Legislative Blog

The New Patent Law: Top Ten Things you Need to Know

John Tang — Tue, 20 Sep 2011 00:00:00 -0500

On September 16, 2011, President Obama signed into law the American Invents Act which makes the biggest changes to U.S. patent law in over 60 years.

What do you need to know about it?

Rights to a patent will be determined by who filed first, not who first conceived the invention. To preserve your patent rights you should consider filing a provisional patent application.
Marking products with an expired patent is no longer a violation of the statute. The cottage industry that grew up around false marketing claims is over.
It will be difficult for plaintiffs (sometimes known as “non-practicing entities” or “trolls” to sue multiple defendants in a single lawsuit. On the other hand, it will be difficult for defendants to coordinate joint defenses.
Failure to disclose an invention’s best mode will not invalidate a patent.
Failure to obtain an infringement opinion of counsel cannot be used to prove willful infringement (subjecting the infringer to punitive damages) or an intent to induce infringement.
Third parties may challenge the validity of a patent in a Patent Office proceeding on any grounds.
The burden to prove invalidity is by a preponderance of the evidence.
No more “tax strategy” patents will be granted.
No patents will be granted on claims encompassing human organisms.
All patent fees will increase 15%.

The Calm Before The Storm

Matthew H. Marchant — Wed, 08 Dec 2010 00:00:00 -0500

This week marks the last week that Texas legislators can accept contributions before the 82nd Legislative Session (the moratorium on contributions begins December 12). To see a list of scheduled fundraising events and opportunities that still remain, click here. There have been several hundred bills already filed; go here to see a complete list. To get a glimpse at the issues that may be at play for Texas businesses in the next 6 months, click here to see 2011 Legislative Agenda for the Texas Association of Business.

Strasburger Texas Legislative Preview

Matthew H. Marchant — Tue, 30 Nov 2010 00:00:00 -0500

The pre-filing of bills for Texas' 82nd Legislature (which begins on January 11, 2011) began on November 8. Nearly 400 bills were filed on the first day alone. Strasburger & Price, LLP is presenting a Legislative Preview luncheon event with a Collin County perspective on Friday, December 10. The event will feature analysis of the upcoming session and presentations by Rep. Ken Paxton and Collin County Judge Keith Self. If you are interested in attending, please contact Mary Catherine Unis at marycatherine.unis@strasburger.com.

The 82nd Legislature

Matthew H. Marchant — Mon, 27 Sep 2010 00:00:00 -0500

The 2010 election cycle is in the home stretch and the polls appear to indicate that the Republicans will maintain majorities in the Texas House and Senate. Any committee leadership changes would be announced in early 2011. Below is a list of key dates for the upcoming session:

Tuesday, November 2, 2010
General election for legislative and other offices is held
[Election Code, Sec. 41.002]

Monday, November 8, 2010
Prefiling of legislation for the 82nd Legislature begins
[House Rule 8, Sec. 7, and Senate Rule 7.04(a)]

Session Begins

Tuesday, January 11, 2011 (1st day)
82nd Legislature convenes at noon
[Government Code, Sec. 301.001]

Monday, May 30, 2011 (140th day)
Last day of 82nd Regular Session; corrections only
in house and senate
[Sec. 24(b), Art. III, TexasConstitution]

Session Ends

Sunday, June 19, 2011 (20th day following final adjournment)
Last day governor can sign or veto bills passed during the
regular legislative session
[Sec. 14, Art. IV, Texas Constitution]
Monday, August 29, 2011 (91st day following final adjournment)
Date that bills without specific effective dates (that could not
be effective immediately) become law
[Sec. 39, Art. III, Texas Constitution]

A Texas Sized Budget Deficit

Matthew H. Marchant — Fri, 30 Jul 2010 00:00:00 -0500

As the Texas Legislature prepares for its 82nd session convening on January 11, 2011, the prospect of an $18 billion deficit is looming large. Since the legislators are required to present a balanced biennial budget, what lies ahead are new fees and taxes or drastic cuts to existing services and departments. Among the items that have been studied by the House and Senate during the interim period have been the expansion of the sales tax to new items, the expansion of the franchise tax to certain service industries and even discussions regarding gambling.

House Speaker Joe Straus has signified that the budgetary gap must come from budget cuts, employee furloughs and other cost saving measures. Watch this blog in the coming months as the bill filing period begins and the “gap fillers” become more apparent.

Freight Broker Legislation Introduced in the US Senate

Matthew H. Marchant — Tue, 22 Jun 2010 00:00:00 -0500

Author: Ken Siegel

Although many freight brokers play a useful role in bringing shippers and small motor carriers together, it is no secret that the three-way relationship between shippers, brokers and carriers creates opportunities for abusive practices and legal controversies. These problems have now attracted bipartisan attention in the United States Senate.

Senators Olympia Snowe (R-Maine) and Amy Klobuchar (D-Minn) have introduced legislation intended to crack down on freight broker abuse of motor carriers and to require motor carriers to obtain a broker license before placing freight with other motor carriers. The legislation, introduced in the Senate on June 15, 2010, is titled the Motor Carrier Protection Act of 2010 and is designated as S. 3483. In support of the bill, the Senators cite the heavy cost that corrupt and/or insolvent brokers have imposed on small motor carriers who currently have no legal recourse against such operators. The bill would:

Require annual renewal of broker’s licenses;
Create stricter requirements for review and approval of applicants for broker licenses;
Require a licensed motor carrier to utilize only vehicles which it owns or leases, and require that a motor carrier tendering freight to another motor carrier must obtain either a broker or freight forwarder license and bond (this is believed to be the first time in more than thirty years that any federal agency has tried to limit so-called “convenience interlining” by motor carriers);
Require all FMCSA issued operating licenses to have a distinctive registration number for each activity, including an indicator of which type of service (motor carrier, freight forwarder or broker) is being authorized;
Require an FMCSA-licensed party seeking compensation for a transportation service to indicate, in writing, the operating authority under which it is providing the service;
Make “property” (cargo) insurance under 49 U.S.C. §13906(a)(4) mandatory for licensed motor carriers (current law gives FMCSA discretion to drop this requirement);
Increase the broker bond from its current $10,000 level to $100,000;
Extend the bonding requirement to freight forwarders, who thus would need both the bond and cargo insurance;
Increase federal penalties for violation of these rules, including unlimited liability of unlicensed/unbonded brokers or forwarders to licensed motor carriers for freight charges on shipments tendered to the carriers by such entities;
Create a private right of action against any person (including the officers and directors of a corporate entity) violating the licensing and bonding requirements;
Permit U.S. DOT to use revenues from annual license renewals for funding of enforcement efforts; and
Establish strict regulations and qualifications for bond providers, and rules governing the manner in which bonds are administered.

The bill has been referred to the Senate Committee on Commerce, Science, and Transportation. No hearings have yet been scheduled by the Committee on the bill, and no related bill has been introduced in the House of Representatives. Even so, the bill is not necessarily “dead on arrival” since several associations and trade groups, including at least one that represents brokers, have expressed support for all or parts of the proposed legislation.

*The author is Of Counsel in Strasburger’s Washington, D.C. office and can be contacted for further information at (202) 742-8602 or kenneth.siegel@strasburger.com.

FCC Attempts to Broaden Control of Broadband

Matthew H. Marchant — Fri, 28 May 2010 00:00:00 -0500

The Federal Communications Commission is working to classify broadband as a telecommunication service. By classifying broadband as a telecommunications service, the FCC could enact new regulations on phone and cable companies that offer broadband or bundles and enforce policies to expand broadband access. The effort has attracted bi-partisan opposition, with Congress aggressively protecting their ability to classify such items. For more information, click here.

Governor Perry Signifies Opposition to Arizona Immigration Policies

Matthew H. Marchant — Fri, 30 Apr 2010 00:00:00 -0500

Immigration policy is again at the forefront of the national debate after Arizona enacted SB1070-492R, which makes it a crime to be in the state illegally and utilizes local law enforcement. Texas Governor Rick Perry has indicated he doesn’t think the law is a good fit for our state, but several State Representatives have declared their interest in seeing similar legislation enacted in next year’s legislative session. Go here for the official summary of the Arizona bill and its impacts.

Elected Officials Be Wary - Resign to Run Provisions in the Texas Constitution

Matthew H. Marchant — Wed, 28 Apr 2010 00:00:00 -0500

Local elected officials in Texas should be wary of discussing interest in another elected office when they have more than 1 year left in their term. Article XVI, Section 65 of the Texas Constitution states that certain officers (including most elected officials) automatically resign their current office if they "shall announce their candidacy, or shall in fact become a candidate" in an election for another office when the remaining term of their current office exceds one year. The Attorney General recently issued an opinion (which can be found here) summarizing some of the intricacies of this provision.

Special Districts Receive Scrutiny

Matthew H. Marchant — Tue, 30 Mar 2010 00:00:00 -0500

Next Tuesday April 6th the Texas Senate Committee on Intergovernmental Relations, chaired by Sen. Royce West (D-Dallas), will convene in Houston to consider the proliferation of municipal utility districts (MUDs) outside the corporate limits or extraterritorial jurisdiction of municipalities and whether increased oversight of these districts by other political subdivisions is needed. The Committee will also review the statutory authority granted to municipal management districts (MMDs) and to emergency service districts (ESDs), the authority of municipalities and counties to create public improvement districts (PIDs).

Please contact one of Strasburger's Governmental lawyers for assistance on matters related to the special districts and municipal law in Texas.

The Healthcare Bill Passed, Now What?

Matthew H. Marchant — Tue, 23 Mar 2010 00:00:00 -0500

President Barack Obama signed the Health Care and Education Affordability Reconciliation Act of 2010 into law this morning. This bill has significant implications for individuals and businesses across the nation. Click here to view a report on the provisions of the bill that go into immediate effect. Click here to see a timeline for the full implementation of the bill.

Texas Supreme Court Alters Timeline for Open Records Requests

Matthew H. Marchant — Mon, 22 Feb 2010 00:00:00 -0500

Cities, counties and other public entities in Texas must maintain and release documents in accordance with the Texas Public Information Act. On Friday, the Texas Supreme Court released a 6-2 decision in City of Dallas v. Abbott that extends the timeline for responding to such requests in certain situations. Entities subject to the Act may, under certain circumstances, have "ten days from the time an unclear or overbroad request is clarified" to respond to such request in the event a clarification is requested.

Please contact one of Strasburger's Governmental lawyers for assistance on matters related to the Texas Public Information Act.

Legislative Response to Citizens United Verdict

Matthew H. Marchant — Fri, 12 Feb 2010 00:00:00 -0500

On Thursday, February 11, Democratic leaders in Congress unveiled proposals intended to limit the impact of the Supreme Court’s decision in Citizens United v. Federal Elections Commission, which held that corporations may use their profits to support or oppose political candidates. Among other things, these proposals seek to: ban companies with more than twenty percent foreign ownership, government contractors, and bank bailout recipients from participating in U.S. elections; require that companies inform their shareholders about political spending; and require that companies’ corporate chief executives appear in any political advertising funded by their companies. Additionally, Democratic lawmakers are still considering whether to require companies to demand shareholder approval for campaign spending. Author: Rachel Dedman.

Elimination of Texas Sales Tax Exemptions?

Matthew H. Marchant — Thu, 11 Feb 2010 00:00:00 -0500

Yesterday in Austin, the House Ways and Means Committee convened to hold a hearing on, among other things, the elimination of sales tax exemptions on certain items. The exemptions discussed were: Installation of Certain Equipment for Export, Bottled Water, Internet Access, Information Services and Data Processing, Aircraft, Certain Ships and Ship Equipment and Services by Employees of Property Management Companies (full list here). The Chairman of the Committee, Rene Oliveira (D-Brownsville), has indicated other exemptions will be considered in the coming months as well.

US Supreme Court Alters Impact of McCain-Feingold Act

Matthew H. Marchant — Thu, 21 Jan 2010 00:00:00 -0500

The Supreme Court of the United States struck down major provisions of the Bipartisan Campaign Reform Act of 2002 (also known as the McCain-Feingold Act) today in a 5-4 decision. The decision overturns the Court's precedent that corporations may not use their profits to support or oppose specific candidates. For a copy of the Court's opinion, click here. Please contact Strasburger's Governmental Practice Group for additional information or analysis.

New FHA Rules For Borrowers

Ryan Langston — Thu, 21 Jan 2010 00:00:00 -0500

The Federal Housing Administration (FHA) announced today that it will change some of its lending policies. The FHA currently endorses roughly 30 percent of all loans for home purchases and 20 percent of refinanced loans. Under the regulations, enw borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA's 3.5 percent down payment program. If a borrower's FICO score is less than 580, then the borrower will be required to put down at least 10 percent. Allowable seller concessions (e.g. paying closing costs or giving free upgrades) will also be reduced from 6 percent to 3 percent of the home's value. These policy changes, among others, will likely go into effect in the early summer. For more information, click here.

Transportation Funding Studies Kick-off in February

Matthew H. Marchant — Mon, 18 Jan 2010 00:00:00 -0500

The Texas House Committee on Transportation (chaired by El Paso Republican Joe Pickett), will be holding a joint hearing with the Texas Senate Committee on Transportation and Homeland Security (chaired by Dallas Republican John Carona) on February 1, 2010 at 8:00am at the State Capitol. The group will be taking testimony on infrastructure funding and discussing alternative financing plans to be considered in the 2011 Legislative Session. Please contact Rider Scott at Strasburger with any questions (469-287-3929).

Texas Senate - Interim Charges Announced

Matthew H. Marchant — Wed, 13 Jan 2010 00:00:00 -0500

Today Lieutenant Governor David Dewhurst announced his interim charges for the Texas Senate Committees. Among the issues to be studied by the various committees in the next 12 months are:

Review the effectiveness of state programs aimed at assisting small business growth and development.

Study the impact of the federal health care legislation on Texas.
Identify and evaluate potential improvements to the property tax system.
Study the impact of changing the constitutional and statutory spending limit based on the sum of the rate of population growth and the rate of inflation.

The results of these studies will be summarized prior to the 82nd Session and will likely form the basis of legislation passed during the Session. To read more about the charges, go here.

Tenants Acquire New Rights Under Federal Foreclosure Law

Matthew H. Marchant — Tue, 13 Oct 2009 00:00:00 -0500

Earlier this year, President Obama signed the Helping Families Save Their Homes Act which provides certain protections for tenants whose landlords fall into foreclosure. Under the new law, tenants have the right to stay in their homes after foreclosure for 90 days or through the term of their lease. The bill also provides similar protections to housing voucher holders. The protections go into effect immediately and expire at the end of 2012.

In addition, the law requires that borrowers be informed whenever their loan is sold or transferred, so that they will always know who owns their loan. For more information about this legislation, click here.

Changes in Texas Foreclosure Law

Allan C. Wisk — Fri, 21 Aug 2009 00:00:00 -0500

There were a great number of bills up proposed in the recently ended session of the Texas Legislature which dealt with the Texas real property foreclosure statute. However, all but three of those bills failed to pass. Of the three bills which were passed, one required a series of new reports by lenders on foreclosures but it was vetoed by Governor Rick Perry leaving two changes to Section 51 of the Texas Property Code, the first to become effective on September 1st and the second is already in effect.

House Bill No. 655

Section 51.0075(f) was amended to clarify how much time a successful bidder at a foreclosure sale could be given to deliver the purchase price. The statute had read “immediately.”

As amended Section 51.0075(f) will read (new language in italics):

“The purchase price in a sale held by a trustee or substitute trustee under this section is due and payable without delay on acceptance of the bid or within such reasonable time as may be agreed upon by the purchaser and the trustee or substitute trustee if the purchaser makes such request for additional time to deliver the purchase price. The trustee or substitute trustee shall disburse the proceeds of the sale as provided by law.”

House Bill No. 3857

New Section 51.015 has been added to the foreclosure statute to conform the statute to the federal law protecting members of the armed forces from foreclosure while they are on active duty.

New Section 51.015 reads:

“Section 51.015. SALE OF CERTAIN PROPERTY OWNED BY MEMBER OF THE MILITARY.

(a)  In this section:

    (1)  “Active duty military service” means:

        (A)  service as a member of the armed forces of the United States; and

        (B)  with respect to a member of the Texas National Guard or the National Guard of another state or a member of a reserve component of the armed forces of the United States, active duty under an order of the president of the United States.

    (2)  “Dwelling” means a residential structure or manufactured home that contains one to four family housing units.

    (3)  “Military servicemember” means:

        (A)  a member of the armed forces of the United States;

        (B)  a member of the Texas National Guard or the National Guard of another state serving on active duty under an order of the president of the United States; or

        (C)  a member of a reserve component of the armed forces of the United States who is on active duty under an order of the president of the United States.

    (4)  “Person” has the meaning assigned by Section 311.005, Government Code.

(b)  This section applies only to an obligation:

    (1)  that is secured by a mortgage, deed of trust, or other contract lien on real property or personal property that is a dwelling owned by a military servicemember;

    (2)  that originates before the date on which the servicemember’s active duty military service commences; and

    (3)  for which the servicemember is still obligated.

(c)  In an action filed during a military servicemember’s period of active duty military service or during the nine months after the date on which that service period concludes to foreclose a lien or otherwise enforce an obligation described by Subsection (b), the court may after a hearing and on the court’s own motion, and shall on the application by a servicemember whose ability to comply with the obligations of the contract secured by the lien is materially affected by the servicemember’s military service;

    (1)  stay the proceedings for a period of time as justice and equity require; or

    (2)  adjust the obligations of the contract secured by the lien to preserve the interests of all parties.

(d)  A sale, foreclosure, or seizure of property under a mortgage, deed of trust, or other contract lien described by Subsection (b) may not be conducted during the military servicemember’s period of active duty military service or during the nine months after the date on which that service period concludes unless the sale, foreclosure, or seizure is conducted under:

    (1)  a court order issued before the sale, foreclosure, or seizure; or

    (2)  an agreement that complies with Subsection (e).

(e) A military servicemember may waive the servicemember’s rights under this section only as provided by this subsection. The waiver must be:

    (1)  in writing in at least 12-point type;

    (2)  executed as an instrument separate from the obligation to which the waiver applies; and

    (3)  made under a written agreement;

        (A)  executed during or after the servicemember’s period of active duty military service; and

        (B)  specifying the legal instrument to which the waiver applies and, if the servicemember is not a party to the instrument, the servicemember concerned.

(f)  A person commits an offense if the person knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited by Subsection (d). An offense under this subsection is a Class A misdemeanor.

(g)  On application to a court, a dependent of a military servicemember is entitled to the protections of this section if the dependent’s ability to comply with an obligation that is secured by a mortgage, deed of trust, or other contract lien on real property or personal property that is a dwelling is materially affected by the servicemember’s military service.

(h)  A court that issues a stay or takes any other action under this section regarding the enforcement of an obligation that is subject to this section may grant a similar stay or take similar action with respect to a surety, guarantor, endorser, accommodation maker, comaker, or other person who is or may be primarily or secondarily subject to the obligation.

(i)  If a judgment or decree is vacated or set aside wholly or partly under this section, the court may also set aside or vacate, as applicable, the judgment or decree with respect to a surety, guarantor, endorser, accommodation maker, comaker, or other person who is or may be primarily or secondarily subject to the obligation that is subject to the judgment or decree.

(j)  This section does not prevent a waiver in writing by a surety, guarantor, endorser, accommodation maker, comaker, or other person, whether primarily or secondarily liable on an obligation, of the protections provided under Subsections (h) and (i). A waiver described by this subsection is effective only if it is executed as an instrument separate from the obligation with respect to which it applies. If a waiver under this subsection is executed by an individual who after the execution of the waiver enters active duty military service, or by a dependent of an individual who after the execution of the waiver enters active duty military service, the waiver is not valid after the beginning of the period of the active duty military service unless the waiver was executed by the individual or dependent during the applicable period described by 50 U.S.C. App. Section 516, as that section existed on January 1, 2009.

SECTION 2. The change in law made by this Act applies only to a sale, foreclosure, or seizure of property under a judgment in an action filed on or after the effective date of this Act or with respect to which a notice of default is given under Section 51.002(d), Property Code, on or after the effective date of this Act. A sale, foreclosure, or seizure under a judgment in an action filed before the effective date of this Act or with respect to which notice of default is given before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 3. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate action, this Act takes effect September 1, 2009.”

Prepared by Allan C. Wisk. 214.651.2345 Direct allan.wisk@strasburger.com

Bidding on Projects Funded with ARRA Stimulus Dollars? Watch Out for Buy American Requirements

Mark Andrews — Thu, 23 Jul 2009 00:00:00 -0500

As part of the American Relief and Recovery Act (“ARRA”) passed earlier this year, the Administration was forced to accept certain “Buy American” restrictions on the sourcing of iron, steel and other items used in projects funded with federal stimulus money. While it is debatable whether these restrictions are consistent with international free-trade commitments of the U.S., the reality for now is that bidders on ARRA-funded projects need to be aware of these restrictions and their scope.

Recent experience with water and sewer projects requiring approval from the Environmental Protection Agency illustrates that the scope of ARRA Buy American restrictions is far from universal, and that waivers of these restrictions are available. In fact, as much as half of the verbiage in recent guidance from EPA is devoted to explaining these limitations and the waiver criteria.

A key element of the Buy American requirement is its applicability to products, but not to components. If Item A is manufactured outside of the U.S., but is then incorporated into Item B after its importation into the U.S., the question becomes whether Item A is only a component of Item B, or retains its separate identity as a product in its own right. EPA has indicated that issues of this type will be analyzed under criteria similar to what U.S. Customs would utilize in determining tariff classifications. For example – and speaking very broadly – is Item A substantially transformed, or is its utilization for other purposes substantially limited, by the process of incorporating it into Item B? And is the process of incorporating A into B extensive and/or complex? Affirmative answers to these questions create a strong case for treating B as the product, so that the foreign sourcing of A as a component would not jeopardize ARRA funding.

As an alternative to the metaphysics of the “substantial transformation” analysis, potential bidders for ARRA-funded projects will want to look at the various types of waivers applicable. For example, a blanket waiver has been issued for certain projects where the bidding process predated the passage of ARRA. Case-by-case waivers are granted where the governmental body building a project shows that use of U.S.-manufactured products would increase costs by more than 25 percent, or would adversely impact the public interest. Recent EPA announcements granting public-interest waivers indicate that the Federal authorities will not extensively second-guess local authorities’ decisions to include performance criteria in IFBs that only foreign-manufactured products can satisfy. Assistance by prospective bidders to local authorities in the process of seeking Buy American waivers appears to be a commonly accepted practice.

For further information, please feel free to contact the authors of this article, Mark Andrews (202.742.8601) or John Dorsey (512.499.3646). Their respective e-mail addresses are mark.andrews@strasburger.com and john.dorsey@strasburger.com .

*Editor’s note: Mark is a partner in Strasburger’s Washington, D.C. office and John is an associate in its Austin office.

ARRA Temporary COBRA Premium Subsidy

Matthew H. Marchant — Wed, 15 Apr 2009 00:00:00 -0500

The American Recovery and Reinvestment Act of 2009 (“ARRA”)¹ was signed into law by President Obama on February 17, 2009. Among its many provisions, ARRA contains a substantial temporary federal government subsidy for COBRA premiums when the COBRA qualifying event is an employee's involuntary termination of employment.² While ARRA's COBRA premium subsidy provisions are a major benefit for unemployed workers and their families, they impose significant administrative requirements on employers.

To Which Health Plans Does ARRA's COBRA Premium Subsidy Apply?

The ARRA COBRA premium subsidy generally applies to all employer-sponsored health plans that are subject to federal or state group health plan continuation coverage requirements, commonly referred to as “COBRA.” These plans include:

Private (i.e., nongovernmental) plans currently subject to the Employee Retirement Income Security Act's (“ERISA's”) and/or the Internal Revenue Code's (“Code's”) COBRA health care continuation coverage requirements;
State and local government plans subject to the Public Health Service Act's health care continuation coverage requirements;

Federal government plans subject to the health care continuation coverage requirements of Section 8905a of Title 5 of the United States Code; and

Small private employer (i.e., averaging less than 20 employees during the prior year) fully insured plans not subject to the federal COBRA law, but subject to state insurance laws requiring health care continuation coverage, such as Texas's “mini COBRA” law.³
Who Qualifies for the ARRA COBRA Premium Subsidy?

The individuals eligible for the subsidy (referred to in the ARRA COBRA premium subsidy provisions as “assistance eligible individuals,” or “AEI's”), are, generally, all COBRA “qualified beneficiaries” who have as their qualifying event a covered employee's involuntary termination of employment occurring on or after September 1, 2008 and before January 1, 2010.

Example: Company X employs Joe. Joe is a participant in Company X's group health plan and has coverage under Company X's group health plan for himself, his wife, and his two children. Company X terminates Joe in April, 2009. Joe, his wife, and his two children are AEI's and therefore are eligible for the ARRA COBRA premium subsidy if they elect COBRA coverage.

What is the Amount of the ARRA COBRA Premium Subsidy?

The subsidy is 65% of the COBRA premium. Since the COBRA premium is typically 102% of the otherwise applicable cost of comparable active employee coverage, the ARRA COBRA premium subsidy will typically be 66.3% (65% of 102%) of the cost of active employee coverage.

Example: COBRA elections are made for Joe, his wife, and his two children. Under Company X's health plan, the cost of coverage for active employees and their families similarly situated to Joe and his family is $1,000, $300 of which was paid by Company X for active employees so that Joe's monthly premium cost for himself, his wife and his two children while he was an active employee was $700. Joe's COBRA premium would normally be $1,020 ($1,000 x 1.02). Joe's ARRA premium subsidy is $663 (1,020 x .65), so his post-subsidy premium is $357 ($1,020 - $663).

When Does the ARRA COBRA Premium Subsidy Go Into Effect?

The ARRA COBRA premium subsidy applies to the first coverage period beginning on or after the date of ARRA's enactment. Since coverage periods typically coincide with the calendar month, and ARRA was enacted on February 17, 2009, the ARRA COBRA premium subsidy generally applies to COBRA premiums beginning with those due for March, 2009.

How Long is an Assistance Eligible Individual Entitled to the ARRA COBRA Premium Subsidy?

The subsidy applies until the earliest of:

The AEI's becoming eligible⁴ for other group health plan coverage⁵ (e.g., under a plan of a new employer or under a plan of the AEI's spouse's employer);

The end of the AEI's maximum COBRA coverage period (i.e., the end of 18 months of COBRA coverage);

The end of the ninth month of premium subsidy (i.e., the maximum subsidy period is nine months).⁶

Since ARRA Was Not Enacted Until February 17, 2009, But Includes AEI's Whose Qualifying Events Occurred on or After September 1, 2008, What Special Rules Apply to Individuals Whose Qualifying

Events Occurred Before ARRA's Enactment?

AEI's whose COBRA qualifying events occurred before ARRA's enactment are entitled to the COBRA premium subsidy, but only for premiums due for periods of coverage beginning on or after ARRA's enactment (i.e., generally, for March, 2009 and later months). Individuals who lost their regular group health plan coverage on account of a covered employee's involuntary termination of employment occurring on or after September 1, 2008, and before February 17, 2009, who did not timely elect COBRA, or who elected COBRA but whose continuation coverage terminated because they stopped paying their COBRA premiums, may under ARRA qualify for the premium subsidy by electing,⁷ or re-electing, COBRA within 60 days of the plan administrator's providing them with notice of the ARRA COBRA premium subsidy and of their right to elect or re-elect COBRA.⁸

How is the ARRA COBRA Premium Subsidy Actually Provided to Assistance Eligible Individuals?

ARRA requires that employers, plan administrators, and insurance companies effectively act as conduits in the Federal government's payment of the COBRA premium subsidy. Specifically, the delivery mechanism for the subsidy works like this: An AEI who timely elects COBRA is required to pay only 35% of the otherwise applicable COBRA premium. The plan must nevertheless provide COBRA coverage as if the full premium had been paid. Generally, under the terms of the plan's insurance or other funding arrangement, the employer will need to pay to the plan and/or carrier the full premium amount, as if it had been paid to the employer by the AEI. The employer⁹ is then entitled to reimbursement by the federal government for the 65% of the COBRA premium not paid by the employee. The reimbursement will generally occur nearly simultaneously with the employer's¹⁰ contribution to the plan, or payment to the insurer, of the unsubsidized portion of the premium, because the employer¹¹ is entitled to treat its payment of the unsubsidized portion of the premium as if it were the employer's¹² payment of federal payroll taxes¹³to the IRS. The employer then takes a credit for this amount immediately against the employer's next federal payroll tax deposit liability.

Example: Joe is an AEI and his COBRA premium for coverage under Company X's group health plan for April 1, 2009, without the ARRA premium subsidy, would be $1,020. Because of ARRA's COBRA premium subsidy, Joe's actual COBRA premium for April, 2009 is just $357 ($1,020 x .35). Joe sends the plan administrator of Company X's health plan $357 as Joe's share of his April, 2009 COBRA premium. Company X remits to the plan and/or insurer $1,020, the full amount of Joe's April, 2009 COBRA premium, of which $663 ($1,020 - $357) is out of Company X's own pocket. When it makes its next payroll tax deposit a few days later, Company X reduces the amount it would otherwise be required to deposit by $663, claiming a credit for that amount on its IRS Form 941 payroll tax return.

Are All AEI's Entitled to the ARRA COBRA Premium Subsidy?

No. An AEI whose modified adjusted gross income (“MAGI¹⁴”) is $145,000 or more ($290,000 or more in the case of a joint return) will have 100% of any COBRA premium subsidy that he or she receives recaptured (essentially, as an addition to his or her personal federal income tax liability) when he or she files his or her 1040 for the calendar year in which the subsidy was received. An AEI whose individual MAGI is $125,000 or more, but less than $145,000 ($250,000 or more, but less than $290,000, in the case of a joint return), is subject to partial recapture of the subsidy.

What is the Definition of “Involuntary Termination of Employment” for Purposes of Determining Whether a Terminated Employee Is Eligible for the ARRA COBRA Premium Subsidy? What About a Termination of Employment for “Cause” or Gross Misconduct?

ARRA does not contain a definition of involuntary termination. The DOL and IRS have indicated, however, that, in addition to covering obvious situations of involuntary termination, such as layoffs and firings, a “constructive” termination, such as an employee's quitting to avoid an imminent involuntary reduction of hours and/or pay, will likely be considered an involuntary termination for purposes of the ARRA COBRA premium subsidy.

Group health plans are not required to provide COBRA continuation coverage to individuals who are terminated for “gross misconduct.” Therefore, for plans that apply this rule, in cases where COBRA continuation coverage is in fact not offered to the employee involuntarily terminated for “gross misconduct,” ARRA's COBRA premium subsidy would not apply. However, it would appear that ARRA's COBRA premium subsidy would apply in cases where an employee is terminated involuntarily under circumstances perhaps amounting to “cause,” but where the employee is nevertheless provided eligibility for COBRA continuation coverage by the plan.

When Do I Need to Notify Terminated Employees About ARRA's COBRA Premium Subsidy?

AEI's whose qualifying events occur on or after February 17, 2009 should be provided a COBRA notice that includes, or is supplemented with, an explanation of the ARRA COBRA premium subsidy. Since COBRA notices are required to be provided within 44 days after a qualifying event, the first deadline for providing notice to an AEI of his or her COBRA premium subsidy rights in connection with a qualifying event occurring on or after February 17, 2009 is April 2, 2009 (February 17, 2009 plus 44 days). Notice regarding ARRA's COBRA premium subsidy to AEI's whose qualifying events occurred before February 17, 2009, and who are entitled under ARRA to make an election of, or to re-elect, COBRA, must be provided within 60 days after ARRA's February 17, 2009 date of enactment, that is, by April 18, 2009.

Is There a Web Page Where I Can Find an Official Explanation and Examples of The Notices That I Need to Provide in Connection With ARRA's Temporary COBRA Premium Subsidy?

Yes. While your insurance carrier or third-party administrator (“TPA”) will likely keep you informed of the notice requirements and provide you with appropriate forms, or simply handle these requirements for you, the U.S. Department of Labor ("DOL") has made an explanation of ARRA's notice requirements, complete with sample forms, available to all on the web. A DOL web page containing a link to the DOL's sample forms and collects links to other DOL web pages, as well as to IRS web pages providing other detailed information about the ARRA COBRA premium subsidy, may be found here.

Has the IRS Provided Guidance and Sample Forms Regarding the Payroll Tax Reimbursement Mechanism for the ARRA COBRA Premium Subsidy?

Yes. Information regarding the ARRA COBRA premium subsidy reimbursement procedures, and a revised IRS Form 941, Employer's Quarterly Federal Tax Return, may be found here.

Since ARRA's COBRA Premium Subsidy is Already in Effect, Am I Out of COBRA Compliance If I Haven't Done Anything About It Yet?

Generally, no. In enacting ARRA's COBRA premium subsidy, Congress realized that employers would need some time to learn about it and implement new procedures. Generally, ARRA provides that a plan administrator who collects the full COBRA premium from AEI's for the first one or two coverage periods (generally, March, 2009 or March and April, 2009) may refund to the AEI the excess portion (i.e., 65%) of the premium paid by him or her or, if the employer reasonably expects that the excess premium payments can be used up within 180 days, instruct the AEI to pay no premium at all until the excess is used up and then apply the excess against the AEI's 35% premium requirement until it is used up.

Whom Should I Contact at Strasburger if I Need Help Navigating the ARRA COBRA Premium Subsidy Requirements?

You should contact your regular Strasburger contact or Luke Bailey, the author of this newsletter.

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1 ARRA is frequently referred to in press accounts as the “economic stimulus bill.”

2 A copy of the COBRA premium subsidy provisions of ARRA may be found as a PDF here and a copy of the Joint Committee Explanation of these provisions as a PDF here.

3 Texas's continuation coverage rules for small employers (i.e., Texas's “mini COBRA” provisions) are at § 1251.251 et seq. of the Texas Insurance Code.

4 Note that the rule for termination of the right to the ARRA COBRA premium subsidy requires only that the qualified beneficiary receiving the subsidy become eligible for alternate non-COBRA coverage, not that he or she actually become covered under the alternate plan, unlike the rules for termination of COBRA coverage itself.

5 Other than coverage consisting of only dental, vision, counseling, or referral services (or a combination thereof), coverage under a flexible spending arrangement (as defined in Section 106(c)(2) of the Code), or coverage under an employer on-site clinic consisting primarily of first aid services, prevention, and wellness care, or similar care (or a combination thereof).

6 In the case of state health care continuation coverage laws, the maximum period of continuation coverage will typically be shorter than the 18 months provided by COBRA, and may be shorter than nine months (e.g., the maximum period of coverage under Texas's mini COBRA law is six months). In such a case, the maximum ARRA COBRA premium subsidy would be conformingly foreshortened.

7 Even if their standard 60-day COBRA election period previously ran out.

8 Such an election or re-election will not, however, extend their COBRA coverage period beyond the maximum period of coverage that they would have had if they had made a timely non-ARRA election or had not stopped paying their premium. Note that if a qualified beneficiary does make a special election or re-election of COBRA under ARRA, no part of the “gap period” when the qualified beneficiary was not covered by COBRA may be counted in determining whether the qualified beneficiary has been without coverage for 63 days for purposes of applying HIPAA's pre-existing condition exclusion rules.

9 In the case of a multiemployer plan, the plan itself must fund the full COBRA benefit and then obtain reimbursement. In the case of a small fully-insured plan that is not subject to COBRA, but is subject to state health care continuation coverage requirements, such as Texas's “mini COBRA” law, the insurer must provide the same benefit as if the AEI had paid his or her full COBRA premium, and can obtain reimbursement from the federal government.

10 Or the plan's or insurance company's. See footnote 9.

11 Or the plan or insurance company. See footnote 9.

12 Or the plan's or insurance company's. See footnote 9.

13 That is, employee federal income tax withholding (“FITW”) or employer and employee social security and Medicare (“FICA”) taxes.

14 For this purpose, MAGI is the AEI's regular adjusted gross income (“AGI”), with foreign income under Code §§ 911, 931, and/or 933 added back.

Law Enforcement Grants in the ARRA

Matthew H. Marchant — Tue, 31 Mar 2009 00:00:00 -0500

The US Department of Justice has compiled all of the Office of Justice Program Grants that are available in the American Recovery and Reinvestment Act. Four billion Dollars has been allocated to assist local law enforcement and create jobs. Click here to access the listing of the available grants.

Major Contractor Liability Changes Pass Texas Senate

Matthew H. Marchant — Thu, 19 Mar 2009 00:00:00 -0500

Under current law, owners can require general contractors to assume liability for the owner’s negligence and those contractors require subcontractors working for them to do the same. Yesterday the Texas Senate approved SB 555, which prohibits such transferral of liability by contract or other means by amending Chapter 10 of the Civil Practice and Remedies Code (click here for bill analysis).

Authored by Senator Robert Duncan, R-Lubbock, now goes to the House for consideration, where it is sponsored by Representative Craig Eiland and is listed as HB 818. Duncan's authorship statement on the bill is as follows: "In construction contracts, owners require general contractors to assume liability for the owner's negligence, and those contractors require any subcontractors under them to do the same.

Therefore, in the case of an accident for which the owner is responsible, a general contractor is responsible for any damages incurred, including the defense costs of the owner, and a subcontractor will be responsible for the same due to the general contractor's negligence and be required to pay for the negligence of the owner as well.

Most construction contracts also require a contractor or subcontractor to purchase an "additional insured" endorsement to its insurance policy, which effectively requires its insurance company to provide coverage for the other entities involved in the contract. Many construction contracts also make the subcontractor liable for a breach of contract and warranty by the general contractor or make the subcontractor responsible for any fines or penalties assessed by a governmental entity directly against an indemnitee.

This essentially makes subcontractors the "insurers" of the entire project, placing the subcontracting company and its insurance carrier at risk for the negligent acts of those entities above them. As proposed, S.B. 555 makes each party liable for its own negligence and prohibits transferring liability by contract or other means in actions involving property damage; bodily injury or death, except for the bodily injury or death of an employee of the indemnitor, its agent, or subcontractor of any tier; breach of contract or warranty, and violation of statute, ordinance, governmental regulation or rule."

Analysis of The Worker, Retiree, and Employer Recovery Act of 2008

Matthew H. Marchant — Sun, 15 Mar 2009 00:00:00 -0500

In December 23, 2008, President George W. Bush signed the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA").¹ WRERA makes technical corrections to the Pension Protection Act of 2006 ("PPA") and amends the PPA, the Internal Revenue Code ("Code"), the Employee Retirement Income Security Act of 1974 ("ERISA"), and the Age Discrimination in Employment Act of 1967 ("ADEA"). Among other things, WRERA suspends the Required Minimum Distribution ("RMD") rules for 2009 for 401(k), 403(b), governmental 457(f) and other defined contribution plans and individual retirement accounts ("IRA’s") but not for defined benefit pension plans. The RMD suspension is a direct reaction by Congress to limit the downturn in the financial markets and its effect on retirement accounts. It allows participants to postpone selling their investments at current depressed values. Employers that sponsor certain qualified plans need to be aware of how the suspension of the RMD rules may affect their plan administration.

Generally, Section 401(a)(9) of the Code requires participants to begin receiving distributions from a qualified plan no later than April 1 following the year in which the participant reaches age 70 ½. If distributions do not begin by that deadline, an excise tax applies equal to fifty-percent of the amount that should have been distributed. WRERA temporarily suspends the RMD rules for calendar year 2009.

The suspension applies to distributions otherwise due in 2009 and to those otherwise due on or before April 1, 2010 with respect to individuals who attain age 70 ½ in 2009. For example, an individual who attained age 70½ in a year before 2008 and who has been receiving annual RMD’s for years before 2009 can simply skip his or her 2009 RMD if he or she wants to do so. Similarly, had WRERA not been enacted, if a participant reached 70 ½ in 2009, then a plan would normally require that the RMD begin no later than April 1, 2010. This is because for the first RMD, there is a three-month grace period for completing the distribution. However, with WRERA, the required minimum distribution for 2009 that generally would need to be paid out by April 1, 2010 would not need to be paid in either 2009 or 2010, although the separate RMD amount for 2010 would need to be paid by December 31, 2010.

In the case where a participant dies before the RMD begins, and the account balance is distributed under the five-year rule, WRERA provides a one-time distribution waiver. The result is that beneficiaries receiving payments over a five-year period can extend the distribution period over a six-year period.

The law does not suspend RMD’s for 2008. So, where an RMD is due on or before April 1, 2009 with respect to an individual who attained age 70 ½ in 2008, the distribution must still be made. Note that WRERA does not suspend the RMD rules for 2010.

Most retirement plans provide that a RMD must be paid out. So employers will generally need to amend their retirement plan in order to suspend the application of the RMD rules for 2009. These amendments must be adopted on or before the last day of the plan year beginning on or after January 1, 2011. In the case of a calendar year plan, the plan must be amended on or before December 31, 2011. Also, for governmental plans, the amendment must be adopted on or before the last day of the plan year beginning on or after January 1, 2012.

If an employer decides to make distributions in accordance with each participant’s previous election, despite WRERA’s waiver, then the distributions may generally be treated as an eligible rollover distribution ("ERD"), i.e., the distribution may be rolled over by the distributee to an IRA or another eligible retirement plan.² Note that WRERA waives the direct rollover notice, and twenty-percent income tax withholding requirement for participants or beneficiaries that receive a 2009 RMD.

Surprisingly, WRERA does not require that the plan notify the participants or beneficiaries, before the distribution, of their opportunity to elect not to take the 2009 distribution. Even in the absence of a notice requirement, employers may find it prudent to inform participants and beneficiaries of the opportunity to suspend their 2009 distribution.

In light of WRERA, employers will need to decide how they wish to address RMD’s for 2009, i.e., continue distributions based on previous elections and presumably provide notice to participants and beneficiaries of the RMD suspension opportunity, suspend all RMD’s and provide notice to the participants and beneficiaries of their opportunity to "opt out" of the suspension, or let each participant elect whether to receive his or her RMD for 2009. But before an employer can decide how to best address WRERA’s one-time suspension of the RMD rules, the employer will want to review the current requirements of its plan document, and also want to review how many participants and beneficiaries are otherwise scheduled to receive a RMD. Then, the employer will have a better idea of how to best approach the suspension of the RMD rules.

If you have any questions regarding the suspension of the RMD rules for 2009, or any of WRERA’s other provisions, please contact the author of this analysis, Drake Frazier, or another member of Strasburger’s Employee Benefits / Executive Compensation Practice Team.

¹Pub. L. No. 110-458 (2008).

²Distributions that are not eligible for rollover under WRERA include (i) any distribution that is one of a series of periodic payments generally for a period of 10 years or more (or, if a shorter period, certain life expectancies), and (ii) hardship distributions. See I.R.C. § 402(c)(4). There is a possibility that future IRS guidance will allow periodic payments that were made as part of a distribution schedule designed to comply with the RMD requirements to be treated as "independent payments" under Treas. Reg. § 1.402(c)-2, Q&A-6(a), but the IRS has not yet clarified this point.

Texas Energy Funding in the Federal Stimulus

Matthew H. Marchant — Sat, 14 Mar 2009 00:00:00 -0500

Vice President Joe Biden and Energy Secretary Chu announced Thursday that Texas will receive $545,757,732 in weatherization and energy efficiency funding – including $326,975,732 for the Weatherization Assistance Program and $218,782,000 million for the State Energy Program. This is part of a nationwide investment announced this week of nearly $8 billion under the President’s American Recovery and Reinvestment Act.

The Weatherization Assistance Program will allow an average investment of up to $6,500 per home in energy efficiency upgrades and will be available for families making up to 200% of the federal poverty level – or about $44,000 a year for a family of four.

The State Energy Program funding will be available for rebates to consumers for home energy audits or other energy saving improvements; development of renewable energy projects for clean electricity generation and alternative fuels; promotion of Energy Star products; efficiency upgrades for state and local government buildings; and other innovative state efforts to help save families money on their energy bills.

For more on this program and how businesses can assist and identify eligible consumers, please contact Strasburger & Price, LLP at 469-287-3900. For more information on the program, you can visit www.energy.gov/Texas.

SENATE COMMITTEE APPROVES “RAILROAD ANTITRUST ENFORCEMENT ACT OF 2009"

Matthew H. Marchant — Sat, 14 Mar 2009 00:00:00 -0500

The Senate Judiciary Committee has approved S. 146, the Railroad Antitrust Enforcement Act of 2009. The Bill was introduced by Senator Kohl [D-WI] and has eight co-sponsors including senators Dorgan [D-ND], Feingold [D-WI], Kaufman [D-Del], Klobuchar [D-MN], Leahy [D-VT], Rockefeller [D-WV], Schumer [D-NY] and Vitter [D-LA]. If enacted the proposed law would:

· Amend the Clayton Act to ALLOW INJUNCTIVE RELIEF against rail common carriers subject to the jurisdiction of the Surface Transportation Board (STB);

· Apply the Clayton Act to section “1132” transactions (probably intended to be railroad mergers and acquisitions within the scope of 49 U.S.C. 11323);

· Provide that, in any civil action under the Clayton Act against a rail common carrier, the U.S. district court shall not be required to defer to the primary jurisdiction of the STB;

· Empower the Federal Trade Commission (FTC) to regulate, and engage in antitrust enforcement regarding, collective rate agreements and certain other transactions, including railroad mergers and acquisitions;

· Permit parties injured by antitrust violations to be awarded treble damages against railroad common carriers in private civil antitrust suits, without regard to whether such railroads have filed rates or whether a complaint challenging rates has been filed with the STB;

· Amend federal transportation law to terminate the exemptions from antitrust laws for rail collective ratemaking agreements;

· Require the STB, when reviewing a proposed collective ratemaking agreement, to take into account its impact upon shippers, consumers, and affected communities; and

· Revise the STB’s authority to provide that a rail carrier, corporation, or a person participating in an approved transaction is not exempt from specified antitrust laws, but would make such provision inapplicable to any transaction relating to the pooling of railroad cars approved by the STB or its predecessor agency.

The provisions of the Act would not be applied retroactively and no complaint could be filed for a period of 180 days after enactment of the Act with respect to any prohibited action or conduct continued after the effective date of the Act.

The bill is strongly opposed by the Association of American Railroads and other rail interests. They claim that its enactment would result in “[o]verlapping regulatory schemes [that] could derail the industry's ability to meet the nation's increased need for environmentally sound freight transportation,” and that the nation “cannot afford to subject railroads to a conflicting regulatory system that will make it difficult – if not impossible -- to meet the nation's transportation needs."

A leading rail industry spokesman went on to say that the impact of the bill would be “nothing but confusion for the railroads and those charged with enforcing the regulations. Congress should be promoting policies that help jumpstart the economy and regain consumer confidence, not overburden an industry that stands ready to get America back on track.”

In contrast, the Congressional supporters of the bill and shippers’ interests assert that the legislative relief is needed due to the exercise of oligarchic power by the four major railroads, especially with respect to captive shippers.

The approval of the bill by the Senate Judiciary Committee is a major step but in no way ensures the enactment of the legislation. A companion bill has been referred to the House Judiciary and Transportation Committees. A similar bill made it out of both House and Senate Committees in the last Congress, but never made it to the floor in either House for a vote. Although the legislation may have a better chance of making it to a vote this year, it will still face strong opposition in both Houses.

Regardless of the proposed law’s beneficial or detrimental effects on the national transportation system, a primary beneficiary of any law eliminating exemptions from federal antitrust laws is always the plaintiffs’ bar. A definite result of the bill’s passage would be a flood of antitrust legislation against the rail industry.

For a copy of the bill, a red-line showing how the bill would revise current law, or further information or assistance with respect to the bill, please feel free to contact the author of this post, Ken Siegel, at 202.742.8602 or at Kenneth.siegel@strasburger.com.

Federal Stimulus - Hearings on State Allocation of Funds

Matthew H. Marchant — Mon, 09 Mar 2009 00:00:00 -0500

Chairman Jim Dunnam will be conducting hearings of the House Select Committee on Federal Economic Stabilization Funding to receive public testimony related to the American Recovery and Reinvestment Act in several cities across Texas. The first such hearing will take place at 10:30am on Saturday, March 14, 2009 at the University of Texas-Arlington, E.H. Hereford University Center ("UC"), Rio Grande Room, 300 W. First Street, Arlington, Texas.

Federal Stimulus - Transportation Summary

Matthew H. Marchant — Tue, 03 Mar 2009 00:00:00 -0500

The federal government has made tens of billions of dollars available to the States, local governments, transit agencies, urban areas, airports and ship builders for transportation related grants as part of the stimulus package. While the amount of money made available in the final package for infrastructure and other transportation projects may be disappointingly small compared to the total infrastructure needs of the country, these billions of dollars provide an unprecedented opportunity to the governments and businesses that take advantage of them.

However, the recipients of the funds, whether they be private companies, state and local governments or agencies and commissions, must also pay close attention to the many conditions which Congress has placed on recipients and the time frames in which they have to act. Congress has taken many and sometimes confusing steps to insure that the funds are used as it intended, that the funds are used in a timely manner, that careful records of the funds’ use are kept and that required reports are filed with the federal government.

The following is a summary of the grant programs and other provisions of the bill which provide tax and other benefits to transportation companies. The grant programs include:

·        $27.5B for highway and bridge projects (HII)

·        $1.5B in Discretionary funds (competitive grants)

·        $8B for construction of high-speed passenger rail lines

·        Airports

·        $1.3B for AMTRAK

·        $8.4B for mass transit

·        $100M in grants to assist small shipyards

·        Another $20 million is provided to the Inspector General at U.S. DOT for enforcement and audit of the grant programs.

·        Required Reporting will be a major element of all of the above programs.

If you would like further information as to any of the matters discussed below or assistance in filing for a grant, you may contact Ken Siegel at 202.742.8602 or by e-mail at Kenneth.siegel@strasburger.com.

NON-GRANT PROVISIONS

Besides the grant programs, there are other provisions of the Stimulus package which provide direct benefits to the transportation industries:

·        $300M in funding for Environmental Protection Agency (EPA) grants to retro-fit older diesel engines with emission-cutting equipment (trucking industry had sought $1.5B)

·        Provision allowing accelerated depreciation of certain equipment purchases through 2009

·        Extension of net operating loss carrybacks for businesses that averaged less than $15M in revenue over last three years (more generous provision deleted in conference)

·        Delayed implementation until 2012 of provision of current law requiring all levels of government to withhold 3% of payments to government contractors

FEDERAL HIGHWAY ADMINISTRATION (FHWA)

Highway Infrastructure Investment (HII)

The $27.5 billion marked for Highway Infrastructure Investment (HII) may be awarded for projects involving restoration, repair, construction and other activities eligible for federal funding under 23 U.S.C. §133 (Federal Aid Projects), and for passenger and freight rail transportation and port infrastructure projects eligible for assistance under 23 U.S.C. §601(a)(8). The HII funds will be available until September 30, 2010.

Fifty percent of the HII funds are to be allotted among States using the formulas found in 23 U.S.C. §104(b)(3)(apportionment based on ratio of highway miles, miles driven, highway taxes collected in a State to the national total). The other 50% of the HII funds are to be allotted under formulas specified in §120(a)(6), Public Law 110-161 (Consolidated Appropriations Act, 2008; Div. K, Title I).

The Secretary must apportion the Funds within 21 days [March 10, 2009] after date of enactment. In making award priority is to be given to projects to be finished within three years and located in economically depressed areas.

If a State fails to obligate all of its allotted funds within 120 days, 50% of the unobligated funds will be withdrawn from the state. After a year any remaining unobligated funds will be withdrawn. The Secretary may grant a State an extension of these times if he/she finds that extenuating circumstances, as defined in the Act, exist. The Secretary will redistribute the withdrawn funds among those States that have not had funds withdrawn.

Congress did specify specific set-asides and allotments for portions of the HII funds, e.g. $550M to Indian reservations, $105M to Puerto Rico). HII funds are in addition to funds allotted to States under any other authorization bill this year. The Federal portion of HII grants may make up 100% of the cost of a project at discretion of recipient.

DISCRETIONARY FUND

Awards and grants under the Discretionary Fund will be made on a competitive basis. The funds will be available through September 30, 2011. The award can be made to a state or directly to local governments or transit agencies. To obtain a grant or award the applicant must show that the proposed project will have a significant impact on the nation, metropolitan area, or region. The application may involve highway or bridge projects eligible under Title 23, United States Code (U.S.C.), including: interstate highway rehabilitation, improvements to rural collector road system, reconstruction of highway overpasses and interchanges, bridge replacements, seismic retrofit projects for bridges, road realignments; or a public transportation project eligible under Chapter 53 of Title 49, U.S.C., (e.g. Urbanized Areas, clean fuel, elderly, disabled, job access & reverse commute programs).

The grant may include an investment in a project participating in existing New Starts or Small Starts programs if the grant will expedite the completion of the projects and its entry into revenue service. Also eligible for grants from the Discretionary Fund are passenger and freight rail transportation projects, and port infrastructure investments, including projects that connect ports to other modes of transportation and improve efficiency of freight movement.

An amount not to exceed $200 million may be used to pay subsidy and administrative costs of projects eligible for Federal credit assistance under Chapter 6 (Infrastructure Finance, e.g. Public Private Partnerships, pilot programs, congestion pricing) of Title 23, U.S.C.

The Federal share of funding on any project may be up to 100%; in other words no matching funds are required on projects under the Discretionary Fund.

The grants and awards must be equitably distributed geographically and between urban and rural communities. Individual grant may not be less than $20 million or greater than $300 million. The Secretary may waive the limitation on the minimum to fund significant projects in smaller cities, regions or states. Not more than 20% of funds can be awarded to projects in one State. In selecting projects the Secretary will give priority to projects that require contribution of Federal funds in order to complete overall financing package, and to projects expected to be completed within three years of enactment of Act.

The Secretary must publish the criteria by which projects will be selected within 90 days [May 18, 2009] of enactment of the Act. Applications must then be filed within 180 days of publication of the criteria. Awards will be made within one year [February 17, 2010] of enactment of the Act.
$1.5 million of the Discretionary Funds may be used by USDOT agencies to fund oversight of the grants.

FEDERAL RAILROAD ADMINISTRATION (FRA)

The Stimulus Bill provides $8 billion for rail projects. These funds are to remain available through September 30, 2012. The Secretary is to give priority to development of intercity high speed rail service in making grants out of these funds. These funds are in addition to funds made available under Section 501, Public Law 110-432 (Rail Safety Improvement Act, assistance to families of persons injured in a rail accident) and discretionary grants to State to pay for costs of projects described in 49 U.S.C. §§24401 (2)(A) and (2)(B) and 24105.

The Secretary must submit a strategic plan to Congress within 60 days [April 20, 2009] of enactment. The plan must describe how the Secretary will use funding to improve and deploy high-speed passenger rail systems. Within 120 days [June 17, 2009] of enactment, the Secretary shall issue interim guidance to applicants covering grant terms, conditions, and procedures to be used until final regulations are issued. Separate guidance shall be issued for high-speed rail corridor programs, capital assistance for intercity passenger rail service grants, and congestion grants. In making grants under this fund the Secretary shall waive the requirement that projects using funds provided under Title XII be in a State rail plan developed under 49 U.S.C. §227.

Federal share of projects may be up to 100%, at the option of recipient.

FEDERAL AVIATION ADMINISTRATION (FAA)

SUPPLEMENTAL FUNDING FOR FACILITIES AND EQUIPMENT:
A total of $200 million is available and will remain available through September 30, 2010, to airports for improvement to power systems, air route traffic control centers, air traffic control towers, terminal radar approach control facilities, and navigation and landing equipment. In making such grants the Secretary is to give priority given to projects which can be completed within 2 years.

These funds are in addition to grants under 49 U.S.C. 106(l)(6) (Contracts with FAA to perform agency functions). As with most other grants under the Stimulus package, the Federal share of all projects shall be 100%. Not more than 60 days [April 20, 2009] after enactment, the Secretary shall issue procedures for applying, reviewing and awarding grants and cooperative and other transaction agreements, including form and content of applications and requirements for maintenance of records necessary to facilitate effective audit of use of funding provided. Provisions of 49 U.S.C. 50101 (Buy America) shall apply to funds provided.

FAA Grants-In-Aid for Airports

The stimulus package makes $1.1 billion available through September 30, 2010 for use in discretionary projects, procurement, installation and commissioning for runway incursion prevention devices and systems at airports. These funds are not subject to apportionment formulas, special apportionment categories, or minimum percentages required under Chapter 471 of Title 49, U.S.C. (Airport Improvements).

The Secretary must give priority to projects which can be completed within two years and which supplement, not supplant, planned expenditures from airport-generated revenues or from other state and local sources on such activities. Secretary shall award grants totaling not less than 50% of the funds within 130 [June 27, 2009] days of enactment and award grants for the remaining amounts not later than one year [February 17, 2009] after enactment. The Federal share of projects receiving such grants shall be 100%. Grants shall not be subject to any limitation on obligations for the Grants-In-Aid for Airports program set forth in any other act.

AMTRAK

AMTRAK is provided $1.3 billion which is to be available through September 30, 2010. $450 million is to be used for capital security grants and $5 million is to be allotted to the AMTRAK Inspector General’s office. The priority for the balance of the funds is use for repair, rehabilitation, or upgrade of railroad assets or infrastructure, rehabilitation of rolling stock. No portion of the funds provided are to be used to subsidize operating losses. No more than 60% of the funds are to used for non-security projects in the Northeast Corridor. The funds must supplement, not supplant, funds from other sources. The funds must be awarded within 30 days [March 19, 2009] of enactment and all projects receiving funds must be completed within 2 years.

TRANSIT

Congress makes $6.9 billion available through September 30, 2010 for Capital Assistance projects. In allocating funds, the Secretary is to allot 10% of the funds to projects under §§5340 (growing and high density States), 5311 (other than urbanized areas), and 80% under §5307 (urbanized areas) of Title 49 U.S.C., respectively. $100M is to be distributed to public transit agencies for capital investments assisting in reducing energy consumption or greenhouse gas emissions of public transportation systems. The Federal portion of grants may be up to 100%, at recipient’s discretion. The funds are not subject to any limitation on obligations for transit programs set forth in any other law. The funds shall not be comingled with funds made available in any prior year.

As with the Highway and Discretionary funds the Secretary shall withdraw funds from a state or urbanized area if the funds are not timely committed. The Secretary shall withdraw 50% of any funds not obligated within 120 days [June 17, 2009]. After 1 year [February 17, 2010] any remaining unobligated funds will be withdrawn and redistributed among states or urbanized area that have not had any funds withdrawn. The Secretary may grant an extension of these time frames if the Secretary finds extenuating circumstances.

FIXED GUIDEWAY INFRASTRUCTURE INVESTMENT

$750 million is made available until September 30, 2010 to fund fixed guideway infrastructure investment. These funds are not to be comingled with funds from prior years. The funds must be apportioned within 21 days [March 10, 2009] of enactment. The Secretary shall withdraw 50% of those funds which a State has not obligated within 180 days August 17, 2009]. After one year [February 17, 2010], any remaining unobligated funds shall be withdrawn. An extension may be granted if Secretary finds extenuating circumstances. The withdrawn funds are to be redistributed among urbanized areas that have not had funds withdrawn. The Federal portion of grants may be up to 100%, at recipient’s discretion.

CAPITAL INVESTMENT GRANTS

There is $750 million available through September 30, 2010 for Capital Investment Grants. Priority is to be given to projects that are currently in construction or are able to obligate funds within 150 [July 17, 2010] days of enactment. Funds under this program cannot be comingled with funds awarded in prior years.

MARITIME ADMINISTRATION

$100 million is made available for Supplemental Grants for Assistance to Small Shipyards. These funds are to remain available until September 30, 2010. The Funds must be obligated with 180 days of distribution.

REPORTING, ENFORCEMENT AND AUDIT PROVISIONS

U.S. DOT OFFICE OF INSPECTOR GENERAL

Congress has made $20 million available until September 30, 2013 to the Department of Transportation’s Office of Inspector General to fund audits and investigations of projects and activities carried out with funds made available under the stimulus program.

CERTIFICATION OF EFFORT BY GOVERNOR

Within 30 days [March 19, 2009] of enactment the Governor of a State must certify to the Secretary that the State will maintain its current efforts with regard to State funding for the types of projects that are funded by the appropriation. If a State fails to maintain its level of certified effort, the Secretary will prohibit the State from receiving additional funding pursuant to redistribution of the funds for highway Federal aid and highway safety construction programs occurring after August 1 of fiscal year 2011.

PERIODIC REPORTS

Each grant recipient shall submit periodic reports to the agency from which they received funding on use of funds appropriated. The agencies shall collect and compile all such reports and forward them to Congress. The specific contents of the reports are spelled out in the Act. The first report is due not later than 90 days [May 18, 2009] after enactment. Subsequent reports must be submitted on the 180th day [August 17, 2009], 1 year [February 17, 2010], 2 years [February 17, 2011], and 3 years [February 17, 2012] after enactment

AG: Schools Subject To Municipal Regulations

Matthew H. Marchant — Mon, 02 Mar 2009 00:00:00 -0500

Texas Attorney General Greg Abbott released Opinion GA-0697 on Friday discussing whether landscaping and screening requirements, setback and height regulations, sign regulations and other building standards adopted by a home-rule city can be enforced against school districts.

The Attorney General concluded that a home-rule city may enforce its reasonable land development regulations and ordinances against an independent school district for the purpose of aesthetics and the maintenance of property values. It has long been settled that cities can enforce regulations against school districts related to building safety, but aesthetics and maintenance of property values has been a gray area.

This opinion is a significant development for those cities and school districts that have been at odds over how much cities may regulate. The practical implications of this ruling will likely turn on the interpretation of what city regulations consistute "reasonable" land development regulations.

Texas Employers May Be Liable For Medical Care

Matthew H. Marchant — Mon, 02 Mar 2009 00:00:00 -0500

State Rep. Jim Jackson (R-Carrollton) has introduced House Bill 1744, which makes employers liable for medical services provided to illegal aliens under the Indigent Health Care & Treatment Act in the Health and Safety Code.

The bill, which was introduced last week, allows a county, public hospital or hospital district to directly bill an employer to recover costs for medical services provided to illegal aliens. Under certain provisions of the bill, a county, public hospital or hospital district may bring action against the employer who knowingly employs an illegal alien and who would otherwise qualify as an eligible resident of the county, public hospital or hospital district in which the services were provided at the time the individual received health care services. The prescribed application procedure requires an applicant to provide employer information at the time they receive the medical services.

Economic Stimulus - Insurance

Matthew H. Marchant — Fri, 27 Feb 2009 00:00:00 -0500

The ARRA provides $15 million in additional capital for the Surety Bond Guarantees Revolving Fund, authorized by the Small Business Investment Act of 1958. The Administration has increased the maximum guaranteed surety bond amount from $2 million to $5 million, and may guarantee a surety for a total work order or contract amount that does not exceed $10 million, if a contracting officer of a federal agency certifies that such a guarantee is necessary (amendment of 15 U.S.C. § 694b(a)(1)). The Bill additionally provides that, for bonds made or executed with the prior approval of the Administration, the Administration shall not deny liability to a surety based upon material information that was provided as part of the guaranty application.

The Bill includes the “Assistance for Unemployed Workers and Struggling Families Act,” which increases the weekly unemployment compensation payments made by participating States by an additional $25 per week, to remain in effect until June 30, 2010. Full federal funding of the extended unemployment compensation is available to the participating States for a limited period.

The Bill also provides an additional $80 million (to remain available until September 30, 2010) to implement the health insurance tax credit under the TAA Health Coverage Improvement Act of 2009. The Act increases the available tax credit and extends COBRA benefits for certain TAA-eligible individuals, and extends the continued qualification of family members for specified benefits after certain events.

American Recovery and Reinvestment Act

Matthew H. Marchant — Thu, 26 Feb 2009 00:00:00 -0500

The American Recovery and Reinvestment Act is now law. The rules, regulations and inevitable glitches associated with its implementation will now begin. The bill generally allocates the funds to three basic categories: (i) cities, counties, and other eligible local entities (38%); (ii) states, generally through single point of contact agencies (24%); and the balance through federal agencies (generally on: green energy, computerized medical records, high speed rail, certain transportation infrastructure, weatherization, etc.). Eligible participants need to be directed to the proper application source in order to obtain the funds.

The Texas Legislative Board has prepared a first blush analysis of the funding categories and what they translate to for the state of Texas based on the various formula applications. Click here to view an initial draft, which is still subject to some refinement. The House Select Committee on Stabilization Funding held its first hearing on Monday, February 24, 2009 with each state agency that is a single point recipient of funds to oversee implementation. The first three agencies set to receive funding (larger recipients) are: the Texas Department of Transportation, the Department of Health and Human Services and the Texas Education Agency.