Episode 452: The Legal Landscape in 2025: What to Expect with Big Government Changes

Previously we covered what taxpayers should plan for in light of the recent United States presidential election and its results. Of course, there’s much more to consider than just taxes, so this week we are considering the legal landscape in 2025 and what various business owners should expect going into the new year.

The Biggest Takeaway is That the Regulatory Environment is Going to Ease in Most Areas

One of the Trump campaign’s overarching themes was reducing the regulatory reach of the federal government. So far, comments from the incoming Trump administration suggest that it will follow through with slashing federal regulations.

Some industries and segments of the economy will feel this impact more than others. In particular, the energy and consumer finance industries will be on the front of this regulatory pullback.

The Biden administration’s relationship with oil and gas companies (federal land leasing for oil drilling, in particular) was a subject of discussion the previous four years. The Trump administration will likely roll back some of the regulations concerning federal land leasing requirements, making it easier for these companies to expand their oil and gas drilling and extraction operations.

Consumer finance is another industry that will probably see some regulatory easing with the new president. The Consumer Financial Protection Bureau (CFPB) has recently developed and put in place various regulations aimed at banks and lending institutions. These regulations limit certain fees that banks can charge their customers. The CFPB has also created similar fee-limiting regulations at airlines, capping what airlines can charge for certain services. While it isn’t clear what will happen to the regulations already on the books, it is probable that the CFPB will have less influence in regulating industries.

Overturning the Chevron Doctrine Will Also Have Regulatory Impacts

In fact, a notable Supreme Court decision came down earlier in 2024 that will steer the regulatory direction further.

The Chevron Doctrine, in place for more than 40 years, was overturned in June. This legal concept required courts to accept a federal regulatory body’s “reasonable interpretation” of the regulations they pass. In other words, the Chevron Doctrine required courts to give preference to the federal regulator’s perspective when making legal judgements.

Now that the Chevron Doctrine has been overturned, courts now have the latitude to interpret regulatory language as it sees fit, which may be in contradiction to what federal regulators intended. In effect, federal regulators will have less power to enforce their actions through the courts.

One Example of Regulatory Changes is with Nondisclosure Agreements and Covenants

It’s still too early to make firm predictions on what the legal landscape will look like in 2025 and what regulatory bodies will be targeted by the Trump administration. However, there is one example of what these changes might look like for business owners – nondisclosure agreements and covenants.

Non-disclosure agreements are made between employers and employees – typically new hires. They restrict what the employee may do with the inside knowledge they gain by working with the business. This includes trade knowledge, customer lists and other important company assets.

Non-disclosure agreements and covenants are a matter of debate because they can either be too restrictive (which makes it difficult for employees to work in the same industry if they leave the business) or too lax (which exposes the employer to significant risk). While campaigning, the Biden administration stated that it would make employer-employee non-disclosure agreements difficult to enforce – coming down on the employee’s side in this regard.

The Trump administration will likely take a different approach. Currently, covenant agreements are enforced at the state level and are therefore enforced differently all over the country. If the Trump administration does differ from the democrats in this area, it may keep the existing state-level regulations in place for non-disclosure agreements. As such, it’s important for employers and employees to check with their state’s restrictions on covenant agreements before authoring or signing the document.

The Legal Landscape in 2025 will Bring Changes, but a Trusted Attorney Can Help You Be Prepared

With a new executive in place and control shifting in the legislature, 2025 will be a year of transition and change. Many of these changes will be aimed at drawing down the regulatory strength to the federal government, which will have impacts on industry and the economy.

If you own a business or are planning on making a major life change in 2025 – like switching jobs or retiring – an experienced attorney can advise you on how to proceed and what to consider so you won’t be caught off guard in the new year.

Episode 451: Tax Planning Post 2024 Presidential Election

Election season is behind us. The U.S. has a new incoming president and likely a new tax philosophy for the country. That means it’s time for taxpayers to review their tax planning strategies and position themselves for potential changes to the tax code.

Starting in 2025, the Republicans will control the executive branch, along with both parts of Congress, albeit with a tight margin in the House that may be an obstacle to major tax-related changes. Regardless, there are certain policies that tax experts are preparing for, including the Hap May legal team.

The Tax Cuts and Jobs Act – What to Expect

During President Donald Trump’s first term in office, his signature tax-related piece of legislation was the 2017 Tax Cuts and Jobs Act (TCJA). The TCJA made many major changes to the tax code that are still in effect today, as most of the relevant provisions are set to sunset (expire) at the end of 2025. One provision that will remain is the corporate tax rate, which was permanently set to 21 percent following the TCJA’s passage.

However, if another tax bill isn’t passed prior to 2026, the following tax provisions are set to revert back to their 2017 standards:

  • Estate taxes – The TCJA doubled the estate tax exemption from around $6-7 million to about $14.3 million. In other words, an estate owner can currently leave $14.3 million in assets from their estate to their heirs before estate taxes are assessed. If the TCJA provisions expire without a replacement, the estate tax threshold will return to its $6-7 million mark.
  • State and local tax deduction (SALT) – The SALT deduction allows taxpayers to deduct a portion of their state and local taxes (such as property and sales taxes) from their federal income tax return.The TCJA imposed a $10,000 cap on the SALT deduction, lowering the amount that (typically wealthy) taxpayers could deduct from their federal income taxes. If the TCJA expires, this cap will be lifted.
  • Marginal income tax rates – The TCJA made some slight but significant adjustments to marginal tax rate brackets. The top marginal tax rate in 2017, for example, was 39.6 percent, which the TCJA lowered to 37 percent. If the TCJA expires, tax rates will revert to the 2017 levels.
  • Small business income deduction – The TCJA implemented a 20 percent tax deduction for qualified pass-through income. S-corporations, partnerships and sole proprietorships were the beneficiaries of this deduction, which will be eliminated with the 2025 TCJA sunset.
  • Standard deduction – The standard deduction is the simplified flat deduction that most taxpayers take when filing taxes. The TCJA increased the standard deduction from $6,500 to $12,000 for individuals, and from $13,000 to $24,000 for those that are married and filing jointly. The TCJA also eliminated personal exemptions. If the TCJA expires, the deduction and personal exemption amounts would revert back.
  • The Child Tax Credit – The Child Tax Credit was increased from $1,000 to $2,000 for each child under 17 in the household under the TCJA. The maximum refundable portion of the credit was increased from $1,000 to $1,400 per child and was indexed to inflation. Further, the TCJA increased the income limits before phasing out the Child Tax Credit. These are set to revert back to the 2017 standard once the TCJA sunsets.

It’s likely that with President Trump’s re-election the above provisions will be extended with the passage of a TCJA “part two” piece of legislation.

What Might Interfere with the Republican’s Post-Election Tax Approach?

There are reasons to believe that both parties would want to avoid a TCJA sunset. The provisions contained in the act benefits a number of constituencies, and allowing the TCJA to expire without an alternative would have potentially serious political blowback for Republicans and Democrats. As such, it’s safe to expect that a new tax law of some kind will be passed in 2025.

It’s also safe to expect that the new tax law will look a great deal like the old one – Trump has even said as much in interviews – but passing the law will mean overcoming a zero-room-for-error margin in the House. As some blue state Republicans may be interested in lifting the SALT cap (which would impact states with a high state or local income tax), there may be contentious negotiations ahead for Republicans behind the scenes.

If You Need to Update Your Tax Planning Tactics, Our Team Can Help

Although tax experts have a general idea of what the next four years will hold from a tax perspective, politics are unpredictable as a rule. That’s why if you’re reviewing your tax planning strategies, it’s best to do so with a tax planning expert. With a professional tax and business attorney providing guidance on your tax planning, you’ll be best positioned for 2025 and beyond.

Episode 450: Beneficial Owner Information Reports: Filing Requirements and Processes

The Corporate Transparency Act (CTA) is a federal anti-corruption and anti-money laundering law that came into effect on January 1, 2024. Among its provisions is the beneficial owner information report (BOIR), which many business entities are required to file, or they may face significant penalties that can increase quickly.

BOIRs are filed with the Financial Crimes Enforcement Network (FinCEN) and are used to identify the entity’s beneficial owners. This is meant to assist FinCEN with identifying bad actors hiding behind business entities to engage in criminal activity. If your organization is engaged in legitimate business, there’s no reason not to comply with the CTA.

Who is a Beneficial Owner?

Beneficial owners must be identified on a BOIR. To be considered a beneficial owner, either of the following must be true about an individual:

  • They own at least 25 percent of a reporting company.
  • They maintain “substantial control” over a reporting company.

The CTA’s definition of “substantial control” is somewhat open-ended, but in general, if any of these are the case for an individual, they likely need to be identified on a BOIR:

  • The individual is a senior officer (a president or chief officer) or general counsel
  • The individual is a general partner of a limited partnership
  • The individual has the authority to remove other officers
  • The individual has control over intermediary entities that possess substantial control over the reporting entity

Who Must File a Beneficial Owner Information Report, and What Entities are Exempt?

Entities that must file a BOIR include limited liability corporations (LLCs), non-publicly traded corporations, and limited partnerships (including limited liability partnerships and family limited partnerships).

Exempt entities include publicly traded corporations, sole proprietorships, non-profit corporations, most trusts, and inactive entities. These entities are not required to file a BOIR with FinCEN. Further, some beneficial owners do not need to be included on a BOIR, including minor children, individuals whose only interest in the reporting company are through a future inheritance, certain creditors, and employees who are not senior officers and whose economic or control benefits are based on their employment status within the company.

What if a Beneficial Owner is Another Entity or a Trust?

If you’ve previously filed a BOIR for a reporting entity and that entity is the beneficial owner of another reporting entity – LLC 1 owns LLC 2, for example, and both need to file a BOIR – you should be able to use a FinCEN number that the reporting system generates upon reporting, and then you can use the FinCEN number to report the beneficial owner information for LLC 2.

However, some have encountered issues with FinCEN’s online filing system that occasionally makes this shortcut entry of a FinCEN impossible without re-entering all of the “end-of-the-line” beneficial owner information for the second entity. This shouldn’t be a problem, as long as you know who the beneficial owners are for the second entity, you can just enter their information to complete the process.

If the entity’s beneficial owner is a trust, check the box that says, “beneficial owner is an exempt entity” and enter the name of the trust in the box.

How is a Beneficial Owner Information Report Filed with FinCEN?

Anyone who is authorized by the reporting entity to file a BOIR may do so. This individual must also provide their personal information (or create their own FinCEN number and provide it) on the BOIR for compliance purposes.

To file a BOIR with FinCEN, go to the agency’s website. Once there, click on “File BOIR” and click on the Web option to File Online. There are numerous prompts to click through and some instructional videos online to watch that demonstrate how to file the BOIR. When submitting the report, the following information will be required:

  • The reporting entity’s name, company EIN, company address and state of formation.
  • The reporting agent’s personal information. If this individual will file many BOIRs in the future, it is recommended that they request a FinCEN number, as this will speed up the process for subsequent BOIRs.
  • The name, address, birthdate and driver’s license or passport information for all beneficial owners, along with a copy of their IDs (either in PDF or JPEG format).

Once the BOIR is filed, make sure to download the filing submission when prompted at the end of the filing process. This is proof that your organization has filed the BOIR. Be sure to save the submission ticket under a document name for the entity that corresponds to the BOIR just submitted. The filing ticket itself will not have the entity name on it.

If you believe that incorrect information has been submitted with the BOIR, the process can be restarted by clicking the “Correct a BOIR” button on the agency’s filing website.

What are the Penalties if a Reporting Entity Fails to File a BOIR?

The CTA stipulates that any reporting entity that willfully violates BOIR reporting requirements are to be assessed a civil penalty of up to $500 each day that the violation continues.

However, none of the May Firm’s clients (that we are aware of) have received warning from FinCEN that they are past filing requirements or have been assessed fines. Given the number of reporting entities that FinCEN must obtain information from, as well as the difficulties in obtaining information from existing companies that must still file, it is likely that it will be some time before the agency reaches out to non-filers and threatens penalties.

That said, it is recommended to comply with BOIR filing requirements and submit beneficial owner information voluntarily. If your business still hasn’t filed its BOIR, there is still time to do so and avoid any penalties.

Prepare Your Organization with Timely BOIR Filing with an Attorney’s Assistance

Filing a BOIR is a relatively straightforward and simple process for reporting entities. However, if your organization is unsure how to proceed with the CTA and with BOIR filing, an experienced business attorney can provide guidance.

Although many questions remain regarding the CTA’s impact on businesses, including when and how FinCEN will enforce BOIR filing, prompt and accurate filing will ensure your organization isn’t surprised by penalties or additional scrutiny from the agency.