Expanded A-901 Requirements Coming Soon? Salespeople, Consultants and Soil Recyclers Should Prepare.

On June 20, 2019, the New Jersey Legislature began moving a bill (S1683/A4267), that would expand the scope of A-901 requirements to a broader range of persons involved in the solid waste industry, including salespeople and consultants. The bill also would subject persons or companies engaged in soil and fill recycling services to the same regulation as those engaged in the business of solid waste.
This proposed legislation passed the Senate unanimously on June 20, 2019 and is now pending before the Assembly.
There are extensive regulations in New Jersey governing businesses involved in the solid waste and recycling industries. Many people do not realize that it is a long and complicated process to become a fully licensed solid waste transporter, facility or broker. And some do not realize that they cannot conduct a solid waste business in the State of New Jersey until the process is completed.
One of the most time-consuming aspects of solid waste licensing is obtaining A-901 approval. The “A901” currently does not apply to those involved in recycling. The A-901 program was adopted many years ago in response to the infiltration of organized crime into the solid waste business to ensure those conducting the business of solid waste in New Jersey have the requisite integrity, reliability, expertise and competence. There are some limited exceptions to A-901 licensing requirements for self-generators of solid waste and Licensed Site Remediation Professionals who manage solid and hazardous waste in connection with remediation projects.
While the process to apply for an A-901 license is long (on average 18 months or longer), our experience has provided several practical considerations that can make the process smoother:

  • The applicant is not the only entity responsible for completing the corporate history disclosure forms; each parent company and potentially even equity, private and remote investors must completely fill out these forms. Moreover, every key employee, owner, officer, director, member and partner in the business must submit a personal history disclosure form, that includes information about family members, employment history and these individuals must also submit to fingerprint checks. It is imperative that these persons be complete in their responses.
  • The New Jersey State Police are obligated to do a background check on applicants. So be prepared to respond to questions and/or inquiries about situations that may have occurred years ago. For example, an applicant recently was asked about long unpaid motor vehicle citations; an affidavit from the applicant explaining that were out of the country at the time and did not own the car in question kept channeled and constrained the background check keeping things on track. In another instance a longstanding litigation unrelated to current business operations came up. By settling the matter the background check stayed on course.
  • Make sure the business is in good standing, including with the Division of Taxation.

Finally, if the applicant is qualified”, NJDEP will issue the A-901 license, but may as a condition require the recipient to attend an NJDEP seminar and/or obtain a letter from an attorney stating that the company has been advised of the applicable laws and regulations and is aware of its compliance obligations. Having an attorney that has been involved in the A-901 application and that will be available to complete this step will also help to efficiently navigate the process.
For more information, please contact the author or any Government Affairs Advisor at DMGS.

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New Jersey BPU Adopts Community Solar Regulations

On February 19, 2019 the New Jersey Board of Public Utilities (“BPU”) formally adopted its proposed regulations (the “Regulations”) regarding the Community Solar Pilot Program (the “Pilot Program”).  Although there are some minor clarifications, and 339 published comments, there are no material changes to the proposed regulations that were published for comment on October 1, 2018.

The first year of the Pilot Program began upon adoption of the Regulations on February 19, 2019, and will end on December 31, 2019.   The remaining two years of the Pilot Program will be calendar years 2020 and 2021.

The next step for the BPU will be to adopt the proposed regulations regarding the form of application which were published on November 28, 2018, and to begin accepting applications.

For further information contact the author. 973-222-1855

The Bureau of Land Management to hold online lease sales for oil and gas drilling.

Last week, the Bureau of Ocean Energy Management held its first live-streamed offshore oil and gas lease sale.

The Bureau of Land Management issued a rule on Tuesday announcing that agency’s intention to hold online lease sales for oil and gas drilling, starting in September.

The agency’s first online lease sale will be Sept. 20, offering 4,398 acres of land in Kentucky and Mississippi, the agency said. Congress gave the agency the authority to hold the auctions online, rather than in person, in an amendment in the National Defense Authorization Act for fiscal year 2015.

The agency “believes that online sales have the potential to generate greater competition by making participation easier, which has the potential to increase bonus bids,” it said in its announcement.

The rule, which formalizes the plan to hold online lease sales, takes effect immediately. It doesn’t require a public comment period because it only restates language from the NDAA legislation and only changes the agency’s own operations.

The decision is part of a broader push by lawmakers to move onshore and offshore lease sales online rather than in person. The possibility of attracting more bids is one reason for such a shift. Another is that it stops anti-fossil fuel protesters from disrupting lease sales.

Basic Rules on Lobbying by 501(c) (3) Organizations

According to the Internal Revenue Code , nonprofit organizations with 501(c)(3) tax-exempt status are organized “for charitable, religious, educational, or scientific purposes,” (IRS Tax Code) and these organizations are subject to the rule that lobbying cannot be a substantial part of their activities.

The organization’s articles [constitution, by-laws] may not “expressly empower it to devote more than an insubstantial part of its activities to attempting to influence legislation by propaganda.”

501(c)(3) organizations may not directly or indirectly participate in political campaigns by supporting or endorsing candidates for public office or by publishing or distributing statements on behalf of a candidate’s campaign. However, 501(c) (3) organizations may lobby as long as that lobbying remains an insubstantial part of their activities.

Direct Lobbying

Direct lobbying is communicating your views to a legislator or a staff member of any other government employee who may help develop the legislation. To be lobbying, you must communicate a view on a “specific legislative proposal.” Even if there is no bill, you would engage in lobbying if you ask a legislator to take an action that would require legislation, such as funding an agency. Significantly, if you ask your members to lobby for this bill, that also is considered direct–not grassroots– lobbying. People are considered members if they contribute more than a nominal amount of time or money. If a newsletter article that goes to both members and non-members urges them to take action, the amount you would need to allocate to grassroots lobbying would be only the percentage of non-members who received your newsletter. However, if you simply tell people about a specific piece of legislation and your position on it but you don’t encourage them to contact their legislators, this is not counted as lobbying.

Direct lobbying also involves trying to influence the public on referenda and ballot initiatives. In these cases, the public are, in essence, the legislators.

Grassroots Lobbying

Grassroots lobbying is trying to influence the public to express a particular view to their legislators about a specific legislative proposal. A communication is considered lobbying (a “grassroots call to action”) if it states that the readers should contact a legislator, or if it provides the legislator’s address and/or telephone number, or provides a post card or petition that the person can use. It is also considered a lobbying communication if you simply identify legislators who are opposed to or undecided about your view of the legislation, or identify that person’s legislators, or state who is on the committee that will vote on the legislation. (This is called “indirect encouragement.”) Simply identifying a bill’s sponsor (the “Istook amendment”) is not considered indirect encouragement.

Organizations that send out frequent “calls to action” urging their members to contact their legislators, organizations that employ an outside lobbyist or lobbying firm, and organizations that lobby through their employees should consult Section 501(h) of the Internal Revenue Tax Code for reporting rules and procedures.

Overhaul of Small Business Subcontracting Rules

The Federal Acquisition Council published several new contracting rules Thursday, including one designed to increase government subcontracting to smaller businesses.

The new federal acquisition circular adds the terms of a 2013 Small Business Administration rule that made a number of changes to federal small business subcontracting requirements into the Federal Acquisition Regulation, the council said. The rule will go into effect at the beginning of November.

The circular also includes several other changes, such as clarifications meant to reduce confusion for contractors, according to the council, which includes the U.S. Department of Defense, U.S. General Services Administration and NASA.

Contractors will have to assign specific North American Industry Classification System codes — used for collecting statistical data — to subcontracts and to provide socioeconomic status of a subcontractor in notifications to unsuccessful subcontract offerers. In addition, contractors will be barred from blocking subcontractors from discussing payment or utilization issues with a contracting officer.

Contracting officers will also get expanded authority, including the discretion to require that small business subcontracting goals be defined in terms of total contract spending — not just based on required subcontract spending — and to request a new subcontracting plan if and when prime contractors grow beyond small business status.

Officers can also establish subcontracting goals at the task or delivery order level when making procurements under overarching indefinite-delivery, indefinite-quantity contracts, among other changes.The rule also changes the way credit is assigned to federal agencies for meeting their small business contracting goals, allowing agencies that fund a contract — not just those responsible for awarding the deal — to receive credit.

The council had issued a proposed version of the rule in June 2015, following on from the SBA’s final rule, which had been put in place in July 2013, and received several dozen comments on the proposal.

Responding to those comments, the council made several tweaks in the final measure, including clarifying that although contracting officers can establish subcontracting goals for each task order, they cannot ask for new subcontracting plans.

In another tweak, the council also said that prime contractors won’t be held liable for misrepresentations made by a subcontractor regarding size or socioeconomic status, if the contractors otherwise acted in good faith.

The other changes in the circular include revisions to forms related to contracts involving bonds and other financial protections aimed at clarifying liability limitations and reducing confusion for contractors, and updates to outdated references in the regulation to federal guidance on administrative and audit requirements.

Small Business Administration Mentor-Protege Program Expansion

There are several pending regulatory changes previously designated by the SBA for release this year, including a rule that will clarify the agency’s suspension, revocation and debarment procedures for contracting agents, and another that will ease eligibility requirements for the Historically Underutilized Business Zones Program, which covers businesses located in certain “historically underutilized business” areas.

But the upcoming change that has prompted the most interest for many contractors  is a pending final rule expanding the SBA’s Mentor-Protege Program, first floated in a February 2015 proposed rule.

The program allows small businesses to partner in a joint venture with a larger mentor business that can provide advice and assistance, for instance to help win or implement larger or more complex deals that the small businesses lack the resources to win on their own, while still maintaining eligibility for federal small-business set-aside contracts.

Currently, the program is limited to businesses that participate in the SBA’s 8(a) Business Development Program, which provides assistance for small businesses majority-owned and -operated by “socially and economically disadvantaged” individuals, but is expected to be extended to all businesses otherwise eligible for set-aside contracts under SBA rules.

While the exact shape of the program expansion has yet to be announced, SBA officials have most recently hinted that the rule should be finalized at some point in July, and have indicated that the program’s terms should be effectively identical to the current 8(a) Mentor-Protege Program.

If those prescriptions hold, then the program’s expansion will be overwhelmingly welcomed throughout the small-business contractor community.

Inversion Regs Cast Wider Net

The U.S. Department of the Treasury on Monday issued rules to curb tax-motivated inversions, and while much of the immediate attention focused on how they would affect the proposed Pfizer-Allergan merger, the regulations could ensnare other kinds of cross-border deals or even domestic transactions.

The regulations issued Monday formalized notices put out by the Treasury in 2014 and 2015 saying the administration would write rules to make it more difficult for companies to merge with competitors in low-tax jurisdictions. The regulations included new measures not mentioned in the previous announcements, such as a provision to prevent companies from getting around existing inversion rules by acquiring multiple companies over a short time, as Allergan Inc. has done.

The Treasury also issued proposed regulations to combat the practice of earnings stripping, one of the primary ways inverted companies reap tax benefits from inversions and which involves saddling domestic affiliates with debt and taking a U.S. tax deduction on the interest.

The government may have written the rules to target inversions, but the more than 300 pages of regulations touch on so many different sections of the tax code that other transactions could be caught up as well.

Firms may have to take another look at deals going back more than a year and a half to see if they comply with the rules. The regulations implementing the 2014 notice apply to transactions completed on or after Sept. 22, 2014, while the regulations formalizing the 2015 announcement apply to acquisitions completed on or after Nov. 19, 2015. The new measures introduced Monday apply to transactions completed on or after April 4.

The proposed earnings-stripping regulations in particular have a wide scope that goes well beyond inversions and would encompass debt transactions that are commonly used by multinational or domestic groups of related corporations.

Under the proposed rules, the IRS said it would treat as stock certain transactions that would otherwise be considered debt, such as instruments issued by a subsidiary to its foreign parent in a shareholder dividend distribution or instruments issued in connection with some acquisitions of stock or assets from related corporations in transactions economically similar to dividend distributions.

The proposed regulations specifically mention a court case from 1956, Kraft Foods Co. v. Commissioner, in which the Second Circuit considered a domestic corporate subsidiary that issued indebtedness in the form of debentures to its sole shareholder, which was also a domestic corporation, in the payment of a dividend. In the case, the government argued that the transaction may have been a sham and should have been treated as stock, but the court sided with Kraft, saying the debentures should be respected as debt.

In the proposed regulations, the IRS said going forward it would treat a debt instrument issued in fact patterns similar to that in Kraft as stock, thus unsettling well established law.

The breadth of the regulations will have implications well beyond inversions and will affect not only foreign companies and inverted companies but U.S. companies as well, Bazar said.

One of the new provisions in Monday’s regulations would target so-called serial acquirers who purchase multiple U.S. companies in quick succession to get around an existing rule that penalizes inversions in which the former stockholders of the U.S. company retain at least 60 percent ownership in the newly combined foreign company. If the former stockholders retain at least 80 percent ownership of the new company, the transaction is completely disregarded for U.S. tax purposes.

In the regulations, the Treasury said it was concerned that a serial acquirer could subvert the rule by issuing stock with each successive purchase of a U.S. company, thereby increasing its ownership and enabling acquisition of an even greater domestic company without crossing the 60 percent threshold. To that end, the regulations exclude from that ownership calculation stock that is issued by a foreign corporation in connection with the acquisition of U.S. entities in the prior three years.