuals who meet the definition of “knowledgeable employee” under the Investment Company Act of 1940 with respect to a private fund. “Knowledgeable employee” is an existing designation determined by an individual’s role for a private fund, and does not impose any wealth thresholds. Currently, an employee of an investment manager might qualify under the Investment Company Act to invest in a “3(c)(7) Fund” as a knowledgeable employee, but not qualify as an accredited investor. This change would eliminate that gap.
5. Family offices and family clients. The proposed rule would create a new category for “family offices” with at least $5 million in assets under management and their “family clients”, each as defined in the Investment Advisers Act of 1940. Currently, a family office might manage accounts for some family clients that do not separately qualify as accredited investors. This change would allow a family office and family clients to count their collective investments to satisfy the $5 million threshold, subject to a few additional conditions.
6. Limited liability companies. The proposed rule would codify a long-standing SEC staff interpretive position that includes limited liability companies in the enumeration of legal entities that qualify as accredited investors if they satisfy the other requirements of Rule 501(a)(3), i.e., they have not been formed for the specific purpose of acquiring the securities offered and have assets in excess of $5 million.
7. Catch-all provision. The proposed rule would create a new category for any entity owning more than $5 million in investments and which was not formed for the specific purpose of investing in the securities offered. This provision is intended to allow for new and foreign types of entities to qualify as accredited investors without being enumerated in Rule 501(a).
8. Spousal equivalents. Currently, a natural person may include a spouse’s resources when calculating income under Rule 501(a)(6) and net worth under Rule 501(a)(5). The proposal would amend those provisions to permit a natural person to include the income and net worth of a “spousal equivalent”, defined as “a cohabitant occupying a relationship generally equivalent to that of a spouse”.
PROPOSED CHANGES TO “QUALIFIED INSTITUTIONAL BUYER” DEFINITION
A “Qualified Institutional Buyer” or “QIB” other than a dealer registered with the SEC must in the aggregate own and invest on a discretionary basis at least $100 million in securities of issuers that are not affiliated with that QIB. Banks and other specified financial institutions are subject to an additional minimum audited net worth requirement of $25 million. Rule 144A specifies the types of entities that are eligible for QIB status if they meet the $100 million threshold. The proposed rule would expand that list to include several categories from the updated accredited investor definition, including the “catch-all” category described above.The SEC’s rationale is that an entity that meets the $100 million threshold is likely to have the financial sophistication and resources necessary to protect itself with less government oversight, and the exact type of entity is much less critical than the financial threshold.
OTHER MATTERS
Notably, the SEC considered but decided not to propose increasing the current financial thresholds or adjusting them for inflation.The SEC requests and encourages comments regarding the proposed rule amendments, specific issues discussed in this release and other matters that may affect the proposed rule amendments.This summary is intended to provide general information only on the matters presented. It is not a comprehensive analysis of these matters and should not be relied upon as legal advice.For further information please contact:Travis L. Gering: travis.gering@wg-law.com | (212) 509-4723Daniel A. Wuersch: daniel.wuersch@wg-law.com | (212) 509-4722Janet R. Murtha: janet.murtha@wg-law.com | (212) 509-6314Jake Brown: jake.brown@wg-law.com | (212) 509-4741Marco E. Palmese: marco.palmese@wg-law.com | (212) 509-6310
Doppelte Staatsangehörigkeit -Voraussetzungen der Beibehaltung der deutschen Staatsangehörigkeit vor der US-Einbürgerung
Durch das zum 1. Januar 2000 in Kraft getretene Gesetz zur Änderung des Staatsangehörigkeitsrechts wurde für die in den USA lebenden Deutschen, die die US-amerikanische Staatsangehörigkeit erwerben möchten, die Beibehaltung der deutschen Staatsangehörigkeit wesentlich erleichtert.
Wichtiger Hinweis: Wer durch Geburt in den USA die US-Staatsangehörigkeit und gleichzeitig durch Abstammung von einem deutschen Elternteil die deutsche Staatsangehörigkeit erworben hat, verfügt über beide Staatsangehörigkeiten, ohne dass es eines Antrages auf Einbürgerung oder auf Beibehaltungsgenehmigung bedürfte.
Bei einem Antragsteller, der seinen gewöhnlichen Aufenthalt im Ausland (USA) hat, wird insbesondere berücksichtigt, ob er fortbestehende Bindungen zu Deutschland hat, und welche Nachteile er zu erwarten hätte, wenn er nicht als US-Amerikaner eingebürgert werden würde. Das Verfahren ist erleichtert, wenn der Antragsteller im Rentenalter ist und mindestens 10 Jahre in den USA gelebt hat, oder jeden Alters ist und seit über 20 Jahren in den USA lebt, da er in diesem Fall ein erhöhtes Integrationsinteresse hat, und nur die Bindungen zu Deutschland nachweisen muss.
Anträge werden beim zuständigen deutschen Konsulat in den USA eingereicht. Zuständig für die Erteilung von Beibehaltungsgenehmigungen für im Ausland lebende Deutsche ist das Bundesverwaltungsamt (BVA) in Köln.
Antragsverfahren: Der Antrag sollte in zweifacher originaler Ausfertigung zusammen mit einem Anschreiben, das die Gründe des Antrags erklärt, die Nachteile einer Nichtannahme der US-Staatsangehörigkeit aufzeigt und die Bindungen zu Deutschland beschreibt, und den notwendigen Unterlagen, an die zuständige deutsche Auslandsvertretung in den USA gesandt werden. Von dort wird der Antrag mit einer Stellungnahme an das BVA in Köln zur Entscheidung weitergeleitet.
Akzeptiert werden die folgenden oft geltend gemachten Gründe für den Erwerb der US-amerikanischen Staatsangehörigkeit: Berufliche Nachteile, aufenthaltsrechtliche Nachteile, und Nachteile bei der Vergabe von Stipendien.
Berufliche Nachteile
Zahlreiche Stellenangebote in den USA fordern als Voraussetzung die US-Staatsangehörigkeit (z.B. Homeland Security, Post, Flughafenbodenpersonal). Macht der Antragsteller glaubhaft, dass er aufgrund seiner beruflichen Qualifikationen für solch eine Stelle in Frage käme, kann ihm eine Beibehaltungsgenehmigung erteilt werden. Einige Tätigkeiten bzw. berufliche Stellungen erfordern eine Sicherheitsüberprüfung (security clearance). Voraussetzung dafür ist jedoch die US-amerikanische Staatsangehörigkeit (z.B. im Ingenieur- und IT-Bereich). Zahlreiche Stellenangebote findet man unter www.usajobs.gov.
Aufenthaltsrechtliche Nachteile
Das US-amerikanische Aufenthaltsrecht erlaubt einem „Permanent Resident“ (Green Card Halter) sich bis zu 180 Tagen im Jahr ausserhalb der USA aufzuhalten, ohne seinen Aufenthaltsstatus zu verlieren. Eine Rückkehrberechtigung bei längerem Aufenthalt ausserhalb der USA erlaubt einen Aufenthalt bis zu zwei Jahren ausserhalb der USA. Sie wird jedoch unproblematisch nur einmal erteilt und liegt im Ermessen der US-Behörde. Verlobte oder Ehegatten von deutschen Staatsangehörigen mit Permanent Resident Card können zwar eine Aufenthalts- und Arbeitserlaubnis in den USA erhalten, aber die Bearbeitung kann bis zu 3-5 Jahre dauern. Schneller geht es nur, wenn der sich mit einer Permanent Resident Card in den USA aufhaltende deutsche Partner die US-Staatsangehörigkeit erwirbt, und für seinen Ehegatten dann eine Aufenthaltserlaubnis beantragt.
Nachteile bei der Vergabe von Stipendien
Ausländische Studenten sind bei der Vergabe von Stipendien benachteiligt. Auch bei der Vergabe von studienbegleitenden Praktika werden ausländische Studenten nachrangig berücksichtigt.
Sonstige Nachteile
US-amerikanische Gerichte übertragen in Scheidungsfällen das Sorgerecht in der Regel dem US-amerikanischen Staatsangehörigen. Um eine bessere Chance zu haben, das Sorgerecht zu erhalten, sollte der deutsche Ehepartner daher die US-amerikanische Staatsangehörigkeit annehmen, sofern er vor oder in einem Scheidungsverfahren steht.
Weitere Dokumente: Neben dem Antrag auf Beibehaltung sollten folgende Dokumente eingereicht werden: Beglaubigte Kopie des deutschen Reisepasses (nur Foto Passseite), beglaubigte Kopie der US-Aufenthaltsberechtigung, Lebenslauf, Ausbildungszeugnis, Beispiele für US-Stellenangebote, und Beschreibung der Bindungen zu Deutschland.
Die Bindungen zu Deutschland sollten die Namen, den Verwandtschaftsgrad und die deutsche Adresse aller Familienangehörigen beinhalten, und ggf. auch enge Freunde und Geschäftspartner einschliessen. Zudem können die Bindungen an Deutschland auch durch Nachweise über ein Bankkonto, Versicherungen, Rentenanwartschaften oder Immobilien in Deutschland belegt werden. Legen Sie dem Antrag ggf. Bankunterlagen, Auszüge aus dem Grundbuch, Grundsteuerbescheide oder Rentenversicherungsunterlagen bei.
Bearbeitungsdauer: Momentan dauert die Bearbeitung einer Beibehaltungsgenehmigung ca. 4-6 Monate. Eine beschleunigte Bearbeitung von Anträgen auf Beibehaltungsgenehmigung lässt das BVA nur in begründeten Ausnahmefällen zu.
Gebühren: Die Gebühren (momentan EUR 255), die im Verfahren über die Erteilung einer Beibehaltungsgenehmigung zu entrichten sind, werden nach Eingang der Entscheidung des BVA mit gesondertem Schreiben angefordert.
Wichtiger Hinweis: Die gültige Genehmigung der Beibehaltung der deutschen Staatsangehörigkeit muss vor dem Einschwörungstermin für die US-Staatsangehörigkeit ausgehändigt werden, um die deutsche Staatsangehörigkeit nicht zu verlieren! Die Beibehaltungsgenehmigung ist für zwei Jahre gültig, und kann u.U. verlängert werden.
Antrag auf US-Staatsangehörigkeit (N-400): Sobald die Beibehaltungsgenehmigung ausgehändigt wurde, kann der Antrag auf US-Staatsangehörigkeit beim United States Citizenship and Immigration Services (USCIS) eingereicht werden.
Mit dem N-400 Antrag bei der zuständigen Behörde sollten die folgenden Unterlagen eingereicht werden: Kopien der Green Card und der Foto Passseite, zwei Fotos (siehe http://travel.state.gov/content/passports/english/passports/photos), eine Kopie des Führerscheines und ein Scheck über $680 zahlbar an „Dept. of Homeland Security“.
Bearbeitungsverfahren: Momentan benötigt USCIS ungefähr sechs Monate für die N-400 Bearbeitung. Nach der Einlegung des Antrags muss der Antragsteller seine biometrischen Daten abgeben, für die er eine Aufforderung erhält, und wird dann zum Interview gebeten. Während des Interviews unterzieht er sich, in den meisten Fällen, einer Englischprüfung und wird auf seine Kenntnisse der amerikanischen Geschichte geprüft. Nach bestandenem Interview findet dann in den meisten Bundesstaaten eine Einschwörung statt. Bei der Erteilung der US-Staatsangehörigkeit muss der Antragsteller seine Green Card im Austausch mit der Einbürgerungsurkunde aufgeben. Danach sollte der Antragsteller sofort den amerikanischen Pass beantragen, da dieser sein neues Reisedokument in die USA ist.
Nach Erhalt der amerikanischen Einbürgerungsurkunde sollte der Antragsteller dem BVA eine Kopie der Einbuergerungsurkunde übersenden.
Gerne stehen wir für etwaige Fragen zu der Beibehaltungsgenehmigung und der amerikanischen Einbürgerung zur Verfügung.
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This article is intended to provide general information only on the matters resented. It is not a comprehensive analysis of these matters and should not be relied upon as legal advice.
Hilde Holland: hilde.holland@wg-law.com | (212) 509 4715
U.S. Supreme Court Tosses Out the Physical Presence Requirement for Sales Tax Nexus: What Now?
In South Dakota v. Wayfair, Inc., et al., 585 U.S. __ (June 21, 2018), the U.S. Supreme Court overruled its 1992 decision in Quill Corp. v. North Dakota which held that a state cannot require an out-of-state sellers with no physical presence in the state to collect and remit sales taxes on goods and taxable services provided to customers located in the state. The Supreme Court noted that the physical presence requirement has become unworkable in the Cyber Age. However, the court's ruling not only affects online retailers, including foreign retailers, but all sellers of taxable goods and services who make sales into a state in which they lack a physical presence. The specific question at issue in Wayfair was whether South Dakota may require remote sellers with more than $100,000 in annual sales in South Dakota or more than 200 transactions with South Dakota residents to collect and remit sales tax in the absence of any further connection with the state. Although the Supreme Court unequivocally decided that a physical presence is not necessary to create a "substantial nexus" (taxable presence) justifying the imposition of a sales tax, the Court declined to adopt a new sales tax nexus standard. Instead, by eliminating the physical presence requirement for sales tax nexus and upholding the South Dakota law, the Court established a threshold for the constitutionality of state nexus standards, but did not provide clear guidelines as to what other state nexus standards might be constitutional. Accordingly, there is no clear nexus standard today.IMMEDIATE EFFECTS FOR REMOTE SELLERSRemote sellers should refrain from hastily registering in each state in which they transact sales. There will be an adjustment period during which the Wayfair opinion is digested by the states and taxpayers alike to understand its practical implications. A number of states will likely issue legislative or administrative guidance outlining the principles pursuant to which they expect remote sellers to collect and remit the sales tax. Some states may decide to simply issue a bulletin informing remote sellers that they are now expected to register and collect sales tax. It should also be expected that states will generally increase audit enforcement in reaction to the Wayfair decision. Because there is still no clear nexus standard, there remain various potential arguments to challenge the states' authority to impose their laws on remote sellers, increasing the need for Federal legislation in this area. Ultimately, as states are increasingly able to require remote sellers to collect and remit sales tax, remote sellers who historically have not collected sales tax will now have to implement sales tax compliance procedures and will no longer maintain a competitive advantage over traditional retailers. ANTICIPATED STATE REACTIONSThe Supreme Court's decision will likely encourage states to adopt similar laws to South Dakota's because they would be able to do so with certainty that the law will withstand constitutional scrutiny. Specifically, in considering the constitutional validity of the South Dakota law, the Court summarized that the South Dakota nexus standard (1) requires businesses whose sales exceed the safe harbor threshold of $100,000 in annual sales or 200 separate transactions to collect sales tax; (2) does not apply retroactively; and (3) is effective in a state that is party to the Streamlined Sales and Use Tax Agreement (SSUTA). South Dakota is one of more than 20 states that have adopted the SSUTA, which standardizes taxes to reduce administrative and compliance costs. SSUTA requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules. It also provides sellers access to sales tax administration software paid for by the state. Sellers who choose to use such software are immune from audit liability.CURRENT STATE ECONOMIC NEXUS STANDARDSIn addition to South Dakota, seven other both SSUTA and non-SSUTA states - Illinois, Indiana, Kentucky, Maine, North Dakota, Vermont and Wyoming - have adopted economic nexus thresholds similar to those adopted by South Dakota. Thus, any remote seller that exceeds the South Dakota thresholds most likely has a sales tax compliance obligation in at least these eight states.Seven additional states - Alabama, Georgia, Iowa, Massachusetts, Mississippi, Ohio and Tennessee -have adopted economic nexus thresholds that vary from those adopted by South Dakota. It remains to be seen whether these laws will be enforced as is, or modified to reflect South Dakota-style provisions. As for the remaining 31 states that impose a state sales tax, they will have to determine whether their existing laws provide a sufficient "economic nexus" basis through which to assert jurisdiction over remote sellers of taxable goods and services, or whether they must amend their laws to adopt the South Dakota standard, or attempt an even lower threshold, perhaps even with retroactive application.Six states - Alabama (effective Jan. 1, 2019), Minnesota, Oklahoma, Pennsylvania, Rhode Island and Washington State have adopted marketplace nexus provisions, under which remote sellers, as well as marketplace facilitators (such as Amazon) are subject to notice and reporting requirements or may elect and to remit sales tax if they exceed certain annual sales thresholds ranging from $10,000 to $250,000, despite a lack of physical presence in the state. Pursuant to these laws, Amazon has agreed to collect and remit sales tax on behalf of all remote sellers for sales made on its platform.POTENTIAL FOR CONGRESSIONAL ACTIONNoting the concerns regarding the complexity of multistate sales tax compliance, the Supreme Court noted that "eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems.... And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so." Currently, there are several pieces of legislation before Congress that address multistate tax compliance issues of online retailers, and the chances for such legislation may be improved by the Wayfair decision. These include the following:
- The Marketplace Fairness Act (MFA), as presented in its revised version by Senate legislators in 2017, would give states more power to collect sales taxes from businesses that do not have a physical location within their borders, so long as the state participates in the Streamlined Sales Tax Project (which developed the SSUTA), or implements the simplification requirements and liability provisions of the MFA. The MFA is completely voluntary for states, provides a small seller exception, and would require a minimum six month waiting period before a state can begin requiring remote sellers to collect sales tax.
- The Remote Transactions Parity Act (RTPA) of 2017, presented by legislators in the House of Representatives, authorizes states to impose sales tax collection obligations on certain remote sellers for sales, regardless of physical presence, so long as the state participates in the Streamlined Sales Tax Project, or implements the simplification requirements and liability provisions of the RTPA. The RTPA is also completely voluntary for states, provides a small seller exception, and would require a minimum six month waiting period before a state can begin requiring remote sellers to collect sales tax.
Neither the MFA nor the RTPA addresses how the legislation applies to remote sellers in foreign countries.It is likely that Congress will wait to see how the states and taxpayers respond to the Wayfair decision before it takes any action, a process that could take several years. In the meantime, remote sellers, including foreign sellers, should determine whether a sales tax nexus exists or the risk of nexus has materially changed because of the Wayfair decision. Specifically, they should consider their historical sales by state; and nexus creating activities under existing state nexus provisions (e.g., affiliate marketing programs). If they come to the conclusion that a substantial risk of non-compliance exists, the Wayfair decision should serve as a wake-up call to (1) resolve any historical exposure proactively (and anonymously through Voluntary Disclosure Agreements); (2) implement sales tax compliance software solutions and processes; and (3) implement processes for tracking sales activity to determine when they exceed sales thresholds in states that adopt economic nexus standards. For further information please contact:Maureen R. Monaghan: maureen.monagahn@wg-law.com; (212) 509-6312
Patent litigation in the United States: overview
By Maria Luisa Palmese
US patent laws stem from the patent clause in the US Constitution, which provides that Congress has the power "to promote the progress of … useful arts, by securing for limited times to … inventors the exclusive right to their … discoveries". Therefore, patents are exclusively governed by federal law and state law has little or no role in patent litigation, except, for example, where the issue is one of contract or ownership. The principal source of federal law governing patents is Title 35 of the US Code.The US has a common law system that relies on judicial precedent. Therefore, federal court decisions also play a vital role in US patent law and litigation, by interpreting the Constitution and federal statutes, and in some cases, creating law themselves. For example, the "doctrine of equivalents", which was first adopted by the US Supreme Court, has no independent statutory basis. Federal courts have exclusive jurisdiction over patent infringement cases, and the Federal Rules of Civil Procedure and the Federal Rules of Evidence apply in these proceedings. In addition, many district courts have instituted local rules specific to patent litigation.To continue reading: Follow this link to the article
Why U.S. Export Control Laws Are Relevant to Non-U.S. Companies
It is not unusual for European and other non-U.S. companies to ignore U.S. export control laws, including for the re-export of U.S.-originated goods or components. Such an approach can turn out to be shortsighted. Generally, while the U.S. is very export-friendly, it controls how and to which countries its products…
It is not unusual for European and other non-U.S. companies to ignore U.S. export control laws, including for the re-export of U.S.-originated goods or components. Such an approach can turn out to be shortsighted. Generally, while the U.S. is very export-friendly, it controls how and to which countries its products are directly or indirectly exported. The U.S. export control laws have a wide ranging extraterritorial reach, and the U.S. government seeks to penalize companies and individuals who breach the export control laws, regardless of where they are located.
INTRODUCTION
There are many reasons as to why the U.S. controls exports – they range from the fight against organized crime and terrorism, nuclear non-proliferation and the control of chemical and biological weapons, to foreign policy and regional stability concerns, and national security considerations. Multiple U.S. departments and agencies are involved in export control. The three primary authorities are:
the Department of State’s Directorate of Defense Trade Controls (DDTC) which is in charge of the application and the enforcement of the International Traffic in Arms Regulations (ITAR);
the Department of Commerce’s Bureau of Industry and Security (BIS) which is responsible for implementing and enforcing the Export Administration Regulations (EAR); and
the Department of the Treasury’s Office of Foreign Assets Control (OFAC) which administers and enforces U.S. embargoes and sanctions against specific countries and individuals.
EXPORT ADMINISTRATION REGULATIONS (EAR)
Whereas the ITAR pertains to defense articles, defense services and related technical data, items subject to the EAR include civilian items, items with both civil and military application and items exclusively used for military applications but which do not warrant control under the ITAR, i.e., less sensitive military items (also note that in 2013 certain articles were moved from the ITAR to the EAR). This article focuses on the EAR.
The types of items subject to the EAR are commodity, software and technology. The EAR contain the Commerce Control List (CCL) which lists all items that are subject to the export licensing authority of the BIS. All of these items have an Export Control Classification Number (ECCN) which indicates their level of control. This in turn determines whether the export of an item to a certain country requires a license from the BIS. In case a license is required, the EAR set forth a number of license exceptions which might apply depending on the product, the country of destination and other factors.
The EAR distinguishes among “export,” “re-export,” and “release.” Export means the actual shipment or transmission of items out of the U.S. Re-export means the actual shipment or transmission of items subject to the EAR from one non-U.S. country to another non-U.S. country. Release (or deemed export) means the release of technology or software to a non-U.S. person in the U.S.
RE-EXPORT OF U.S. GOODS UNDER THE EAR
Companies may not assume that the permitted export of goods from the U.S. means that these goods may then be re-exported to a third country without further consideration of U.S. export control laws. Rather, the EAR require that the export and re-export of goods are assessed separately. The same licensing requirements apply to re-exports as to exports because the U.S. export control laws regulate U.S.-origin products regardless of where they are located.
Example: A German company purchased specific mechanical high speed cameras from a U.S. company. The U.S. seller determined that while the camera in question is subject to the EAR, no license was required for an export of the camera to Germany based on the CCL and the Commerce Country Chart which is a look-up table in the EAR listing all countries. The German company now plans to sell these mechanical high speed cameras to a customer in Brazil, which from an EAR perspective would be a re-export. Even though no license was required for the initial export to Germany, the German company would need a license from the BIS for the re-export of the cameras to Brazil because the export licensing requirements for this product are different for Germany and Brazil.
EXPORT OF NON-U.S. PRODUCTS WITH U.S. COMPONENTS OR TECHNOLOGY
The EAR may also apply to non-U.S. companies that manufacture goods which contain U.S. components or technology. The EAR set forth de minimis thresholds based on the value of the U.S. components or technology incorporated into a non-U.S.-made product to determine if the product is subject to the EAR. The threshold rules apply in case (i) a non-U.S.-made commodity “incorporates” controlled U.S.-origin commodities or is “bundled” with controlled U.S.-origin software, (ii) non-U.S.-made software “incorporates” controlled U.S.-origin software, or (iii) non-U.S.-made technology is commingled with or drawn from controlled U.S.-origin technology. For most destinations and items, a non-U.S.-made product or software is subject to the EAR if the value of the U.S.-origin controlled content exceeds 25% of the total value of the finished item. For some destinations (e.g., Iran, Syria), the de minimis threshold is 10%. The application of the threshold depends on the ECCN of the U.S.-origin controlled content and the ultimate destination to which the non-U.S.-made item is exported; special rules apply to high performance computers and encryption commodities and software. By comparison, there is no de minimis rule for defense articles, defense services and related technical data under the ITAR. As soon as a single ITAR component is installed in a non-U.S.-made product, the ITAR applies.
Example: A French company purchased software designed for the operation of numerically controlled finishing machine tools from a U.S. company. The U.S. seller determined that while the software in question was subject to the EAR, no license was required for an export to France. The French company would like to use the U.S.-origin software with its own hardware and sell the bundled products to a company based in Haiti (“bundled” means that the software that is re-exported together with the item is configured for the item but not necessarily physically integrated into the item). If the value of the software exceeds 25% of the value of the bundled product, the French company would need a license from the BIS before being able to lawfully export the product because the export licensing requirements for this software are different for France and Haiti.
ENFORCEMENT ACTIVITIES
In recent years, the U.S. government has been placing more and more pressure on businesses outside the U.S. to comply with U.S. export control laws. In 2017, 31 individuals and businesses were convicted and there were 52 administrative cases which resulted in large fines. By way of example, in March 2017, ZTE Corporation, a Chinese telecommunications company, pleaded guilty to conspiring to violate U.S. export control laws by illegally shipping U.S.-origin items to Iran and North Korea and agreed to pay the U.S. government a record-high combined civil and criminal penalty of $1.19 billion. In April 2017, a Chinese national pleaded guilty to violating U.S. laws in connection with a scheme to illegally export to China, without a license, high-grade carbon fiber, which is used primarily in aerospace and military applications. In October 2015, three individuals were convicted of conspiring to illegally export controlled technology to Russia.
Non-U.S. companies which are involved in the re-export of U.S. goods or technology or use U.S.-origin components or technology in their products are well-advised to familiarize themselves with U.S. export control laws and seek legal advice.
For further information, please contact:
Christophe Durrer, christophe.durrer@wg-law.com, + 1 212-509-4713
The information contained in this article is provided for informational purposes only and should not be understood or construed as legal advice. The examples are only provided for illustrational purposes and cannot be relied upon in the determination of whether an item might be subject to the EAR and/or whether a license from the BIS (or another U.S. government agency) would be required.
Copyright litigation in the United States: overview
By Maria Luisa Palmese
In the US, there are two types of statutory laws, federal laws enacted by the US Congress and state laws enacted by individual states.
US copyright law stems from Article 1, section 8, clause 8, of the US Constitution, which is often referred to as the Copyright Clause. This clause gives the US Congress the "power to promote the progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries".
The principal source of copyright law in the US is the Copyright Act 1976 (17 USC 101 et seq), which took effect on 1 January 1978 and is often referred to as the Copyright Act. Other important sources of US copyright law include the Digital Millennium Copyright Act 1998, codified in the Copyright Act at 17 USC 512, 1201-1205, 1301-1332, which relates to software protection and digital technology, and 18 USC 2319, which provides for additional penalties for criminal copyright infringement, including imprisonment.
To continue reading: Follow this link to the article
U.S. Tax Reform – Significant Changes for Foreign Investors
On December 22, 2017, President Trump signed into law the comprehensive tax reform bill (the “Act”) that had been passed by Congress on December 20. The Act represents the most significant reform of the U.S. Internal Revenue Code in over 30 years. The following is a high-level summary of key features of the Act that may be of particular interest to foreign businesses and individuals investing in the United States. Unless otherwise specified, all changes became effective for tax years beginning on or after January 1, 2018. CORPORATIONSCorporate Tax Rate. The Act permanently reduces the maximum corporate tax rate from 35% to 21%, and repeals of the corporate alternative minimum tax (AMT).Shift from “Worldwide” Taxation to “Territorial” Taxation. With certain exceptions, a U.S. corporation that owns 10% or more of a foreign corporation is entitled to a 100% dividends-received deduction for the foreign-source portion of dividends from these foreign corporations. However, the Subpart F regime (which requires immediate taxation of certain passive or portfolio income of foreign subsidiaries) is largely preserved. This shift to a territorial system does not change the taxation of U.S. corporations that operate abroad through branches, nor does it exempt from taxation gain arising from the sale of shares of subsidiaries (unless they are recharacterized as dividends).Limitation on Business Interest Deductibility. The Act replaces the traditional “thin-capitalization” rules with new rules that disallow a deduction for net business interest expense of both corporations and flow-through entities (i.e., partnerships and limited liability companies) in excess of 30% of the business’s adjusted taxable income. For taxable years beginning before January 1, 2022, adjusted taxable income is computed without regard to depreciation, amortization and depletion (i.e., similar to EBITDA). Beginning on January 1, 2022, adjusted taxable income will take into account depreciation, amortization and depletion (i.e., similar to EBIT). Disallowed interest deductions may be carried forward indefinitely.Business interest expense is defined as interest paid or accrued on indebtedness. It does not include investment interest within the meaning of Internal Revenue Code section 163(d) for individual taxpayers. For partnerships and other flow-through entities, the net interest expense disallowance is determined at the entity level (e.g., at the partnership level instead of the partner level). Small businesses with $25 million or less of gross receipts are exempt from this limitation. There is no grandfathering for preexisting debt.Net Operating Losses. Net operating losses (NOLs) arising after December 31, 2017 are deductible only up to 80% of the taxpayer’s taxable income. NOLs can be carried forward indefinitely, but generally cannot be carried back. ANTI-BASE EROSION AND INCOME SHIFTING PROVISIONS. Base Erosion and Anti-Abuse Tax (BEAT) Applicable to Large Multinationals. The BEAT is designed to keep U.S. corporations from shifting revenues from the U.S. to foreign jurisdictions with a lower tax rate, and affects U.S. subsidiaries with foreign parents. The BEAT is essentially a 10% minimum tax (11% for banks and registered securities dealers) calculated on the taxpayer’s income without tax deductions or other tax benefits arising from “base erosion” payments. A “base erosion payment” is generally an amount paid or accrued by a taxpayer to a related foreign person that is deductible to the taxpayer, but does not include cost of goods sold or qualified derivative payments.The BEAT applies to domestic corporations that (i) are not taxed on a flow-through basis (such as S corporations, regulated investment companies, or real estate investment trusts), (ii) are part of a group with at least $500 million of annual domestic gross receipts over a three-year averaging period, and (iii) have a “base erosion percentage” of 3% or higher for the tax year (or 2% for certain banks and securities dealers). The base erosion percentage means the percentage determined by dividing the corporation’s base erosion tax benefits by the total deductions allowed with respect to the corporation.Limitation on Deduction of Certain Related-Party Payments in Hybrid Transactions or with Hybrid Entities. The Act disallows a deduction for any disqualified related-party amount paid or accrued in a hybrid transaction, or by, or to, a hybrid entity. A disqualified related-party amount is any interest or royalty paid or accrued to a related party if (i) there is no corresponding income inclusion to the related party under local tax law or (ii) such related party is allowed a deduction with respect to the payment under local tax law. The Treasury Department is given broad authority to issue regulations or other guidance necessary or appropriate to carry out the purposes of the provision.Hybrid transactions are transactions in which payments are treated as interest or royalties for federal income tax purposes but are not so treated for purposes of the tax law of a foreign country. A hybrid entity is one that is treated as fiscally transparent for federal income tax purposes (e.g., a disregarded entity or partnership) but not for purposes of a foreign country, or an entity that is treated as fiscally transparent for foreign tax law purposes but not for federal income tax purposes (reverse hybrid entity).Limitations on Income Shifting through Intangible Property Transfers. The Act expands the universe of assets that are considered “intangible property” for purposes of outbound transfers to include workforce, goodwill, going-concern value, and “any other item” with a value that is not attributable to tangible property or the services of an individual. This provision makes it more difficult for a U.S. corporation to transfer intangible property abroad without incurring taxes.Repeal of Active Trade or Business Exception for Outbound Transfers. Prior law provided an exception to gain recognition for certain outbound transfers of property for use in foreign corporation’s active trade or business. The Act repeals this active trade or business exception. As a result, U.S. corporations that transfer assets to a foreign corporation for continued use in an active trade or business will recognize gain on the outbound asset transfer. PASSTHROUGH ENTITIES AND SOLE PROPRIETORSHIPSExpanded S Corporation Shareholders. Previously, only U.S. residents could be shareholders of an S corporation. The Act now permits nonresident aliens to be beneficiaries of an Electing Small Business Trust (“ESBT”) that is a shareholder of an S corporation. The S corporation stock held by the ESBT may not, itself, be distributed to the nonresident alien without terminating the S corporation election. This provision may expand the number of corporations that elect S corporation status, as well as the ability of S corporation shareholders to engage in gift and estate tax planning.Sale of Foreign Partner’s Partnership Interest as ECI. Overturning a recent case decided by the Tax Court, the Act provides that a non-U.S. partner in a partnership recognizes gain or loss treated as “effectively connected” to a U.S. trade or business upon the sale of the partner’s partnership interest, to the extent that the partner would be treated as having effectively connected income in a hypothetical sale of all the assets of the partnership. The transferee in such a transaction must withhold 10% of the amount realized, unless the transferor certifies that it is not a nonresident alien or foreign corporation.Deduction for Passthrough “Qualified Business Income.” The new law allows an individual taxpayer to deduct 20% of domestic qualified business income (“QBI”) from a partnership, S corporation, or sole proprietorship. This deduction, as other provisions affecting individual taxpayers, sunsets after 2025. The deduction generally would be limited to the greater of: (a) 50% of the W-2 wages paid with respect to the trade or business; or (b) 25% of the W-2 wages paid with respect to the trade or business plus 2.5% of the unadjusted basis of all qualified property. The QBI deduction is not available to most service businesses (e.g. health, law, accounting), but individuals with taxable incomes below certain threshold amounts are not subject to this exclusion, nor the foregoing W-2 limitation. For further information please contact:Maureen R. Monaghan: maureen.monaghan@wg-law.com; (212) 509-6312
U.S. Immigration Alert - Changes to U.S. Employment-Based Immigration
U.S. IMMIGRATION ALERT
Changes to U.S. Employment-Based Immigration
- New Travel Ban Effective October 18, 2017
- Changes to H-1B Program
- Postponement of International Entrepreneur Rule
- Denials of I-131 Applications Subject to International Travel
- In-Person Interviews for All Employment-Based Immigrant Visa Applications
- Increased Administrative Processing
In carrying out the Hire American Policy formulated in his April 18, 2017 Executive Order, the President directed the Secretaries of the Department of State (DOS), Department of Labor (DOL) and Homeland Security (USCIS), as well as the Attorney General, to propose new rules and issue new guidance to protect the interests of U.S. workers in the administration of the U.S immigration system. The response by federal agencies in carrying out this Executive Order has been swift, with USCIS working on a combination of rulemaking, policy memoranda and operational changes, the Department of State (DOS) making changes to its Foreign Affairs Manual (FAM) including new language referencing the Executive Order regarding the adjudication of H, L, O, P and E visas, and DOL and DOS increasing their monitoring and enforcement efforts of H-1B employers.
New Travel Ban Effective October 18, 2017
On September 24, 2017, the Trump administration issued new travel restrictions on foreign nationals seeking to enter the U.S. from eight countries which include Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela and Yemen, that goes into effect on October 18, 2017. While Iraq was not specifically included in this ban, nationals of Iraq will be subject to additional screening measures. Country-specific travel restrictions apply as follows:
Chad Suspends the entry of immigrants and temporary visitors on business or tourist visas (B-1/B-2).
Iran Suspends the entry of immigrants and all nonimmigrants, except F (student), M (vocational student) and J (exchange visitor) visas, though they will be subject to enhanced screening.
Libya Suspends the entry of immigrants and temporary visitors on business or tourist visas (B-1/B-2).
North Korea Suspends the entry of all immigrants and nonimmigrants.
Somalia Suspends the entry of immigrants, and requires enhanced screening of all nonimmigrants.
Syria Suspends the entry of all immigrants and nonimmigrants.
Venezuela Suspends the entry of certain government officials and their family members on business or tourist visas (B-1/B-2).
Yemen Suspends the entry of immigrants and temporary visitors on business or tourist visas (B-1/B-2).
Changes to H-1B Program
President Trump specifically highlighted the H-1B visa program and directed the agencies to suggest reforms to help ensure that H-1B visas are awarded only to the most skilled and highest paid beneficiaries. Changes have already included the temporary suspension of premium processing for most H-1B petitions (although premium processes will fully resume on October 3, 2017) and petitioners have seen a surge in Requests for Evidence on H-1B cap petitions where a Level 1 wage was indicated on the Labor Condition Application.
Postponement of International Entrepreneur Rule
The International Entrepreneur Rule is a proposed regulation by USCIS to increase the presence of foreign entrepreneurship in the U.S. Under this rule, qualified foreign entrepreneurs would have been granted temporary parole to the U.S. in order to build and scale their businesses. Foreign entrepreneurs wishing to enter or remain in the country to build their business operations would need to meet certain criteria that would be reviewed on a case-by-case basis by the Department of Homeland Security (DHS). It was supposed to go into effect on July 17, 2017, but has been postponed.
Denials of I-131 Application Subject to International Travel
In a recent trend, USCIS has begun to deny advance parole (AP) applications (Form I-131) for applicants who have traveled abroad before their applications are approved. This is in stark contrast to the previous, longstanding policy which allowed an AP applicant to travel abroad while the case was pending, as long as the individual had other valid means of being readmitted to the United States, such as a valid L-1 or H-1B visa.
In-Person Interviews for all Employment-Based Immigrant Applications
Effective October 1, 2017, all applicants and beneficiaries of an employment-based immigrant visa petition (Green Card) will be subjected to a personal interview. Previously, applicants in this category did not require an in-person interview with USCIS officers in order for their application for permanent residency to be adjudicated. Beyond these categories, USCIS is planning an incremental expansion of interviews to other benefit types.
Increased Administrative Processing
There has been a noticeable increase in visa application processing delays due to Section 221(g), otherwise known as "Administrative Processing." Such processing can be triggered by the following factors: applicants with intended occupations in targeted fields on the Technology Alert List; applicants or "namesakes" appearing in national security and law enforcement databases, such as the Interagency Border Inspection System (IBIS); or information found on Form DS-160. Visa processing delays due to additional administrative processing can last from a couple of weeks to several months. In most cases, Consular Posts will retain the application and the applicant's passport until the matter is resolved. It is important to note that the visa applicant will be prohibited from entering or re-entering the United States until the administrative processing has been completed.
We will continue to closely monitor developments in visa application processing and will provide updates as necessary.
Important Changes in U.S. Immigration
U.S. IMMIGRATION UPDATE AND HELPFUL TIPS
- Increased Border Scrutiny
- Longer Visa Processing Times
- Frequent Site Visits
- Increased Visa Scrutiny and Denial
On April 18, 2017, President Trump signed the “Buy American and Hire American” Executive Order, which seeks to create higher wages and employment rates for U.S. workers and protect their economic interests by rigorously enforcing and administering U.S. immigration laws. It also directs DHS (Department of Homeland Security), in coordination with other agencies, to advance policies to help ensure H-1B visas are awarded to the most skilled or highest-paid beneficiaries. Since then, USCIS (United States Citizenship and Immigration Services) is working on a combination of rulemaking, policy memoranda, and operational changes to implement the Buy American and Hire American Executive Order. These initiatives are intended to protect the economic interests of U.S. workers and prevent fraud and abuse within the immigration system. The impact of this Executive Order can already be felt throughout U.S. immigration proceedings and border processing, including:INCREASED BORDER CONTROL AND SCRUTINYOver the last several months, U.S. entry control and scrutiny has clearly increased at U.S. borders. In particular, frequent Business Travelers are reporting increased questioning and control through CBP (Customs and Border Protection) Officers at airports and land border crossings. For your knowledge, foreign travelers coming to the United States to conduct temporary business, for example business meetings and consultations, attending conventions and conferences, or negotiating contracts, need B-1 visitor visas unless they qualify for entry under the Visa Waiver Program.In particular, business travelers are extensively questioned on their U.S. activities, engagements and possible violations deemed by CBP to be conducting “productive work”. For instance, a foreign officer of a U.S. company who admits to “supervising and controlling” U.S. employees is considered engaging in productive work and may be denied entry into the U.S. as a Business Visitor.Frequent U.S. business travelers should ensure that they are able to fully document their U.S. activities, including their continued foreign employment and maintenance of a foreign residency, and it is recommended that frequent travelers carry a letter from the foreign employer, confirming the bona fide business travel purposes of the employee, a foreign employment agreement, recent pay stubs and a copy of the traveler’s foreign lease in demonstration of his foreign abode.It is also important to note that, if an ESTA Business Visitor is denied entry into the U.S., he has the right to withdraw his/her request for U.S. entry and offer his/her voluntary departure to avoid a possible deportation from the U.S., which can have dire consequences for future U.S. travel. A Business Traveler entering under a valid B-1 visa, has the same right and can also request a hearing before an Immigration Judge which, however, may take some time, and the traveler may be put into detention pending the hearing. It is also always good practice to ask to be seen by a CBP supervisor in secondary inspection should the initial entry officer intend to deny the traveler entry into the U.S.As a general rule, all visitors and visa holders should also verify their permissible U.S. stay by downloading their I-94 Arrival/Departure records in the electronic system at https://i94.cbp.dhs.gov/ upon EACH individual U.S. entry.INCREASED ADMINISTRATIVE SITE VISITSSince 2009, FDNS (Fraud Detection and National Security) conducts site visits to employers of H-1B, L-1A/B and R-1 (Religious Workers) visa holders to verify whether the employers and employees are complying with U.S. immigrations laws and regulations. FDNS conducts site visits on randomly selected visa petitioners after USCIS has adjudicated their petitions, and on all religious worker petitioners before adjudication. Employers should be prepared to present any information originally submitted with the visa petition and should immediately provide any available documents and information at or after the site visit. If FDNS detects fraudulent activity, it will refer the case to ICE (Immigration and Customs Enforcement) for further investigation. Please note that the frequency of site visits has increased over the last year, and employers are advised to maintain requisite documentation at the visa holders work location site.INCREASED VISA AND CONSULAR PROCESSING TIMES AND SCRUTINYEffective April 2, 2017, USCIS suspended the premium processing option for H-1B visas which resulted in lengthy processing times of 4-5 months. Moreover, USCIS issuance of Requests for Evidence have increased in connection with visa petition filings, in particular L-1 visas, resulting in much longer processing times.Scrutiny on E Treaty Trader/Investor Registration applications has increased at some U.S. Consular Posts. Many U.S. Consular Posts are now requesting additional evidence after the initial filing, which has resulted in longer processing times than before. Further, during interviews at U.S. Consular Posts, the visa applicant is now extensively questioned and scrutinized on his education, experience and specialized knowledge and often has to explain why the U.S. position cannot be filled by a U.S. worker. Under the new “Putting American Workers First” doctrine, it is crucial that convincing argumentation and supporting documentation is provided to explain why the individual visa applicant is unique for the offered U.S. position and why a U.S. worker is not readily available for the position.Additionally, visa applicants with a criminal background (previous arrests, convictions, and/or citations short of pure traffic violations) should bring a Police Certificate to the interview and should expect that their application will be put into Administrative Processing (i.e. the Consulate requests approval of the visa issuance from the U.S. State Department), which will delay the visa issuance by several weeks.This increased scrutiny requires the prudent employer/visa applicant to plan visa applications far in advance in order to not be greatly affected by long delays and ensure visa issuance prior to the desired U.S. work start date or travel plans.ENSURING PROPER VISA ISSUANCE DATES AND DOCUMENTATION Since U.S. Consulates are issuing visa stamps with validity dates under the reciprocity rules, it is often confusing what the visa holder’s actual visa expiration date is. All L-1 visa stamps should have a PED (Petition End Date) entry on the lower right corner which provides the actual visa expiration date. If no such PED is issued, the visa validity is based on statutory provisions. For instance, an L-1 visa is issued initially for a three-year duration and can then be extended in two-year increments until the statutory visa limitation is reached.Please also note that E visa stamps can be issued for a 4-5 year duration based on the country of nationality’s reciprocity rules, but the permissible stay upon EACH entry in this status is two years, and the E visa holder must download their I-94 Arrival/Departure record upon EACH entry into the U.S. in order to track their required exit date accordingly.
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This summary is intended to provide only general information on the legal matters addressed herein. It is not a comprehensive analysis of these matters and should not be relied upon as legal advice. If you have any questions about the matters covered in this summary, please contact:Hilde Holland: hilde.holland@wg-law.com Tel: (212) 509 4715
New Law Permits Denial or Revocation of US Passports Due to Significant Federal Tax Delinquencies
Under the Fixing America’s Surface Transportation Act, which President Obama signed on December 4, 2015, an individual’s US passport can, for the first time, be denied or revoked because the individual has a significant US tax liability. This provision became effective on January 1, 2016. The liability does not have to be for US income tax; it includes, for example, an excise tax imposed on an individual who engages in certain “prohibited transactions” with a qualified retirement plan or IRA.The liability amount which triggers this exposure is $50,000 (including interest and penalties). This amount will be adjusted annually for inflation.A taxpayer need not fear that his or her passport might be denied or revoked merely because an IRS agent determines on audit that the taxpayer owes federal tax. Rather, the new law jeopardizes a passport only where: the liability has been assessed; and the IRS has either issued a notice of lien to the taxpayer or levied on the taxpayer’s property to satisfy the tax debt.In addition, a passport cannot be denied or revoked where the taxpayer is paying off his or her debt under an installment agreement or offer in compromise entered into with the Internal Revenue Service. Similarly, while a taxpayer is in the process of appealing the IRS’s tax determination to a court such as the US Tax Court, the taxpayer’s passport is safe.Under the new law, the IRS first must issue a certification to the Treasury Department that a particular individual has a “seriously delinquent tax debt.” The taxpayer must be notified that such certification has been issued. The Treasury Department is then authorized to transmit this certification to the Department of State. Once the State Department has received the delinquency certification it must deny any application by the taxpayer for a passport; and it may (not required) revoke a passport previously issued to that taxpayer.Procedures are authorized for a taxpayer’s seriously delinquent tax status to be decertified under circumstances which include the taxpayer’s payment of the tax liability after he or she has been certified as seriously delinquent.This summary is intended to provide general information only on the matters presented. It is not a comprehensive analysis of these matters and should not be relied upon as legal advice. If you have any questions about the matters covered in this publication, please contact:
Maureen R. Monaghan: maureen.monaghan@wg-law.com I (212) 509 6312
Charles E. Chromow: charles.chromow@wg-law.com I (212) 509 4712