ISRAEL PRACTICE NEWSLETTER
SPRING 2020
TABLE OF CONTENTS Introduction..............................................................................................................................................................................2 COVID-19 Insights....................................................................................................................................................................2 A Token Change.......................................................................................................................................................................6 New CFIUS Regulations Take Effect.........................................................................................................................................7 An Overview of U.S. and Israeli Charitable Organizations and Tax Benefits...............................................................................7 U.S. Foreign Aid to Israel..........................................................................................................................................................8 The Top 10 Government Contracting Compliance “Headaches” of 2020..................................................................................8 Solving the Pop-Up Puzzle: Tips for Owners and Short-Term Tenants......................................................................................9 New H-1B Procedures Take Effect in 2020...............................................................................................................................9 Media Mentions and Speaking Engagements.........................................................................................................................10
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ISRAEL PRACTICE
NEWSLETTER Holland & Knight is a U.S.-based global law firm with a strong commitment to the state of Israel. We focus on providing guidance to Israeli investors and companies interested in doing business in the United States and Latin America. With more than 1,400 professionals in 28 offices, our lawyers and professionals are highly experienced in all the interdisciplinary areas necessary to guide entrepreneurs, investors, and startup or established companies through the opportunities and challenges that arise throughout the business or investment life cycles. Areas of legal guidance that are typically provided to our Israel Practice clients include real estate, mergers and acquisitions, private equity, international tax, cross border and customs, internet privacy and cybersecurity, intellectual property, government lobbying, regulations and compliance, U.S. Foreign Corrupt Practices Act (FCPA), U.S. Foreign Account Tax Compliance Act (FATCA), and litigation and dispute resolution. We invite you to read our Israel Practice newsletter, in which our authors discuss pertinent American-Israeli topics. As Israel has been a crossroads and a prolific source of new ideas for more than 3,000 years, a natural tradition of inventiveness finds its most recent expression in the creation of a technology startup ecosystem with global impact. This newsletter addresses, among other relevant topics, how the innovative technologies and ideas generated in Israel can be deployed in the United States and globally. We invite you to discuss your thoughts on this issue with our authors listed within the document. Please note: Holland & Knight has established a COVID-19 Response Team to help address business, regulatory and legal issues companies may face related to COVID-19.
Introduction
COVID-19 Insights Federal Reserve Board, Treasury Department Unveil New and Expanded Credit Facilities By Daniel T. Sylvester, Tim Ryan, Gregory Bauer, Kelsey M. Hayes, Kara M. Ward and Christopher J. Armstrong The Federal Reserve Board and U.S. Department of the Treasury released general guidelines for a series of credit facilities that can assist companies with less than 10,000 employees or $2.5 billion in revenues that have been negatively impacted by the economic disruption caused by the coronavirus (COVID-19). To be eligible, the business must be created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States. Read full article >>
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Guidance for VC-Backed Companies Seeking SBA Paycheck Protection Program Loans Under CARES Act By Jeffrey R. Seul, Mary Beth Bosco, David S. Black, Taite R. McDonald and Daniel T. Sylvester The U.S. Small Business Administration is overseeing a forgivable loan program of up to $10 million for businesses in the United States that generally have 500 or fewer employees who reside in the United States. Foreign-owned companies may be eligible if they have a U.S. management that is either a U.S. citizen or green-card holder and has been in place for more than one year (additional requirements or exclusions may apply). As the purpose of the loan is to keep employees employed, 75 percent of the forgivable loan amount must be used for payroll costs for employees with residence in the U.S. Read full article >>
The Federal Communications Commission (FCC) COVID-19 Telehealth Program By Miranda A. Franco The CARES Act provided $200 million to the Federal Communications Commission (FCC) to support healthcare providers in the fight against the ongoing pandemic. The COVID-19 Telehealth Program will make $200 million available to help healthcare providers purchase telecommunications services, broadband connectivity and devices necessary for providing telehealth services in response to COVID-19. The FCC noted that it does not anticipate awarding more than $1 million to any single applicant. FCC will award support to eligible applicants based on the estimated costs of the supported services and connected devices that they intend to purchase. Read full article >>
The 2020 Stock Market Crash and PFIC Status By Seth J. Entin If an Israeli company has U.S. investors and becomes classified under the U.S. tax rules as a “passive foreign investment company� (PFIC), there can be adverse tax consequences to U.S. investors (at least without proper planning). It is possible that some Israeli companies may become classified as PFICs because of the downturn in the Israeli financial markets. These companies and their investors should carefully monitor these matters and take proactive steps if necessary to minimize or avoid adverse consequences. Read full article >> 3
CARES Act: Key Tax Provisions Affecting Private Equity Funds and Portfolio Companies By Alan Schwartz, Sean J. Tevel and Gary L. Schoenbrun The CARES Act implements several important tax provisions to provide economic relief to businesses and individuals impacted by the coronavirus (COVID-19). This Holland & Knight article highlights the provisions that are expected to significantly impact investment funds and their portfolio companies. A number of these provisions will have international impact and will be relevant to non-U.S. investors or non-U.S. companies. Changes to the net operating loss (NOL) carryback rules and the rules limiting the deductibility of business interest may impact non-U.S. companies with U.S. operations or U.S. companies with non-U.S. investors. In addition, COVID-19’s effect on businesses and their operations may implicate additional important tax provisions. For example, the residency status of a non-U.S. company’s U.S.-based employees should be considered. In addition, business operations undertaken by U.S.based employees of non-U.S. companies as a result of COVID-19 may implicate the non-U.S. businesses U.S. taxable presence or permanent establishment status. Read full article >>
How the CARES Act Benefits Individual Taxpayers By Scott Johnston, Monika Jain and Greg Kiley The CARES Act provides that eligible individuals, which includes resident aliens of the U.S., may be entitled to stimulus payments of up to $1,200 ($2,400 for a married couple filing jointly) plus an additional $500 for each qualifying child under the age of 17 at year-end, based on their adjusted gross income (AGI). Although the act suspends for 2020 the limitation of 60 percent of AGI for cash contributions to qualifying organizations that would normally apply when calculating one’s deduction, the act does not modify the U.S.-Israel income tax treaty. A U.S. citizen or resident’s charitable deduction for contributions to qualified Israeli charities is still limited to 25 percent of their Israeli-source adjusted gross income. Read full article >>
CARES Act: The Treasury Department’s $500B Coronavirus Economic Stabilization Act Program By Christopher J. Armstrong, Kara M. Ward and Joel E. Roberson This summary describes the provisions of the CARES Act $500 billion relief program for the aviation industry, small- and medium-sized business, and industry generally. It provides a breakdown of these programs, how the U.S. Department of the Treasury is likely to implement them and requirements on companies accepting funding. Read full article >> 4
COVID-19 Round 3 in D.C.: CARES Act Summary By Christopher J. Armstrong, Nicole M. Elliott, Rich Gold, Leslie I. Pollner and Eve Maldonado O’Toole This summary outlines the CARES Act, a $2.2 trillion package enacted into law on March 27, 2020. A portion of the CARES Act includes a $350B program for loans to small businesses (generally 500 employees or fewer) located in the U.S. The use of loan proceeds to the business is limited to covering payroll, rent, mortgage interest and utilities. The total of the proceeds to nonpayroll amounts cannot exceed 25 percent of the loan proceeds. Upon demonstrating that the loan proceeds were used for the required purpose, the loan may be forgiven. Read full article >>
The Race to Develop Coronavirus Vaccine – Could the Solution be Found in Israel? By Meital Stavinsky Across the world, scientists are racing to develop a vaccine and a treatment to contain the COVID-19 pandemic. With the sharp shift in countries priorities, and the effect on how we work, travel, learn and shop – the economic impact will undoubtedly have a global effect. According to the World Health Organization, it received to date applications for review and approval of 40 diagnostics tests, 20 vaccines are in development and many clinical trials of therapeutics are underway. A mix of well-established pharmaceuticals companies and small startups have stepped forward with plans to develop vaccines and treatments. Such research and development efforts require substantial funding that most countries are struggling to allocate for those important efforts. Read full article >> Reprinted with permission from The Times of Israel
Expansion of Telehealth During the COVID-19 Emergency By Miranda A. Franco Congress and the U.S. Department of Health and Human Services (HHS) have instituted several flexibilities that waive many of the generally applicable rules governing Medicare telehealth services in response to the coronavirus (COVID-19) public health crisis. These flexibilities have been implemented incrementally. These steps should increase both supply and demand for telehealth during the public health emergency. Read full article >> 5
U.S. Income Tax Residence and the Coronavirus By Seth J. Entin Israeli individuals might find themselves compelled to stay in the United States for longer than they expected because of travel restrictions resulting from the coronavirus. They should carefully examine whether they are at risk of becoming U.S. tax residents and, if possible, take steps to minimize their tax risks. Read full article >>
A Token Change By Lee Samuelson and Shawn S. Amuial Israel, as with many technology sectors, has become a hotspot for blockchain innovation. Israeli startups have leveraged blockchain technology to disrupt several industries, including security, finance, retail and law. Israelis are also well known for their keen interest in real estate investments. Israeli firms (and Israeli expats around the world) hold substantial real estate holdings in many of the world’s major cities, and Israel’s own real estate industry has seen staggering growth over the past decade. However, many Israeli real estate investment firms (domestic and international), including private real estate investment trusts (REITs), have been unable to harness capital investments from noninstitutional and retail-level investors, in part, because of the administrative costs of managing so many investors. This article examines how “tokenization” can unlock significant benefits for REITs, allowing them to 1) substantially reduce fees and costs by leveraging automation, and 2) provide access to investors who otherwise would not have an opportunity to invest in private REITs. Read full article >> Originally published in Commercial Investment Real Estate magazine at www.ciremagazine.com. Reprinted with permission of CCIM Institute.
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New CFIUS Regulations Take Effect By Antonia I. Tzinova and Caroline D. Bisk Israeli companies will need to be cognizant of the new regulations of the Committee on Foreign Investment in the United States (CFIUS) implementing various requirements on heightened investment scrutiny of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), including those relating to real estate transactions. Given that Israeli companies receive more and more funding from Chinese investors, and collaborate more with Chinese companies, Israeli investors into the U.S. ought to consider the impact of their Chinese exposure on potential U.S. investments and operations. Additionally, FIRRMA developed an “excepted state” and “excepted real estate investor” paradigm. The regulations, which took effect on Feb. 13, 2020, identified Australia, Canada and the United Kingdom as the first excepted states. These states, and future members of the “white list,” would have implemented robust processes to review foreign investment in their own countries similar to the CFIUS process in the U.S. Such a process is currently in development in Israel, sparked by Chinese investment in the Haifa port. In early 2019, senior Israeli officials convened high-level meetings during which draft proposals were weighed and evaluated.1 Therefore, it is probable that in a few years, Israel might receive a special status under CFIUS regulations. Israeli businesses need to consider how to leverage this with their own and the U.S. governments, so that they can minimize impact on investment in the U.S. transactions. Read full article >> ____________________________________________________ 1
“Foreign Investment in Israel’s Critical Infrastructure: Towards New Legislation,” Foundation for Defense Democracies
An Overview of U.S. and Israeli Charitable Organizations and Tax Benefits By Jason E. Havens and Kelly L. Hellmuth Corporate and private clients are continually looking for ways to help others. Fortunately, because of the United States-Israel income tax treaty, donors in the U.S. or Israel may contribute to charitable organizations in either country and receive tax benefits for doing so. This article provides an overview of the applicable rules, a summary of the legal forms and general requirements governing tax-exempt organizations in each country, and some recent U.S. tax law developments tax could positively – and negatively – impact charitable gifts and U.S. charities. Read full article >>
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U.S. Foreign Aid to Israel By Meital Stavinsky and Ronald J. Klein In recent years and under the radar, the Israeli defense industry has undergone some impactful changes. Such changes, so it seems, might not be given full attention by the Israeli ecosystem: phasing out the ability to convert U.S. Foreign Military Financing (FMF) for Offshore Procurement (OSP) into shekels for local defense research, development and procurement of Israeli manufactures equipment. Israel is the largest cumulative recipient of U.S. foreign assistance. As of August 2019, the U.S. has provided Israel $142.3 billion in bilateral assistance and missile defense funding. The U.S. Congress has throughout the years demonstrated a bipartisan broad support for the U.S.-Israel bilateral relationship, including for U.S. aid to Israel. In recent years, however, there has been a change of the terms of such support. Read full article >> Reprinted with permission from The Jerusalem Post
The Top 10 Government Contracting Compliance “Headaches” of 2020 By Eric S. Crusius, Amy L. Fuentes, Kelsey M. Hayes and Vijay S. Surampudi While contracting with the U.S. government offers a lot of rewards, it can also be filled with pitfalls. As the next decade of government contracts is underway, some of the following compliance-related issues – presented in no particular order – promise to be among the biggest “headaches” for government contractors in 2020. Even those many of these headaches are centered on U.S. law, they also impact Israeli companies doing business with the federal government directly or through subcontractors. Because of that, Israeli companies should be prepared to understand and comply with these government requirements. Read full article >>
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Solving the Pop-Up Puzzle: Tips for Owners and Short-Term Tenants By David I. Schneider and Herman R. Lipkis Real estate owners and operators are increasingly turning to pop-up operators to help monetize vacant or underused spaces in their property portfolios. Popups are growing in popularity throughout the United States and sophisticated Israeli real estate owners and investors should understand the zoning, regulatory and drafting considerations inherent to short-term tenants and licensees. Read full article >> Reprinted with permission from the NAIOP Commercial Real Estate Development Association’s Development Magazine
New H-1B Procedures Take Effect in 2020 By Tara L. Vance One of the most common U.S. work visas allowing a foreign national to work in the United States is the H-1B specialty worker visa, which requires in general that 1) the foreign national hold at least a U.S. bachelor’s degree or higher, or the foreign equivalent, in a professional discipline; 2) the job position in the U.S. must require a person with such educational background; 3) the proposed salary must equal or exceed the “prevailing wage rate” of similarly employed U.S. workers; and 4) there must be an H-1B visa available under the annual cap. The current administration has recently changed the procedure pursuant to which U.S. employers can file a new H-1B visa petition, such that all employers must have registered the H-1B visa petition they want to file between March 1 and March 20, and only those H-1B registrations chosen in a random lottery will be able to proceed to filing an actual H-1B visa petition with the U.S. Citizenship and Immigration Services (USCIS). H-1B visas are subject to an annual cap, such that there are 65,000 H-1B visa petitions available to foreign nationals who have a master’s degree or higher from a U.S. institution and an additional 20,000 available for foreign nationals with a U.S. bachelor’s degree or the foreign equivalent, or a higher level degree, from a non-U.S. institution. In general, H-1B visas are initially valid for up to three years and can be renewed for a total of up to six years. Dependent spouses and children receive H-4 dependent visas and spouses, however, cannot work on H-4 visas. To file a registration to apply for an H-1B visa petition on behalf of a foreign national prospective employee, please contact the author or another Holland & Knight attorney for assistance. Read full article >>
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Media Mentions and Speaking Engagements Potential Sources of Coronavirus-Related Federal Funding for Israeli Tech, Consulate General of Israel in Miami Webinar, Meital Stavinsky, April 14, 2020 Equality in Times of Coronavirus, The Marker, Meital Stavinsky, March 31, 2020 Opinion: The Solution for Coronavirus Can be Found in Israel, Globes, Meital Stavinsky, March 20, 2020 Understanding Business Lobbying in the U.S. – How to Get it Done?, Israel-USA Business Summit 2020, Feb. 27, 2020, Meital Stavinsky and Ron Klein U.S. Cannabis Regulation: What Happened in 2019 and What to Expect in 2020?, Globes, Meital Stavinsky, Jan. 14, 2020 U.S. Foreign Aid Conversion to Israeli Shekels is Decreasing - And Israeli Defense Companies Must Explore New Directions, The Marker, Meital Stavinsky, Jan. 14, 2020 Engineers in Male Territory: How Women Battery Career at Agritech?, The Marker, Meital Stavinsky, Dec. 25, 2019
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A Strong Commitment to the State of Israel Holland & Knight is a U.S.-based global law firm with a strong commitment to the state of Israel. We focus on providing guidance to Israeli investors and companies interested in doing business in the United States and Latin America. With more than 1,400 professionals in 28 offices, the lawyers and professionals in our Israel Practice are highly experienced in all of the interdisciplinary areas necessary to guide an entrepreneurial or an established company through the opportunities and challenges that arise throughout the company’s life cycle. Areas of legal guidance that are typically provided to our Israel Practice clients include real estate, mergers and acquisitions, private equity, international tax, cross border and customs, internet privacy and cybersecurity, intellectual property, government lobbying, regulations and compliance, reimbursement, U.S. Foreign Corrupt Practices Act (FCPA), U.S. Foreign Account Tax Compliance Act (FATCA), and litigation and dispute resolution. Among our Israeli clients are leading innovative technology companies in a wide range of industries, including information technology, advanced transportation, agtech, cleantech, healthcare and life sciences, medical devices and cybersecurity. Our Israeli real estate clients are leading commercial and residential developers and investors, and Holland & Knight’s venture capital and private equity attorneys advise both Israeli funds and U.S. funds investing in Israeli companies. A core value of Holland & Knight is our dedication to delivering the highest quality of legal services and providing responsive and cost-effective counsel to every client. This core value of the firm – coupled with our business acumen, legal experience and solid commitment to the Israeli marketplace – enables us to successfully assist our Israeli clients operating in the United States, as well as companies and investors doing business in Israel. The members of our team have client and business meetings in Israel on a regular basis and would be delighted to arrange for a meeting in person. Please do not hesitate to reach out to us with any questions, as we look forward to helping you excel and achieve your business goals in the U.S. and Latin America.
מחויבות עמוקה למדינת ישראל אנו מתמקדים במתן שירותי יעוץ למשקיעים וחברות ישראליות. הינה פירמת עורכי דין אמריקאית גלובלית בעלת מחויבות עמוקה לשוק הישראליHolland & Knight עורכי דין ואנשי מקצוע1,400- מעסיקה למעלה מHolland & Knight פירמת עורכי הדין.המעוניינים להרחיב פעילות או להשקיע בארצות הברית ובאמריקה הלטינית ומספקים מגוון, הפוליטיקה והסביבה החברתית בישראל, הינם בעלי הבנה עמוקה של הכלכלהHolland & Knight חברי הפרקטיקה הישראלית של. משרדים27-ב לחברי הפרקטיקה הישראלית שלנו ניסיון רב בכל תחומי המשפט.רחב של שירותים משפטיים ללקוחות ישראלים שפועלים בחו"ל ולחברות ומשקיעים הפועלים בישראל . חברות הזנק וחברות מבוססות בכל שלבי ותהליכי הצמיחה וההתפתחות של החברה, משקיעים,הנחוצים כדי להנחות יזמים פרטיות ואבטחת, מסחר בינלאומי ומכסים, מיסוי בינלאומי, קרנות השקעה, מיזוגים ורכישות, נדל"ן,התחומים בהם אנו מייעצים ללקוחותינו הישראלים כוללים בין היתר . סיוע ביישוב סכסוכים עסקיים וליטיגציה,FATCA - וFCPA לרבות, ייעוץ לוביסטי ורגולטורי, קניין רוחני,מידע , אנרגייה, מים, סביבה, חקלאות, תחבורה חכמה, לרבות בתחומי טכנולוגיות מידע ותקשורות,בין לקוחותינו הישראלים נמנות חברות מובילות בתחומי החדשנות הטכנולוגית עם. עם לקוחות הנדל"ן שלנו נמנים משקיעים וחברות מובילות העוסקים הן בנכסים לשימוש מסחרי והן בנכסי נדל"ן למגורים. ציוד רפואי ואבטחת מידע,מדעי החיים .לקוחותינו בתחומי ההון סיכון וקרנות השקעה נמנות קרנות ישראליות וקרנות זרות המשקיעות בישראל ערך מרכזי. הוא מחויבותנו להעניק שירותים משפטיים באיכות הגבוהה ביותר ולספק יעוץ אישי המותאם לצרכיו של כל לקוח ולקוחHolland & Knight ערך מרכזי של מאפשרים לנו לסייע בהצלחה ללקוחותינו הישראלים הפועלים בארצות הברית- הניסיון המשפטי ומחויבותנו האיתנה לשוק הישראלי,זה בשילוב האינטיליגציה העסקית נפגשים עם לקוחות בישראל באופן קבוע וישמחו, שחלקם דוברי עברית, חברי הפרקטיקה הישראלית שלנו. ולחברות ומשקיעים הפועלים בישראל,ובאמריקה הלטינית .לתאם פגישות עם חברות ויזמים המעוניינות ללמוד על הדרכים בהן נוכל לסייע להצלחת מיזמים עסקיים בארצות הברית ובאמריקה הלטינית
For inquiries regarding this newsletter, you may contact: Ronald J. Klein Co-Chair, Israel Practice Fort Lauderdale +1.954.468.7874
Meital Stavinsky Co-Chair, Israel Practice Miami +1.305.789.7710
Washington, D.C. +1.202.469.5152 ron.klein@hklaw.com
Washington, D.C. +1.202.828.5004 meital.stavinsky@hklaw.com 11
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