In January of 2007 the U.S. Food and Drug Administration (FDA) proposed a definition for the term “gluten-free,” and three years later there is still no regulation regarding the term. Regulations for gluten-free labeling would help those who suffer from celiac disease, a chronic inflammatory disorder of the small intestine which is triggered by certain proteins known as gluten. Approximately 1 percent of the population suffers from celiac disease. Glutens are naturally present in certain cereal grains and form when wheat flour is mixed with liquid and kneaded. Grains that contain gluten are wheat, rye, barley, cross-bred hybrids, and possibly oats. Currently, a label with the term “gluten-free” must be truthful and not misleading; however, there is no set definition provided by the FDA. The FDA has proposed that a food which bears the label “gluten-free” must not have more than 20 parts per million or more of gluten, which is the amount that can be reliably detected. The use of the label would be voluntary, meaning foods that are naturally gluten-free, such as milk or water, would not have to bear the label. Foods that would be prohibited from bearing the label are those which include barely, common wheat, rye, spelt, kamut, triticale, farina, vital gluten, semolina, and malt vinegar. Other countries such as Canada, Brazil and the Codex Alimentarius Commission, an joint international FAO/WHO standards organization, have defined gluten-free as having no more than 20 parts per million of gluten present. Recently, the owner of Great Specialty Products in North Carolina was sentenced to 11 years in prison after he was found guilty of purchasing regular bread and rolls and repackaging them as gluten-free. Dozens of people complained of illness after consuming the goods. Hopefully, the FDA will not take as long to define the term “gluten-free” as it took the U.S. Department of Agriculture (USDA) did to define the term “organic.” CNN reported in 1997, seven years after the Organic Foods Production Act of 1990, that USDA officials had finally drafted a set definition for organic. On May 4, 2011, activists seeking to pressure the FDA to define gluten-free brought a 13-foot-tall gluten-free cake to Capitol Hill. In the absence of a federal standard, it is buyer beware. Fuerst Ittleman will continue to monitor the FDA for changes to gluten-free labeling requirements. For more information, contact us at email@example.com.
Archive for May, 2011
Proposed rulemaking by DEA will bring its regulations governing forfeitures in line with the Civil Asset Forfeiture Reform ActFriday, May 27th, 2011
The Drug Enforcement Administration (DEA) recently published a notice of proposed rulemaking regarding the consolidation of seizure and forfeiture regulations in the Department of Justice which will harmonize the regulations of the DEA, Bureau of Alcohol, Tobacco & Firearms (ATF) and Federal Bureau of Investigation (FBI) pertaining to the seizure and forfeiture of assets and bring those procedures for seizure and forfeiture under one regulation. That notice of proposed rulemaking can be found here. Generally, assets may be seized and forfeited to the government if they were used in violation of a law providing for forfeiture, are contraband, violate a regulatory statute, or are connected in some way to the laundering of monetary proceeds of a specified unlawful activity.
In 2000, Congress passed the Civil Asset Forfeiture Reform Act (CAFRA) which amended the forfeiture laws regarding seizures and forfeitures involving federal agencies, except for violations of the Customs laws, certain laws involving embargos, IRS laws or seizures for violations of the Food, Drug & Cosmetic Act. CAFRA was passed in response to stories of abuse regarding the seizures and forfeitures of assets without adequate due process protections for individuals who could not afford counsel or the bond often required to challenge government forfeitures.
For example, prior to CAFRA, there were no fixed time limits regarding when notice letters had to be sent by the agency informing an owner that his or her goods had been seized for forfeiture and no remedies to the owner for goods being held an inordinate amount of time. Likewise, there was no fixed deadline governing when a forfeiture proceeding had to be commenced after notice had been sent to the owner. Additionally, persons claiming seized goods had to post a bond, sometimes in the thousands of dollars, just for the right to contest the forfeiture. In cases where the owner of seized property could not afford a lawyer, he or she had to represent his or her self. In all cases, the agency only had to show probable cause that the goods were forfeitable, the owner had the burden of proof to show why the goods should not go to the agency. Innocence or lack of knowledge of a violation of the law was not necessarily a defense.
Now, under CAFRA, forfeiture notices must generally be sent within 60 days of seizure;, and if the notice is not sent the agency must return the property. If an owner files a claim for the property, a complaint for forfeiture in court must be filed within 90 days, the owner no longer needs to post a bond, and if the forfeiture is of a primary residence, and the owner does not have the funds for a lawyer, the court must appoint a lawyer. Furthermore, the government now has the burden to prove by the greater weight of the evidence that the goods are forfeitable under the law, and an owner now can assert innocence or lack of knowledge of the violation claimed by the agency as a defense to forfeiture, and an owner can obtain an attorneys fees award against the agency if he or she prevails in a forfeiture action in court.
The proposed rulemaking by the DEA seeks to harmonize its regulations with these CAFRA requirements and consolidate its rules and procedures with those of other Department of Justice agencies. These proposed, consolidated regulations will apply to all seizures and forfeitures commenced by any agency of the Department of Justice except those specifically excluded by CAFRA. The proposed regulations will make express in the rules of the Department of Justice the enhanced due process protections provided by CAFRA to owners and others with interests in property.
When faced with the deprivation of property by a federal agency, it is important to obtain counsel in order to ensure that the government complies with the enhanced due process protections of CAFRA. At Fuerst Ittleman, we will monitor the proposed rulemaking and will blog when the final rules are promulgated.
A recent study shows that the ability of nerve cells derived from human induced pluripotent stem cells (iPSCs) to function in the body may vary according to the method used to generate the iPSCs from adult stem cells. As we previously reported, iPSCs are adult stem cells that have been genetically reprogrammed to have the pluripotency character of embryonic stem cells. In the current study, a team based in the Republic of Korea and the United States has found that neurons and neural precursor cells (NPCs) demonstrated residual expression of exogenous reprogramming genes, early senescence, and apoptotic cell death when derived from virally reprogrammed iPSCs. However, NPCs and dopamine neurons were highly expandable and exhibited gene expression and other properties similar to those of the brains own dopamine neurons when derived from iPSCs generated using a protein reprogramming technique. These NPCs and dopamine neurons also restored motor deficits in rats with Parkinson disease.
According to the authors of the study, “[o]ur results suggest that protein-based reprogramming may be a viable approach for generating a patient-specific source of cells for treatment of [Parkinson disease] and other degenerative diseases.” We will continue to monitor the progress that scientists are making with induced pluripotent stem cells and other stem cells. For more information contact us at firstname.lastname@example.org
IRS’s Second Guidance on the Foreign Account Tax Compliance Act (FATCA) Leaves Many Questions UnansweredThursday, May 26th, 2011
As we previously discussed here, the Foreign Account Tax Compliance Act (FATCA) enacted in March 2010 imposes a 30 percent withholding tax on foreign banks who do not properly disclose accounts held by U.S. taxpayers. In its implementation of FATCA, the Internal Revenue Service (IRS) has issued two Notices providing guidance to those that are affected. As previously discussed in our blog, the IRS issued its first guidance regarding its implementation of FATCA in late 2010. In this original guidance, the IRS required foreign institutions to document every account regardless of whether it had documentation on file.
In response to numerous complaints to the first notice, the IRS provided additional guidance in Notice 2011-34 on April 8, 2011. According to this notice, financial institutions will have to review paper and electronic account files to identify U.S. accounts. Although this has reduced the requirements imposed by the first notice, it is still extremely burdensome.
According to Danielle Nishida, attorney advisor in the Office of Associate Chief Counsel, the IRS has narrowly tailored its guidance regarding the FATCA, hoping to provide more broad advice in the future. Notably, however, the IRS is looking to the community for comments in assessing the effect of FATCA on retirement plans, employee benefit plans, trusts, and numerous other areas. Ultimately, these comments will guide the IRS in its implementation of FATCA.
According to Nishida, the IRSs goal is to “get U.S. reporting” and “not to tax anyone besides U.S. taxpayers.” Notably, however, the foreign institutions involved are either subject to the task assigned to them by the IRS or pay a 30 percent withholding tax. While discussing the withholding tax, Michael Plowgian, attorney advisor in the Treasurys Office of Tax Policy, explained the 30 percent withholding tax “gives foreign financial institutions a way to incentivize recalcitrant account holds to provide information about their accounts” and “prevents a ring of Ëœblockers from forming around the United States to act on behalf of noncompliant entities.”
The IRS is also struggling with how to best address partnerships and other pass-through entities under the disclosure regime established by FATCA. During a forum sponsored by the D.C. Bar Taxation Sections Passthroughs and Real Estate Committee on May 25, 2011, Plowgian expressed that “because of the way partnerships are structured, these entities represent a significant challenge as the government works to implement the statute.”
According to Plowgian, the IRS is working to create exceptions for those entities that do not represent a risk of tax evasion. Specifically mentioned were pension and retirement plans and tax exempt charities. The Department of Treasury is also working to narrow the scope of entities subject to the FATCA by working on determining “when a foreign entity is primarily engaged in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest in such instruments,” which would put that institution within the requirements of the FATCA.
The two guidance documents issued by the IRS are clearly only a starting point in the implementation of FATCA. Before the provisions become effective in 2013, the IRS must undertake the responsibility of explaining the mechanics of FATCA to the endless list of potential taxpayers.
The attorneys at Fuerst Ittleman have extensive experience in the areas of tax law and tax law litigation and will continue to monitor the changes made or considered by the Internal Revenue Service. If you have any questions regarding the FATCA or any other Internal Revenue Code section, do not hesitate to contact us as email@example.com
The U.S. Food and Drug Administration (FDA) is extending the comment period until July 5, 2011 for the proposed requirements for providing nutritional information on menus at chain restaurants and similar retail food establishments. As we previously blogged, the comment period for the proposed rule for chain restaurant menu labeling was set to expire on June 6, 2011. As we previously blogged (here, here, here, and here), the proposed rule involves a provision of the Patient Protection and Affordable Care Act (“PPACA”), the 2010 Healthcare Reform Law, which requires that chain restaurants and similar retail food establishments that are part of a chain with 20 or more locations doing business under the same name and offering the same menu items, provide calorie information directly on the menu and have nutritional information available upon request.
The FDA stated in todays Federal Register Notice that it has received several requests to extend the comment period. The additional time is needed, according to the requesters, for a number of reasons, “including a need for time to assess the effect of the proposal on the industry; a desire to conduct consumer research to support comments on the proposal; and the complexities of the proposed rule.”
For more information regarding labeling of food products and how the PPACA will impact your business, please contact us at firstname.lastname@example.org.
According to a recent Wall Street Journal article, the Internal Revenue Service is looking to “retroactively tax top donors to political advocacy groups” following the Supreme Courts Citizens United ruling reversing certain campaign finance laws. Specifically, donations made during the 2010 elections to IRC § 501(c)(4) nonprofit groups are being considered. Groups classified as IRC § 501(c)(4) can support candidates and legislation, but cannot be primarily political in nature. According to the IRS, large donations to these groups should have been subject to the gift tax, although enforcement has been lax in the past. Currently, individual donors can contribute $13,000 annually ($26,000 for couples), subject to a lifetime maximum of $5 million, before a 35% tax rate takes effect. In 2013 the lifetime exempted amount drops to $1 million.
Reports in the press indicate that at least five donors have been contacted by the agency for not filing gift tax returns, a requirement for large political donations. In a statement, IRS spokeswoman Michelle Eldrige wrote, “[t]hese examinations were started by employees of the Estate and Gift Tax Unit at the IRS as part of their increased efforts in the area of non-filing of gift and estate tax returns” and is not political in nature. The statement continues, “[a]ll of the decisions involving these cases were made by career civil servants without any influence from anyone outside the IRS.”
The Los Angeles Times reports that “[i]n 2010, nonprofit groups, many of them [IRC §] 501(c)(4)s, disclosed nearly $300 million in spending on midterm election campaigns, much of it to elect Republicans.” A similar article in the New York Times states, “Democrats have embraced the model, too. Bill Burton, Mr. Obamas former deputy press secretary, was skewered by critics of these groups for creating Priorities USA Action to help Democrats.” Experts predict that “broad IRS action against donors could slow the groups funding streams as the 2012 presidential election nears.”
The attorneys at Fuerst Ittleman have extensive experience in the areas of tax law and tax law litigation and will continue to monitor the changes made or considered by the Internal Revenue Service. If you have any questions regarding IRC § 501 or any other Internal Revenue Code section, do not hesitate to contact us as email@example.com.
On May 19, 2011, a criminal information was filed in the U.S. District Court for the District of Massachusetts charging Michael F. Schiavo with one count of willfully violating the Foreign Bank Account Reporting Requirements of 31 U.S.C. sections 5314 and 5322(a).
Of particular interest is the following paragraphs of the information:
11. A “silent disclosure” occurs when a U.S. taxpayer with an undeclared account files FBARs and amended returns and pays any related tax and interest for previously unreported offshore income without notifying the IRS of the undeclared account through the Voluntary Disclosure Program. A silent disclosure does not constitute a voluntary disclosure. On its website, the IRS strongly encourages taxpayers to come forward under the Voluntary Disclosure Program and warns them that taxpayers who instead make silent disclosures risk being criminally prosecuted for all applicable years.
18. On or about October 6, 2009, following widespread media coverage of UBS’s disclosure to the IRS of account records for undeclared accounts held by U.S. taxpayers and the IRS’s Voluntary Disclosure Program, Schiavo made a “silent disclosure” by preparing and filing FBARs and amended Forms 1040 for tax years 2003 to 2008, in which he reported the existence of his previously undeclared account at HSBC Bank Bermuda. He made such filings notwithstanding the availability of the Voluntary Disclosure Program. Schaivo reported on the amended individual income tax returns the interest income that he earned from the previously undeclared account he held at HSBC Bank Bermuda but did not report on the 2006 return the income earned that he earned from Headway Partners.
19. On or about October 27, 2009, a Special Agent from the IRS attempted to interview Schiavo at his home.
20. On or about October 29,2009, Schiavo prepared and executed a second amended individual income tax return for tax year 2006 on which he reported the income earned that he earned from Headway Partners and that had been deposited into his previously undeclared account at HSBC Bank Bermuda.
A full copy of the information is available here.
What is interesting is that the criminal charges do not contain any violations of the Internal Revenue Code (Title 26), but instead only contain violations of the Bank Secrecy Act. The Bank Secrecy Act requires individuals to file Form TD 90.22-1. A copy of the form is available here.
Further, the U.S. Department of Justice has issued a press release on the matter available here.
The attorneys at Fuerst Ittleman, PL have extensive experience in addressing undeclared foreign bank accounts, undeclared income and voluntary disclosures. You can contact an attorney by emailing us at firstname.lastname@example.org.
The North Carolina legislature is currently considering a bill that would provide immunity from lawsuits for drug companies in cases where the drug product in question had received FDA approval. If passed, North Carolina would be only the second state to provide such immunity for drug manufacturers. Michigan, which passed a similar law in 2005, was the first state to do so.
Prior to bringing a drug to market, drug manufacturers must receive FDA approval. During this approval process, the burden of establishing the safety and effectiveness of a drug is on the drug manufacturer. Traditionally, even after a drug has been approved for use, the law, both state tort law as well as federal regulatory law through the FDCA, has placed a continuing duty upon drug companies to warn its consumers of any potentially harmful effects of its products. Recent Supreme Court precedent has echoed this principle.
In Wyeth v. Levine, 129 S Ct 1187 (2009), the issue of whether FDA approval of a drug product was intended to preempt and prohibit contemporaneous state tort lawsuits was addressed by the United States Supreme Court. In Wyeth, the plaintiff filed tort action for negligence and strict product liability against a drug manufacturer in Vermont State Court alleging that the drug company had failed to include an adequate warning label describing the possible injuries which could occur from the injection of its drug product. In response, the drug manufacturer argued that the Plaintiffs failure-to-warn claims were preempted by federal law because: 1) it had received FDA approval for its products drug label; and 2) any state-law duty to provide stronger warnings would obstruct the purposes of the FDCA and federal drug labeling regulations because it would substitute a lay jurys decision about drug labeling for the expert judgment of the FDA.
In rejecting the drug manufacturers argument, the Court found that the FDCAs purpose was to bolster consumer protection and that Congress did not provide for federal remedies for consumers harmed by unsafe/ineffective drugs because state common law rights of action were already available. Further, unlike medical devices, Congress did not specifically provide for preemption of claims for drugs. Therefore, the Court found that “Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness.”
However, if passed, HB 542 would provide immunity to drug manufacturers and sellers from product liability suits related to any drug sold or manufactured which first received FDA approval prior to production and sale. The only exceptions under the proposed bill are for cases where FDA approval was obtained through fraud or bribery. Such a law will have dramatic effects not only on the ability of consumers to hold drug companies accountable for selling dangerous or defective drugs but also on the State government itself bringing related claims.
An example of the likely effects of such legislation can be seen in a recent decision of the Michigan Court of Appeals interpreting a similar immunity statute under Michigan law. In Michigan v. Merck & Co. Inc., the Michigan Court of Appeals held that where the drug in question was approved by the FDA, the states suit to recover Medicaid money premised on fraud by the drug company in its representations regarding the safety and efficacy of the drug was barred under Michigan law. In that case, the court found that, though the suit was based on the Michigan Medicaid False Claims Act, the underlying allegations of the Complaint qualified the suit as a “product liability action” under Michigan law. As such, because 1) the States suit constituted a “product liability action” under Michigan law, 2) Mercks drug received FDA approval, and 3) that approval was not obtained through fraud or bribery, Merck qualified for immunity and the Court of Appeals remanded the case with orders to dismiss.
For more information regarding the drug approval process or for any questions regarding how your company can maintain FDA regulatory compliance, please contact us at email@example.com.
On May 7, 2011, the Department of Justice announced it will no longer argue for Chevron deference to apply to revenue rulings and revenue procedures. The announcement comes in the wake of the Supreme Courts recent decision in Mayo Found. for Med. Educ. & Research v. U.S., 131 S. Ct. 704 (2011) in which the Court held all regulations should be analyzed using Chevron deference regardless of the agency which promulgated them.
A basic principle of administrative law is that, generally, courts will tend to defer to an agencys interpretation of the statute that it administers. The Supreme Court expanded upon this idea in Chevron U.S.A. Inc. v. Natural Resource Defense Counsel, 467 U.S. 837 (1984). In Chevron, the Court established a two part test to determine whether to grant deference to an administrative agencys interpretation of a statute. First, the Court will look to see if Congress has directly spoken to the matter at issue. If so, the Courts analysis is complete and the administrative agencys interpretation is not entitled to deference. However, if the Court determines that issue is ambiguous, the Court will proceed to step two of the Chevron analysis. Under step two, the question for the court is whether the agency’s interpretation is based on a permissible construction of the statute. So long as the agencys interpretation is a permissible construction, the Court will not substitute its own judgment for that of the administrative agency and will uphold the agencys interpretation.
Not all agency actions are entitled to the highly deferential standard of Chevron deference. While Chevron deference applies to agency interpretations contained within properly promulgated regulations, interpretations such as those in opinion letters and interpretations contained in policy statements, agency manuals, and enforcement guidelines — all of which lack the force of law — do not warrant Chevron deference. Instead, they are “entitled to respect,” but only to the extent that they are persuasive. See Skidmore v. Swift & Co., 323 U.S. 134 (1944). Revenue rulings, which are official pronouncements of the IRS addressing the application of the Internal Revenue Code (“I.R.C.”) and regulations to particular factual situations, and revenue procedures, which are official statements of a procedure that affect the rights or duties of taxpayers under the law, would fall into this latter category.
Prior to the Mayo decision, debate raged as to whether Treasury regulations were to be analyzed under the highly deferential Chevron standard or whether the older, less deferential. multi-factored analysis of National Muffler Dealers. Assn., Inc. v. United States, 440 U.S. 472 (1979), used by the Court previously to analyze tax regulations, still governed. Under National Muffler, when evaluating a regulations validity, the Court looked to numerous factors to determine whether the Commissioners interpretation of the statute in question should receive deference including: 1) whether the regulation was promulgated contemporaneously with the statute in question; 2) the length of time the regulation had been in effect; 3) the reliance placed on the regulation by the Commissioner; 4) the consistency of the Commissioners interpretation over time; and 5) the degree of scrutiny Congress has devoted to the regulation during subsequent reenactments of the statute. National Muffler Dealers Assn., Inc., 440 U.S. at 477. As a result, while a regulation could pass muster as being a permissible construction under the Chevron test, “[u]nder National Muffler, . . ., a court might view an agencys interpretation of a statute with heightened skepticism when it has not been consistent over time, when it was promulgated years after the relevant statute was enacted, or because of the way the regulation evolved.” Mayo Found. for Med. Educ. & Research, 131 S. Ct. 104.
Moreover, prior to Chevron, the Court emphasized that rules passed pursuant to the Treasury Departments “general authority” under 26 U.S.C. § 7805(a), such as the rule in Mayo, were entitled to less deference than those rules under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision. See Rowan Cos. v. United States, 452 U.S. 247 (1981); United States v. Vogel Fertilizer Co., 455 U.S. 16 (1982). As a result of these Pre-Chevron decisions, the deference afforded to the Commissioners interpretation of ambiguous IRC provisions varied depending on not only the multiple National Muffler considerations but also the authority under which the regulation was promulgated.
In Mayo, the Court found that as a result of Chevron and its progeny, the administrative law landscape had changed substantially since National Muffler, Rowan, and Vogel. The Court found that the underlying principles of Chevron applied to the tax context and that the Court in previous decisions had recognized the importance of maintaining a uniform approach to the judicial review of administrative agency actions. Therefore, the National Muffler analysis was no longer appropriate and the more deferential Chevron deference applied. Additionally, as a result of Mayo, all regulations promulgated by the Commissioner, regardless of whether promulgated under a specific grant of authority, will be analyzed under Chevron and entitled to the same deference.
The attorneys at Fuerst Ittleman, PL have extensive experience dealing with tax matters, administrative law, and regulatory compliance. You can reach at attorney by emailing us at firstname.lastname@example.org.
The United States Senate recently passed a food safety crime bill sponsored by Senator Patrick Leahy that will significantly strengthen criminal penalties for companies and persons that knowingly violate food safety standards and place tainted products on the market. The legislation, known as the Food Safety Accountability Act, will create a new criminal offense in Title 18 of the United States Code, and will have significant criminal penalties of up to 10 years imprisonment for committing certain food offenses “knowingly and intentionally to defraud or misleadand with conscious or reckless disregard or a risk of death or serious bodily injury.” The Senates version will now go to the House of Representatives for consideration. This bill evidences the Governments increased focus on food safety and adds teeth into the new Food Safety Modernization Act, passed last year to increase the regulatory powers and oversight of the Food & Drug Administration.
The FDA is ramping up criminal enforcement of the nations food and drug laws. We have previously blogged about the unsuccessful prosecution of the general counsel of GlaxoSmithKline, a large pharmaceutical company for obstruction of justice, here. We have also recently blogged here on the new emphasis by the FDA on bringing Park doctrine prosecutions, where corporate executives can be convicted of crimes even if they have no knowledge of or intent to commit a crime. Our lawyers are monitoring the progress of this bill and are ready to advise clients on how to navigate the FDAs regulatory minefield.