Internal Revenue Service Office of the Chief Counsel Carves Out Narrow Exception for Properly Applied First Sale Rule in Customs Law

On October 29, 2010, the Office of the Chief Counsel of the Internal Revenue Service (IRS) issued Chief Counsel Advice (CCA) 2010-43-028, which discusses the effect of the First Sale Rule under customs law on Internal Revenue Code (IRC) § 1059A.

Under the Customs Modernization Act, it is the responsibility of the importer of record to enter, classify and value goods entering the United States and provide any other information necessary to enable U.S. Customs and Border Protection (CBP) to properly assess duties, collect statistics, and determine whether all legal requirements are met. Under U.S. law, the transaction value of imported merchandise is the primary or preferred method for determining the value of imported goods. Generally, the transaction value is the price actually paid or payable for merchandise when sold for exportation to the United States, plus certain statutorily enumerated additions.

Before merchandise reaches the United States, however, it may have been subject to a series of sales. For example, it may be sold by its manufacturer to a middleman (in the same or a different country), who in turn sells the merchandise to a U.S. importer. In the case of a series of sales, the importer may, under criteria prescribed by CBP, choose a sale that occurred earlier in the chain and use the price paid at that point, as long as the importer can establish that the earlier sale was a sale for exportation to the United States. The option to choose the earlier sales price as the transaction value is known as the “First Sale Rule.” The United States International Trade Commission has provided guidance to ensure proper use of the First Sale Rule in customs law.

In CCA 2010-43-028, the IRS Office of the Chief Counsel discussed how this alternative valuation is treated for purposes of Federal Income Tax.

Given the option afforded by the first sale rule, importers often choose the first sale value because it minimizes custom duties. Use of first sale rule generally results in a disparity between the custom valuation and the income tax valuation because the income tax valuation is based on a later more valuable sale.

As discussed in the CCA, the conflict in tax law is apparent in IRC § 1059A(a), which provides:

If any property is imported into the United States in a transaction (directly or indirectly) between related persons (within the meaning of section 482), the amount of any costs (1) which are taken into account in computing the basis or inventory cost of such property by the purchaser, and (2) which are also taken into account in computing the customs value of such property, shall not, for purposes of computing such basis or inventory cost for purposes of this chapter, be greater than the amount of such costs taken into account in computing such custom value.

>> To read the complete Chief Counsel Advice Memorandum, click here.

In addressing the conflict for taxpayers who choose to take advantage of the First Sale Rule, the Office of the Chief Counsel cited to Treas. Reg. § 1.1059A-1(c)(2). The cited regulation allows taxpayers to increase the customs value of imported property by certain amounts that are properly not included in customs value, but which are incurred by the taxpayer and properly included in the transfer price of the property for income tax purposes.

Thus, the IRS Office of the Chief Counsel concluded that “an adjustment under section 1059A with respect to a value differential that results solely from an importers correct application of the first sale rule and subsequent real value added under Treas. Reg. § 1.1059A-1(c)(2) is not proper.”

Note, however, that the Office of the Chief Counsel limited its conclusion to only those situations where the taxpayer both correctly applied the first sale rule and subsequent real value was added. Thus, all other adjustments under § 1059A may nonetheless be appropriate.

Treas. Reg. § 1.159A-1(c)-7 stresses the independence of IRC § 1059A from IRC § 482. As discussed in the regulation, IRC § 1059A “in no way limits the authority of the Commissioner to adjust the taxpayers transfer price under IRC § 482 or other provision of the law. Consequently, where the basis or inventory value is determined under the arm’s-length standard of IRC § 482 as an amount less than the customs value, the taxpayer cannot adjust the basis or inventory value upward to equal such customs value by virtue of IRC § 1059A.

Not surprisingly, IRS Chief of Appeals Diane Ryan implied that the Commissioners discretion to adjust transfer price under IRC § 482 is frequently exercised. While speaking at the fall meeting of the American Institute of Certified Public Accountants Tax Division, she indicated that transfer pricing cases were “the largest deficiency cases in appeals.” Due to the increasing number of transfer pricing and other complex cases involving international issues, IRS Appeals now has a standalone unit for this area.

If you have any questions regarding correct application of the First Sale Rule, IRC § 1059A, or any other transfer pricing issues or regulations, please contact Fuerst Ittleman at contact@fidjlaw.com.

Taxpayer Advocate Service Recommends IRS Change Mission Statement to Reflect New Expanded Role

On October 26, 2010, the Taxpayer Advocate Service (“TAS”) announced that it will recommend in its annual report to Congress that the IRS change its mission statement to reflect its expanded role in administering benefit programs and to acknowledge that the IRS now will have two missions: revenue collection and administration of benefit programs.

The current IRS mission statement is direct and simple: “provide Americas taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.” The current mission statement was adopted in 1998 after the passage of the IRS Restructuring and Reform Act which mandated that the IRS review and restate its mission to place a great emphasis on serving the public and meeting taxpayers needs while still focusing primarily on revenue collection services.

Now, however, with the passage of the Patient Protection and Affordable Care Act (“PPACA”) the IRS will also be responsible for enforcing and monitoring compliance with the individual and employer health insurance mandates.

Under the PPACA, all Americans will be required to carry a minimum level of health insurance or pay a tax for every month they are without such coverage. It will be the responsibility of the IRS to monitor individuals and employers and to punish those who do not comply starting in 2014. Starting in 2014, individuals and businesses will be required to report to the IRS, on their tax returns, whether they have purchased or provided the required insurance and to disclose which months, if any, in which they failed to do so. Using this information, the IRS would determine whether the employer or individual qualified for an exception to the mandate or should be required to pay a separate tax which has a yearly maximum of $750 per person.

According to a Congressional Budget Report, in order to carry out its new duties, the IRS will need $10 billion in additional funds, none of which were provided for in the PPACA. The House Ways and Means Committee estimated that this additionally funding would allow the IRS to hire 16,500 new agents and personnel whose role it would be to monitor and enforce the new healthcare mandates. It is the need for these new employees and the lack of Congressional funding that is driving the TAS call for a new mission statement.

The TAS, an independent office within the IRS that assists taxpayers in resolving their problems with the Service and identifies and proposes changes to systemic problems that exist within the Service, hopes that with the acknowledgement of its new expanded mission, the IRS will receive the increased funding it needs to properly administer the mandates.

Whistleblower Lawsuit Results in $750 million Settlement for GlaxoSmithKline

Facing criminal and civil charges relating to the manufacturing and distribution of certain adulterated drugs made at its Cidra Manufacturing Plant in Puerto Rico, GlaxoSmithKline (GSK) has pleaded guilty and agreed to pay the United States $600 million in settlement of criminal charges and $150 million for civil violations.

The Cidra Manufacturing Plant had been cited by the FDA for manufacturing violations as early as 2002. GSK had instructed Cheryl Eckard and a team of scientists to fix these manufacturing violations. According to Eckards lawyers, she and her team found additional problems than those already cited by the FDA, including mixed-up products, contaminated water systems, and air-handling systems that misdirected the flow of product powder. She recommended GSK shut down the plant, advice which GSK ignored. Her lawyers indicate that she was fired in 2003 after she had, on numerous occasions, requested GSK to address the problems at the Cidra Manufacturing Plant.

Eckard then instituted a qui tam lawsuit in federal court in the District of Massachusetts under the False Claims Act in 2004. The qui tam, or whistleblower, lawsuit permits private citizens to bring suits on behalf of the United States and share in any recovery. In a press release dated October 26, 2010, the Justice Department discussed the effectiveness of the False Claims Act in cases involving fraud against federal health care programs, indicating total recoveries since January 2009 of $5.4 billion. The whistleblower in this case, Cheryl Eckard, will receive approximately $96 million as her share of the settlement amount.

Among the drugs manufactured at the closed Cidra facility were Kytril, a sterile anti-nausea medicine, and Bactroban, a topical anti-infection ointment. The criminal information alleges that GSK failed to ensure that these products were free of contamination from microorganisms. Additionally, it is alleged that manufacturing deficiencies resulted in Paxil CR, a two-layer tablet which is the controlled-release formulation of the popular anti-depressant drug, Paxil, to split apart. Also, Avandemet, a combination Type II Diabetes drug, allegedly was not always composed of the FDA approved mix of active ingredients, and potentially contained too much or too little of the ingredient with the therapeutic effect. The Cidra facility also allegedly suffered numerous product mix-ups.

Commenting on the settlement, Mark Dragonetti, Special Agent in Charge of the FDA New York Field Office, stated:

FDA expects pharmaceutical companies to abide by these manufacturing standards and correct deficiencies in an expedited manner. FDA and its law enforcement partners will continue to aggressively pursue those companies that place the public health at risk by distributing products that do not comply with all FDA requirements.

U.S. Attorney Carmen Ortiz expressed his views that the industry must comply with all of the rules and regulations or face these severe consequences. “To do less erodes public confidence and compromises patient safety.”

If you have any questions regarding qui tam actions, FDA manufacturer requirements or any other FDA regulations, please contact Fuerst Ittleman, PL at contact@fidjlaw.com.

Lame Duck Congress Addresses Expiring Bush-era Tax Cuts, the Alternative Minimum Tax, and Tax Reform for the Upcoming Tax Year

With only a few months left until the 2011 tax filing season, Congress seeks to come to decisions regarding Federal Income Tax, specifically addressing issues such as the Alternative Minimum Tax (AMT) and the expiration of the Bush-era tax cuts. After lawmakers return to Washington on November 15, 2010, they have a four week “lame duck” period to address tax issue and appropriations.

If left unaddressed by Congress, the AMT imposes an additional obligation on 25.2 million taxpayers in 2010, whereas this obligation was only paid by 3.8 million in 2008. The Senate Finance and House Ways and Means Committees have proposed a means to address this issue. The proposed AMT patch for 2010 raises the exemption level from $33,750 to $47,450 for individuals and from $45,000 to $72,450 for couples filing jointly. This exemption is estimated to prevent 21 million taxpayers from being affected by the AMT.

December 31, 2010 also marks the expiration of the Bush-era tax cuts. These include the overall 10 percent reduction on all individual tax rates, the 15 percent rate for capital gains and dividends, the increase in the child care credit, the increase in the dependent care deduction, and the repeal of the personal exemption phaseout. Many members of Congress, including Democratic Senate Budget Committee Chairman Kent Conrad and Democratic Senator Evan Bayh, have expressed their views that all of the expiring tax cuts should be temporarily extended due to the weak economy. Republican Representative David Camp expressed his desire to permanently extend these cuts, to avoid “seeing a wet blanket thrown over the beginnings of economic recovery.” As the next chairman of the tax-writing panel of the House Ways and Means Committee, Camp plans on focusing his efforts on extending the Bush-era tax cuts.

With respect to tax reform, Camp plans to “look at tax reform with a goal of trying to simplify the tax code and addressing the inequities in the code as well its inefficiencies and burdens.” He also hopes see an increase in the number of oversight hearings over the administration by the Oversight Subcommittee of the House Ways and Means Committee.

The uncertainty among the members of Congress with respect to legislation in tax is likely to increase even more with the Presidents Fiscal Commission Report, scheduled to come out on December 1, 2010. Because there are numerous issues on the lame duck Congresss four week agenda, many members have expressed hesitation as to how much will be accomplished. As stated by Evan Liddiard, tax counsel to Senate Finance Committee member Senator Orrin Hatch, “there is a significant chance we can see December 31 come and go without these items being addressed.”

If you have any questions regarding the expiration of the Bush-era tax cuts, the AMT, or any other tax provision, please contact Fuerst Ittleman at contact@fidjlaw.com.

FDA Releases Guidance for Cellular Therapy Sponsors

The U.S. Food and Drug Administration (FDA) have recently published its guidance document, entitled “Guidance for the Industry: Cellular Therapy for Cardiac Disease.” Found here, this document finalizes and incorporates various comments from last years draft guidance entitled “Guidance for Industry: Somatic Cell Therapy for Cardiac Disease.”  The newly-released guidance is intended for sponsors who are in the process of developing cellular therapies for cardiac disease. 

This Guidance provides various recommendations regarding the design of pre-clinical and clinical studies.  In addition, the document suggests what information the FDA will consider when an Investigational New Drug (IND) application is submitted.  Although the suggestions in this document are non-binding, compliance with these procedures may facilitate the path to FDA approval.

For more information on FDA guidance documents or cellular therapies, please contact us at contact@fidjlaw.com.

Mitchell Fuerst Featured Speaker at Upcoming Stem Cell and Age Management Medicine Conference and Meeting

Fuerst Ittlemans Managing Partner, Mitchell S. Fuerst, Esq., is a featured speaker and participant at a series of upcoming meetings and conferences focused on stem cell medicine and age management medicine.

Fuerst will be speaking on the "Practice of Medicine “ Physicians, Stem Cells and the Current Regulatory Environment" at the annual conference of the Age Management Medicine Group (AMMG) in Las Vegas, NV, on November 11, 2010.  The conference, entitled "Clinical Applications for Age Management Medicine," brings together leading healthcare professionals, physicians, researchers and others to provide education and information on the preservation of optimum human function and quality of life making every effort to modulate the process of aging prior to the onset of degenerative aging.

In addition to traditional medicine, alternative medicine therapies, and general health and nutritional régimes, age management medicine focuses on regenerative and stem cell therapies.  The leading professional, non-profit organization devoted to researching, promoting and safeguarding stem cell therapies and its related research, the International Cellular Medicine Society (ICMS), will be holding its annual membership meeting and congress concurrent with the AMMG conference.

The 2nd Annual International Congress on Regenerative and Cell Based Medicine, sponsored by ICMS and Fuerst Ittleman, will bring together medical practitioners from dozens of countries to discuss the latest developments in cell-based medical therapies and will feature presentations on the therapeutic use of platelet rich plasma, adipose tissue, bone marrow, and peripheral blood.  As one of the foremost authorities on the governmental regulation of stem cell therapies and medical professionals who practice in the field, Mitchell Fuerst is featured at the Congress as a faculty member.

In addition to its Congress, ICMS will also be conducting its annual general membership meeting, at which Mr. Fuerst will serve as a panel member discussing "Severe Adverse Events and Cell Based Medicine."  The panel is expected to discuss FDA regulation over stem cell therapies and the various ways in which the FDA could attempt investigation and enforcement actions regarding the practice of that particular form of medicine.

For more information on Fuerst Ittlemans experience in the legal aspects of stem cell therapies, age management medicine, food and drug law in general, and FDA regulatory and enforcement actions, please visit our Food, Drug and Cosmetic Law practice page.

New Clarification on UTP Disclosures from the IRS

In the aftermath of the release of the final Schedule UTP, IRS officials have been offering clarifications on several key issues that are of great concern to taxpayers. Service officials have also stated that further guidance on filing Schedule UTP may come before the end of the year.

Speaking in San Diego on November 5th at the annual meeting of the California Tax Bar and California Tax Policy Conference, William J. Wilkins, IRS Chief Counsel, stated that tax practitioners must make concise disclosures of uncertain tax positions (UTPs) which are obligated to be disclosed. According to the instructions to Schedule UTP, a “concise description” should include a description of the facts material to the tax treatment of the position and information that reasonably can be expected to apprise the IRS of the identity of the tax position and the nature of the issue. While initial guidance indicated that the statement need not be more than a few sentences and need not include an assessment of the hazards of a tax position or an analysis of the support for or against the tax position, officials caution that the disclosure must be concise and descriptive enough for the IRS to properly evaluate the position.

Wilkins further stated that tax practitioners should not over-analyze the information being provided on the Schedule.

Similar comments have come from other IRS officials speaking at other tax functions. At a November 4th meeting sponsored by the Tax Audits and Litigation Committee of the Tax Section of the D.C. Bar, Ronald Schultz, Senior Adviser to the Deputy Commissioner for Service and Enforcement stated that additional guidance on Schedule UTP may have to be issued before the end of the year to answer tax practitioner questions. Schultz further stated that the additional guidance most likely will not result in changes to the form, “What we put out was intended to be final.”

Schultz and Deborah Palacheck, a senior adviser in IRS’s Large Business and International Division, said that guidance may be required in four areas that are frequently the source of practitioner questions and comments:

  • “Recording a Reserve” “ Schedule UTP instructions provide a generic definition of what it means to record a reserve (a triggering event for disclosing the UTP) and, according to Schultz, intentionally steer clear of specificity. But questions keep arising, said Schultz, therefore the IRS is looking to see if additional guidance is necessary.
  • “Reserve Amounts and Ranking” “ Schultz stated that additional inquiries surround the reserve amount that must be reported and the requirement in the regulations to rank each tax position by size.
  • “Foreign Tax Positions” “ Although the IRS believes the instructions on the reporting of foreign tax positions are clear, Schultz stated that the IRS continues to get questions about foreign tax positions, so additional guidance may be warranted.
  • “Embedded Net Operating Loss Carryforwards” “ Schultz also noted that the Service is working to respond to numerous questions regarding net operating loss (NOL) carryforwards that are inherently embedded in uncertain tax positions. This very scenario was addressed in the instructions to the form, but tax practitioners still want further guidance.

The issue of overlapping disclosures “ such as the NOL carryforwards highlighted above “ are a focus of IRS discussions as the Service determines whether additional guidance is necessary. IRS Special Counsel Kathryn Zuba, the primary author of the official IRS guidance on Schedule UTP which has already been released, stated at a recent tax forum that “a complete and accurate disclosure of a tax position on the appropriate year’s Schedule UTP will be treated as if the corporation filed a Form 8275-R, Regulation Disclosure Statement, regarding the tax position.”

Zuba further stated that the Service will be looking at the Schedule M-3 for large and mid-sized businesses vis-à-vis the companies Schedule UTP disclosures to determine if any overlap can be eliminated.

The bottom line is that the IRS is continuing to tweak its guidance with respect to Schedule UTP, and more information will be forthcoming in the next two months.

McConnell Says Republicans Must Block Obama Tax Hikes

U.S. Senate Republican Leader Mitch McConnell (R-KY) spoke on November 4, 2010 at the Heritage Foundation in Washington, D.C., laying out his roadmap for the future of the Republican Party agenda in the aftermath of the election. What is among the top GOP priorities according to McConnell? Blocking President Obama from raising taxes.

“[W]hat can Americans expect from Republicans now? On the economy,” promised McConnell, “we will work hard to ensure Democrats dont raise taxes on anybody, especially in the middle of a recession.”

Since President Obamas election in 2008, the Republican Party has been focused on keeping the President from raising taxes. The drumbeat has been that the Bush-era tax cuts, which are set to expire at the end of this year, must remain in place. In 2001 and 2003, Bush enacted several major tax cuts including:

  • A reduction of individual income tax rates from 15, 28, 31, 36, and 39.6 percent to 10, 15, 25, 28, 33, and 35 percent;
  • Lowered tax rates for dividends and capital gains;
  • An increase in the child tax credit from $500 to $1,000;
  • A phased-in reduction in estate taxes, and a one-year repeal in 2010;
  • A big expansion of tax-favored retirement savings plans.

Republicans have warned that allowing these tax cuts to expire during the current recession will further damage the overall U.S. economy and cause even higher unemployment.

Fresh from his “shellacking” in Tuesdays election, President Obama seems to be extending an olive branch to the Republicans when it comes to the tax cuts. White House Spokesman Robert Gibbs said Thursday “ after McConnells speech “ that while Obama believes that extending tax cuts permanently for upper income earners “is something the President does not believe is a good idea,” Obama may be open to the possibility of extending the cuts for one or two years.

How would McConnell respond to this offer of détente on tax cuts?

“The formula is simple, really,” said McConnell on Thursday, “when the administration agrees with the American people, we will agree with the administration. When it disagrees with the American people, we wont. If the administration wants cooperation, it will have to begin to move in our direction.”

While the olive branch is looking a little bedraggled and singed from the fiery rhetoric, according to McConnell, “There is no reason we cant work together to prevent a tax hike on small businesses.”

In these uncertain tax times, effective, aggressive and proactive tax planning is a must for individuals and businesses of all sizes. Let the experienced Tax Planning practice at Fuerst Ittleman, PL, help guide you. Contact us today for a free consultation.

Tea Party May Throw Kink Into GOP Trade Policies

By Ryan Davis

Law360, New York (November 03, 2010) — In the past, a sweeping election win for Republicans reliably translated into wide support for free trade measures. That may not be the case after Tuesday’s election results, lawyers say, because the Tea Party movement that powered the GOP to victory is largely an unknown commodity when it comes to trade and may be hostile to the traditional GOP agenda on the issue.

Congress has gotten relatively little done on the international trade front since President Barack Obama took office, but the Republican gains and divided legislature brought about by the election will likely push trade even further down on the congressional agenda, attorneys say.

While the new leaders in the House, including presumptive House Speaker John Boehner, R-Ohio, and Majority Leader Eric Cantor, R-Va., have a track record of supporting free trade policies, the freshman class of Tea Party-backed Republican representatives could be far less supportive, though their positions on trade are still largely unknown, lawyers say.

The conservative rhetoric in this year’s election was fueled by populist anger about the economy and fear about the threat open trade policies pose to American jobs, lawyers say.

“It’s interesting, you would expect a high number of additional Republicans would translate into additional support for free trade,” said Behnam Dayanim, a partner at Axinn Veltrop & Harkrider LLP. “But we’re not in normal times.”

Nevertheless, few of the newly elected Republican representatives have extensive background in trade or ran on an explicitly trade-based platform, so it is difficult to guess how they will vote, said Russell L. Smith, special counsel at Willkie Farr & Gallagher LLP.

Given the economic climate and the circumstances of the election, Smith said it’s possible the freshman GOP lawmakers will be inclined to support protectionist trade policies to curry favor with constituents.

That could create tension with House leaders who are more supportive of free trade and lead to a “battle for the soul of the Republican Party,” Smith said. Whether the leadership will be able to wrangle the votes to pass legislation in support of free trade “is a big unknown,” he added.

Dayanim said he could envision a scenario in which Tea Party Republicans and liberal members of Congress who support more protectionist policies form an unusual coalition to oppose some pieces of free trade legislation.

Republicans who are skeptical of free trade “will have to do a delicate straddle on this issue because their corporate supporters like those policies just fine,” said Stanley J. Marcuss, a partner with Bryan Cave LLP.

“It’s a peculiar time,” said Mitchell S. Fuerst, managing partner at Fuerst Ittleman PL. “There are rules we thought we knew about Democrats and Republicans, but new rules are getting written.”

Any ideological schism between Republicans of different stripes will only become visible when trade legislation comes up for a vote, but many lawyers say they don’t expect trade to be a significant part of the agenda in the new Congress.

“Unfortunately, I don’t think trade will be a priority issue,” said Ashley W. Craig, a partner at Venable LLP. “The Republicans in the House have said they will focus on financial issues and repealing health care reform, so trade may get caught in the crossfire and fall victim to a further lack of consideration.”

Thompson Hine LLP partner David Christy said he doesn’t see any way for the newly elected Congress to score political points by pushing potentially unpopular free trade measures that may just get vetoed by the president anyway.

“Given the state of the economy, it won’t be a golden age for free trade,” he said.

One litmus test for how the new Congress will handle trade issues will be how it addresses the three pending free trade agreements with South Korea, Colombia and Panama. The U.S. signed the deals years ago, but they still require approval by both houses of Congress.

There has been little action so far during the Obama administration about getting the agreements approved by Congress, although the U.S. and Korea are seeking to finalize details of the plan in advance of next week’s G20 meeting in Seoul.

Jennifer Choe Groves, a partner at Hughes Hubbard & Reed LLP, said the free trade agreements “might provide an opportunity for cooperation between the White House and Congress.”

She said that even with the unknown quantity of the Tea Party’s stance on trade and the fact that Obama has voiced support for getting the deals approved, she’s optimistic the House, if not the Senate, could vote to implement the trade deals.

“Passage of the free trade agreements would be good for the country,” she said. “I don’t think the Republicans would vote against them just to spite Obama.”

Craig was less certain that the House GOP leaders would have the appetite for a vote on trade deals that conservative new members could portray as aiding foreign countries at the expense of American jobs.

“The big question is whether they want to tackle something that could blow up in their face,” he said.

Still, Craig said, Republican leaders inclined to seek a less risky approach to supporting free trade and set themselves apart on trade issues could issue statements putting pressure on the administration to begin negotiating new free trade agreements with other trading partners.

As it has for the past several years, China will be the focus of most trade-related policy and discussion, and legislators on both sides of the aisle could ramp up anti-China rhetoric, Dayanim said, and even seek to strip away some favorable trade provisions the country now enjoys.

“I suspect China is going to be an even bigger bogeyman for many members of Congress than it has been in the past,” he said.

Smith said that although the new Republican leaders have pledged to tackle the very difficult task of fixing the economy first, if they become frustrated in that effort, they may find it politically expedient to capitalize on public suspicion of China and by imposing punitive trade measures.

Mario Mancuso, a partner at Fried Frank Harris Shriver & Jacobson LLP, said that ultimately U.S. policy toward China may not change much under the new Congress, but in terms of public comments about Chinese policies, “there will be more fireworks.”

While Democrats retained control of the Senate, they now have a slimmer margin that could open the door for passage of free trade measures, lawyers say. Free trade proponents are also encouraged by the election of Republican Rob Portman, a former U.S. trade representative in the George W. Bush administration, to a Senate seat in Ohio.

Some parts of Obama’s trade agenda could be significantly hampered by the Republican victory, Mancuso said.

For one, the administration has placed a high priority on reform of the country’s Cold War-era export control system, a plan that requires congressional approval for some measures, but not others.

While export control reform is not typically viewed as a partisan issue, the aspects that need a vote by the legislative branch may run up against the same skepticism about free trade that could hinder other policies, he said.

Members of Congress who oppose the plan could also slow down parts of the process that don’t need a vote by requiring members of the administration to testify more frequently and answer more questions about the project, he said.

The election may also have brought the Obama administration’s efforts to open trade with Cuba, such as relaxing regulations on family travel and some exports, to a screeching halt, Mancuso said.

That’s because Ileana Ros-Lehtinen, a Cuban-American Florida Republican who strongly supports the embargo, is expected to become new chairwoman of the House Foreign Affairs Committee, which handles most Cuba-related legislation.

“To the extent that there was a mini-trend toward easing up on the embargo, that mini-trend stopped last night,” Mancuso said.

2,923 Small Biotechnology Companies to Receive $1 Billion in New Therapeutic Discovery Project Credits and Grants

On November 3, the Secretary of the Treasury, the Secretary of Health and Human Services, and the National Institute of Health Director announced recipients of the $1 billion in new therapeutic discovery project credits and grants created by the Affordable Care Act. The 2,923 small companies receiving awards specialize in biotechnology and medical research and are located in 47 states and the District of Columbia.

The purpose of the program is to assist biotech companies in producing new, cost-effect technologies, create jobs, and increase the competitiveness of the United States in the global biotechnology industry, specifically in the filed of life, biological, and medical sciences. The program is meant to target projects showing significant potential to produce new therapies, address unmet medical needs, reduce long-term growth of health care costs, or advance the goal of curing cancer within the next 30 years. The biotechnology industry is growing rapidly and currently employs approximately 1.3 million workers.

The new therapeutic discovery project credit covers up to half of the cost of qualifying biomedical research. The credit is only available to firms with fewer than 250 employees.

For more information on tax and regulatory issues influencing the biotechnology industry, please contact us at contact@fidjlaw.com.