On March 25, 2025, Delaware Governor Matt Meyer signed into law significant amendments to the Delaware General Corporation Law (DGCL) that are designed to reduce excessive stockholder litigation and reinforce the authority of independent directors and disinterested stockholders.  The amendments, while controversial, received bipartisan support and praise from the business community in the aftermath of recent decisions by Tesla and a growing number of other highly visible companies to reincorporate elsewhere.

Elevated Standards for Conflict-of-Interest Transactions

The amendments to Section 144 of the DGCL provide procedural safe harbors for transactions involving directors, officers, and “controlling stockholders,” which includes any person or entity who:

• Controls a majority of voting power in director elections;
• Influences the election of directors holding a majority of the board’s voting power; or
• Possesses at least one-third of the voting power and managerial authority.

Under the amended Section 144, a controlling stockholder transaction that is not a “going private” transaction may be entitled to safe harbor protection that prevents equitable relief and damages if, among other requirements: (i) all of the material facts about the transaction have been disclosed to stockholders entitled to vote and a special committee consisting of a majority of disinterested directors; and (ii) the transaction is approved or ratified by the special committee and a majority of informed, disinterested, and uncoerced stockholders.  Additionally, under the new Section 144(d)(2), a director of a public company is presumed disinterested if the company’s board of directors determines that the director satisfies applicable stock exchange standards.

Stricter Controls on Stockholder Inspection Rights

Revisions to Section 220 of the DGCL, which governs the scope of stockholders’ rights to inspect corporate records, have also undergone significant changes. Whereas previously, stockholders could broadly request both formal and informal corporate documents, the amended law substantially narrows this scope, primarily by limiting access to formal corporate records such as board minutes, board resolutions, financial statements, and similar records. In contrast, informal documents, like internal communications, emails, text messages, or drafts of documents can no longer be routinely requested. Stockholders seeking access to these informal records must now clearly demonstrate a compelling and specific justification tied directly to their investigation or claim, effectively limiting broad and exploratory demands that have previously led to extensive litigation.

Balancing Governance and Litigation Prevention

The amendments demonstrate a level of intentionality by the First State to create an optimized governance and decision-making environment for management and directors. By clarifying and tightening the standards governing conflict-of-interest transactions and restricting overly broad document inspections by stockholders, Delaware seeks to mitigate unnecessary and speculative litigation. The amendments strike a careful balance between reasonable safeguards and information requests and those that reduce the ability of Delaware corporations and their officers and directors to effectively manage and make strategic decisions in the best interests of the corporation and its stockholders.

Practical Key Takeaways for Delaware Corporations

Delaware corporations should consider the following actions in response to the recent DGCL amendments:

• Update internal policies to align with the revised conflict-of-interest standards under the amended Section 144.
• Document director independence in accordance with national stock exchange criteria.
• Implement procedures to clearly distinguish between formal and informal corporate records, anticipating the tightened standards for stockholder inspections.
• Conduct training sessions for directors and officers on the new legal standards to mitigate litigation risks.
• Review and update corporate governance practices to ensure compliance with the amended DGCL provisions.

We believe that the Delaware legislature and courts will remain at the forefront of innovations and trends in corporate governance. If you have any questions about the above amendments and how it might impact your Delaware corporation, please do not hesitate to contact us.

February Forecast Shows Worsening Budget Outlook

Minnesota Management and Budget (MMB) delivered the delayed February budget and economic forecast yesterday. While MMB projects a $456 million surplus for the FY 2026-27 biennium, this projected surplus is now $160 million lower than estimates from the November Forecast. In a statement, MMB said the “budget outlook has been adjusted downward amid significant near-term economic and fiscal uncertainty” and that “higher forecast inflation results in increases in projected revenues and expenditures.”

The projected deficit for the FY 2028-2029 biennium has grown to $5.995 billion, $852 million worse than November estimates. MMB stated further in its statement that “shifting policies at the federal level introduce significant uncertainty to the projections.”

Impact of Discretionary Inflation Account is New

During the last biennium, the legislature changed the law, now requiring estimates of inflation to be included in the official budget forecast. However, in crafting the forecast, the cost of inflation isn’t spread out amongst the various parts of the budget where it is anticipated, but rather those expected inflationary costs are accounted for in a separate bucket, a discretionary inflation account. In accounting for inflation in this way, the legislature is acknowledging that in order to maintain certain services, costs will increase; however, they are also acknowledging that it is the responsibility of the legislature to decide whether to accept the increased costs or to alter existing policies to bend cost curves or make other decisions in how to spend that money.

Topline Budget Numbers Don’t Tell Whole Story

Despite the negative headlines, the forecast picture isn’t as bleak as it seems. The anticipated inflation forecast for FY 26-27 is $1.145 billion, which is placed in the discretionary inflation account. When the $456 million projected surplus is combined with the $1.145 billion discretionary inflation account, the total actual surplus is $1.601 billion. This represents a greater number than existed in November. At that point, the surplus was $616 million, while the discretionary inflation number was $926 million for a total of $1.542 billion. In short, legislators have more money to spend now in FY 26-27 than they did following the November Forecast. The money just shifted from the surplus to the discretionary inflation account.

Future Coming into Focus…

Just after publication of last week’s Top 5 (in which we discussed the lack of announced deadlines), legislative leaders released the 2025 committee deadlines. Due to the unusual nature of this year’s legislative session, the first and second deadlines have been combined (April 4 at 5:00 p.m.), and take place just one week before the final committee deadline (April 11 at 12:00, noon). In effect, what the deadlines mean is that the work of policy committees should be completed by April 4, and omnibus finance bills must be completed by April 11. Deadlines do not apply to the following committees: Capital Investment, Finance / Ways and Means, Taxes and Rules. The legislature will be on break following the final deadline, until Tuesday, April 22, at which point they will have approximately four weeks to complete their work.

…And Becoming More Clear

Also this week, we have received insight on when budget targets may be announced. Separately, House and Senate leaders announce their preferred budget targets for the various areas of jurisdiction in order to craft finance bills. According to Axios reporter Torey Van Oot, the House plans to release targets by April 1, though the Senate indicated they may not release their until as late as April 5. Neither of these dates provide much time for committees to make final decisions on what to include in their finance bills.

Taxpayer confidentiality isn’t just a legal technicality—it’s a fundamental pillar of trust in the U.S. tax system. Federal law is designed to ensure that individuals and businesses can comply with tax obligations without fear that their sensitive financial information will be mishandled or exposed. Yet, recent legal battles highlight a growing concern: What happens when those entrusted with taxpayer data fail to protect it?

Who Has Access to Your Tax Information?

When you file your taxes, you expect that your private financial details are handled with care. But government agencies don’t operate in a vacuum—they rely on contractors and external organizations to process, store, and manage data. Reports have indicated that the Department of Government Efficiency (DOGE) has extensive access to taxpayer information, along with numerous third-party contractors assisting the IRS, DOGE and other government agencies. That access, if not properly controlled, has the potential to lead to serious breaches of taxpayer privacy.

The Legal Framework: Your Rights Under Federal Law

Federal law is clear: taxpayer information is confidential. Under 26 U.S.C. § 6103, tax returns and return information cannot be disclosed except in specific, legally permitted situations. Any unauthorized disclosure—whether intentional or negligent—can lead to serious consequences, including civil and criminal penalties.

26 U.S.C. § 7431 gives taxpayers a path to seek damages if their confidential tax information is unlawfully shared. Even if a breach wasn’t intentional, failure to implement safeguards against unauthorized access can result in liability. In addition to federal protections, state laws often allow individuals to sue for privacy violations, such as the public disclosure of private facts.

Why This Matters: Real-World Legal Consequences

Recent litigation has tested these protections. Over several years, Charles Littlejohn, an employee of a contractor for the IRS, leaked substantial amounts of confidential taxpayer information to major media organizations.  Littlejohn was convicted and sentenced to five years in prison in 2024.  Multiple affected individuals sued the IRS and its contractors for this breach, including Ken Griffin and Kelcy Warren.  In response to and in settlement of Mr. Griffin’s lawsuit, the IRS issued a public apology. Most recently, in Warren v. Booz Allen Hamilton, Inc., a case pending before the United States District Court in Maryland, the court ruled that the plaintiff could pursue claims under § 7431 against Littlejohn’s employer, reinforcing the idea that contractors can potentially be held accountable for mishandling taxpayer information.

This case sets a powerful precedent. It signals to government agencies and their contractors that taxpayer privacy is not just a best practice—it’s the law. It also serves as a warning: when taxpayer data is misused, legal action can and will follow.

The Risks of Unchecked Access

The problem isn’t limited to one case. As the government increasingly relies on third-party contractors to manage taxpayer data, the risk of unauthorized disclosures grows. The broad access granted to DOGE and its affiliated contractors create additional vulnerabilities for potential privacy breaches. Without strict oversight, taxpayers remain exposed to data leaks that could result in identity theft, financial fraud, and reputational harm.

What You Can Do

For taxpayers, these legal battles underscore the importance of vigilance. If you suspect your tax information has been improperly accessed or disclosed, legal avenues exist to hold the responsible parties accountable. As attorneys, we’re adept at navigating the complex legal framework surrounding taxpayer confidentiality. Whether it’s pursuing claims under § 7431 or leveraging state privacy laws, legal action can serve as both a remedy and a deterrent against future violations.

Final Thoughts: Protecting the Integrity of the Tax System

Maintaining trust in the tax system requires more than just laws—it demands enforcement. As scrutiny on data security intensifies, government agencies and their contractors must prioritize taxpayer privacy. Holding those who mishandle confidential information accountable isn’t just about legal recourse; it’s about reinforcing the integrity of a system that millions of Americans rely on.

If you or your organization handle taxpayer information, now is the time to assess your compliance protocols. And if you’re a taxpayer affected by a breach, know that the law is generally on your side.

Reach out to a member of our Tax team with questions or to learn more here.

No Committee Deadlines

While House and Senate committees met and heard a variety of policy and spending bills this past week, legislative leaders again failed to agree on setting committee deadlines. DFL leaders have been advocating for later deadlines because they expect the House DFL to return to parity with the House Republicans after the March 11 Special Election in House District 40B. With House Republicans currently in control, very few DFL bills are being heard and later deadlines will allow more DFL hearings. As expected, House Republicans oppose this and support earlier deadlines.

House Energy Committees Redefines Carbon-Free

On Tuesday, the House Energy Finance and Policy Committee heard H.F. 249, a bill which would redefine the definition of carbon-free to include woody biomass. Woody biomass is wood and other woody plant material that can be used as a renewable energy source. The bill was authored by Representative Spencer Igo (R-Wabana Township) and would give utilities another method to generate or procure energy to meet the 100 percent carbon-free energy mandate by 2040. H.F. 249 passed and was sent to the House Floor.

Data Center Tax Exemption Bills Heard

Both the House and Senate Tax Committees heard data center tax exemption bills this week. Senator Grant Hauschild’s (DFL-Hermantown) S.F. 769 was heard on Tuesday and the House version of the bill, H.F. 1277, was authored by Tax Chair Greg Davids (R-Preston) and heard on Thursday. Both versions of this bill would extend the data center tax exemption indefinitely and  transition the credit to a front-end credit. Business groups and labor trade groups testified in favor of the bill in both bodies while MAPE, Clean Water Action, Isaiah, Vote Solar, and the Sierra Club all vigorously opposed the bills. The Department of Revenue estimated that the tax exemption would cost $20 million. Both bills were laid over for possible inclusion in their respective Omnibus Tax Bills.

House Republicans Continue Focus of Waste, Fraud and Abuse

Throughout the 2024 campaign season, House Republicans were talking about waste, fraud and abuse in state government. The issue was a key component to their electoral success in ending the DFL trifecta that had been in place last biennium. Now, Republicans are continuing to keep focus on the issue. In the power sharing agreement between House Republicans and DFLers, the single committee that will not be co-chaired is the Fraud Prevention and State Agency Oversight Policy committee, chaired by Kristin Robbins (R-Maple Grove). Further H.F. 1 (Rep. Patti Anderson, R-Dellwood), which would create a new Office of the Inspector General, has been quickly moving through the committee process, already receiving hearings in four separate committees. Don’t be surprised if this bill makes it to the floor soon.

Paid Family and Medical Leave Changes?

Republicans have also been focused on “fixing” various new laws that were passed during the last legislative session, most notably the state’s new Paid Family and Medical Leave program. The program is set to start on January 1, 2026, though H.F. 11 (Rep. Dave Baker, R-Willmar) would delay implementation by a year. The legislation is scheduled for its final committee stop before the floor on Monday, March 3. In addition to the delayed implementation timeline, Republicans are seeking several other changes including definition changes and exemptions. Despite the Republicans efforts, it is unlikely that Democrats will agree to any significant changes.

Busy Week at the Capitol

After a turbulent January and early February, activities at the Legislature returned to normal this past week. The halls of the Capitol were filled with people from all over Minnesota as numerous stakeholders held “Day at the Capitol” events. House and Senate committees met to consider policy and spending bills while also vetting the Governor’s budget recommendations. This cadence will continue for the next few weeks until Minnesota Management and Budget releases the budget forecast on March 6. This budget forecast will provide the necessary revenue and spending numbers for the House and Senate to begin budget development work.

House Republicans in Majority…for now

On the political front, House Republicans still hold a 67-66 majority and have been functioning as the majority party in the House. While unable to pass bills without a 68th vote, they do have enough members at 67 to control management of the House. The special election in the largely blue House District 40B will be held on March 11, and a likely DFL victory in this seat will return the House to a 67-67 tie.

Tax Credit for Underutilized Buildings Advances

The House Housing Finance and Policy Committee heard the conversion of underutilized buildings (CUB) bill this week.  The bill would provide an income tax credit for the reuse of vacant and underutilized buildings.  Proponents testified that the tax credit would allow for office-to-housing conversions, particularly in downtown Minneapolis and St. Paul, and lead to much needed revitalization. While there is a lot of momentum behind this idea, the cost is significant. The bill passed the Housing Finance and Policy Committee and has been referred to the House Tax Committee.

Governor’s Sales Tax Proposal Receives Committee Airing

Earlier this week, the House Taxes Committee heard from Commissioner of Revenue Paul Marquart regarding the Governor’s proposed changes to the Minnesota tax code. As part of the plan, the Governor has proposed expanding the tax base to include more services, while providing a slight reduction to the sales tax rate from 6.875% to 6.8%. Despite the rate decrease, collections would be expected to increase approximately $185 million over the course of the next biennium, as the tax is expanded to include most legal, accounting, brokerage and some bank services charges. Marquart defended the proposal, highlighting that it “right-sizes the tax code to a more service-oriented economy. Back in 1967, when we initiated the sales tax at 3%, about 60% of our economy was goods, which is taxes, and 40% services. Today, that has flip-flopped. So, you are taxing a narrower and narrower portion of the economy which increases the rate you have enact to get the same amount.”

Business-Related Tax Proposals Also Discussed

While business-to-business sales taxes would remain exempt under the Governor’s proposal, other changes affecting businesses have been proposed. One issue that was the subject of committee conversation is a possible expansion of the state’s research and development (R&D) credit. DFL Committee Lead Aisha Gomez (Minneapolis) questioned whether that was the best approach following a recent report by the Office of the Legislative Auditor. Others on the committee agreed, suggesting that the Angel Tax Credit may be a better approach to help businesses. We expect more conversations and committee action after bill language is released with additional details on the specifics of the Governor’s tax proposal.

Rafi Mottahedeh is author of, “Liquidations that Run for the Border,” for the M&A Tax Report.

Rafi Mottahedeh is the co-author of the article, “The Import Price Advantage Under the Border-Adjusted Tax.”  The blueprint proposes a cash-flow-based border-adjustable tax (BAT) that combines elements of a consumption tax and an income tax.

Download the article here.

In partnership with the Minnesota State Bar Association – Civil Litigation Section, Winthrop recently hosted a lively and educational Roundtable event featuring a distinguished panel of nine members of the Hennepin County bench, including Assistant Chief Judge, the Honorable Mark J. Kappelhoff, and co-moderated by Winthrop shareholder, Kyle Kroll, and David Tomenes of the U.S. Department of Veterans Affairs.

The conversation centered on civil trial “dos and don’ts,” courtroom use of technology, and complex case management strategy, and provided candid judicial advice from this diverse panel. Below are key takeaways and courtroom practice pointers from the event:

1. Be Prepared and Organized

• Plan Ahead: Whether it’s reviewing deposition transcripts, preparing exhibits, or organizing motions, being prepared well in advance of trial is critical. Last-minute scrambling—especially with motions, objections, or video edits—can be a major setback.
• Deposition Preparation: Have your depositions organized and reviewed well before trial, with a focus on key sections to use in court. Avoid leaving crucial decisions to the last minute, especially regarding objections or the specific excerpts you plan to present.

2. Limit Video Depositions

• Use Sparingly: Video depositions, particularly for impeachment, are often poorly received by juries. They can be confusing, especially if not edited properly. Instead, focus on live testimony and use video only when absolutely necessary.
• Preparation Is Key: If video depositions are used, make sure they are well-edited and prepared ahead of time to avoid issues during trial.

3. Keep It Simple and Focused

• Jury Trials: In jury trials, avoid getting bogged down in small issues or excessive details. Focus on presenting a clear narrative that jurors can easily understand. Judges recommend focusing on the key facts and legal issues, keeping your case simple and compelling.
• Cross-Examination: Avoid repeating direct testimony during cross-examination. Cross-examination should be focused and concise, aiming to highlight contradictions or key facts rather than restating what’s already been said.

4. Professionalism and Civility Matter

• Respect Between Counsel: Maintaining professionalism between opposing counsel can have a significant impact on how jurors perceive the case. Jurors pick up on tension between attorneys, and it can undermine your case. While zealous representation is important, civility goes a long way in ensuring a smoother trial process.
• Juror Perception: Jurors value seeing attorneys interact respectfully and collaboratively. They are more likely to trust and value the information presented by attorneys who maintain a professional demeanor.

5. Use Technology Wisely

• Remote Hearings: There is growing support for hybrid or remote hearings, especially for logistical reasons (e.g., out-of-state counsel or clients). Judges are becoming more flexible about accommodating remote participation but still value in-person interaction for complex matters.
• Visual Aids: Visual aids (like PowerPoints or diagrams) can help clarify complex issues, but they should be used strategically. Overuse of slides or presenting overly complicated visual information can become distracting.
• Remote Observation: Judges generally support remote observation for co-counsel or in-house counsel, especially when travel is difficult or costly. However, this should not replace the direct involvement of counsel in the courtroom.

6. Be Strategic with Expert Witnesses

• Clear and Direct Answers: Expert witnesses should be prepared to provide clear and direct answers. Avoid allowing them to engage in unnecessary debates or quibbling, which can frustrate both the jury and the judge.
• Preparation Is Crucial: Both expert and lay witnesses need thorough preparation, especially for cross-examination. Lay witnesses, in particular, can be caught off guard by the intensity of cross-examination, which can damage their credibility if they aren’t well-prepared.

7. Pre-Trial Preparation and Trial Briefs

• Trial Briefs: Trial briefs are more useful in bench trials, where legal arguments may be more complex or nuanced. For jury trials, trial briefs are often unnecessary unless there’s a significant evidentiary issue that needs to be addressed.
• Jury Instructions and Exhibits: In jury trials, focus on preparing exhibits and jury instructions ahead of time. Having agreed-upon jury instructions and a special verdict form before the trial begins can save significant time during the trial and ensure a smoother process for all parties involved.

8. Handling Witnesses and Testimony

• Witness Preparation: Preparing witnesses thoroughly—especially lay witnesses—for what to expect during cross-examination is crucial. Witnesses who are surprised by aggressive questioning can lose credibility quickly, so mock cross-examinations can help them stay composed under pressure.
• Cross-Examination Strategy: Instead of merely reiterating the testimony presented during direct examination, focus on challenging key aspects of the testimony. Get to the point quickly and avoid unnecessary repetition.

9. Trial Efficiency

• Avoid Minor Disputes: Judges caution against spending too much time on minor legal disputes or irrelevant issues. Instead, focus on the broader aspects of the case that will be most impactful to the jury or judge. This approach ensures you don’t lose sight of what really matters.
• Work Together: Collaboration between counsel—especially when it comes to preparing exhibits, stipulating certain evidence, and agreeing on jury instructions—can streamline the trial process. Judges appreciate when counsel can resolve issues before trial begins.

Winthrop thanks all of the participants and attendees for their contributions to this educational event.

Kyle Kroll and Michael Petschel recently published an article, “Cannabis, Insurance, and the Federal-State Divide,” in DRI’s In-House Defense Quarterly.

As of Q3 2024, thirty-eight states have legalized cannabis in some form, whether for recreational use (twenty-four states) or medicinal use (fourteen additional states). Likewise, more than one-third of states permit home cultivation of cannabis. But despite continued legalization at the state level, cannabis possession, cultivation, and distribution remains illegal at the federal level under the Controlled Substances Act (“CSA”)—though, this year’s campaigns suggest this may change.

Read more about “…states facing a new era of legality may draw upon these early cases while recognizing what has changed in public policy,” in the DRI Fall Edition.