Practically on the eve of the inauguration, the Federal Trade Commission (FTC) and the Department of Justice, Antitrust Division (DOJ), jointly issued antitrust guidelines for business activities affecting workers. The FTC’s vote to approve the guidelines was split 3-2 along party lines, with the Republican commissioners issuing a brief dissenting statement.

The guidelines, which replace the 2016 Antitrust Guidance for Human Resource Professionals, explain how the agencies identify and assess whether business practices affecting workers violate the antitrust laws.

As the acting assistant attorney general of the DOJ notes, “[f]or more than a century, the antitrust laws have protected workers from unlawful schemes, abuses of bargaining power, and restrictions on their mobility.” The guidelines outline specific types of arrangements or business practices that may violate the antitrust laws, such as non-solicitation agreements between two companies, no-poach agreements between a franchisor and franchisee or among franchisees of the same franchisor, information exchanges involving compensation or other sensitive terms of employment, restrictions on workers’ freedom to leave their jobs, and “other restrictive, exclusionary, or predatory employment conditions that harm competition.”

The guidelines provide limited explanation regarding assessment of “other restrictive” provisions. For example, they explain:

• Non-disclosure agreements can violate the antitrust laws when they span such a large scope of information that they function to prevent workers from seeking or accepting other work or starting a business after they leave their job.

• Training repayment agreement provisions are requirements that a person repay any training costs if they leave their employer. If they function to prevent a worker from working for another firm or starting a business, these provisions can be anticompetitive.

• Non-solicitation agreements that prohibit a worker from soliciting former clients or customers of the employer if they are so broad that they function to prevent a worker from seeking or accepting another job or starting a business, can be anticompetitive.

• Exit fee and liquidated damages provisions requiring workers to pay a financial penalty for leaving their employer can be anticompetitive if they prevent workers from working for another firm or starting a business.

Perhaps the most interesting section of the guidelines relates to false claims regarding workers’ potential earnings. Specifically, the guidelines note that the agencies may investigate and take action against businesses that make false or misleading claims about potential earnings that workers may receive (including both employees and independent contractors). The role of the antitrust laws in such situations is not entirely clear, but the guidelines related such false claims to competition by noting that “honest businesses are less able to fairly compete” when workers are attracted to companies by false earnings promises.

The Republican commissioners’ dissenting statement was succinct: “[T]he lame-duck Biden-Harris FTC . . . announcing its views on how to comply with the antitrust laws in the future is a senseless waste of Commission resources. The Biden-Harris FTC has no future.” While current Republican Commissioner Andrew Ferguson will lead the FTC after the inauguration, the agency will not fully transition to a Republican majority until the anticipated confirmation of Mark Meador. The guidelines, however, provide case citations and interpret case law consistent with the current administration’s enforcement priorities in an effort to encourage the continuation of those priorities beyond the transition.

Days before President Biden leaves the White House, the U.S. government has delivered a major blow against Russia. On January 10, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced its most comprehensive sanctions to-date against Russia’s energy sector. OFAC’s sanctions were complemented by another sweeping sanctions action by the U.S. Department of State (State Department) on the same day.

This latest package is part of the ongoing G7 commitment to curtail Russian revenues from energy exports. But these actions, reinforced by similar measures taken by the United Kingdom, mark a significant escalation in the international campaign to weaken Russia’s economic capacity to sustain its war effort in Ukraine. Other G7 partners, such as the EU, have not yet followed these biting sanctions, but are reportedly working towards that goal.

Notably, President-elect Trump’s nominee for Treasury Secretary, Scott Bessent, stated during his January 16^th confirmation hearing that he would “be 100% on board” for “taking sanctions up, especially on the Russian oil majors, to levels that would bring the Russian Federation to the table.” He criticized the Biden Administration for imposing sanctions on the Russian energy sector that were “not fulsome enough,” faulting them for being overly “worried about raising prices during an election season.” This could be a strong indication that the incoming administration may leave these tough sanctions in place, and possibly even continue to escalate them.

Specifically, OFAC has added to the List of Specially Designated Nationals (SDNs) and Blocked Persons (SDN List) some of the largest energy companies in Russia, among dozens of other Russian individuals, entities and vessels. In addition, OFAC issued a broad prohibition on the provision of petroleum services to Russia (the Determination Pursuant to Section 1(a)(ii) of Executive Order 14071 (the Petroleum Services Determination)), along with a determination that threatens the imposition of additional sanctions in the future on parties operating in Russia’s energy sector (the Determination Pursuant to Section 1(a)(i) of Executive Order 14024 (the Energy Sector Determination)). A number of new and amended general licenses (GLs) (8L, 115A, 117, 118, 119, 120, and 121) were issued under the Russian Harmful Foreign Activities Sanctions Regulations, 31 CFR part 587 (RuHSR) and one new GL (26) was issued under the Ukraine-/Russia-Related Sanctions Regulations 31 CFR part 589. OFAC also revoked Russia-related GL 93, which had previously authorized transactions involving certain Joint Stock Company Sovcomflot (Sovcomflot) vessels and published five new Russia-related FAQs (1213-1217) and 15 amended Russia-related FAQs (967, 976, 977, 978, 999, 1011, 1012, 1017, 1117, 1126, 1182, 1183, 1201, and 1203).

Following these actions, on January 15, 2024, the U.S. government announced yet another package of Russia sanctions from both OFAC and the State Department. This package notably included the SDN designation of a bank in Kyrgyzstan, accused of facilitating cross-border transfers on behalf of a sanctioned Russian bank and creating “a sanctions evasion hub for Russia to pay for imports and receive payment for exports.” Oddly, OFAC alleges that this bank in Kyrgyzstan acted in conjunction with an SDN politician from Moldova, along with an unnamed “Russian oligarch.” This action highlights the secondary sanctions risks that non-U.S. financial institutions face under the Russia sanctions program, and the ways in which reputational issues can escalate into sanctions targeting.

These latest actions against Russia’s energy sector mark a significant shift from the previous focus on the “price cap” policy as the primary way of curtailing Russia’s revenue from the sale of its oil and petroleum products internationally. The ripple effects from this move will extend well beyond direct business in Russia’s energy sector, and will have major ramifications for global financial institutions, including in the insurance industry, shipping, and other areas.

Significant Designations and Increased Secondary Sanctions Risk

OFAC has added two of Russia’s largest oil producers— Public Joint Stock Company Gazprom Neft (Gazprom Neft) and Surgutneftegas—to the SDN List. These entities were designated under two distinct authorities: Executive Order 14024 and Executive Order 13662. The distinction is significant because sanctions imposed under Executive Order 13662 are codified into statute through the Countering America’s Adversaries Through Sanctions Act of 2017. Additionally, OFAC took the unusual step of re-designating under Executive Order 13662 almost 100 entities already designated under Executive Order 14024, in order to subject “foreign persons, including foreign financial institutions, that knowingly facilitate significant transactions for or on behalf of any of these entities . . . to mandatory secondary sanctions.” This is a clear signal of an intent to step up targeting of non-U.S. persons under U.S. “secondary sanctions.”

Relatedly, OFAC’s new Energy Sector Determination now provides a basis for the imposition of sanctions on any individual or entity involved in Russia’s energy sector, including non-U.S. persons. Preliminary guidance indicates this will cover a wide spectrum of upstream, midstream, and downstream operations, as well as various energy products including oil, natural gas, and petroleum products, but also coal, wood, and agricultural products used to manufacture biofuels, along with goods, services and technology relating to nuclear, electrical, thermal, and renewable power.

OFAC also greatly expanded the pre-existing sanctions on Sovcomflot, by revoking GL 93 and targeting 183 vessels, including tankers that are part of Russia’s so-called “shadow fleet” that are viewed as evading international sanctions. Traders in third countries have also been sanctioned for their roles in shipping and selling Russian oil and petroleum products outside the price cap regime.

At the same time, the government fired a shot across the bow of the Chinese oil/logistics sector by adding to the SDN List Shandong United Energy Pipeline Transportation Co. Ltd., described as “a PRC-based oil terminal operator that facilitated port calls and discharges in September and December 2024 of a U.S.-blocked Russian crude oil tanker.” This will make other entities in China, India, and elsewhere think twice about further dealings with Russia’s so-called “shadow fleet.” With the massive expansion of sanctions against these vessels, traders, producers, etc., there are now serious questions about how Russia will market and ship its products internationally.

The State Department has sanctioned two of Russia’s four operational liquefied natural gas (LNG) projects and entities operating such Russian LNG export terminals – Gazprom’s Portovaya LNG terminal‎ and Cryogas’ Vysotsk LNG terminal‎ – building on prior sanctions against the Artic LNG 2 project and others in the LNG sector and their international suppliers. Also targeted is Vostok Oil, described as “a major Russian oil development project from which Russia hopes to export upwards of 2 million barrels of oil per day.” The State Department said this action was “intended to slow down or halt further construction of the Vostok Oil project and limit the project’s ability to market and export crude oil and petroleum products in the future.”

Other targets of the sanctions package include two Russia-based maritime insurance providers, Ingosstrakh Insurance Company and Alfastrakhovanie Group, both of which play critical roles in underwriting and insuring Russian exports.Such designations are likely to have profound implications for the global insurance and reinsurance markets, disrupting insurance arrangements for vessels, traders and other entities involved in global energy supply chains.

OFAC and the State Department designated numerous Rosatom subsidiaries and officials, as well as business partners in Turkey and elsewhere, further tightening the noose around Russia’s state-owned nuclear energy company, which has still not been itself comprehensively blocked.

The State Department imposed numerous sanctions on China-based entities for supporting the Russian war effort and went out of its way to note that one of the targets is a Chinese state-owned enterprise supplying laser components to Russia. The State Department also sanctioned Chinese entities for providing engines and other components for Russia’s devastating “glide bombs.” These are major escalations of the U.S. government’s accusations about Chinese involvement in supporting Russia’s war effort.

Petroleum Services Prohibition

OFAC also introduced the Petroleum Services Determination, which, beginning on February 27, 2025, will prohibit U.S. persons from providing petroleum services to parties in Russia. There are a few exceptions to this ban, including for limited services that comply with the pre-existing price cap rules, certain wind-down activity, activity related to the operations of the Caspian Pipeline Consortium, Sakhalin II, or Tengizchevroil, and for isotopes from petroleum manufacturing used in medical, agricultural, or environmental applications (e.g., Carbon-13). OFAC has indicated that the term “petroleum services” will be interpreted broadly, encompassing services related to crude oil, petroleum products, and natural gas as a byproduct of oil production. Other natural gas-related activity is not covered by this particular prohibition.

More than 30 Russian oilfield service providers and more than a dozen senior energy executives also have been designated as SDNs.

Key General License Restrictions

These new measures will disrupt and complicate financial transactions relating to Russia’s energy sector going forward. OFAC has replaced GL 8K, which previously had broadly authorized transactions related to energy with key Russian entities, with GL 8L. GL 8L is instead an authorization (with certain limitations) for the wind-down of energy-related transactions with specific sanctioned Russian financial institutions, until March 12, 2025. Beginning on that date, unless OFAC extends the wind-down period or issues a separate authorization, any continued transactions with the sanctioned Russian entities listed in GL 8L may risk exposure to U.S. sanctions. This will seriously complicate international financial transactions related to Russia’s energy sector, particularly in light of the recent targeting of Gazpombank Joint Stock Company (Gazpombank‎).

GL 117 authorizes the wind down of transactions, until February 27, 2025, involving Gazprom Neft, Surgutneftegas, and certain other blocked entities. Beginning on that date, there will be hard questions about U.S. sanctions compliance for transactions involving Russian oil and related products and whether any of these blocked entities may have an interest that could trigger U.S. sanctions risk.

GL 115A authorizes, until June 30, 2025, the maintenance or support of civil nuclear energy projects initiated before November 21, 2024, involving Gazpombank or other specified blocked financial institutions. However, among other limitations, the GL explicitly excludes transactions related to the Paks II nuclear power plant project or its successors, in a major swipe at Hungary’s energy relationship with Russia.

As noted above, numerous other GLs have been issued or modified, making compliance in this space increasingly complex.

Implications for Global Energy, Financial, Insurance, and Shipping Sectors

These new sanctions create a far more complex compliance landscape for companies even with only indirect exposure to Russia’s energy sector, such as international insurers or other financial institutions, and companies in the shipping/logistics sectors. The price cap policy, which once provided a relatively light-touch mechanism for regulating Russian oil and petroleum product exports, is now riddled with overlapping restrictions, making compliance a high-risk exercise.

The broader designation of energy companies and projects also disrupts supply chains and impacts third-country activities, particularly in the Commonwealth of Independent States‎ region and certain countries in Europe where now-blocked entities operate critical infrastructure and sources of supply.

A Strategic Shift in U.S. Sanctions Policy

This sanctions package marks a major departure from prior actions targeting Russia’s energy sector. Under the Biden Administration, the U.S. had, until now, largely avoided broader sanctions that could destabilize global oil and gas markets. These sanctions represent a clear escalation, signaling a willingness to impose greater restrictions despite potential supply disruptions or price increases. Businesses operating in or with exposure to the global energy market must now navigate a far more complex and high-risk compliance landscape.

Geopolitical and Economic Considerations

These sanctions come at a time of significant uncertainty in global energy markets. While the International Energy Agency has projected a potential global oil supply surplus in 2025, that could change as a result of these actions, and any price spikes could test the durability of these policies. The potential for reduced Russian pipeline flows through Ukraine and delays in ramping up U.S. LNG export projects further complicate the outlook.

To learn more about these developments or related compliance risks and expectations, please ‎reach out to Pete Jeydel or Ryan Last.

Starting January 2025, entities formed or registered to do business in Pennsylvania are required to file an annual report with the Department of State. Pennsylvania has repealed decennial reports and now requires most domestic and foreign filing associations to report annually.

To comply with Pennsylvania’s new annual report requirement, entities registered to do business in the Commonwealth should be aware of the following:

• Which associations are required to submit an annual report.
• Corporations, LLCs, and other entity designations have different filing deadlines.
• Online reporting procedures and best practices for timely and efficient filing.
• Administrative consequences of failing to file annual report.

Entities Required to File an Annual Report

• All domestic corporations (business and nonprofit), limited liability companies, limited liability (general) partnerships, electing partnerships (that are not limited partnerships), limited partnerships, professional associations, and business trusts (collectively, “associations”) are required to submit an annual report.
• All foreign associations doing business in Pennsylvania must also file an annual report.

Key Deadlines: The Deadline to File Depends on Association Type[1]

Association Type	Filing Dates
Corporations (business and nonprofit)	January 1 – June 30
Limited Liability Companies	January 1 – September 30
Limited Partnerships Limited Liability Partnerships Business Trusts Professional Associations	January 1 – December 31

Recommendations to Prepare for Annual Reporting

To ensure compliance with the new annual report requirement, Pennsylvania businesses should take the following steps:

• Review Reporting Obligations: Assess organizational structure and registrations to determine which reports are required,[2] relevant due date, and options available to cure administrative penalties in the event of a failure to file.
• Keep up-to-date information on file with the Department of State and submit reports online: The Department of State strongly recommends preparing and submitting reports online.[3] Ensuring the accuracy of company details benefits reporting associations because the online form populates required fields with information on file and dictates specifics of reporting notifications. All annual reports submitted online will be automatically approved with a certificate of approval immediately available.
• Provide an email address for one or more persons to receive other notifications: Postcard notices are sent to addresses of registered offices on file, but only if the address provided is a street address. Commercial Registered Office Providers (CROP) receive a list of associations they represent, and CROP then assumes the responsibility to provide notice of upcoming deadlines. However, email notifications will be sent to any email address on file for a particular association.

Consequences of Failing to File Annual Report

• Failing to File Will Result in Administrative Dissolution, Termination, or Cancellation: Starting in 2027[4], an association that fails to file an annual report will be administratively dissolved, terminated, or cancelled six months after the due date of the annual report.
• Risk to Association’s Name: When subject to dissolution, termination, or cancellation, the affected association’s name is made available to any other filing association. In the event the available name is selected before the association is reinstated or reregistered, that association must choose a new name.

Options for Filers Subject to Administrative Dissolution/Termination/Cancellation Following Failure to File

• Reinstatement for Domestic Filers: The reinstatement process for domestic filing associations includes: (i) submitting an application for reinstatement; (ii) current annual report information; and (iii) a fee for each delinquent annual report that has not previously paid.
• Foreign Filers Must Reregister: The only option for a foreign filer that has been administratively terminated is to reregister. To reregister, the filer must submit a new Foreign Registration Statement.

Need Assistance?

Despite state efforts to notify filing entities of upcoming deadlines and relevant reporting requirements, it is ultimately the responsibility of clients to complete and submit their annual reports in accordance with annual deadlines. Troutman Pepper Locke is available to assist clients with their reporting obligations and analysis for compliance with Pennsylvania’s annual report filings. If you have questions or need assistance with your annual report, please reach out to your primary Troutman Pepper Locke contact or the authors of this article.

---

[1] Deadlines are the same for both domestic and foreign filers.

[2] Despite the repeal of the decennial report requirement for associations, decennial reports are still required for Insignia and Marks used with Articles or Supplies.

[3] For detailed instructions on submitting reports online, please see the guide published by the Pennsylvania Department of State.

[4] The legislation mandating the change in reporting, Act 122 of 2022, requires the department to give associations a transition period before imposing any dissolutions, terminations, or cancellations for failure to file annual reports. Associations that fail to file reports due after January 4, 2027, are no longer afforded leniency under the transition period.

Published in Law360 on January 15, 2025. © Copyright 2025, Portfolio Media, Inc., publisher of Law360. Reprinted here with permission.

State attorneys general across the U.S. took bold steps in 2024 to address unlawful activities by corporations in several areas, including privacy and data security, financial transparency, children’s internet safety, and other overall consumer protection claims.

These efforts were not only about enforcement but also about setting new precedents and pushing the boundaries of existing laws to better protect consumers in an increasingly complex digital and financial landscape.

State attorneys general’s efforts to address these areas, and others, in 2024 included record-breaking settlements and aggressive litigation, focusing on interstate coalitions targeting specific legal issues. This dynamic strategy underscores a commitment to not only address immediate concerns, but also to lay the groundwork for stronger regulatory frameworks and more robust consumer protections in the years to come.

In this first of two articles, we walk through notable state attorney general litigation and settlements in these areas in 2024. In part two, we discuss where we expect state attorneys general to focus their attention in 2025.

Privacy and Data Security

This past year, the California and Texas attorneys general led the way on privacy and data security actions.

In February, California Attorney General Rob Bonta announced a settlement with DoorDash[1] —The People of the State of California v. DoorDash Inc., in the Superior Court of the State of California, County of San Francisco — to resolve allegations that the company violated the California Consumer Privacy Act and the California Online Privacy Protection Act by selling consumers’ personal information without proper notice or an opportunity to opt out.

Bonta’s investigation allegedly revealed that DoorDash participated in a marketing cooperative where businesses exchanged customer personal information for advertising purposes, without disclosing this practice within the company’s privacy policy.

Despite being notified of noncompliance before the California Consumer Privacy Act’s right-to-cure violations expired, DoorDash allegedly failed to rectify the situation as it could not restore affected consumers to their original position or identify which downstream companies had received the data. As part of the settlement, DoorDash agreed to pay a $375,000 civil penalty and adhere to injunctive terms.

In June, Texas Attorney General Ken Paxton announced[2] a new team within the Consumer Protection Division to enforce Texas’ privacy laws, including the Texas Data Privacy and Security Act, effective July 1, 2024. This team, the largest of its kind in the U.S., will handle cases under multiple laws, such as the Identity Theft Enforcement and Protection Act, the Data Broker Law, state laws like the California Online Privacy Protection Act, and federal laws like the Health Insurance Portability and Accountability Act.

The Texas Data Privacy and Security Act mandates consumer data access, editing, deletion and opt-out options, with violations penalized up to $7,500. This unit signifies a shift toward prioritizing privacy enforcement, reflecting the rapid growth of privacy laws and increasing data breaches.

In July, Paxton secured a record-breaking $1.4 billion settlement with Meta — in State of Texas v. Meta Platforms Inc., in the 71st District Court of Harrison County, Texas — over alleged biometric privacy violations. This landmark case focused on Meta’s collection of facial recognition data without proper consent, signaling a firm stance against misuse of consumer information.

Just two months later, Paxton turned his attention to artificial intelligence, securing what his office called a “first-of-its-kind” settlement with Pieces Technologies,[3] an AI healthcare technology company. In State of Texas v. Pieces Technologies Inc., in the 191st District Court of Dallas County, Texas, Paxton’s office alleged the company made a series of false and misleading statements, including those regarding a series of metrics the company created regarding the accuracy and safety of its products.

A big stake in the ground is what comes next with AI. Paxton’s generative AI settlement is the first dot in what is expected to be a kaleidoscope of dots related to attorneys general regulating AI, and it wasn’t surprising that the first settlement was related to healthcare, where privacy and potential consumer harms based on inaccurate data are significant concerns.

Financial Transparency and Consumer Protection

Several state attorneys general targeted deceptive pricing practices in 2024 that allegedly misled consumers about the true costs of products and services, often thanks to junk fees and drip pricing.

In 2024, state attorneys general concentrated significantly on issues related to pricing and the disclosure of pricing, particularly targeting hidden fees. This focus was evident in sectors such as ticketing, hospitality and the online economy.

Both federal and state levels emphasized the necessity for companies to disclose the total price, including any unavoidable fees. This emphasis was enforced through both legislation and litigation. States like California and Minnesota have enacted or are about to enforce new laws to ensure that consumers are fully aware of the total cost of products and services upfront. These issues have reemerged as potential enforcement trends.

In late July, District of Columbia Attorney General Brian L. Schwalb made a splash when he sued StubHub[4] — in District of Columbia v. StubHub Inc., in the Superior Court of the District of Columbia — alleging the company engages in a deceptive and unfair practice of not showing consumers mandatory fees until they’re near the end of their transactions, and then failing to provide accurate information about the purpose of those fees or how they are calculated. Thus, consumers are shown a deceptively low fee during a long transaction process and pressured into purchasing tickets out of fear they might lose out on them, thanks to a countdown clock that creates a false sense of urgency.

California’s Consumers Legal Remedies Act, which became effective July 1, 2024, aims to eliminate drip pricing, which is a practice where the advertised price is lower than the actual price a consumer pays. The law prohibits advertising an initial low price for a product and then adding mandatory fees during the checkout process. All mandatory fees must be included in the total advertised price. However, the advertised price does not need to include government taxes, such as sales tax or shipping costs for physical goods.

Environmental Concerns

State attorneys general increased their focus on single-use plastics and recycling last year. In September, Connecticut’s Attorney General William Tong led a conference addressing the problems and potential solutions associated with plastics use and waste.[5] Panelists at the conference urged attorneys general to combat “greenwashing” by plastic producers and recyclers who overstate environmental benefits. They advocated for stricter
regulations and greater accountability for plastic waste and pollution.

In June, California issued petitions[6] to enforce subpoenas against the Plastics Industry Association and the American Chemistry Council, seeking documents related to the feasibility of plastic recyclability and trade association-funded studies. Both organizations filed lawsuits — American Chemistry Council Inc. v. Bonta, and Plastics Industry Association Inc. v. Bonta, in the U.S. District Court for the District of Columbia — claiming the subpoenas violated their First Amendment rights by undermining their ability to engage in open discourse, share information and develop public policy positions.

Additionally, 11 state attorneys general supported further intervention and controls related to plastics use. In March, they signed a letter[7] backing a proposed amendment from the General Services Administration to reduce single-use plastic packaging in federal procurements. The attorneys general suggested expanding the rule to include all single-use plastic products procured by the federal government, and requested that federal agencies publicly report their consumption of single-use plastic and nonrecyclable paper products to increase transparency.

These measures could potentially extend to the state level, requiring contractors to implement changes in manufacturing or supply chains.

Litigation and Resolution Trends

In 2024, state attorneys general increasingly demonstrated a willingness to file lawsuits against companies —when the majority of state attorney general investigations occurred through confidential investigations and lawsuits were reserved for the worst actors. We expect this new trend to continue as state attorneys general’s continue to recruit attorneys that have — or are seeking — additional courtroom experience.

In 2024, multistate attorney general coalitions were still navigating the pathway forward, particularly in identifying areas where they could act on a bipartisan level. A notable trend was the formation of multistate coalitions composed predominantly of either Democratic or Republican states. Despite this, states were actively seeking common ground in areas such as privacy and Big Tech.

It will be interesting to see if Big Tech somewhat changes in light of the increasing role that certain sectors from Big Tech are having with the new administration and how that will trickle down to the attorneys general. Traditional multistate activities, often driven by staff,continued to occur where party affiliation complexities were less critical.

In the courtroom, state attorneys general have historically been afforded significant judicial deference, benefiting from consumer protection laws that explicitly provide state attorneys general with broad latitude regarding what constitutes the unfair or deceptive acts that violate state consumer protection laws. Further, because state attorneys general typically reserved litigation for companies perceived to be the worst actors, case law has developed in a manner such that there are few unfavorable decisions.

However, if state attorneys general continue to be willing to litigate, we expect that sophisticated companies — and their counsel — will vigorously defend companies, testing the bounds of state attorneys general’s statutory authority.

As one such example, in 2022, the Colorado Supreme Court ruled that Attorney General Phil Weiser’s lawsuit against an electronic cigarette manufacturer — State ex rel. Weiser v. JUUL Labs Inc. —could not include four of the company’s executives as personal jurisdiction did not exist over said executives, explaining that Colorado did not provide “facts supporting a conclusion that any of the defendants expressly aimed their conduct at Colorado.”

Regarding resolving investigations and litigation, we’ve seen state attorneys general favor consent decrees over traditional settlement agreements as a resolution tool in 2024. Unlike settlement agreements, which state attorneys general argue can be more difficult to enforce, consent decrees carry the authority of court approval, making them legally binding and easier to monitor. By securing a consent decree, state attorneys general believe they are ensured the terms of the decree are enforceable through the courts, reducing the risk of disputes or noncompliance from the parties involved.

This preference reflects a broader shift toward prioritizing accountability and systemic reform, as consent decrees often include detailed compliance obligations, regular reporting and third-party oversight. According to state attorneys general, these consents offer a powerful mechanism to achieve long-term enforcement objectives and to address public interest concerns more effectively than settlement agreements alone.

Conclusion

In part two of this series, we consult our crystal ball and discuss the areas state attorneys general may focus their attention on in 2025.

---

[1] https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-settlement-doordash-investigation-finds-company.
[2] https://www.regulatoryoversight.com/2024/06/texas-ag-launches-data-privacy-team/.
[3] https://www.regulatoryoversight.com/2024/09/takeaways-from-texas-ags-novel-ai-health-settlement/#more-20343.
[4] https://www.regulatoryoversight.com/2024/08/district-of-columbia-ag-sues-stubhub-for-alleged-dark-patterns-and-hidden-fees/.
[5] https://www.regulatoryoversight.com/2024/10/are-plastics-the-new-pfas/.
[6] https://www.regulatoryoversight.com/2024/06/california-ag-enforces-subpoena-plastic-lobbying-groups-respond-with-lawsuit/.
[7] https://www.regulatoryoversight.com/2024/03/11-ags-sign-letter-in-support-of-gsas-proposed-rule-on-plastic-packaging/.

This article was originally published in the January 2025 issue of The Investment Lawyer and is republished here with permission.

It’s been only two years since the required compliance date for the US Securities and Exchange Commission’s (SEC) amended Rule 206(4)-1 (the Marketing Rule) under the Investment Advisers Act of 1940, as amended (Advisers Act). Since the Marketing Rule’s adoption, the SEC Staff of the Division of Investment Management (IM) has issued four FAQs and the SEC’s Division of Examinations (EXAMS) has issued three risk alerts on the rule. Despite this guidance, advisers are still struggling with implementation and interpretation issues, making the Marketing Rule ripe for further regulation through enforcement.

Click here to read the full article in The Investment Lawyer.

State attorneys general increasingly impact businesses in all industries. Our nationally recognized state AG team has been trusted by clients for more than 20 years to navigate their most complicated state AG investigations and enforcement actions.

State Attorneys General Monitor analyzes regulatory actions by state AGs and other state administrative agencies throughout the nation. Contributors to this newsletter and related blog include attorneys experienced in regulatory enforcement, litigation, and compliance. Also visit our State Attorneys General Monitor microsite.

Contact our State AG Team at StateAG@troutman.com.

---

TROUTMAN PEPPER LOCKE SPOTLIGHT

Troutman Pepper Locke Partner Ashley Taylor Co-Edits ABA Book on Consumer Protection and the Rise of State Attorney General Enforcement

Comprehensive Guide Offers Insights Into Enforcement Actions, Challenges, and Priorities

Ashley L. Taylor, Jr., co-leader of Troutman Pepper Locke’s nationally ranked State Attorneys General Practice, co-edited a new book published by the American Bar Association titled “Consumer Protection: Understanding Enforcement Actions Brought by State Attorneys General.” Given the growing regulatory power of state attorneys general in highly regulated industries, companies are at risk of bet-the-company government investigations, enforcement actions, and high-stakes litigation.

Continue Reading

---

STATE AG UPDATES

U.S. Supreme Court Declines to Overturn New York’s Affordable Broadband Act

By Troutman Pepper Locke State Attorneys General Team and Dascher Pasco

The U.S. Supreme Court closed out 2024 by confirming states’ authority to regulate internet service providers. On December 16, 2024, the Court denied certiorari in New York State Telecommunications Association, Inc., et al. v. Attorney General Letitia James, Case No. 21-1975, allowing New York’s Affordable Broadband Act (ABA) to stand.

Continue Reading

Oregon Issues AI Guidance for Businesses

By Troutman Pepper Locke State Attorneys General Team

As one of her last acts in office, on December 24, 2024, Oregon Attorney General (AG) Ellen Rosenblum issued guidance for businesses deploying artificial intelligence (AI) technologies. The guidance highlights the risks associated with the commercial use of AI, and underscores that, despite the absence of a specific AI law in Oregon, a company’s use of AI must still comply with existing laws.

Continue Reading

New Year, New Liability for Private Equity

By Allison O’Neil, Warren Myers, Colleen O’Connor, and Troutman Pepper Locke State Attorneys General Team

Newly Signed Massachusetts Law Ramps up Regulation and AG Liability for Private Equity Investments in Health Care

Private equity firms and health care companies operating in Massachusetts will now face enhanced liability risks following the recent passage and enactment of legislation regulating private equity investment in Massachusetts health care. This new law greatly expands the authority of the Massachusetts attorney general (AG) and other state health care regulators to examine the involvement of private equity funds and other “significant investors” in the state’s health care sector. Here’s what you need to know.

Continue Reading

---

AG OF THE WEEK

Jason Miyares, Virginia

AG Jason Miyares’ story doesn’t start in Virginia, but in Havana, Cuba, when his mother, Miriam Miyares, fled communist Cuba, penniless and homeless. A product of Virginia public schools, Jason graduated with a bachelor’s degree in business administration from James Madison University and a J.D. from the College of William and Mary School of Law.

After serving for three terms in the state legislature, he ran and was elected the 48th AG of Virginia in November 2021. He also previously served as a prosecutor in the Virginia Beach Commonwealth’s Attorney Office, where he worked alongside law enforcement to keep the community safe.

Miyares is the first Hispanic American to be elected to a statewide office in Virginia, and the first child of an immigrant to be AG. Since his inauguration in January 2022, Miyares has focused on fighting violent crime and improving public safety, strengthening economic growth, combatting the deadly impact of opioids and fentanyl, and protecting Virginians from corporate misconduct.

Virginia AG in the News:

• On January 8, Miyares announced that the Fourth Circuit Court of Appeals upheld Virginia’s right to regulate hemp-derived products with intoxicating THC levels, preventing the sale of counterfeit THC products marketed to children.

• On December 3, Miyares shared tips to help Virginians avoid charity scams.

---

UPCOMING AG EVENTS

• January: RAGA | Winter National Meeting | Austin, TX
• February: DAGA | Los Angeles Policy Conference | Los Angeles, CA
• February: RAGA | Victory Fund Ski Retreat | Big Sky, MT

For more on upcoming AG Events, click here.

Troutman Pepper Locke’s Cannabis Practice helps clients throughout their business cycle enter or expand into the cannabis space. Our team combines the resources of attorneys in areas such as licensing and taxation, regulatory compliance, corporate and transactional, intellectual property, and real estate, among others, to provide comprehensive services.

Our Cannabis Practice provides advice on issues related to applicable federal and state law. Cannabis remains an illegal controlled substance under federal law.

---

Cannabis Regulatory Updates

Cannabis Rescheduling: ALJ Cancels Upcoming Hearings on Proposed Rulemaking

By Jean Smith-Gonnell, Zie Alere, and Nick Ramos

Hearings on the merits of the Drug Enforcement Agency’s (DEA) proposed cannabis rescheduling, initially set to begin this month, have been cancelled. The preliminary hearing period has been littered with accusations that the DEA improperly excluded certain parties from participating, that the DEA itself does not adequately support rescheduling, and that the DEA engaged in improper ex parte communications with anti-rescheduling parties.

Read More

Federal Appeals Court Deals Another Blow to Intoxicating Hemp Products in Virginia

By Jean Smith-Gonnell, Agustin Rodriguez, and Michael Jordan

On January 7, the U.S. Court of Appeals for the Fourth Circuit found that Virginia’s hemp product restrictions do not violate federal law. The ruling is the latest defeat for the Virginia hemp industry’s efforts to overturn Virginia S.B. 903, a law intended to prohibit the sale of intoxicating hemp products like delta-8 and delta-10 tetrahydrocannabinol (THC) gummies and beverages in the Commonwealth.

Read More

The IRS and the Treasury Department issued final regulations on January 3 (Final Regulations), providing guidance on the clean hydrogen production tax credit under Section 45V (Hydrogen PTC) and the investment tax credit under Section 48 (Hydrogen ITC). The Final Regulations follow the passage of the Inflation Reduction Act of 2022 (IRA), the publication of Notice 2022-58, 2022-47 I.R.B. 483, which requested comments on the Hydrogen PTC and ITC, and proposed regulations addressing the Hydrogen PTC and ITC that were issued on December 26, 2023 (Proposed Regulations). Treasury received more than 30,000 written comments in response to the Proposed Regulations.

The Final Regulations apply to taxable years beginning after December 26, 2023. Taxpayers may choose to apply the Final Regulations for taxable years beginning after December 31, 2022, and on or before December 26, 2023, if they apply the Final Regulations in their entirety and in a consistent manner. Taxpayers may choose to rely upon the Proposed Regulations for taxable years beginning after December 31, 2022, and before January 10, 2025 (the date the Final Regulations were published in the Federal Register), provided that taxpayers follow the Proposed Regulations in their entirety and in a consistent manner.

Background

The Hydrogen PTC is available for a 10-year production period at an amount equal to the product of (1) the kilograms of qualified clean hydrogen produced by a taxpayer during a taxable year at a qualified clean hydrogen production facility and (2) an applicable percentage of $0.60, as adjusted for inflation. The applicable percentage, which ranges from 20% to 100%, is based on the lifecycle greenhouse gas (GHG) emissions rate of the process to produce such qualified clean hydrogen, which ranges from 4 to 0.45 kilograms of CO2e per kilogram of hydrogen. The Hydrogen ITC is equal to the basis of a clean hydrogen production facility multiplied by an applicable percentage ranging from 1.2% to 6% depending on the reasonably expected lifecycle GHG emissions rate.

The Hydrogen PTC and ITC rates are multiplied by five if the qualified clean hydrogen production facility begins construction before January 29, 2023 or satisfies applicable prevailing wage and apprenticeship requirements. Section 45V does not provide for domestic content or energy community credit enhancements for the Hydrogen PTC or ITC.

Energy Attribute Certificates

The Hydrogen PTC and ITC depend on the lifecycle GHG emissions of the hydrogen production process. The Proposed Regulations introduced a process by which taxpayers would be required to match energy input to hydrogen production through the acquisition and retirement of energy attribute certificates (EACs). Specifically, taxpayers may treat electricity used by a hydrogen production facility as being from a specific electricity generating facility rather than the regional electricity grid only if the taxpayer acquires and retires a qualifying EAC for each unit of electricity the taxpayer claims from such source. An EAC is a tradeable contractual instrument issued through a qualified EAC registry or accounting system that represents the energy attributes of a specific unit of energy produced. The Final Regulations retain the EAC requirements, regardless of whether the facility is grid-connected, directly connected, or co-located with the hydrogen production facility.

The EAC requirement is the vehicle through which Treasury addressed the so-called “three pillar” requirements of incrementality, temporal matching, and deliverability, intended to prevent an increase of “induced emissions” (i.e., increased emissions in the power generation sector due to diversion of zero- or low-emission energy sources to hydrogen production).

• The incrementality, temporal matching, and deliverability requirements were the subject of intensive discussions and debate leading up to the issuance of the Proposed Regulations and of many comments received by Treasury in response to the Proposed Regulations. They reflect the tension between ensuring that the hydrogen is “clean” and encouraging the development of hydrogen production and infrastructure, which will require significant capital outlays.

The Final Regulations generally retain the three pillar requirements set forth in the Proposed Regulations, with certain clarifications and modifications described below.

Incrementality

Generally, an EAC meets the incrementality requirement if the facility that produced the electricity has a commercial operation date or an uprate (an increase in rated nameplate capacity) that is no more than 36 months before the hydrogen production facility was placed in service. In response to many comments that the short timeline could limit the universe of power plants capable of serving as sources of power for producing clean hydrogen, the Final Regulations include the following significant modifications:

• An EAC may meet the incrementality requirement if the electricity represented by the EAC is produced by a qualifying nuclear reactor (i.e., a nuclear reactor that is either a merchant nuclear reactor or a single-unit plant, meets the average annual gross receipts test related to the Section 45U credit for any two of the calendar years 2017 through 2021, and either has a physical electric connection with the hydrogen production facility or is the subject of a written binding contract under which the owner of a hydrogen production facility agrees to acquire and retire EACs from the nuclear reactor for a fixed term of at least 10 years). Only up to 200 megawatt hours (MWh) of electricity per operating hour per qualifying nuclear reactor may be considered incremental.

  • Taxpayers will be familiar with the “written binding contract” standard from various iterations of IRS guidance on the beginning-of-construction standard.

  • The exception for a qualifying nuclear reactor is narrowly tailored to identify nuclear reactors most at risk of retirement and ensure that hydrogen production facilities materially contribute to the continued operation of these reactors. However, the exception represents a major win for the nuclear industry.

• An EAC may meet the incrementality requirement if the electricity it represents is produced by an electricity generating facility that has been retrofitted with carbon capture and sequestration (CCS) technology, if the CCS equipment was placed in service no more than 36 months before the hydrogen production facility was placed in service.

• For purposes of the uprate rule, a facility that has been decommissioned or is in the process of decommissioning may be considered as having increased capacity from a base of zero if it restarts operations. The facility must have been shut down for at least one calendar year during which it was not authorized to operate by its respective federal regulatory authority (e.g., FERC or the NRC), and the increased capacity of the restarted facility must be eligible to restart based on an operating license issued by the regulatory authority. The facility must not have ceased operations for the purpose of qualifying for the rule for restarted facilities.

• An EAC may meet the incrementality requirement if the electricity represented by the EAC is produced by an electricity generating facility that is physically located in a qualifying state, and the hydrogen production facility is also located in a qualifying state. A qualifying state is one that has both a qualifying electricity decarbonization standard and a qualifying GHG cap program. A qualifying electricity decarbonization standard includes a target for 100% of the state’s retail sales of electricity to be supplied by renewable or minimal-emitting sources by 2050 or earlier, and a qualifying GHG cap program includes a legally binding cap on GHG emissions from the electricity sector that declines over time and applies to the majority of in-state and out-of-state electricity supplied to the state.

  • As of the publication date of the Final Regulations, only California and Washington are qualifying states.

Temporal Matching

An EAC meets the temporal matching requirement if the electricity represented by the EAC is generated (i) in the same calendar year that the hydrogen production facility uses the electricity, with respect to electricity generated before January 1, 2030, or (ii) in the same hour that the hydrogen production facility uses the electricity, with respect to electricity generated after December 31, 2029.

• The hourly matching requirement has been the subject of much concern for the hydrogen industry, given both the developing state of EAC registries and concerns over consistent supply of renewable electricity. The Proposed Regulations would have shifted from the annual to the hourly matching requirement as of January 1, 2028. The Final Regulations extend the transition rule by two years to provide additional time for tracking systems to achieve functionality and to allow the market to develop for hourly-matched EACs.

The Final Regulations also add a rule clarifying that an EAC meets the temporal matching requirement if the electricity represented by the EAC is discharged from a storage system in the same hour that the hydrogen production facility uses the electricity to produce hydrogen. The storage system must be in the same region as both the hydrogen production facility and the facility generating the electricity to be stored.

• The energy storage system does not need to meet the incrementality requirement, but the electricity stored must meet the incrementality requirement based on the attributes of the generator. The use of energy storage must be verified by an EAC registry that ensures no double counting, accounts for storage-related efficiency losses, and tracks the temporal profile of stored and discharged electricity.

Deliverability

An EAC meets the deliverability requirement if the electricity represented by the EAC is generated by a source that is in the same region as the hydrogen production facility. The term “region” means a U.S. region that corresponds to a balancing authority (as set forth in a table in the Final Regulations) to which the facility is electrically interconnected. The Final Regulations provide an alternative rule under which an EAC can meet the deliverability requirement if the electricity generation represented by the EAC has transmission rights from the generator location to the region of the clean hydrogen producer, and such generation is delivered to the producer’s region. This delivery must be demonstrated on at least an hour-to-hour basis, with no direct counterbalancing reverse transactions, and verified with NERC E-tags or equivalent. Tracking of transmission rights and electricity delivery must also occur via the relevant EAC registry. In the case of imports from Canada and Mexico, the electricity generator must include an attestation that the attributes included in the eligible EACs are not being used for any other purpose.

• Treasury may provide updated versions of the table of balancing authorities, which taxpayers may choose to rely on, or taxpayers may continue to utilize the table in the Final Regulations.

RNG and Fugitive Sources of Methane

In the Proposed Regulations, Treasury announced the intent to provide rules addressing hydrogen production pathways that use renewable natural gas (RNG) or other fugitive sources of methane (for example, from coal mine operations) for purposes of the Hydrogen PTC or ITC. The Final Regulations include such rules, which apply different approaches for each type of natural gas alternative, rather than rules that provide a single, generic alternative fate for all natural gas alternatives.

Importantly, the Final Regulations do not impose a “first productive use” requirement for the relevant methane, although the preamble to the Proposed Regulations indicated that was Treasury’s intent. Under a first productive use requirement, for natural gas alternatives to receive an emissions value consistent with that gas (and not fossil natural gas), the natural gas alternative used during the hydrogen production process must originate from the first productive use of the relevant methane. The Final Regulations instead take the likelihood of alternative productive use into account in assessing the alternative fate of such gas.

• While a first productive use requirement could effectively address important considerations in the determination of a lifecycle GHG emissions rate, Treasury acknowledged that the requirement may be difficult for taxpayers to substantiate and to verify independently.

More specifically, the Final Regulations establish general requirements for lifecycle GHG emissions determinations for processes that use methane derived from natural gas alternatives to produce hydrogen. In doing so, the Final Regulations require such determinations to consider the alternative fates of that methane, including avoided emissions and alternative productive uses of that methane, the risk that the availability of the Hydrogen PTC and ITC creates incentives to produce additional methane or otherwise induces additional emissions, and observable trends and anticipated changes in waste management and disposal practices over time as they are applicable to methane generation and uses. The Final Regulations address specific alternative fates for specific sources of methane.

The Final Regulations allow a book-and-claim system for establishing claims to certain attributes of RNG or coal mine methane used in hydrogen production, provided the Treasury Secretary makes a determination that one or more electronic tracking systems meets the standards for a qualifying gas EAC registry or accounting system set forth in the Final Regulations, which determination may be no earlier than January 1, 2027. Before such determination, a taxpayer using RNG or coal mine methane in a hydrogen production process must substantiate the use of such gas by maintaining a direct pipeline connection to a supplier or documentation of exclusive delivery of such gas.

Lifecycle Greenhouse Gas Emissions

The Proposed Regulations would have provided that, except as otherwise provided, the term “lifecycle greenhouse gas emissions” has the meaning provided pursuant to 42 U.S.C. 7545(o)(1)(H) (as in effect on August 16, 2022) of the Clean Air Act[1] and only includes emissions through the point of production (well-to-gate), as determined by the most recent GREET model. The Final Regulations modify this rule to provide that, for purposes of Section 45V, lifecycle GHG emissions are determined under the 45VH2-GREET Model (discussed below).

The term “emissions through the point of production (well-to-gate)” means the aggregate lifecycle GHG emissions related to hydrogen produced at a hydrogen production facility during the taxable year through the point of production. The Final Regulations clarify that emissions that result from certain purification activities that occur downstream of the facility’s qualified clean hydrogen production process are still within the well-to-gate system boundary. If the taxpayer knows or has reason to know the purification of a hydrogen gas stream is necessary for a hydrogen gas stream to be productively used, or to be sold for productive use, any lifecycle GHG emissions relating to such purification (for example, emissions from electricity used in purification, or carbon dioxide that is separated from a hydrogen gas steam and then vented as part of purification) are treated as emissions through the point of production (well-to-gate). Additionally, if the taxpayer knows or has reason to know that a hydrogen gas stream contains less than 99 percent hydrogen and will be combusted without purification, any lifecycle GHG emissions relating to the purification needed to purify the hydrogen gas stream to contain 99 percent hydrogen are treated as emissions through the point of production (well-to-gate).

Applicable GREET Model

Under the Proposed Regulations, unless otherwise specified, the “most recent GREET model” would have been the most recent version of 45VH2-GREET available to the public and provided in the instructions to the latest version of Form 7210, Clean Hydrogen Production Credit, as of the first day of the taxpayer’s taxable year in which the qualified clean hydrogen for which the taxpayer is claiming the Hydrogen PTC or Hydrogen ITC was produced. The Proposed Regulations would have further provided that, if a version of 45VH2-GREET subsequently becomes available to the public in the same taxable year, the taxpayer may choose to treat such version of 45VH2-GREET as the most recent GREET model. The Final Regulations change the nomenclature of the “most recent GREET model” to the “45VH2-GREET Model,” but do not otherwise change the definition of such model. The current GREET model, past versions of the GREET model, and future updates to the GREET model may be found at: https://www.energy.gov/45vresources.

The Proposed Regulations would have provided procedures to calculate the lifecycle GHG emissions rate of hydrogen produced at a hydrogen production facility using the most recent GREET model. The Proposed Regulations would have further provided that, for each taxable year during the period described in Section 45V(a)(1), a taxpayer claiming the Hydrogen PTC or ITC determines the lifecycle GHG emissions rate of hydrogen produced at a hydrogen production facility within the interface of 45VH2-GREET. The 45VH2-GREET User Manual released in conjunction with the Proposed Regulations provided that 45VH2-GREET is expected to be updated on at least a yearly basis, which would result in taxpayers using an updated version of 45VH2-GREET each taxable year (insofar as an update arises).

To provide greater certainty about a hydrogen production facility’s lifecycle GHG emissions rate throughout the credit period for that facility, the Final Regulations give taxpayers the option to elect to use the version of 45VH2-GREET that was in effect on the date when construction of their hydrogen production facility began for the remaining taxable years within the 10-year credit period. Additionally, in the case of a facility owned by the taxpayer that began construction before December 26, 2023, the Final Regulations provide taxpayers with the option to make an election to use the first publicly available version of 45VH2-GREET (the version of 45VH2-GREET released in December 2023) for the remaining taxable years within the 10-year credit period. This election is irrevocable.

The Proposed Regulations additionally would have provided that a taxpayer may use a PER (as defined below) to calculate the amount of the clean hydrogen production credit with respect to qualified clean hydrogen produced by the taxpayer at a qualified clean hydrogen production facility beginning with the first taxable year in which a PER determined by the Secretary has been obtained and for any subsequent taxable year during the 10-year period beginning on the date such facility was originally going to be placed in service, provided all other requirements of Section 45V are met, and until the lifecycle GHG emissions rate of such hydrogen has been determined under the most recent version of 45VH2-GREET. The Final Regulations clarify that taxpayers may continue to use the PER to calculate the amount of the Hydrogen PTC with respect to qualified clean hydrogen produced at a qualified clean hydrogen facility, provided that: (1) the lifecycle GHG emissions rate of such hydrogen has not been determined; (2) there are no material changes to the information about the taxpayer’s hydrogen production process from the information provided to the DOE to obtain an emissions value; and (3) all other requirements of Section 45V are met.

Provisional Emissions Rate

If the most recent GREET model does not include a lifecycle GHG emissions rate for the hydrogen production pathway through which a taxpayer produces qualified clean hydrogen, the taxpayer may file a petition for a “provisional emissions rate” or “PER.” The Proposed Regulations would have provided that an applicant may request an emissions value only after a front-end engineering and design (FEED) study or similar indication of project maturity, such as project specification and cost estimation sufficient to inform a final investment decision, has been completed for the hydrogen production facility. The Final Regulations retain the requirement for a FEED study but clarify that a taxpayer only needs a Class 3 FEED study or similar indication of project maturity, as determined by the DOE, to apply for an emissions value.

• Class 3 FEED studies reflect more mature projects than FEED studies of Class 4 or 5, making them more likely to be robust and therefore likely to facilitate faster reviews. Class 3 FEED studies can also be conducted sooner in a project and are generally less detailed or time-consuming than a Class 1 or Class 2 FEED study.

Anti-Abuse Rule

The Proposed Regulations would have provided that the Hydrogen PTC or ITC is not allowed in circumstances where the primary objective of the production and sale or use of the qualified clean hydrogen is to obtain the benefit of the credit in a manner that is wasteful. The Final Regulations clarify that the Hydrogen PTC is not allowable if the primary purpose of the sale or use (rather than the production and sale or use) of qualified clean hydrogen is to obtain the benefit of the credit in a manner that is wasteful. The Final Regulations further clarify that the taxpayer obtains the Hydrogen PTC in a wasteful manner if the taxpayer sells qualified clean hydrogen that the taxpayer knows or has reason to know will be vented, flared, used to produce heat or power that is then directly used to produce hydrogen, or otherwise used to produce hydrogen, in excess of standard commercial practices.

The Final Regulations provide that venting or flaring for safety or maintenance reasons in the ordinary course of business is a non-abusive commercial industry practice. However, while not abusive, such venting or flaring is also not a verifiable use under the Final Regulations and therefore any such hydrogen that is vented or flared for safety reasons is not eligible for the Hydrogen PTC or ITC.

Impact of Incoming Trump Administration

The Final Regulations’ interpretation of the “three pillars,” which are not explicitly addressed in Section 45V, may be a likely target for a court challenge given the recent Loper Bright decision overturning the Chevron doctrine.

While a Congressional overturning of the Final Regulations is possible under the Congressional Review Act, it is unlikely given the narrow Republican margins in Congress and the fact that the Congressional Review Act has not previously been used to overturn tax regulations. A revision to the Final Regulations also seems unlikely, given the notice and comment process for new regulations. What is more likely is that the Trump Administration could provide additional flexibility for hydrogen producers through the issuance of subregulatory guidance such as IRS notices. However, as of now the Trump Administration’s views on the Hydrogen PTC and ITC are unknown.

In addition, while a large-scale repeal of the IRA tax credits is not currently expected, modifications to the Hydrogen PTC and ITC as part of a tax bill passed through a budget reconciliation process cannot be ruled out.

Summary

The Final Regulations reflect a slight loosening of the requirements around incrementality, temporal matching, and deliverability, but generally retain the structure of the Proposed Regulations intended to limit induced emissions associated with hydrogen production. The issuance of the Final Regulations provides some much-needed clarity, particularly for projects currently in development, though the comfort is dampened somewhat by the uncertainties around the incoming Trump Administration and the new Republican-controlled Congress.

---

[1] 42 U.S.C. 7545(o)(1)(H) (as in effect on August 16, 2022)

The Federal Trade Commission (FTC) announced the annual changes to the Hart-Scott-Rodino (HSR) Act notification thresholds. The HSR Act requires all persons contemplating certain mergers or acquisitions that meet or exceed the jurisdictional thresholds to file notification with the FTC and the Department of Justice and to wait a designated period of time before consummating such transactions. These thresholds are adjusted annually based on changes in the U.S. gross national product (GNP). The changes are expected to become effective 30 days after notice is published in the Federal Register.

Generally, the HSR Act requires notification for mergers, acquisitions, joint venture formations, and certain exclusive pharmaceutical license agreements over a certain size and among parties over a certain size. The size-of-transaction threshold will increase to $126.4 million from $119.5 million. Transactions that will result in the purchaser holding voting securities, assets or noncorporate interests valued above that threshold will be reportable if the size-of-parties test is also satisfied and no exemptions apply.

The size-of-parties threshold will also increase. Generally, one party must have sales or assets of at least $25.3 million, and the other party must have sales or assets of at least $252.9 million. Unless an exemption applies, transactions valued in excess of $505.8 million will require premerger notification regardless of the annual sales or assets of the parties.

FTC announces changes in filing fees

In addition to announcing the new HSR thresholds, the FTC approved publication of the new merger filing fee thresholds. There are six filing fee thresholds based on the size of the transaction:

Filing Fee	2025 Size-of-Transaction
$30,000	valued above $126.4 million but less than $179.4 million
$105,000	valued at or above $179.4 million but less than $555.5 million
$265,000	valued at or above $555.5 million but less than $1.111 billion
$425,000	valued at or above $1.111 billion but less than $2.222 billion
$850,000	valued at or above $2.222 billion but less than $5.555 billion
$2,390,000	valued at or above $5.555 billion

To determine reportability, parties must apply the thresholds that are or will be in effect at the time of closing. However, the applicable filing fee is based on the filing fee threshold that is in effect at the time the parties submit their HSR filings.

Summary of new HSR thresholds are as follows:

Size-of-transaction threshold:
$119.5 million will become $126.4 million

Size-of-parties thresholds:
$23.9 million will become $25.3 million
$239 million will become $252.9 million

Size-of-transaction where size-of-parties no longer relevant:
$478 million will become $505.8 million

The HSR regulations are complex and address, among other things, how to determine the size of the person and the size of the transaction and whether an exemption could apply. It is important to be familiar not only with the specific thresholds but also with how the thresholds apply to your transactions.

In Gunderson v. The Trade Desk, Inc., the Delaware Court of Chancery held that a charter provision requiring supermajority stockholder approval to amend or repeal The Trade Desk, Inc.’s (Trade Desk) charter was not triggered by a proposed conversion from a Delaware corporation to a Nevada corporation, despite the conversion effectively resulting in a repeal of Trade Desk’s charter. The court based its decision on longstanding case law applying the doctrine of independent legal significance.

Background

Trade Desk’s board proposed a conversion under Section 266 of the Delaware General Corporation Law (DGCL), which requires approval of a majority of the outstanding shares of stock of the corporation entitled to vote. According to the court, given that Trade Desk’s CEO controlled roughly 49% of the outstanding voting power, this voting threshold was easily obtainable. A plaintiff stockholder subsequently sought to enjoin the conversion, arguing that Article X of Trade Desk’s charter required 66 2/3% of the outstanding voting power of Trade Desk’s stock to approve the conversion. Under Article X of Trade Desk’s charter, a 66 2/3% vote would be required “to amend or repeal, or adopt any provision” of the charter inconsistent with certain specified articles of the charter. According to the plaintiff, the conversion would result in a repeal of the charter sufficient to trigger the supermajority right. Trade Desk argued that Article X’s supermajority provisions applied only to direct charter amendments under Section 242 of the DGCL, not to amendments accomplished through other provisions of the DGCL.

Analysis

According to the court, under the doctrine of independent legal significance, “action authorized under one section of the [DGCL] is not invalid because it causes a result that would not be achievable if pursued through other action under other provisions of the statute.” The court held that the language of Article X (i.e., “amend or repeal, or adopt any provision) applied to amending or repealing a charter provision under Section 242 of the DGCL, but not to a conversion under Section 266 of the DGCL that had the effect of amending or repealing the charter. As part of its analysis, the court noted that drafters of corporate documents governed by Delaware law are presumed to be aware of the doctrine of independent legal significance and that if they intend to prohibit certain actions with a supermajority blocking right, then they would need to be specific when drafting such a right. In so doing, the court detailed the history of the doctrine of independent legal significance and highlighted the Delaware Supreme Court’s prior guidance to drafters of corporate charters in the context of mergers that result in charter amendments: “The path for future drafters to follow in articulating class vote provisions is clear. When a certificate … grants only the right to vote on an amendment, alteration or repeal, the preferred have no class vote in a merger. When a certificate adds the terms “whether by merger, consolidation or otherwise” and a merger results in an amendment, alteration or repeal …, there would be a class vote.” Accordingly, because Article X did not specify conversions within its ambit, the court denied the plaintiff’s injunction.

Takeaway

The case serves as a reminder that drafters should not assume that broad language granting protective rights will apply in all intended instances. Instead, drafters should specify the types of transactions that apply within a protective provision’s scope to avoid circumvention of those rights through other types of transactions accomplishing the same end.