Selected Developments in Business Law —Counseling California Corporations – Forthcoming May 2026 Update

The State and Local Tax (SALT) cap initially applied only through the 2025 tax year, and the Small Business Relief Act provided that the SALT cap workaround was effective for tax years 2021–2025. In July 2025, SB 132 (Stats 2025, ch 17) was signed into law, which provides that that the SALT cap workaround would be extended to include tax years 2026–2030 in the event that the SALT cap was extended (Rev & T C §17052.11). The SALT cap was subsequently extended by the One Big Beautiful Bill Act (OBBBA) in 2025, triggering the extension of the SALT cap workaround. See §1.99A.

For any public corporation, IRC §162(m) disallows a deduction for compensation paid to a covered employee to the extent that the amount exceeds $1 million annually. Covered employees include (1) the principal executive officer of the corporation or the principal  financial officer (or an individual acting in such capacity) as of the close of the taxable year, and (2) the three most highly compensated officers forany taxable year beginning before or on December 31, 2026 or the five most highly compensated officers for any taxable year beginning after December 31, 2026  (other than the principal executive officer or principal financial officer). See §2.100.

Title VII of the Civil Rights Act of 1964 (42 USC §§2000e—2000e–17) permits a plaintiff to challenge an employer’s specific employment practice that has caused a significant disparate impact on employment opportunities. In Ames v Ohio Dep’t of Youth Servs., (2025) 605 US 303, 145 S Ct 1540 held that a majority may also constitute a protected class, reversing the “background circumstances” rule, first elaborated in Parker v Baltimore & O. R. Co. (DC Cir 1981) 652 F2d 1012, that had required additional evidence to prove discrimination against members of a majority. See §3.52.

On March 2, 2025, the U.S. Treasury Secretary announced the suspension of enforcement of the CTA against U.S. citizens, domestic reporting companies, and their beneficial owners. The Secretary determined that it would be appropriate to exempt U.S. persons from having to provide beneficial ownership information (BOI) and to exempt foreign reporting companies from having to report the BOI of any U.S. persons who are its beneficial owners. See §3.1.

On March 26, 2025, FinCEN issued an Interim Final Rule, with immediate effect, to exempt domestic reporting companies from the Reporting Rule and to exempt U.S. persons from having to provide such information to the foreign reporting companies for which they are a beneficial owner. 90 Fed Reg 2764 (Mar. 26, 2025).. See §3.1.

On June 5, 2025, the DOJ’s Criminal Division released an internal memorandum—Guidance on Coordinating Corporate Resolution Penalties in Parallel Criminal, Civil, Regulatory, and Administrative Proceedings—directing prosecutors to significantly prioritize victim compensation when deciding whether to credit corporate payments made to other enforcement authorities.  To ensure a resolution is coordinated, the company must inform the Criminal Division about other investigations and potential resolutions, and must proactively seek a coordinated resolution (see https://www.justice.gov/criminal/media/1402751/dl?inline). See §4.8.

On May 12, 2025, the U.S. Department of Justice (DOJ) Criminal Division (DOJ) announced its White-Collar Enforecment Plan which resulted in important revisions to the Division’s Corporate Enforcement and Voluntary Self‑Disclosure Policy (CEP), applicable to FCPA cases, and designed to incentivize corporations to self‑disclose and cooperate with law enforcement. In particular, it addresses how the DOJ will credit companies that voluntarily disclose criminal conduct and cooperate with the government’s investigation. See https://www.justice.gov/criminal/media/1400031/dl?inline See §4.18.

 The DOJ’s Corporate Enforcement and Voluntary Self‑Disclosure Policy dated May 12, 2025 expressly states that cooperation credit may not be conditioned on waiver of attorney-client privilege or work-product protections. However, the DOJ continues to require companies seeking cooperation credit for a “timely disclosure of the relevant facts” concerning a misconduct – who did what, when, and how – even if the facts were learned through privileged interviews or internal investigations.  Justice Manual §9–28.720 (see https://www.justice.gov/jm/jm-9-28000-principles-federal-prosecution-business-organizations). Recently, in In re FirstEnergy Corp. (6th Cir 2025) 154 F4th 431, the U.S. Court of Appeals for the Sixth Circuit held that held that attorney-client privilege and work‐product doctrine applied to a company’s internal investigation conducted by outside counsel, even if the materials were also used for business purposes.. See §4.33.

In EpicentRx v Superior Court (2025) 18 C5th 58, the California Supreme Court disapproved of Handoush v Lease Fin. Group, LLC (2019) 41 CA5th 729 and held that a forum selection clause requiring disputes to be litigated before the Delaware Court of Chancery is enforceable even though the Delaware jurisdiction does not recognize the right to a civil trial jury. The court found that “[e]ven where enforcement of a forum selection clause may effectively deprive a plaintiff of the right to trial by jury, this circumstance alone does not provide a basis to avoid its enforcement.” See §6.21.

Effective January 1, 2023, amended Govt C §12999 and amended Lab C §432.3 require most California employers to comply with new recordkeeping and reporting requirements and expanded rules for disclosing pay scale information to job applicants and existing employees. Additional requirements were added by SB 464 (Stats 2025, ch 760) including separating demographic information collected for the pay data report separate from the personnel records, and increasing the number of job categories from 10 to 23, redefining wage rates, and making civil penalties for pay data reporting violations mandatory. See §9.18.