Election 2020 Snapshot: Helping our clients make sense of the U.S. election results - Hogan Lovells
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Election 2020 Snapshot: Helping our clients make sense of the U.S. election results
On Tuesday, November 3, 2020, Americans chose the
presidency and the makeup of the United States Congress.
With the U.S. election now decided, with the exception of the
Georgia Senate races, we are delighted to share with you our
Election 2020 Snapshots. In this publication we anticipate
the potential impacts, share and analyze insights, and
understand the implications of the political landscape under
a Biden Administration and its outcomes for global business
and many industries. For each of these snapshots, we have
asked our industry thought leaders throughout the country to
write about trends and compelling legal issues that are both
of interest to them and ones they believe will impact
our clients in the near future and beyond.
We hope that you find the brochure insightful. If you would
like to discuss our capabilities or the outlook for your industry
in more detail, please do not hesitate to get in touch.
Ivan Zapien
Partner
Practice leader, Government Relations & Public Affairs
Taxation
While there is an anticipation of greater predictability under a President Joe Biden,
which is critically important to the commercial real estate industry, expected and
potential changes in trade, taxation, housing and health care policy are all factors President-elect Biden has generally proposed funds rely on 1031 exchanges to freely buy and sell
increasing taxes on the real estate industry. properties, without having to worry about taxes
that could affect the industry. During the 2020 campaign, President-elect Biden resulting from such sales hurting cash flow. If 1031
proposed a number of changes to the Internal tax deferral for these exchanges is eliminated, the
Revenue Code including raising individual and tax cost would significantly hurt rates of return.
corporate income tax rates, increasing capital Moreover, if a Biden administration is successful
In November 2020, Democrat Joe Biden defeated incumbent Republican gains tax rates, eliminating 1031 like-kind in increasing capital gains and Section 1231 tax
Donald Trump to become the President-elect of the United States. exchange deferrals, investing in the Low Income rates, this would serve to further increase the
Housing Tax Credit Program, and reforming the amount of tax due on these real property sales.
During the election cycle, the Biden campaign proposed policy changes statutory rules relating to qualified opportunity Finally, any restrictions added to the opportunity
that could have broad consequences for the real estate sector, zones. President-elect Biden will also seek to zones program, which offers deferral of capital
increase the tax rate on carried interest, at least gains or 1231 gains for sales proceeds invested
including eliminating certain tax-advantaged treatments of real estate for high-income taxpayers. While an increase in in designated areas (“opportunity zones”) of the
assets, and encouraging public and private investment in low-income tax cost may lead some potential sellers to stay on country, or if this program is eliminated entirely,
the sidelines, tax impacts are typically just one of would further limit deferral options and increase
housing, infrastructure projects and renewable energy. Whether the many factors motivating transactions. tax cost.
Biden administration can implement any of the goals of the Biden Increases in corporate tax rates have historically It’s worth noting that a number of these potential
campaign will largely depend on two factors, (i) macro-economic been connected to increases in demand for changes would likely have little to no impact
tax credits, as companies look for new ways to on the tax liability of foreign investors into U.S.
trends and (ii) who wins the Georgia run-offs for two Senate seats reduce their tax liability. Accordingly, if a Biden real estate. Foreign investors generally have
on January 5, 2021. administration is able to pass a corporate income limited U.S. capital gains, and are often subject
tax increase, as well as legislation providing for to a withholding regime which makes it nearly
investments in the Low Income Housing Tax impossible for them to take advantage of tax
Credit program, investors could see an increase deferral programs like the Opportunity Zones
in opportunities to develop and in invest in Program. As such, an increase in capital gains
low income multifamily properties. Similarly, rates and/or an elimination of 1031 exchange
increases in the corporate income tax rate could deferral may with respect to non-U.S. entities
also provide opportunities for investment in do little to cool the desirability of investing in
properties involving tax credits relating to energy U.S. Real Estate. With this said, any potential
efficiency or historic preservation. changes in the tax arena will likely be priced
Like most other major sectors of the economy, Additionally, an increase in capital gains rates, into the market, so even if investors find that
the future of real estate over the next year and coupled with the elimination of the like-kind these potential changes to the tax code have no
beyond will be largely dependent on the success (1031) exchange deferral, which allows property substantial impact on their U.S. tax liability, they
of COVID-19 vaccines and their distribution to a sellers to defer recognition of tax gain when sale will still likely have an impact on the valuations of
The Georgia Special election on January 5, 2021 various investments and real estate assets.
large percentage of the public and thereafter, and for two Senate seats will determine which party proceeds are re-invested in like-kind properties,
how fast the economies of the country and the will control the Senate. If Democrats win both could even more dramatically affect the US real
world can bounce back from the pandemic. These races, then the Senate would be split 50-50 with estate market. Many developers, REITs, and
factors would be accelerated if Washington is able the Vice President-elect breaking any ties. If
to approve another meaningful COVID-19-related Republicans win one or both Georgia seats, then
stimulus package. they will retain control of the Senate. Holding the
The Biden administration has repeatedly presidency and a Democratic Senate and House
discussed adopting a more cohesive national would enable Biden to enact large portions of his
approach to COVID-19, and one of its first steps agenda and implement policies that would affect
post-election was to appoint a task force to help the real estate sector. If Republicans retain the
the country better respond to the pandemic. Senate, the Biden agenda will have a less impactful
So, there is some reason for optimism that a effect on the broader economy and commercial
rebound in the sector may be coming soon. real estate.
Foreign Investment
A Biden administration will have power to able to get an infrastructure bill through
influence spending priorities and the regulatory Congress. While a Biden administration will
environment and to enact trade policy. The likely be no less aggressive in prosecuting and
Trump administration has generally taken a restricting Chinese interests than the Trump
nationalistic approach to foreign investment and administration, it is anticipated that Chinese
has not hesitated to publicly undermine, or investments will be reviewed by CFIUS in a
attempt to block, foreign acquisitions of U.S. less public manner and that Biden will seek
companies or investments into U.S. projects. opportunities to reduce tensions in U.S.-China
In contrast, President-elect Biden has generally relations.
taken a less antagonistic view towards foreign One of President-elect Biden’s priorities has
investment and has emphasized the opportunities been modernizing America’s immigration
in international economic cooperation. This system and welcoming immigrants into the
difference in approach could lead to substantial U.S. This stance could encourage more foreign
changes in how investments in certain U.S. nationals to reconsider attempting to obtain
companies and projects are reviewed, as well as citizenship through programs like EB-5, which
increased opportunities for immigration-related allows foreign nationals to obtain United States
investments such as those made pursuant to the green cards by investing in job-creating real
EB-5 Program. The potential for less trade estate projects. Additionally, as part of this
friction, especially with U.S. allies, may be a modernization of the immigration system, it
helpful factor as the economy pulls out of the is feasible that there could be changes to the
pandemic-induced recession. EB-5 Program itself. Accordingly, it is possible
On February 13, 2020, the Council for Foreign that a Biden administration could provide a Infrastructure
Investment in the United States (“CFIUS”) was rejuvenation of EB-5 financing and lead to an
granted new authority to review foreign direct increase in the number of projects financed by
investments into real estate assets located near this capital source. The Biden infrastructure proposal also has the infrastructure projects can quickly become
military bases or critical infrastructure potential to positively impact real estate property infeasible without contribution from the Federal
A Biden presidency will likely represent a
(including energy and IT-infrastructure), as values and operations in the United States. Biden Government. However, with a proposed $1.6
departure, or attempted departure, from the
well as investments into this infrastructure has advocated for the Federal Government to invest trillion of spending for infrastructure and R&D
Trump administration’s policies in the realms
itself. Notably, CFIUS is under the purview in the repair and creation of public transportation under a Biden administration, real estate demand
of taxation and foreign investment.
of the executive branch and as such, the systems, green spaces, water systems, electricity for sectors such as office and industrial should be
President has substantial authority over its grids, and broadband connections throughout the positively impacted. The residential real estate
approach to reviewing and approving foreign country. Owners and tenants of real estate in sector could see positive effects if housing policy
investment transactions. It is reasonable to densely populated regions, such as New York City initiatives, such as tying federal funding to zoning
expect that while CFIUS under a Biden and the surrounding areas, could benefit greatly changes spur affordable housing development in
administration will continue to scrutinize the from the repair and modernization of high speed suburban areas. Alternatively, the tax law changes
flow of foreign capital into these critical assets, rail lines. Increased availability and capacity of necessary to achieve the infusion of federal funds
it will potentially take a much less antagonistic broadband through high-speed fiber optic cables for such additional spending could lower consumer
approach towards these investments, as could significantly expand the geographic areas of spending in the luxury retail segment and some
compared to the Trump administration, unless the U.S. that are able to support the demands of areas of the housing market. Increases in corporate
they pose security risks. Thus, foreign modern businesses with increasing broadband taxes may impact capital expenditures by
investors may find it easier to invest in U.S. communications and cloud storage needs. Without businesses and wage and job growth. Developers
energy projects such as wind farms and infrastructure spending by the Federal Government, will also be keeping an eye on Biden’s
powerplants, data centers, and other state and local governments, as well as specific environmental agenda which may also have
infrastructure projects. This could greatly improvement districts set up to pay for implications for commercial building operating
increase the potential for investment infrastructure projects would be required to come costs in order to meet higher energy efficiency
opportunities if a Biden administration is also up with the money themselves, often through standards.
additional taxes on real estate. Large, costly
COVID Key contacts
Possibly the largest single determinant
of the health and vitality of the real estate
market will be the timing of recovery from Lea Ann Fowler
the COVID-19 pandemic. The pandemic Partner
has presented legitimate questions as to the Denver
projected investment outlook for various +1 303 454 2561
asset classes in the U.S. real estate market. leaann.fowler@hoganlovells.com
The disruption and changes in the economy
have inflated rents in some asset classes while
creating distress in others. However, it is
difficult to predict with certainty which, and Michael Kaplan
to what degree, trends initiated or accelerated Senior Associate
by COVID-19, such as remote working office Denver
policies and avoidance of retail centers, will +1 303 454 2436
become permanent. COVID-19 will continue michael.kaplan@hoganlovells.com
to affect the U.S. real estate industry regardless
of which administration controls the Federal
Government. However, while the Trump
administration has largely left specific decisions Ted Brown
about the response to the pandemic to state and Senior Associate
local government, Biden has campaigned on a Denver
different approach. He has proposed dedicating +1 303 454 2405
more federal resources to slow the spread of ted.brown@hoganlovells.com
COVID-19, including increasing the number
of drive-through testing sites, as well as hiring
additional federal workers to coordinate contact
tracing. He has also discussed additional Ned Nakles
COVID-19-related stimulus packages to Law Clerk
individuals and businesses, though it is unclear Denver
what exactly those packages would include, +1 303 454 2490
or whether they could pass through a likely ned.nakles@hoganlovells.com
Republican-controlled Senate. A relief package
of less than $2 trillion is expected under a
Republican controlled Senate but the amount
of stimulus could be higher and implemented in Aaron Cutler
multiple phases if the Democrats gain control Partner
over the Senate. Washington, D.C.
+1 202 637 5648
If effective at slowing the spread of the virus, aaron.cutler@hoganlovells.com
the incoming administration’s policies may
be helpful in stabilizing U.S. real estate values
and operations. However, we note that the
widespread rollout of an effective vaccine will
be the most likely catalyst for a return to normal James Wickett
and initial indications are that such trend will Partner
occur, at best, by the end of the second quarter Washington, D.C.
of 2021. +1 202 637 6422
james.wickett@hoganlovells.com
Post-election enforcement and regulatory waves: charter. Biden’s position on policies designed to
facilitate FinTech innovation could shape the future
how the financial services industry can prepare for FinTech. These include the efforts by agencies like
the CFPB to give limited assurances that innovative
products are compliant with existing laws or will not
prompt enforcement actions (i.e., “innovative sandbox”
Brace for increased regulation of the financial services industry and policies such as the CFPB’s No-Action Letter Policy,
federal enforcement under the Biden Administration with a focus Compliance Assistance Sandbox, and Trial Disclosure
Sandbox). Conventional wisdom suggests that a
on consumer protection and debt collection, discrimination in Democratic administration will move to strengthen
the housing and consumer credit markets, and climate change regulations and that these programs could draw
scrutiny. However, because many FinTech innovations
disclosure. If Republicans maintain control of the Senate, serve populations that have been under-served by
continued legislative gridlock will likely prevent new legislation traditional financial products, and may be a critical
that would broadly impact the industry except to perhaps component to curbing lending discrimination, they
could remain unchanged. FinTech is an area ripe for
extend mortgage forbearance programs and eviction bipartisanship as key Congressional Republicans have
moratoriums into 2021. all staked out an interest in this policy area, including
Leader Kevin McCarthy (R-CA), House Financial
Services Committee Ranking Member Patrick
McHenry (R-NC) and soon-to-be Senate Banking
Committee Chairman Pat Toomey (R-PA).
Although we do not expect an ambitious legislative
agenda in the next Congress if the Senate is controlled
by Republicans, Representative Maxine Waters,
Chairwoman of the House Financial Services
Committee, is focused on leveling the financial playing
What to expect from a field. We therefore expect congressional hearings
Biden Administration related to her efforts to expand access to lending
and to hold financial institutions accountable for
discriminatory practices to continue. We also think
A Biden inauguration on January 20, 2021 looks
further congressional hearings on topics related to
all but certain. What policy and regulatory changes Reinvestment Act to ensure banks and non-bank
the CARES Act mortgage forbearance programs are
the Trump Administration will implement before financial services institutions are serving all
likely. However, if the outlook for the Senate changes,
leaving the White House, however, is somewhat agencies that strengthened their own communities; and (4) Enacting regulations that will
the agenda would be more aggressive. The two Senate
unpredictable. Removing Fannie Mae and Freddie enforcement activities over the last several require communities receiving certain federal funding
seats in Georgia are headed to a run-off on January 5th,
Mac from conservatorship – a long-time goal of the years will remain active and will perhaps even be to proactively examine housing patterns. We also
and Democrats would need to win both seats to attain
Trump administration – could be on the list. emboldened by the support from a consumer-friendly expect that under a new Director, the CFPB will move
a 50-50 majority in the U.S. Senate with Vice President
Once a Biden Administration is in place with adequate federal administration (i.e. New York’s Department expeditiously to enact more stringent Payday lending
Harris casting the tie-breaking vote. If they do so, we
staffing, we expect much activity in the first 100 days. of Financial Services (DFS), the Attorneys General regulations, perhaps resurrecting an Obama-era
may also see the Biden Administration look to use the
Biden will likely replace the Acting Comptroller of Offices in New York and Massachusetts; the new regulation that would have required payday lenders
Congressional Review Act to reexamine or reverse
the Currency (OCC) as well as the Director of the California Department of Financial Protection to check that borrowers could afford to pay back their
some Trump Administration rules.
Consumer Financial Protection Bureau (CFPB). Soon & Innovation). loan on time.
thereafter, we anticipate an uptick in enforcement, The Biden campaign has identified curbing racial The Securities Exchange Commission is expected to
particularly at the CFPB, once a new director is discrimination in the housing market as a key priority move to require disclosures related to climate change
installed and President Trump’s political appointees and indicated that a Biden Administration would risk and other environmental, social and governance
leave. Although we expect federal financial regulators work specifically toward: (1) Ending redlining and (ESG) disclosures. Finally, the impact that the Biden
and enforcement agencies to be more aggressive in a other discriminatory practices; (2) Holding financial Administration will have on FinTech is unclear. We
Biden Administration, they will not be the only cops institutions accountable for discriminatory practices; will be watching to see if a new Comptroller defends
on the beat. Many state enforcement (3) Strengthening and expanding the Community the OCC’s current litigation position for its FinTech
Prepare now for changes ahead We can help Key contacts Useful resources
Financial services companies can take As your company prepares for 2021, The CRA: Schumer-led Senate Could
several actions now to prepare for 2021. keep the following in mind: Overturn Trump Deregulatory Legacy
Aaron Cutler
• Work to resolve any outstanding investigations • Our Government Relations and Public Affairs Partner Litigation and regulatory risks of
before Biden appointees are in place. Washington, D.C.
and Legislation teams can help you strategize in LIBOR cessation guide launched
+1 202 637 5648
• Focus on compliance by: (1) reviewing past the face of emerging policy risks and opportunities. aaron.cutler@hoganlovells.com
examination issues to ensure they have been With team members having served in prior How tolling orders may complicate
fully resolved; (2) perfecting compliance policies administrations, the government relations team NY mortgage collections
and procedures – especially related to fair monitors, advises on and helps shape legislative
lending, CARES Act, and areas related to rules or and executive branch actions – including FATF reviews progress on the
appointments to key administration positions – Gregory Lisa
amendments that have taken effect in the past four Partner
implementation of its standards on
years; (3) ensuring compliance staffing is sufficient and can help you prepare for what’s around virtual assets and VASPs
Washington, D.C., New York
and considering appointing a fair lending officer if the corner. +1 202 637 3647 (Washington, D.C.)
one is not yet in place; (4) examining and refreshing • Our regulatory team is equipped to assist you in +1 212 918 3644 (New York)
compliance training programs; and (5) ensuring implementing compliance for current or proposed gregory.lisa@hoganlovells.com
compliance procedures include a mechanism to regulations, drafting comments to proposed
review consumer complaints regularly to spot regulations, and analyzing potential regulatory
potential problems early. It is also critical that risks for current or planned products. We can also
companies thoroughly document these efforts, conduct an audit of your compliance programs,
and any efforts to investigate and remedy and review and revise compliance policies, to put
compliance problems. you in the best position in the face of increased Allison Schoenthal
Partner
• Begin reviewing risks associated with climate enforcement.
New York
change and designate a specific officer to asses • Our Government Relations and Public Affairs +1 212 918 3647
these risks. and Investigations, White Collar and Fraud teams allison.schoenthal@hoganlovells.com
• Remain steadfast in building good relationships have deep experience preparing executives to
with your state and federal regulators so that you provide congressional testimony and responding
are in a position to quickly and effectively respond to congressional requests for documents.
to any future regulatory inquiries. • Our Financial Services Regulatory Investigations
Ashley Hutto-Schultz
• Identify the products that are currently benefiting and Enforcement and Financial Services Litigation Senior Associate
from the CFPB “innovation sandbox” policies and teams are ready to help you navigate any Washington, D.C.
closely monitor any changes to these programs. supervision or enforcement inquiries. Whether it’s +1 202 637 5409
the CFPB, an attorney general’s office, or a state ashley.huttoschultz@hoganlovells.com
• Prepare for requests for your executives to department of financial services, our Consumer
participate in congressional oversight hearings – Finance Litigation and enforcement teams have
this is especially true for larger financial institutions handled inquiries, investigations and enforcement
and leading FinTech companies. Taking time actions for our financial services clients.
to prepare a potential witness before receiving a
• Our FinTech team can help you navigate ensuing Rebecca Umhofer
hearing invitation is always a good idea. Knowledge Lawyer
legal shifts and new regulations as financial
Washington, D.C.
services players continue to adopt and deploy
+1 202 637 6939
innovations and new technologies. rebecca.umhofer@hoganlovells.com
• With more than 6,000 people globally, across
14 U.S. offices and 35+ other offices around the
world, we are ready to assist.
Election 2020 Snapshot: Impacts on the
technology and telecoms industry sector
An overhaul of tech antirust policy? Increased telecommunications
regulations coupled with expanding telecoms infrastructure?
Business as usual for Committee on Foreign Investment in the
United States (CFUIS) investigations? We explore these questions
and more in our analysis of the Biden administration’s potential
approach to technology and telecommunications policy.
Increased antitrust scrutiny?
President-elect Biden has not provided
Antitrust enforcement in the technology sector details regarding his administration’s
has received significant political and popular antitrust and tech policy, but leading
press attention over the past several years, and it Democrats and members of his transition
will likely continue to be a focus for the Biden team have expressed their support for an
Administration. The belief that so-called “Big overhaul of antitrust policy and enforcement.
Tech” has gotten too big gained bipartisan Representative David Cicilline, Chairman of
support among policymakers and enforcers the House Judiciary Antitrust Subcommittee,
during the Trump Administration, with many has said that he will begin working on new
expressing support for closer scrutiny and antitrust legislation in the coming weeks.
tougher antitrust enforcement in the sector. Senator Amy Klobuchar, who is a possible
Last month, the House Judiciary Committee, Attorney General under Biden, has also
following months of hearings, issued an pushed for new antitrust legislation and
extensive report calling for new antitrust expressed support for the Google antitrust
legislation aimed at the largest companies in the lawsuit. Gene Kimmelman, a member of
digital economy. Since then, the Department of Biden’s DOJ transition team and former
Justice (DOJ) has filed lawsuits against major senior official of the DOJ antitrust division
tech companies. The Biden Administration during the Obama Administration, testified
likely will move forward with pending tech in the House hearings and has advocated
antitrust litigation, particularly actions that are for increased oversight and regulation in
supported by state antitrust enforcers. Further, the tech industry. As a further indicator
the Biden administration could pursue new that the Biden Administration will take a
enforcement actions against other tech hardline on enforcement in the tech industry,
companies, possibly taking an even more a spokesman for Biden said that tech giants’
aggressive stance than the prior administration. alleged abuse of power will “end[] with...
President Biden.”
In short, technology companies should Antitrust Division. Biden’s selection of DOJ
anticipate increased antitrust scrutiny leadership will have a significant impact on
related to their mergers, including particular the government’s antitrust priorities during
attention on acquisitions of nascent his term. The full antitrust overhaul urged
competitors, and potential exclusionary by some legislation and policy proposals is
conduct related to digital platforms and big unlikely to gain sufficient bipartisan support
data. New antitrust legislation may also be in the agencies or in Congress. Thus, in the
on the horizon; however, the precise aim immediate term, antitrust policy in the Biden
and scope of such legislation is unclear. The Administration is unlikely to significantly
Biden Administration likely will increase depart from the status quo. However, more
funding and resources for the DOJ and expansive changes could occur if Democrats Expandingconnectivity,
connectivity, Biden Administration to name and confirm a
Federal Trade Commission (FTC), expanding take control of both houses of Congress, and Expanding successor (although
administration’s FCC.Biden
Undercan immediately
Democratic
their capacity for enforcement.
alsoregulation?
also regulation? name one of
leadership, wethemay current Democratic
see efforts to incorporate
after Democrats take control of the FTC.
commissioners
social policy goals asinto
the spectrum
new chair). The and
policy current
We do not expect that significant change will In short, technology companies should
Republican
more commissioners
consideration haveas:
of ideas such been more
occur overnight. Despite the administration The centralincreased
anticipate role of telecommunications
antitrust scrutinyin
change, leadership at the FTC, one of the two our personal
related andmergers,
to their commercial lives has
including only
particular •reluctant
Smallerto pursue
license aggressive enforcement
areas
Logan Breed or major policy changes than the Democratic
federal antitrust enforcement agencies, is deepened
attention since the COVID-19
on acquisitions pandemic.
of nascent •commissioners.
Higher auctionAt bidding credits
Partner DOJ, Biden will appoint
not likely to change immediately. Although it We expect the and
competitors, Biden administration
potential to
exclusionary
Washington, D.C. •a new
MoreU.S.
extensive
Attorney spectrum
Generalsharing
who will of lead
is likely that FTC Chairman Joe Simons will +1 202 637 6407 pursue
conductsignificant
related tonew investment
digital platforms in and big unlicensed spectrum
overall DOJ enforcement policy, as well as
resign (as is common when the Presidency logan.breed@hoganlovells.com telecommunications infrastructure,
data. New antitrust legislation mayespecially
also be
switches parties), Republicans will hold in
onrural areas, and
the horizon; increased
however, theregulation
precise aimof •anMore
Assistant Attorney
promotion Generaltechnology
of O-RAN to lead the
Antitrust Division. Biden’s selection of DOJ
three of the five FTC commissioner seats the
andtelecommunications and information
scope of such legislation is unclear. The • Embracing of municipal broadband to
leadership will have a significant impact on
spur competition.
until then, and it will take some time for the service industries, with likely
Biden Administration a focuswill
on increase
increasing
the government’s antitrust priorities during
Biden Administration to name and confirm a Ashley Howlett access,
fundingexpanding consumer
and resources for theprotections,
DOJ and and In
hisaddition,
term. The netfull
neutrality
antitrustwill continue
overhaul to
urged
successor (although Biden can immediately Senior Associate increasing service
Federal Trade provider competition.
Commission (FTC), expanding be hotly contested. A Democratic-led FCC
by some legislation and policy proposals is
name one of the current Democratic Washington, D.C. their capacity forvast
enforcement. will likelyto
move
+1 202 637 3682 Efforts to deploy amounts of unlikely gaintosufficient
reclassifybipartisan
broadband support
commissioners as the new chair). The current as a Title II telecommunications common
ashley.howlett@hoganlovells.com spectrum
We do notand expand
expect thatinfrastructure for will
significant change in the agencies or in Congress. Thus, in the
Republican commissioners have been more carrier service, allowing the policy
FCC toin expand
broadband and 5GDespite
occur overnight. will continue under
the administration immediate term, antitrust the Biden
reluctant to pursue aggressive enforcement its regulatory authority and reestablish
the Bidenleadership
change, administration,
at the but
FTC,shifts
one in
of the two Administration is unlikely to significantly
or major policy changes than the Democratic Obama-era
underlying priorities
federal antitrust may affectagencies,
enforcement program is depart fromnet theneutrality
status quo. rules. The prospect
However, more
commissioners. At DOJ, Biden will appoint of re-regulation may create the opportunity
implementation.
not likely to change Theimmediately.
Biden campaign Although it expansive changes could occur if Democrats
a new U.S. Attorney General who will lead for a legislative
platform included
is likely that US$20 billion
FTC Chairman Joe for ruralwill
Simons take control of compromise
both houses that could endand
of Congress,
overall DOJ enforcement policy, as well as the pendulum swings and provide market
broadband,
resign (as isbut if Congress
common whenaligns on an
the Presidency after Democrats take control of the FTC.
an Assistant Attorney General to lead the stability.
infrastructure bill, we
switches parties), could see significantly
Republicans will hold
more
threefunding. InFTC
of the five addition to ongoingseats
commissioner We also expect to see significant legislative
efforts to deploy
until then, and itrural
will and
taketribal
somebroadband
time for the and regulatory activity on data and platform
infrastructure, the Biden administration regulation during the Biden administration.
will likely seek to address broadband Additional efforts to modify tech platform
deserts in urban and suburban areas and immunity for third party content under
barriers to broadband adoption. We expect Section 230 of the Communications Decency
a Democratic-led Federal Communications Act seems likely, though a Democratic-led
Commission (FCC) to encourage a FCC is likely to leave that task to Congress
collaborative approach between carriers and and not seek to interpret Section 230’s social
state and local governments, and potentially media platform immunity shield as the
pull back on some of the preemption of local Trump FCC committed to do. Both parties in
zoning laws that occurred under the Trump Congress have shown significant interest in
this issue for different reasons. Democratic-
proposed legislative reforms will likely CFIUS: business as usual? Commerce identifies additional emerging
emphasize transparency regarding algorithms and foundational technologies (a subset
of “critical technologies”) in sectors such Brian Curran
and moderation procedures. Republican- Since the enactment of the Foreign Partner
proposed reforms will likely continue to as biotechnology, artificial intelligence,
Investment Risk Review Modernization Washington, D.C.
focus on perceived bias against conservative robotics, data analytics, quantum +1 202 637 4886
Act of 2018 (FIRRMA), every foreign
viewpoints. Consumers and policymakers computing, and advanced materials, and brian.curran@hoganlovells.com
investment in a U.S. business is potentially
continue to show a high level of interest in (ii) a greater demand for export controls
subject to a mandatory filing with CFIUS,
data privacy and security, big data, artificial expertise with the addition of an export
and CFIUS has expanded its jurisdiction to
intelligence, and automated decision-making, licensing criterion to CFIUS’s critical Zachary Alvarez
review the national security implications of
and Congressional Democrats have already laid technologies mandatory filing program. Associate
even non-controlling investments in certain Washington, D.C.
significant policy and legislative groundwork types of U.S. businesses. • Non-notified transaction inquiries – +1 202 637 6559
in these areas. We also expect the FCC in a continued inquiries of parties that did zachary.alvarez@hoganlovells.com
In contrast to certain other areas of U.S.
Biden Administration to prioritize consumer not submit a filing to CFIUS for certain
trade policy, we anticipate that continuity,
protection matters, including accessibility, completed transactions, even ones that
not change, will be the hallmark of the Biden
robocalls, and call blocking issues. While closed years ago and involved relatively
administration’s approach to CFIUS. We
big legislative or regulatory developments small investments.
expect such continuity because the concern
do not seem imminent, the possibility of a • Investment fund exemption – increased
that national security threats may appear
galvanizing event is always use of the investment fund exemption for
in the guise of foreign investments is a
on the horizon. certain U.S.-controlled funds with foreign
bipartisan one (e.g., FIRRMA was passed
by large bipartisan majorities in Congress). limited partners.
Moreover, FIRRMA, in effect, codified • Excepted investors exemption – increased
much of what we already had been seeing number of Australian, UK, and Canadian
Ari Fitzgerald in practice since the Obama administration
Partner
investors taking advantage of the excepted
– namely, CFIUS concerns about foreign investor exemption from the CFIUS
Washington, D.C.
+1 202 637 5423 investments (particularly Chinese mandatory filing programs and potentially
ari.fitzgerald@hoganlovells.com investments) in U.S. businesses involved in more allied countries added to the excepted
critical technologies, critical infrastructure, foreign states list (as such countries
and sensitive personal data (technology, develop or enhance their own foreign
infrastructure, and data businesses investment review regimes and cooperate
now called “TID U.S. Businesses” in the with the U.S. Government on investment
regulations). Accordingly, we do not expect security issues).
a significant change in CFIUS trends as we
transition from the Trump administration to • Rise in declarations – increase in the
the Biden administration, although we have number of allied country investors that
highlighted, below, areas to watch. seek to file short-form declarations (a type
of CFIUS filing introduced by FIRRMA), as
During the Biden administration, we expect CFIUS’s rate of clearance for these 30-day
to see a continuation – and in some cases, an filings continues to rise.
acceleration – of the most prominent CFIUS
trends that we have observed since the
passage of FIRRMA, as described below:
• Increased importance of CFIUS-
export controls intersection – (i) an
increase in the number of TID U.S.
Businesses, as the U.S. Department ofWe can help providers. We are equipped to assist you in
implementing compliance for current or
proposed regulations, drafting comments
As you prepare for 2021, our Technology to proposed regulations, and analyzing
and Telecommunications industry sector potential regulatory risks. We can conduct
teams can help. an audit of your compliance programs, and
Our Government Relations and Public review and revise your policies to put you
Affairs team can help you strategize in in the best position in the face of increased
the face of emerging policy risks and enforcement.
opportunities. With team members Our International Trade and Investment
having served in prior administrations, practice, recently named “International
the government relations team monitors, Practice Group of the Year” for 2020 by
advises on, and helps shape legislative Law360, brings together CFIUS, export
and executive branch actions – including control, and sanctions know how to help you
appointments to key administrative navigate all things related to International
positions – and can help you prepare for Trade and Investment. Coupled with a top
what’s on the horizon. notch Antitrust and Competition team, we can
Our Tier 1 ranked Communications practice help you anticipate and deal with competition
possesses a deep understanding of the law risks before they become problems.
telecommunications sector, working closely With more than 6,000 people globally,
with cable, mobile, satellite, and all types of across 15 U.S. offices and 35+ other offices
advanced broadband network operators, around the globe, we are ready to assist.
internet service providers; broadcasters
and media companies; and equipmentElection 2020 Snapshot: Helping our life sciences including permitting drug importation, stopping
surprise billing, and repealing the existing law
consuming. For example, Biden’s plans to expand to
a public health care option and to expand Medicare
and health care clients make sense of the explicitly barring Medicare from negotiating lower
prices with drug corporations. Biden also pledged
to younger people would face huge obstacles in
a Republican-controlled Senate, and could be
U.S. election results that the Department of Health and Human Services
(HHS) would work in his administration to establish
challenging to pass even if the Democrats win the
two seats in Georgia that will have run-off elections
an independent review board to assess drugs’ value in January. Even in areas where both parties’ goals
President-elect Joe Biden has pledged to expand the role of the federal and recommend a reasonable price, based on the align, such as drug pricing reform, partisanship
government in response to the COVID-19 public health emergency, average price in other countries (a process called may continue to keep each party from approving the
external reference pricing); or, if the drug is entering other’s proposals.
build on the Affordable Care Act, and continue drug pricing reform the U.S. market first, based on an evaluation by the
efforts. These actions will create opportunities for companies in the life independent board members. In addition, Biden said Nevertheless, we should expect the Biden
he would work to prohibit all brand, biotech, and administration to work to make health care more
sciences and health care space, who may find more ways to partner “abusively priced” generic drugs from increasing their affordable to patients through mechanisms already
with the government under the Biden administration. prices more than the general inflation rate. available in the law. For example, Biden likely will
Furthermore, Biden said he would end the tax encourage states to expand their Medicaid programs
deduction for prescription drug ad spending, and he without work requirements or eliminate those
supports proposals to accelerate the development requirements in existing programs. Biden can also
of safe generics. seek to increase advertising for the open enrollment
period and expand that period.
Regarding COVID-19, we can expect the Biden
Implications/Opportunities administration to be focused on a national plan
for testing, vaccines, and PPE production and
While some of the reform efforts promised by Joe distribution, along with the dissemination of
Anticipated policy changes Biden can be accomplished through executive action, federal public health guidelines. This will create
some larger changes will require legislation, because opportunities for life sciences and health care
statutes would need to be changed. However, with companies to partner with the government, as Biden
In response to the COVID-19 pandemic, President-elect Ethnic Disparities Task Force that would transition to Congress divided, and the Senate likely to continue considers the creation of a Health Advanced Research
Joe Biden has pledged to ramp up testing to prevent a permanent Infectious Disease Racial Disparities Task under Republican control, the passage of any health Projects Agency and plans to create new task forces.
spread of the disease. Efforts to expand testing could Force, and create the Nationwide Pandemic Dashboard. care reform legislation will be difficult and time-
include offering free testing regardless of insurance, Last, Biden would promote greater international
increasing drive-by testing, and promoting the creation cooperation, including restoring the White House
of at-home tests and instant tests. Biden said he would National Security Council Directorate for Global Health
also invest in next-generation testing, create a pandemic Security and Biodefense, as well as the United States’
testing board, and establish a U.S. Public Health Jobs relationship with the World Health Organization
Corps to perform contact tracing.
Meanwhile, the Biden Administration will seek to
Joe Biden has further pledged to expand the federal protect the Affordable Care Act and Biden said he would
response by using the Defense Production Act to ramp also build on the ACA to create “Bidencare” – a program
up production of masks, face shields, and other personal that would offer all Americans a public health care
protective equipment, while promoting American- option similar to Medicare, which would be available on
sourced manufacturing capabilities. Biden would the ACA insurance exchanges. Bidencare would have
encourage more CDC guidance, establish a renewable power to negotiate lower prices from hospitals and
fund for state and local governments to help prevent other health care providers, coordinate among all of a
budget shortfalls, and press Congress to pass additional patient’s doctors, cover primary care without any
funding measures to support schools and small co-payments, increase the value of tax credits to lower
businesses, including full federal subsidies for COBRA premiums, and offer premium-free access to the
premiums during the pandemic. public option for people in the 14 states that have not
taken up the ACA’s expansion of Medicaid eligibility.
In addition to these increases in federal spending, Biden
would invest $25 billion in a vaccine manufacturing and Continuing the efforts of the Trump administration,
distribution plan, and establish a COVID-19 Racial and Joe Biden said he would push drug pricing reformsKey contacts Useful resources
FDA advises drug manufacturers on best
practices for restarting operations during
Alice Valder Curran COVID-19 pandemic
Partner
Washington, D.C.
+1 202 637 5997
COVID relief legislation update
alice.valder.curran@hoganlovells.com (Phase 4/CARES 2.0)
HHS tackles barriers to value-based care:
Part 1 – new protections for value-based
arrangements under Stark and the AKS
and other key AKS changes
Beth Halpern
Partner
Washington, D.C. Trump administration reversal would
+1 202 637 8609 take away FDA’s authority to approve
elizabeth.halpern@hoganlovells.com biosimilars
Protecting biomedical innovation as a
national security asset
David Horowitz HHS ends EUA requirement for Laboratory
Partner Developed Tests; FDA may continue to
Washington, D.C. assert authority
+1 202 637 5403
david.horowitz@hoganlovells.com
FDA, CMS actions on drug importation
promise much, likely deliver little
Kelly Ann Shaw
Partner
Washington, D.C.
+1 202 637 5743
kelly.ann.shaw@hoganlovells.com
Ivan Zapien
Partner
Washington, D.C.
+1 202 637 5613
ivan.zapien@hoganlovells.comPublic policy has a significant and direct impact on
businesses in the Transportation and Mobility area.
Commercial Drones:
Those businesses are highly regulated in the U.S. but are The Biden Administration can be
expected to support enabling regulation
global in scope and the technology deployed is evolving for the commercial drone industry,
allowing safe and secure drone
rapidly and changing business models. Emission limits, operations at scale which will unlock a
multi-billion dollar industry with huge
safety issues, and trade rules are particularly important. benefits for the American public. There
is bipartisan support for American
leadership in aviation innovation, and
so a Republican Senate would likely
agree with this approach.
Passenger Rail:
Anticipated changes The Biden Administration has expressed
strong support for a transformative
high speed rail infrastructure program,
Vehicle Emissions: Vehicle Safety Rules: but if Republicans retain control
A Biden victory suggests the stringency The rapid technological change in the in the Senate, and with competing
of federal GHG emission limits and fuel industry with new driver assist methods needs for COVID recovery and other
economy will increase significantly. and a goal of autonomous vehicles infrastructure funding, a major
Many of these changes can be made (AV) means regulations on safety will high speed rail program is unlikely.
through existing regulatory authority, need modification. Shifting from crash Incremental improvement in higher
and will essentially force the heavy use of survivability to crash avoidance is a speed passenger rail is more likely.
electric vehicles before wide acceptance significant change. While Republicans
by consumers has been achieved. have nominally been more accepting Trade:
of risk and willing to pass legislation to Both parties are concerned about jobs
Were there a “Blue Wave” of
advance AV development, Democrats in the U.S. and believe various policy
Democratic President and
have remained more hesitant. This actions in China require a more active
Congressional control, as many
legislative challenge will continue. A U.S. policy in response to preserve
anticipated, comprehensive
Biden Administration is also likely to U.S. jobs and the nation’s technology
environmental legislation likely would
be more cautious on regulatory issues leadership and capacity. The “tone”
have funded EV charging infrastructure
regarding new autonomous technologies. around these trade related issues is
and support for consumer purchases of
likely to change with more discussion
EVs. Republican control of the Senate Aviation: with U.S. allies and less abrupt changes,
makes that type of support for EVs less The single most important issue but the policy goals and substance
likely and more challenging to achieve. currently facing the aviation industry should not shift dramatically.
“Divided” government could provide a is the impact of COVID-19. President-
elect Biden has indicated his support Privacy, cybersecurity and artificial
difficult context for the auto companies:
for further stimulus funding to assist intelligence are significant issues for
imposing more strict federal emission
the aviation industry. Congress has the industry. In general, Democrats are
limits necessitating EVs without the
also expressed bi-partisan support more restrictive on data use and more
legislation to help facilitate a significant
for the same, however, deadlocked worried about artificial intelligence. We
transformation.
negotiations on broader stimulus issues expect regulatory oversight to reflect
continue to stifle progress. that concern.We can help Key contacts
We routinely and actively assist clients
on all aspects of the many regulatory
and legislative issues involved with the Lance Bultena
rapid transition of the industry. We are Senior Counsel
recognized thought leaders that help clients Washington, D.C.
+1 202 637 5587
anticipate, and get ahead of, regulatory and lance.bultena@hoganlovells.com
legislative change, while also impacting the
development of those regulatory structures.
Government policy will help shape a rapidly
evolving technological landscape that is Joanne Rotondi
altering long settled business models. We Partner
Washington, D.C.
advise clients on all related regulatory and +1 202 637 6470
legislative issues and strategies. joanne.rotondi@hoganlovells.com
Michael Bell
Partner
Washington, D.C.
+1 202 637 5441
michael.bell@hoganlovells.com
Kevin Sheys
Partner
Washington, D.C.
+1 202 637 3680
kevin.sheys@hoganlovells.com
Follow our Hogan Lovells
Global Mobility and Transportation
LinkedIn Page
Visit our Hogan Lovells Mobility
and Transportation HomepageElection 2020 Snapshot: Helping our aerospace and
defense (A&D) clients make sense of the U.S. election aerial systems and increasing cyber Although Biden has been relatively silent
warfare, artificial intelligence (AI), regarding space policy, his administration
and hypersonic missile capabilities. is expected to continue President Trump’s
The election of Joe Biden as the 46th President of the United States Moreover, defense spending will continue ambitious agenda of pushing human
likely will result in significant shifts in U.S. aerospace and defense to focus on competition with “near-peer” exploration of space. Based on the Democratic
countries China and Russia. Party platform, a Biden administration is
industry priorities, revocation of certain Trump administration also likely to leverage space, and in particular
policies applicable to government contractors, strengthened Small businesses are in a good position to NASA’s budget, for scientific research,
benefit from some of Biden’s pronouncements
“Buy American” requirements, and increased use of defense that signal support for aerospace and defense
including to study climate change using
space-based technologies.
and National Aeronautics and Space Administration (NASA) contractors. For example, Biden has signaled an
Finally, the aviation industry is looking for
budgetary authority to combat climate change. intention to leverage a “scaled-up” version
stronger prospects of reimplementation of
of the Small Business Innovation
Research (SBIR) program to fund small pandemic-related support under Biden, to
businesses and to commercialize cutting- the extent it does not occur earlier. At this
edge technology. This bodes well for those time, the prospects for an economic stimulus
companies that qualify for the SBIR program package being passed during the “lame
and whose technology is of interest to the duck” session of Congress are uncertain.
government (e.g., AI, cyber, robotics, advanced Additionally, Biden’s statements regarding
increased infrastructure spending
manufacturing, communication technologies,
extends to the nation’s airports, which
Government spending priorities batteries, and biotech, to name a few). will be welcomed by both airlines and aircraft
and resulting opportunities and The aerospace and defense industry will also original equipment manufacturers (OEMs).
challenges face opportunities and challenges as Biden
stimulate further merger and pivots the government to focus more on
acquisition (M&A) activity in the combating climate change. As perhaps
Under the Biden administration, U.S. defense the largest consumer of fossil fuels and
budgets are expected to face increased pressure, defense industry as companies look to grow
revenue and increase competitiveness non- producer of carbon emissions, the Biden DoD
with the expectation that Biden’s initial defense is expected to accelerate its research and use
budgets will be no greater than flat organically. M&A activity, however, may face
increased scrutiny under a Biden of green technologies, while subjecting its
compared to the current proposed defense contractors to green requirements. For
budget. It is worth noting that Michèle Flournoy, administration, pushed by progressive
Democrats who are seeking more aggressive example, the department is likely to hasten its
a former undersecretary of defense for policy in shift to more efficient consumption of energy
the Obama administration and one of the enforcement of antitrust laws.
sources at its bases (including use of efficient
leading candidates for secretary of defense, has Additionally, based on historical experience, microgrids); increase its focus on compact
publicly criticized the Obama-era budget we expect there to be increased bid protest nuclear fusion; and require the purchase of,
sequestration cuts in defense spending. If and claim litigation activity between and its contractors to use, environmentally
Flournoy becomes the defense secretary, she is contractors and their government customers friendly technologies.
unlikely to support major defense cuts, reflecting as contractors in low-growth defense
the consensus among defense establishment environments tend to be less willing to
figures across both parties. forego revenue without a strong justification.
While Republican representation in the Senate And, while spending on certain legacy
is expected to counter calls from progressive and nuclear programs is likely to face
House Democrats for significant decreases in increased scrutiny, Biden’s past statements
defense spending, the flat demand is likely to suggest strong support for unmannedRegulatory changes Executive Order 13495 Nondisplacement of has threatened to respond in kind by is one of the world’s biggest markets for U.S.
Qualified Workers Under Service Contracts “carouseling” the European products subject aircraft. At the same time, it may benefit the
(EO 13495). EO 13495 required contractors to duties and raising the duties as high as defense aerospace sector if it leads to more
to offer a right of first refusal of employment 100 percent. Such an escalation could further sales to Taiwan and U.S. allies in the Asia-
President-elect Biden is likely to continue
to certain service employees who worked on complicate U.S.-EU trade in aerospace and Pacific region.
the Trump administration’s strengthening
predecessor contracts. other products that are subject to penalty
of regulations focused on contractor At the same time, absent any more
duties. While the sensible thing would be to
cybersecurity and supply chain Biden may also reinstate the Obama meaningful concessions by China or
settle the WTO dispute, a settlement poses
security, which include support of the new executive order that banned federal other action-forcing events, the Biden
technical challenges and has eluded the
rules requiring cybersecurity assessments contractors from discriminating against administration will likely leave the
parties during 15 years of litigation. If that
and restrictions on the use of certain Chinese employees on the basis of sexual orientation Section 301 tariffs and China Phase
dispute can be settled, a Biden administration
telecommunication and video surveillance or identity. Also, in a pre-election One trade agreement in place for the
may have an opportunity to work with the
technology. Biden has also signaled, pronouncement, Biden stated that he foreseeable future. There is bipartisan
European Union to craft new global rules on
however, a strengthened commitment would “require that companies receiving support for a tougher U.S. policy
aircraft subsidies, or tackle China’s growing
to “Buy American” procurement and procurement contracts are using taxpayer toward China, so any effort to unwind
aerospace industry.
supply chain requirements. Although the dollars to support good American jobs, the Section 301 tariffs faces serious
Trump administration issued several policy including a commitment to pay at least On Biden’s trade policy more generally, it challenges, at least in the short term.
announcements aimed at strengthening “Buy [US]$15 per hour, provide paid leave, remains to be seen who Biden will nominate
American” policies, Biden has been critical of maintain fair overtime and scheduling as his trade representative, or for other key Where Biden’s policies on China
those announcements as ineffective. practices, and guarantee a choice to join a administration posts responsible for trade may differ from the Trump
union and bargain collectively.” and investment policies. Biden has, however, administration’s are with respect to
In his “Made in All of America” policy climate, where the Biden team has
said that he will not pursue trade agreements
paper, Biden stated a commitment to For trade and its impact on commercial said a Biden administration would
during his first year in office. Significantly, fast
“[l]everage federal buying power and the full aerospace, one major development to watch seek to find common ground,
track Trade Promotion Authority expires on
range of government authorities, including is the outcome of the longstanding World although it remains to be seen if
June 30, 2021, which could preclude any new
the Defense Production Act, BARDA, and Trade Organization (WTO) dispute between this is possible. Biden also has
major trade deals unless Congress renews
federal procurement, to make sure that we the United States and the European Union said that he will work closely
the authority.
make critical products in America.” Biden’s over aircraft subsidies, which may or may with allies to confront China on
pronouncement, if implemented, will not be settled before Biden takes office. Elsewhere on international trade, Biden is trade, national security, and
provide a significant competitive advantage While the United States has had punitive expected to continue to put pressure on China. human rights issues.
to two audiences: 1) those companies in the duties in effect on US$7.5 billion of EU For example, Biden is likely to continue to
federal government market that offer U.S.- aircraft, aircraft parts, cheeses, whiskies, expand export control restrictions to counter
made products, and 2) potentially countries alcoholic beverages, woolens, and hand tools Chinese efforts to acquire strategic technology
with reciprocal trade agreements covering since October 2019, a WTO arbitrator just from the United States. He also is likely to
government procurement – if the enhanced authorized the European Union to impose maintain or expand sanctions in response
requirements extend beyond strictly U.S.- sanctions on US$4 billion of U.S. products, to Beijing’s actions in Hong Kong and its
made end products. which they began imposing on November 10. detention of religious and ethnic minority
This includes a levy of 15 percent on aircraft. groups in Xinjiang. Relatedly, Biden is likely
Biden reportedly is eager to repeal several
to defer action on the Section 301 tariffs
labor-related requirements that Trump While some member states reportedly imposed on Chinese goods with respect to
imposed on government contractors. For supported suspending the duties to intellectual property/forced technology
example, Biden is expected to rescind the encourage settlement talks, the European transfers, as well as restrictions on certain
Trump Executive Order on Combating Race Union reportedly has decided to go ahead Chinese-made telecommunications and video
and Sex Stereotyping, which prohibits federal with the duties instead, while making it technology items and services. The continued
contractors from conducting certain diversity clear it is prepared to remove them if the deterioration of U.S.-China trade, economic
training. Also, Biden is expected to reinstate case can be settled. This risks a further and security relations, and the expansions of
Obama-era procurement policies that had escalation of the dispute, since United States U.S. export controls pose challenges for the
been revoked by Trump, including former Trade Representative Robert Lighthizer U.S. commercial aerospace sector, since ChinaYou can also read
