Tax Implications of H.R. 1

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H.R. 1 (the Act), formerly known as or nicknamed the “One Big Beautiful Bill Act”, was signed into law on July 4, 2025, and introduces significant tax reforms. It extends several expiring provisions of the Tax Cuts and Jobs Act (TCJA), creates new legislation, and modifies several existing provisions of the U.S. tax code.

Extensions of the Tax Cuts and Jobs Act (TCJA)

  • Income Tax Rates: The TCJA personal income tax rates and brackets are now permanent. The seven (7) brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
  • Standard Deduction: The temporary TCJA standard deduction amounts ($15,000 for individual filers, $30,000 for joint filers, and $22,500 for heads of households) are made permanent.
  • Personal Exemption Repeal: The TCJA temporarily repealed the personal exemption deduction. The Act makes this repeal permanent.
  • Mortgage Interest Deduction: The TCJA mortgage interest deduction limit of $750,000 ($375,000 for single filers) is made permanent. Certain mortgage premiums may be eligible for a tax deduction. There is no longer a deduction for interest on home equity debt.
  • Personal Casualty and Theft Loss Deductions: The TCJA repeal of casualty and theft loss deductions is made permanent. An exception for federal disasters remains in place.
  • Miscellaneous Itemized Deductions: The TCJA rule of no miscellaneous itemized deductions is made permanent. Deductions subject to the previous 2% floor are permanently eliminated.
  • AMT Exemption: The TCJA’s alternative minimum tax (AMT) exemption and exemption amounts ($88,1000 for single filers and $137,000 for joint filers) are permanently extended. Exemption amounts are indexed for inflation. The threshold for phaseout of the exemption is $500,000 for single filers and $1 million for joint filers, indexed for inflation. Phaseout is increased to 50% of the amount by which the taxpayer’s alternative minimum taxable income exceeds the phaseout threshold amount.
  • Charitable Deductions: The TCJA expands the tax deduction for charitable donations. Filers who do not itemize can claim a deduction up to $1,000 for single filers and $2,000 for joint filers for specific charitable donations. Filers who itemize are now subject to new carryover rules and a new limit on deductions. Those who itemize can deduct donations only to the extent they exceed 0.5% of the filer’s contribution base. Carryovers are only permitted if this 0.5% threshold is met. Additionally, the 60% contribution limit for cash gifts to qualified charities is made permanent.
  • Pease Limitations: Pease limitations are permanently eliminated.
  • Section 529 Accounts: Tax-free distributions from section 529 accounts may be used for expenses in connection with enrollment or attendance at an elementary or secondary school, including private schools and religious schools. Tax-free distributions may also be used for qualified higher education expenses.
  • Estate, Gift, and Generation-Skipping Transfer Taxes: The Act permanently increases the exemption amounts for these taxes to $15 million for single filers and $30 million for joint filers, indexed for inflation.

State and Local Tax (SALT) Deductions Increase

  • The SALT deduction cap temporarily increases to $40,000, with a 1% annual increase through 2029.
  • For individuals with a modified adjusted gross income over $500,000, a phase-down applies to the available deduction with a floor of $10,000. 
  • In 2030, the cap will permanently revert to $10,000 for all filers, regardless of income.

Changes to the Inflation Reduction Act (IRA)

  • Several IRA green energy tax credits and individual clean energy credits are repealed.
  • For further guidance on the impact of the Act on previous IRA tax credits, please see [link to client advisory on IRA and clean energy tax credits].  

Tax Reform for Individuals

  • Child Tax Credit: The Child Tax Credit is made permanent. The credit increases to $2,200, subject to a phaseout. The phaseout begins at an income of $200,000 for single filers and $400,000 for joint filers. To qualify for the Child Tax Credit, the child and at least one parent must have a valid Social Security Number.
  • Additional Deduction for Seniors: Seniors are eligible to claim a deduction of $6,000, subject to a phaseout (beginning at an income of $75,000 for single filers and $150,000 for joint filers). The deduction is completely phased out at an income of $175,000 for single filers and $350,000 for joint filers.  This added deduction is set to expire in 2028.  
  • No Tax on Tips: Income from tips is temporarily deductible. The deduction is capped at $25,000 of reported tips and is subject to a phaseout. Tips are still reportable and taxable at the state and local level. This deduction is set to expire after 2028.
  • No Tax on Overtime: Income earned from overtime pay is temporarily deductible. This new law applies to qualified overtime pay of $12,500 for single filers and $25,000 for joint filers. This deduction is subject to a phaseout for individuals with incomes exceeding $150,000 who file singly and $300,000 for those filing jointly. This provision is set to expire after 2028.
  • Deductible Car Loan Interest: For cars assembled in the United States, auto loan interest is deductible through 2028 and is capped at $10,000. The deduction is also subject to phaseouts for single filers with income above $100,000 and joint filers with income above $200,000.
  • Trump Accounts: The Act establishes a tax-favored account to benefit children under the age of eighteen. Parents can contribute up to $5,000 per year to the account, adjusted for inflation, and the money may be withdrawn once the beneficiary turns 18. The funds can be used to pay for college, a first-time home purchase, or to start a business. Account withdrawals are taxed at favorable capital gains rates. There are no income limits or applicable phaseouts. 

Tax Reform for Businesses

  • Qualified Business Income (Sec 199A) Deduction: The Act makes permanent the 20% deduction of qualified business income (QBI) for qualifying business owners of pass-through entities. The deduction limit phase-in is $75,000 for single filers and $150,000 for joint filers. The Act also adds a minimum $400 deduction, indexed for inflation, for taxpayers with $1,000 or more of QBI. 
  • Qualified Small Business Stock (Section 1202) Exclusion: For qualified small business stock issued after July 4, 2025, the exclusion limitation under section 1202 is now $15 million, indexed for inflation. The following tiered system applies to qualified small business stock issued after July 4, 2025:
    • 50% for stock held for at least 3 years
    • 75% for stock held for at least 4 years
    • 100% for stock held for at least 5 years
  • Research and Development (R&D): For domestic R&D expenses, taxpayers may elect to immediately deduct R&D costs in the year incurred or capitalize and amortize costs over the useful life of the research. The Act also allows small businesses and startups to receive refundable credits for R&D.
  • Employee Retention Credit (ERC): The IRS can no longer issue refunds for unpaid claims filed after January 31, 2024. The statute of limitations for ERC claims made with respect to the third and fourth quarters of 2021 is extended to six years. The Act also implements additional penalties for ERC mill promoters.
  • Section 179 Expensing Provision: The section 179 expensing provision cap is now $2.5 million, indexed for inflation. It is subject to a phaseout beginning at $4 million.
  • Additional Changes:
    • The excess business loss limitation is now permanent. Depreciation, amortization, and depletion deductions are removed from the adjusted taxable income (ATI) calculation. The 100% bonus depreciation provisions of the TCJA are now permanent. The Qualified Opportunity Zone (QOZ) program is now permanent with some modifications. The low-income housing credit and its eligibility requirements have been reformed, expanding the number of issuable tax credits. The New Markets Tax Credit is permanently extended.
    • 25% of interest income from qualified loans secured by rural or agricultural real property is excluded from gross income.

Tax Reforms for Tax-Exempt Organizations

  • Executive Compensation Excise Tax: The excise tax under section 4960 now applies to all earners of a nonprofit receiving over $1 million in compensation.
  • Excise Tax on Investment Income of Private Colleges and Universities: The Act creates a tiered tax system based on an institution’s “student-adjusted endowment.” The tiered system applies to private institutions that have at least 3,000 tuition-paying students and a student-adjusted endowment of at least $500,000. The rates for applicable institutions are as follows:
    • 1.4% for endowments of at least $500,000 but less than $750,000
    • 4% for endowments of at least $750,000 but less than $2 million
    • 8% for endowments of at least $2 million

Tax Reform for International Tax

  • GILTI Deduction: The Global Intangible Low-Taxed Income (GILTI) deduction is made permanent, providing a tax break for offshore profits. This deduction has been renamed as the Net CFC Tested Income (NCTI) deduction. The NCTI deduction percentage is set at 40%. Deductions allocated to NCTI only include the section 250 deduction and directly allocable deductions.
  • FDII: The Foreign-derived Intangible Income (FDII) deduction is reduced to 33.34%. The FDII deduction has also been renamed as the Foreign-Derived Deductible Eligible Income (FDDEI) deduction.
  • QBAI: The Qualified Business Asset Investment (QBAI) is eliminated for purposes of determining deductions for GILTI and FDII. 
  • BEAT: Base Erosion and Anti-Abuse Tax (BEAT) is permanently increased from 10% to 10.5%.
  • Foreign Tax Credits: The Act increases the deemed paid foreign tax credits (FTC) on net CFC-tested income to 90% and disallows FTC on 10% of associated foreign taxes.
  • Section 163(j): The Act permanently reinstates EBITDA as part of the calculation for modified adjusted taxable income (ATI) for business interest limitation. Several international inclusions have been removed from the ATI calculation.
  • Section 954(c)(6): The section 954(c)(6) look-through rule for CFCs is permanently extended.
  • Additional Changes:
    • The Act eliminates the option for a one-month deferral year for a specified foreign corporation. The Act restores section 958(b)(4) and creates a new section 951B for foreign-controlled U.S. shareholders and foreign-controlled foreign corporations.
    • The Act modifies the pro rata share rules to require any U.S. shareholder who owns stock during any part of the CFC year to include their pro rata share of subpart F income.

For questions about how these changes may impact you or your business, contact Varnum’s Tax Compliance, Planning, and Litigation Team.

For information on how the Act affects clean energy tax credits, read our advisory: How New Tax Legislation Impacts Clean Energy Tax Credits.

2025 summer associate Isadora Dimovski contributed to this advisory. Isadora is currently a law student at the University of Michigan.

How New Tax Legislation Impacts Clean Energy Tax Credits

How New Tax Legislation Impacts Clean Energy Tax Credits

On Friday, July 4, President Trump signed into law the budget reconciliation bill H.R. 1. (the Act), formerly known as or nicknamed the “One Big Beautiful Bill Act”. Among other substantial changes to the tax code, the Act significantly reduces tax incentives for clean energy practices, terminating many of the environmental and clean energy tax credits introduced by the Inflation Reduction Act (IRA) of 2022. Many of those credits were scheduled to remain in effect until 2032.

The Act impacts clean energy tax credits in two key ways:

  1. It accelerates the expiration and phasing out of certain credits.
  2. It prohibits specified foreign entities, foreign-influenced entities, and domestic entities that receive material assistance from specified foreign entities from claiming certain credits.

Credit Phase-Outs

Taxpayers currently engaged in clean energy projects should be aware of critical deadlines to begin construction or place projects in service to remain eligible for tax credits.

For example, solar and wind facilities must either:

  • Begin construction within one year of the Act’s enactment (i.e., before July 4, 2026), qualifying for a four-year continuity safe harbor; or

  • Be placed in service by December 31, 2027, to remain eligible for the Clean Electricity Production or Clean Electricity Investment credits before those credits are phased out.

These new deadlines do not apply to energy storage technologies, including those placed in service at wind or solar facilities, or certain other qualified technologies.

The Act also introduces a tiered adjustment for the domestic content bonus threshold under the Investment Tax Credit (ITC), similar to the structure used for the Production Tax Credit (PTC).

Foreign Entity Restrictions

In addition to timing changes, the Act imposes new limitations on foreign involvement in clean energy projects.

Many tax credits are now unavailable to “specified foreign entities” and “foreign-influenced entities.” Specified foreign entities include:

  • Chinese military companies

  • Entities of concern identified under the William M. Thornberry National Defense Authorization Act

  • Entities listed in Public Law 117-78

  • Entities specified under Section 154(b) of the National Defense Authorization Act

  • Foreign-controlled entities.

A foreign-influenced entity includes an entity under the direct authority of, or partially owned by, a specified foreign entity.

Summary of Key Energy Tax Credit Changes

Clean Vehicle Credits:

  • Previously-Owned Clean Vehicle Credit (25E), Clean Vehicle Credit (30D), and Qualified Commercial Clean Vehicles Credit (45W) expire for vehicles acquired after September 30, 2025, previously scheduled to expire on December 31, 2032.

  • Alternative Fuel Vehicle Refueling Property Credit (30C) expires on June 30, 2026, previously scheduled to expire on December 31, 2032.

Home Improvement Credits:

  • Energy Efficient Home Improvement Credit (25C) expires for property placed in service on or after December 31, 2025, previously scheduled to expire on December 31, 2032.

  • Residential Clean Energy Credit (25D) expires for expenditures made after December 31, 2025, previously scheduled to expire on December 31, 2034.

  • New Energy Efficient Home Credit (45L) expires for homes acquired after June 30, 2026, previously scheduled to expire on December 31, 2032.

Electricity Credits:

  • Clean Electricity Production Credit (45Y) phases out beginning in 2032, previously scheduled to phase out later in 2032 or the year in which greenhouse gas emissions from electricity production were reduced to a specified level.

  • Clean Electricity Investment Credit (48E) prohibits facilities from receiving material assistance from prohibited foreign entities if construction begins after December 31, 2025.

  • Wind and solar facilities must begin construction by July 4, 2026, or be placed in service by December 31, 2027, to remain eligible.

  • Clean Electricity Production Credit and Clean Electricity Investment Credit are unavailable to specified foreign entities and foreign-influenced entities.

Nuclear and Hydrogen Credits:

  • Zero Emission Nuclear Power Production Credit (45U) is unavailable to specified foreign entities; eligibility ends for foreign-influenced entities two years after enactment.

  • Clean Hydrogen Production Credit (45V) expires for facilities with construction beginning on or after January 1, 2028, previously scheduled to expire on January 1, 2033.

Manufacturing Credits:

  • Advanced Manufacturing Production Credit (45X) phases out beginning with critical minerals produced after December 31, 2030. Production of metallurgical coal produced after December 31, 2029, and production of wind energy components produced and sold after December 31, 2027, are not eligible for the credit.

  • The credit is unavailable to specified foreign entities and foreign-influenced entities. Eligible components used in a product sold before January 1, 2030, cannot receive material assistance from prohibited foreign entities.

Clean Fuel Credits:

  • Clean Fuel Production Credit (45Z) is extended to fuel sold on or before December 31, 2029, previously scheduled to expire on December 31, 2027. The credit is unavailable for fuel derived from feedstock sourced outside the U.S., Mexico, or Canada starting December 31, 2025. It is also unavailable to foreign entities on that date and two years after enactment for foreign-influenced entities.

Carbon Capture Credits:

  • Carbon Oxide Sequestration Credit (45Q) is unavailable to prohibited foreign entities and foreign-influenced entities.

On July 7, 2025, President Trump issued an Executive Order requiring the Treasury and Interior Departments to strengthen provisions in the Act that eliminate tax credits for solar and wind energy projects. Specifically, the order requires the Treasury Department to “issue new and revised guidance… to ensure that policies concerning the ‘beginning of construction’ are not circumvented.” Moving forward, developers should carefully document construction start dates on solar and wind projects to ensure eligibility for ITC and PTC tax credits. Varnum attorneys will continue to monitor developments and provide updates as additional Treasury guidance becomes available.

Individuals and businesses involved in or considering clean energy projects should consult with an attorney in Varnum’s Environmental and Renewable Energy practice to ensure current projects meet the new deadlines and eligibility for tax credits. Taxpayers operating within affected industries, particularly wind and solar, should consult with one of our attorneys to understand the full implications of the Act.

2025 summer associate Julia Sommerfeld contributed to this advisory. Julia is currently a law student at Ohio State University Law School.

Florida CHOICE Act Overhauls Non-Compete Laws for Employers

Florida CHOICE Act Overhauls Non-Compete Laws for Employers

The Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act makes sweeping changes to how restrictive covenants, such as non-compete agreements, are handled in the state. While many states are tightening restrictions on these agreements, Florida is moving in the opposite direction. Effective July 1, 2025, the CHOICE Act increases employers’ ability to enforce non-compete agreements and introduces new legal tools to protect businesses.

What Does the CHOICE Act Do?

The CHOICE Act strengthens the protections afforded to employers and their ability to enforce restrictive covenant agreements. Currently, non-compete agreements are governed by Florida Statute § 542.335, which requires employers to prove:

  • The existence of a written agreement signed by the employee;
  • A legitimate business reason that is necessary to protect the employer; and
  • Reasonable limitations on the time (typically 2 years), geographic scope, and scope of business restrictions contained within the agreement.

The Act expands these provisions and instead places the burden on the employee to show the agreement is unenforceable. Under the Act, covered garden leave agreements and covered non-compete agreements are presumed to be enforceable, and courts must issue a preliminary injunction to enjoin a covered employee from violating a restrictive covenant.

Who is Covered by the CHOICE Act?

The CHOICE Act applies to both “covered employees” and “covered employers.”

  • Covered Employees: Includes employees or independent contractors who earn more than twice the average wage in the county where they live or where the employer’s principal office is located. In most Florida counties, this means a salary range of approximately $90,000 to $170,000.

Health care practitioners are excluded from the CHOICE Act. Any new non-compete agreements involving health care practitioners will continue to fall under Florida’s existing restrictive covenant statute.

  • Covered Employers: Include any entity or individual that employs a covered employee. The employer does not need to be located in Florida to be covered under the Act. If an out of state employer enters a restrictive agreement with a Florida-based employee, the CHOICE Act will apply. Likewise, if an employee lives outside of Florida, but the employer’s principal office is in Florida, the Act will govern the agreement.

Garden Leave Agreements

Garden leave agreements allow employers to require advance notice of resignation, during which the employee remains on payroll but may not work elsewhere.

Under the CHOICE Act, employers may:

  • Require up to four years of advance notice before termination
  • Keep the employee on payroll during that period, limited to base salary
  • Require the employee to work for only the first 90 days of the notice period
  • Allow the employee to stop working and engage in non-work activities after the 90-day period

To be enforceable, garden leave agreements must meet the following criteria:

  1. The agreement must inform the employee in writing of the right to seek legal counsel, and provide at least 7 days to review it
  2. The employee must acknowledge in writing that they may receive confidential client information during their employment
  3. The agreement must explain that the employee is only required to work for the first 90 days and may pursue non-work activities after that time
  4. The agreement must state that the employee may not begin working elsewhere without the employer’s written permission

Employers may shorten the notice period to 30 days’ written notice. In cases of gross misconduct, employers may reduce the employee’s salary without breaching the agreement.

Non-Compete Agreements

The CHOICE Act expands the scope and enforceability of non-compete agreements in Florida.

Key changes include:

  • Non-compete periods may now last up to four years
  • Agreements are not required to include geographic limitations
  • Employers are no longer required to prove restrictions are reasonable in time, geography, or business scope

To be enforceable, a non-compete agreement must:

  1. Inform the employee in writing of the right to seek legal counsel, and allow at least 7 days for review
  2. Include a written acknowledgment from the employee that they may access confidential client information
  3. Limit the non-compete period to no more than four years
  4. Reduce the non-compete period day-by-day for any portion of a concurrent garden leave period during which the employee is not working.

How Will the CHOICE Act Be Enforced?

If a dispute arises, Florida courts are required to issue a preliminary injunction against a covered employee automatically. After the injunction is issued, courts may only modify or dissolve the injunction if the covered employee or new employer can prove by clear and convincing evidence that either:

  1. The covered employee will not perform similar work during the restricted period;
  2. The employee will not use confidential information or customer relationships within their new employment;
  3. The covered employer failed to pay the required consideration under the restrictive agreement (after a cure period of at least 30 days); or
  4. The subsequent employer is not engaged in, or preparing to engage in, a similar business within the restricted geographic area.

The “clear and convincing” standard is a challenging burden for a plaintiff to meet in civil litigation. Terms such as “similar work” and “similar business” are not defined in the Act, which may lead to uncertainty in how courts apply them. The prevailing party in any dispute is entitled to recover reasonable litigation costs from the losing party.

Considerations for Employers

The CHOICE Act offers new protections for employers who may want to incorporate the new non-compete structure into their contracts. Although employers may continue using the existing Florida statute, the new law may provide strategic advantages. Employers should consider reviewing current agreements and evaluating whether to adopt new language that complies with and benefits from the CHOICE Act’s provisions.

For questions about how these changes may impact your business or to ensure your business is fully compliant with the CHOICE Act, contact Varnum’s Litigation Practice Team.

2025 summer associate Nolan Thomas contributed to this advisory. Nolan is currently a law student at the University of Miami.

Title IX Challenge Delays $2.8B College Athlete NIL Settlement

Title IX Challenge Delays $2.8B College Athlete NIL Settlement

The recent settlement of In re College Athlete NIL Litigation (the Settlement) has been challenged on Title IX grounds. The Settlement mandated back payments of $2.8 billion to former Division I athletes who played college sports before Name, Image, and Likeness (NIL) compensation was allowed in 2021.

Why Are the NIL Settlement Payments Delayed?

A group of female athletes filed a Title IX challenge, arguing that the distribution of the $2.8 billion, 90% to men’s football and basketball players, 5% to women’s basketball players, and 5% to all other student athletes, violates Title IX’s gender equity requirements.

Which Parts of the Settlement Will Still Take Effect in 2025?

Key components of the settlement, including revenue sharing, a new NIL framework, and revised roster limits, are still scheduled to take effect on July 1, 2025. Only the $2.8 billion in back payments is paused.

What Is the NIL Clearinghouse and What Role Does Deloitte Play?

The NIL clearinghouse is a third-party administrator of the College Sports Commission tasked with reviewing NIL agreements for compliance with the new rules regarding NIL. It will review NIL agreements involving third parties affiliated with schools, such as boosters and collectives. Deloitte will operate the clearinghouse through its NIL Go platform, which will evaluate whether athlete compensation in certain deals meets or exceeds fair market value.

Which NIL Agreements Will the Clearinghouse Review?

The clearinghouse will review NIL agreements exceeding $600 that involve “associated entities,” such as school-affiliated boosters and collectives. Athletes must disclose all agreements over $600, but only those involving associated entities are subject to fair market value review.

How Are “Associated Entities” Determined?

Entities or individuals are considered associated if they were created to support a school’s athletics program, have donated more than $50,000 to the school or such entities, or have been directed by the school to assist in recruiting or retaining athletes.

What is a “Legitimate Business Purpose” for NIL Deals?

To pass review, agreements must serve a legitimate business purpose, such as promoting goods or services to the public. Deals lacking a clear business rationale will not pass the fair market value review.

Has the NCAA Provided NIL Guidance?

In December 2024, the NCAA issued internal Q&A memos to guide schools on evaluating NIL deals; however, this guidance has not been made publicly available.

How Will the Clearinghouse Evaluate Fair Market Value?

Deloitte is expected to utilize a database of past NIL deals and consider factors such as athlete performance, social media presence, and brand influence to determine whether the compensation under a given NIL agreement falls within the fair market value. The full methodology has not been publicly disclosed.

What Happens If an NIL Agreement Is Not Cleared?

If a deal is not cleared, athletes may renegotiate, decline the deal, or proceed at the risk of losing eligibility, as determined by the College Sports Commission. Athletes can also request neutral arbitration to resolve disputes.

The regulatory landscape of college athletics continues to evolve rapidly. Interested parties should contact Varnum’s NIL Practice Team to ensure compliance with NCAA, state, and institutional regulations.

Florida Passes Major Reforms for Community Associations

Florida Passes Major Reforms for Community Associations

Florida’s most recent legislative session introduced a series of changes impacting condominium and cooperative associations aimed at increasing transparency, accountability, and safety.

Stricter Licensing Rules for Community Association Managers

Community association managers (CAMs) are now required to maintain an active license with the Department of Business and Professional Regulation (DBPR), which includes keeping their information up to date regarding the associations and firms they represent.

If a CAM’s license is revoked, they are prohibited from owning or working for a management firm for a period of ten years. Associations must verify that their CAMs are appropriately licensed and in good standing, marking a notable shift in compliance duties at the board level.

Expanded Building Safety and Reserve Oversight

The legislation reinforces requirements for milestone inspections and structural integrity reserve studies (SIRS). Associations must complete their first SIRS by December 31, 2025, and include a funding plan to support long-term structural needs.

Boards may pause or redirect reserve contributions in specific emergencies or inspections, but only with membership approval and in accordance with new statutory procedures. Board members must also sign an affidavit acknowledging receipt of completed SIRS, reinforcing their fiduciary responsibility.

New Standards for Meetings and Records

Operational procedures have also been modernized. Boards may now meet by video conference, but must follow new rules regarding meeting notice, access, recording, and retention of materials. Video recordings must be preserved as official records for a minimum of 12 months.

Additional changes to accounting and insurance appraisal requirements aim to ensure associations are appropriately documented and insured. By October 1, 2025, associations must also maintain an online account with the DBPR containing essential building, governance, and financial information.

Reserve Funding and Investment Options

The threshold for capital repairs requiring funding has increased from $10,000 to $25,000, with future adjustments tied to inflation. For items identified through a SIRS, funding must follow a baseline plan that ensures long-term adequacy.

Funding can be obtained through assessments, loans, or lines of credit, subject to member approval. Boards now have greater flexibility to invest reserve funds in insured financial institutions without a membership vote, provided that investments are made with sound judgment.

These updates aim to give boards stronger financial tools and greater responsibility in safeguarding the association’s long-term stability.

For questions about how these changes may impact your community or to ensure your association is fully compliant, contact Varnum’s Condominium and Homeowners Association Practice Team.

2025 summer associate Nolan Thomas contributed to this advisory. Nolan is currently a law student at the University of Miami.

Does HIPAA Apply To My Business?

Does HIPAA Apply to My Business?

Varnum Viewpoints:

HIPAA applies outside of healthcare providers. If you offer employee health benefits, especially through a self-funded plan, HIPAA applies to your health plan.

You may be a covered entity or business associate. Health plans, providers, and vendors handling health data are subject to HIPAA, often to differing extents.

HIPAA has specific compliance duties. Requirements include privacy notices, policies, risk assessments, and business associate agreements.

The Health Insurance Portability and Accountability Act (HIPAA) applies far more often than many realize, including when a company outside of the healthcare sector provides certain types of health benefits to its own employees. While HIPAA compliance quickly gets complex, determining if it applies to your business does not need to be. This advisory includes helpful definitions of key terms, including Protected Health Information (PHI), the Privacy Rule, and the Security Rule.

What Is a HIPAA Covered Entity?

HIPAA applies only to covered entities, including health care providers and health plans, and their business associates. Many covered entities already know they are subject to HIPAA. This includes those in the healthcare sector, such as doctors, hospitals, pharmacies, and insurance companies, for whom HIPAA compliance should be an integral part of daily business.

Does My Employee Health Plan Make My Company a Covered Entity?

Employer-sponsored health plans are also covered entities. The design of that health plan will impact how HIPAA applies, but the Privacy Rule and the Security Rule make it clear: if employees receive health benefits, HIPAA will apply to the health plan, even if it does not apply to the company in its role as an employer generally. If an employer maintains a fully-insured plan and the insurer is handling most or all of the administration of the coverage, the employer may not receive much PHI, if any. However, as more plans move toward self-funding and self-administration, HIPAA will apply to more functions carried out by the employer.

Who Is a HIPAA Business Associate?

A business associate is any entity that creates, receives, or transmits PHI in relation to a covered entity. Business associates are subject to the same HIPAA compliance rules as covered entities, and the same penalties apply for violation of these rules. In addition, covered entities and their business associates must enter into “business associate agreements” which explicitly require the business associate to comply with HIPAA and may set forth other terms such as notification and indemnification provisions.

As with covered entities in the healthcare sector, most business associates will know that their work is subjecting their business to HIPAA. However, any business that provides products and services that are or could be used to provide healthcare should carefully assess whether and to what extent HIPAA applies to their business. For example, SAAS providers and app developers may have access to PHI, making them a business associate that must comply with HIPAA. Some covered entities will push their vendors to enter into business associate agreements, even if it does not directly apply.

What Is PHI?

Protected health information is any individually identifiable health information that is created, received, stored, or transmitted by a covered entity, an entity subject to HIPAA, such as a health care provider, insurance company, or employer health plan, or their business associates, those entities who access PHI on behalf of the covered entity.

What Is the HIPAA Privacy Rule?

The Privacy Rule is the part of HIPAA that protects PHI through limiting who can access it, how it is used, and providing individuals with rights relating to their PHI.

What Is the HIPAA Security Rule?

The Security Rule is the part of HIPAA that covers how electronic creation, storage, use, and disclosure of PHI must be done to ensure the privacy of PHI.

What Are My HIPAA Compliance Requirements?

When HIPAA applies, the entity is expected to comply with HIPAA’s broad range of requirements. Key compliance requirements include providing a notice of privacy practices, naming a compliance officer responsible for complying with HIPAA, establishing policies and procedures, conducting a risk assessment, and entering into necessary agreements, such as business associate agreements. See our detailed explanation, HIPAA and Employee Benefits: The Basics of Compliance.

If you have questions or concerns, contact a member of our Privacy or Employee Benefits Practice Teams.

DOJ Expands Whistleblower Policy Under Trump Administration

DOJ Expands Whistleblower Policy Under Trump Administration

Varnum Viewpoints:

Whistleblower Scope Expanded: The DOJ now rewards tips on more violations, including immigration and trade, with payouts up to 30% of recoveries.

Individual Focus: The DOJ prioritizes prosecuting individuals, encouraging companies to self-disclose misconduct for leniency.

Enforcement Surge Likely: New whistleblower incentives and the DOJ priorities signal increased investigations, especially in federal programs.

On May 12, 2025, Matthew Galeotti, head of the Department of Justice Criminal Division, issued a memorandum titled “Focus, Fairness, and Efficiency in the Fight against White-Collar Crime,” laying out the Department’s enforcement priorities as they align with the Administration’s agenda. The new enforcement plan reflects longstanding DOJ priorities (including healthcare fraud, market manipulation, and incentivization of voluntary self-disclosure of misconduct) while emphasizing a renewed effort to pursue individual offenders rather than cooperative corporations. 

The broader enforcement plan revisions include changes to the Corporate Whistleblower Awards Pilot Program (CWAPP). Established under the Biden Administration in August 2024, the CWAPP encourages individuals with knowledge of specific categories of white collar crime to come forward in exchange for financial compensation, provided the information enables the DOJ to recover more than $1 million in civil or criminal forfeiture. The potential awards for whistleblowers are substantial: up to 30 percent of the first $100 million of net proceeds forfeited, and up to 5 percent of net proceeds between $100 million and $500 million.

The eligible categories include violations by financial institutions; violations related to foreign corruption and bribery, including violations of the Foreign Corrupt Practices Act; violations by or through companies relating to payment of bribes or kickbacks to domestic public officials; and certain federal health care offenses and frauds related to the health care industry. Whistleblowers are not eligible for an award “if they would be eligible for award through another U.S. government program or statutory whistleblower, qui tam, or similar program if they had reported the same scheme[.]”

The DOJ has expanded the CWAPP program to cover violations committed by or through companies that reflect the Trump administration’s broader policy priorities, including:

  • Fraud against the United States in connection with federally funded contracting or programs,
  • Trade, tariff, and customs fraud,
  • Federal immigration law,
  • Sanction offenses,
  • Material support of terrorism,
  • Crimes involving cartels and transnational criminal organizations, including money laundering, narcotics, and Controlled Substances Act violations.

Updates to Health Care Fraud Coverage in CWAPP

For health care fraud offenses, the revised policy specifically includes federal health care offenses and removes language restricting covered violations to those involving non-public health care programs. On the other hand, it explicitly excludes health care fraud and illegal health care kickbacks from the new provision covering fraud or deception against the United States in connection with federally funded contracts or federal programs. Although these two revisions seem in tension, they likely are intended to maintain consistency with language denying eligibility to whistleblowers who would be eligible for an award through another U.S. whistleblower or qui tam program, such as the False Claims Act (FCA), if they had reported the same scheme. Although the language has changed, there seems to be very little daylight between the prior and revised program when it comes to most fraud violations in the health care industry.

Implications for Companies and Enforcement Trends

The revised program’s inclusion of violations of federal immigration law, procurement and federal program fraud, trade, tariff and customs fraud and violations involving sanctions, material support of terrorism or those facilitating cartels and Transnational Criminal Organizations all carry broad implications that companies should be planning for in the immediate future. With employees financially incentivized to report misconduct in these areas, companies may see an uptick in the reporting of misconduct and enforcement by the DOJ.

Moreover, Attorney General Bondi issued a memo on February 5, 2025, designating immigration enforcement a top prosecution priority. In the context of the revised CWAPP, this could carry significant ramifications for employers across the board. Under the new policy, a whistleblower can now file a tip with the DOJ regarding immigration violations in exchange for a significant reward if the DOJ can successfully prosecute and forfeit substantial assets based on the information. Further, the increase in reporting combined with Attorney General Bondi’s expressed commitment to defending the constitutionality of the False Claims Act, and DOJ leadership signaling an interest in aggressively utilizing the FCA, the next three and a half years are likely to see increased investigation and civil enforcement actions, particularly in connection with federal benefits, contracting programs, and international trade.

It is reasonable to anticipate that the new CWAPP policy will lead to increased reporting, investigation, and civil and criminal enforcement actions against both individuals and companies. In another speech on June 10, 2025, Galeotti reported that the DOJ has continued to see “robust tips from whistleblowers,” including tips in each of the new categories. But companies that self-report and cooperate in investigations might still be able to receive declinations of prosecution via the Criminal Division’s revised Corporate Enforcement and Voluntary Self-Disclosure Policy, even where a whistleblower reported the conduct before the company self-disclosed.

If you have any questions about the revised CWAPP, the DOJ’s new white collar and corporate enforcement policies, or other federal action, contact a member of Varnum’s White Collar Defense and Government Investigations practice team.  

2025 summer associate Mehraan Keval contributed to this advisory. Mehraan is currently a student at Georgetown University Law Center.

 

DOJ Updates Corporate Enforcement Policy to Incentivize Self-Disclosure

DOJ Expands Whistleblower Policy Under Trump Administration

Varnum Viewpoints:

More Certainty for Companies: The DOJ now offers a clearer path to declination for companies that self-disclose, cooperate, and remediate.

Expanded Benefits Even with Aggravating Factors: Companies with aggravating factors may still, qualify for declination or “near miss” treatment.

Whistleblower Risk Heightened: With expanded DOJ whistleblower programs, timely self-reporting is more critical than ever.

The head of the United States Department of Justice Criminal Division, Matthew R. Galeotti, announced on May 12, 2025, that the division is “turning a new page” on white collar crime enforcement. Among other changes, the Criminal Division has revised its corporate enforcement policy to increase incentives for companies to self-disclose misconduct, offering a “clear path” to avoid prosecution.

Speaking at the Securities Industry and Financial Markets Association’s (SIFMA) Anti-Money Laundering and Financial Crimes Conference, Galeotti explained the division will focus on the most egregious and urgent prosecutions, allowing the DOJ to avoid burdensome and drawn-out corporate enforcement investigations. For American companies, voluntary self-disclosure (VSD) is now more definitively advantageous than it was under the previous policy.

What is New About the Revised Corporate Enforcement Policy?

The revised Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) states the division will decline to prosecute a corporation for criminal conduct when the company makes a proper VSD, fully cooperates with the investigation, timely and appropriately remediates, and does not have aggravating circumstances. The CEP “encourages voluntary self-disclosure of potential wrongdoing at the earliest possible time, even when a company has not yet completed an internal investigation[.]”

Under the previous CEP, these criteria led only to a presumption of declination, leaving companies to consider the possibility that early VSD could do them more harm than good. The goal of the revised policy is to provide more certainty for companies.  

Companies that do not meet the criteria for declination can still benefit from the revised policy. For example, the CEP provides prosecutors discretion to recommend declination, even if there are aggravating circumstances, after weighing the severity of those circumstances against the company’s cooperation and remediation. The Criminal Division will make all declinations under the CEP public, likely to remove the company from the cloud of investigation and in service of general transparency.

In addition, if a company timely and appropriately remediates and self-reports in good faith but does not meet the VSD requirements or has aggravating circumstances that warrant a criminal prosecution, the company will receive “near miss” treatment. “Near miss” treatment yields a non-prosecution agreement (NPA) with a term of three or fewer years, no monitor requirement, and a 75 percent reduction of an already lower fine. The previous policy allowed prosecutors to recommend a fine reduction between 50 and 75 percent off the low-end of the guidelines range.

Companies who are not a “near miss” can still benefit from remediating and cooperating under the revised policy. A company who appropriately remediates and cooperates will receive a presumption of a fine on the low end of the United States Sentencing Guidelines range. The company will not be eligible for more than a 50 percent fine reduction, but prosecutors retain discretion to determine the appropriate form of resolution (e.g., a non-prosecution agreement, deferred prosecution agreement, or guilty plea).

The Criminal Division published a flowchart and definitions to provide guidance on what companies can expect in various circumstances.

Key Considerations for Corporate Compliance and Enforcement

The takeaway for companies is that self-reporting, cooperation, and remediation should provide significantly greater and more predictable (though not certain) benefits than they have previously. The DOJ appears willing to work with companies who come forward in good faith, even if they do not meet all VSD requirements.

The CEP does not specifically define aggravating circumstances. However, it suggests the division will consider the nature and seriousness of the offense, the egregiousness or pervasiveness of the misconduct within the company, the severity of harm caused by the misconduct, and whether the company has been subject to criminal adjudication or resolution for similar conduct within the preceding five years. Companies could benefit from robust internal compliance programs, as prompt discovery and remediation of misconduct and good-faith disclosure to the DOJ appear to be increasingly valuable. In another speech on June 10, Galeotti emphasized that, although it retains discretion to decide declination is not appropriate in certain cases, the Criminal Division is not playing “a game of ‘gotcha’.” Galeotti assured his audience that he is reviewing all corporate resolutions to ensure that a non-declination resolution is warranted by circumstances that are “truly aggravating and sufficient to outweigh the fact that the company voluntarily came forward.”

Galeotti’s remarks and his memorandum reflect a continued focus on prosecuting individual actors, most prominently spelled out by Deputy Attorney General Sally Yates in 2015. Galeotti told SIFMA that the DOJ is “here to prosecute criminals, not law-abiding companies,” and urged companies to use their compliance programs as “the first line of defense” against criminal conduct, incentivizing them to help the DOJ identify and prosecute culpable individuals. In discussing the DOJ’s new guidelines on enforcement of the Foreign Corrupt Practices Act, Galeotti observed in his June 10 remarks that they reflect “common sense principles, such as focusing on specific misconduct of individuals, rather than collective knowledge theories.”

Galeotti’s May 12 speech highlighted the benefits of early cooperation, but his June 10 remarks pointed to the “important corollary”: the Criminal Divisions will “swiftly” and “aggressively” prosecute individuals and companies who do not come forward “and all the benefits of our policies will not be available to these offenders.” Galeotti reported that the DOJ has seen new voluntary self-disclosures since the revised CEP policy was issued.

Companies should also be aware that the Criminal Division piloted a VSD program for individuals in April 2024 and has expanded its whistleblower award program, incentivizing individuals to help the DOJ discover corporate misconduct. Under the CEP’s definition of voluntary self-disclosure, a company can still qualify for a presumption (notably, not a certainty) of declination if a whistleblower makes both an internal report to the company and the DOJ and the company self-reports within 120 days of receiving the internal report. The interplay between the revised CEP and the pilot VSD and whistleblower award programs will likely increase the number of disclosures from both individuals and companies, as everyone involved will be aware of the incentives on both sides. This may make disclosure even more attractive to companies, who should consider getting to the DOJ’s door before a whistleblower does.

However, companies and counsel should keep in mind that these policies govern the DOJ Criminal Division only. They do not bind the 93 U.S. Attorneys’ Offices, the other litigating components at DOJ (such as the Civil, Antitrust, Environment and Natural Resources, and National Security Divisions), other federal agencies (such as the Securities and Exchange Commission), or state and local authorities. These policies might have persuasive weight in how U.S. Attorneys, other DOJ components, and other agencies approach white collar and corporate enforcement, but it is important to consider any multi-jurisdictional aspects at play.

For help navigating the DOJ’s revised corporate enforcement policy or new white collar crime policy, contact a member of Varnum’s White Collar Defense and Government Investigations practice team.

2025 summer associate Julia Sommerfeld contributed to this advisory. Julia is currently a student in the Moritz College of Law at Ohio State University.