Minnesota Management and Budget (MMB) today issued the latest Budget and Economic Forecast. For the current budget period FY 2026-2027, there is a projected surplus of $2.465 billion due to what MMB says is a “better-than-expected fiscal year close and higher near-term revenue collections”. These increased revenue collections were partially offset by increased spending estimates.

MMB characterizes the state budget and economic outlook as “stable” for FY 2026-2027 with “structural” challenges in FY 2028-2029. Higher health care costs and slow economic growth cause a $2.96 billion projected deficit in FY 2028-2029. The budget reserve is $3.711 billion.

The Minnesota Department of Human Services (“DHS”) quietly communicated on December 1, 2025, its intent to issue a temporary licensing moratorium for 245D-licensed Home and Community Based Services (“HCBS”), effective January 1, 2026. The licensing moratorium is the latest step in DHS’s heightened efforts to tamp down widespread fraud, waste and abuse uncovered in the Medical Assistance (“Medicaid”) program over the last several months.  Our team’s prior coverage of these actions can be found here.

In a December 1, 2025, letter to the chairs of the House Human Services Finance and Policy Committee and the Senate Health and Human Services Committee, Temporary Commissioner Shireen Gandhi wrote that the decision to implement a moratorium was based on several factors, including (i) growth in the number of HCBS licensed providers has outpaced the needs of enrolled waiver participants; (ii) the number of existing active 245D licenses is nearly equal to the number of pending applications, further supporting the position that license capacity has grown faster than the number of waiver participants over the last five years; and (iii) DHS is not sufficiently funded to process the growing backlog of licensing applications while also meeting federal waiver plan commitments to review every 245D licensed provider at least once every three years.

The moratorium, which DHS states is authorized by Minnesota Statutes section 245A.03, subd. 7a and Executive Order 25-10, will go into effect on January 1, 2026 and last for an anticipated 24 months, ending December 31, 2027.

Under the moratorium, DHS will:

• Stop issuing new 245D licenses;
• Stop accepting new 245D license applications;
• Stop adding new services to existing 245D licenses; and
• Cancel existing 245D license applications, and make licensing application fee refunds available until December 31, 2026, to all affected applicants.

An exception process will be available based on requests from counties, Tribal Nations or managed care organizations responsible for a person’s waiver case management.  DHS states that before January 1, 2026, it will finalize and publicly share the processes and criteria for granting exceptions requested by lead agencies.

Existing licensees should be prepared for DHS compliance reviews and should begin preparing for records requests and on-site visits, including reviewing policies and procedures, ensuring documentation of appropriate staff training and qualifications, and assuring that recipient records are complete and up-to-date. It is also unclear how changes of ownership of existing 245D licensees will be handled since those transactions typically require a new license application.

If you are an affected provider and have questions regarding the new licensing moratorium, or are facing adverse DHS action, reach out to the health care regulatory attorneys at Winthrop & Weinstine, P.A.

If you own real estate in Minnesota, you will soon receive (if you haven’t already) an estimate, known as the “Truth-in-Taxation” or “Proposed Property Tax” notice, of your real estate tax liability payable in 2026. Prior to receipt of this notice, typically in March or April of each year, Minnesota property owners receive an estimate of your property’s value as of January 2025, as determined by your respective local assessor. While you may have been pleased or disappointed with this “first look” estimate, your November notice will tell you approximately how much you will owe in the coming year. It is important to note that the Truth-in-Taxation notice is only an estimate and is not your tax bill (which will be sent in March), but it does provide you with the opportunity to budget for the tax payment or consider contesting the proposed valuation.

How are property taxes determined in Minnesota? 

In Minnesota, property taxes are paid in arrears, meaning that the 2025 taxes are due and payable in 2026, usually in two installments due in mid-May and mid-October. The tax bill you will receive in March 2026 will be a percentage of the January 2025 value. Real estate taxes are a function of the tax rates set by government entities and the valuation of each property. Particularly if you own real estate in the greater Twin Cities area, don’t be surprised if your effective tax rate (taxes/estimated market value) rises. If property values have fallen, as they have on office buildings in the Cities’ central business districts, a city needs to tighten its budget and/or increase its tax rates to continue funding its service priorities.

How is my property’s tax value determined?

Local government assessors are charged with estimating the fee simple market value of the properties to which they are assigned—namely, the probable selling price, as of a specific date, in cash or cash equivalent, of the fee simple title, after reasonable exposure in a competitive market, assuming the parties would each act prudently, knowledgeably, in their own self-interest and under no duress. While assessors have a pretty good overall feel for valuations of the various types of properties — apartments, offices, medical offices, industrial, retail, residential, etc.— located within their respective jurisdictions, they typically don’t know the unique aspects of a particular property very well (if at all). Instead, they take a macro view of the market, performing mass appraisals at least every five (5) years. That said, a specific property may vary in value from the average due to a variety of factors, rendering a property less competitive on the marketplace. Some common factors include:

• Deferred maintenance;
• New competition and/or neighboring development;
• Traffic, access or visibility issues; or
• Obsolescence.

How do I know if the assessed tax value is correct?

While any number of factors can affect value, you may not know your property is overvalued for tax purposes unless you (i) recently bought it, (ii) have a current appraisal, or (iii) otherwise know that the property is underperforming. If you suspect that your valuation is too high, now is a good time to engage an appraiser to evaluate your property, its financials, and comparable sales statistics to help you determine whether further inquiry or a tax appeal is justified. Many appraisers will perform an initial “look-see” verbal assessment at limited cost, which you can then use to help evaluate your options and next steps.

Although an appraiser’s input up front is not necessary to pursue an appeal, it is often a good idea, particularly if you are unfamiliar with the market. In the case of rental properties, an appraiser’s input early in the process can be particularly helpful, since owners of income-producing properties will need to provide financial statements to the assessor in the course of a tax appeal. If the financial statements support a higher value, the assessor can perhaps use that information to justify an increase the assessed value in future years. Furthermore, if the case goes to trial, the court has the discretion to raise taxes for the year appealed. Having an appraiser review financial statements in advance and advise on whether an appeal may be appropriate can help avoid that risk down the road.

How do I appeal my tax value?

While the government-established tax rates are unappealable, if you have good reason to believe that your property may be overvalued, misclassified, or taxed unequally, filing a property tax appeal may result in some relief. Filing a property tax petition with your local district court, allows you to negotiate with your County assessor. Most (not all) cases settle out of court. Property tax appeals for taxes payable next year must be filed on or before April 30, 2026. This deadline is hard, with extremely rare exceptions. It is generally too late to appeal for taxes payable in 2025 and prior years.

Our team has helped clients over the years with hundreds of property tax appeals and would be happy to answer any questions you have about the process.

On November 4, 2025, voters in Duluth, Minnesota approved a Right to Repair ballot initiative, granting tenants a right to repair certain defects in residential rental units when applicable requirements are met.[1]  This ordinance affects landlords of property in the city of Duluth and went into effect on November 10, 2025.

What is a Right to Repair?

The ordinance grants residential tenants a right to repair certain defects in their unit upon giving proper notice to their landlord and waiting fourteen (14) days. It states that in order to provide notice, the tenant must: (1) send written notice to the landlord to the address where the tenant pays rent, (2) either call, text, email, or send a message through the rental portal communicating the needed repair to the landlord, and (3) notify the landlord of the repair that is needed and the tenant’s intent to deduct the cost of the repair from the tenant’s rent. Once the tenant has given proper notice, the landlord has fourteen (14) days to either complete the repair or provide a scheduled repair date to the tenant. If landlord does not do so within the 14-day period, the tenant may contract to complete the repair and withhold up to half of a month’s rent, or $500, whichever is greater, to pay for repairs.[2]

Following proper notice and repair in accordance with the above requirements, the tenant may then deduct the cost of repairs (up to the maximum threshold)[3] from their future rent or pay for the repair and then receive reimbursement from the landlord.[4] If the lease terminates before the tenant is able to deduct repair costs from future rent, the landlord must reimburse the tenant.[5]

Repairs are subject to this ordinance only to the extent necessary to comply with the municipal code.[6]

Eligible required repairs include but are not limited to the following:[7]

• Holes in walls and ceilings and floors
• Leaks in pipes or faucets
• Electrical fixtures
• Appliances the landlord supplies or is required to supply
• Heating facilities and gas-fire appliances
• Smoke alarms, sprinkler systems, and fire alarm systems
• Hall and stairway lighting and other safety measures
• Reasonable energy efficient measures like weatherstripping, caulking, and storm windows
• Small window repairs
• Bathroom fans
• Doors and cabinets
• Insect and pest extermination

The ordinance also includes a catch-all provision that states an eligible repair is anything necessary to address a circumstance in which the landlord fails to maintain the dwelling unit and common areas in a fit and habitable condition.[8]

Who Must Comply with the Ordinance?

The ordinance defines “landlord” as any person directly or indirectly in control of a rental property.[9] If the residential rental unit has a tenant, that tenant may invoke the right to repair if the landlord does not respond in accordance with the ordinance within fourteen (14) days.[10]

Can a Landlord Dispute the Need for a Repair?

The landlord may dispute that the repair is needed if they send a written notice disputing the repair to the tenant within fourteen (14) days of the tenant’s notice.[11] The landlord must then arrange for a building official to inspect the property within thirty (30) days of the landlord’s notice of the dispute.[12] If the inspection does not happen within thirty (30) days or if the inspection confirms that a repair is needed, the tenant retains the right to initiate the repair.[13]

What are the Limitations of the Right of Repair?

The tenant cannot exercise their right to repair at the landlord’s expense if the condition was caused by the tenant’s deliberate or negligent act, or the tenant’s omission.[14] This limitation extends to damage caused by the tenant’s family, friend or guest who was on the premises with the tenant’s consent.[15]

A tenant exercising their right of repair must ensure that if applicable, the repair is completed by a person licensed to perform the required work.[16]

A tenant must provide a receipt to the landlord before subtracting the amount paid for repairs from the future rent.[17]

What are Potential Consequences for Violations of the Ordinance?

The ordinance provides a private right of action for tenants.[18] If a landlord is found in violation of the ordinance, the tenant is entitled to penalties which may include rent reduction, rescission of the lease, up to a $500 civil penalty per violation, and reasonable attorney fees.[19]

Key Takeaways:

• If a tenant provides written notice and either calls, texts, emails, or sends a message through the rental portal requesting a repair, it is critical that landlords respond in accordance with the ordinance within fourteen (14) days. Otherwise, the landlord waives their right to dispute the repair. The landlord’s response can be to:
  • Complete the repair; or
  • Contract for the repair and send a scheduled repair date to the tenant; or
  • Dispute the repair in writing and arrange for the building official to conduct an inspection within thirty (30) days of the written dispute.
• The tenant may not contract to fix the repair at the landlord’s expense if the poor condition was caused by the tenant’s deliberate or negligent action, or an omission by tenant.
• A landlord may not take negative action against a tenant for exercising the tenant’s right to repair.[20]
• The ordinance does not apply to short-term rental units such as an Accessory Home Share, [21] or a Vacation Dwelling Unit.[22]

[1] Marisa Ornat, Duluth residents vote “yes” to Right to Repair Ordinance, Northern News Now (Nov 4, 2025, at 11:17 CST), https://www.northernnewsnow.com/2025/11/05/duluth-residents-vote-yes-right-repair-ordinance/

[2] Duluth, Minn., Ordinance No. 25-015-0, Right to Repair (2025) (to be codified at Duluth City Code Ch. 29A).

[3] Up to half of a month’s rent, or $500, whichever is greater, to pay for repairs.

[4] Duluth, Minn., Ordinance No. 25-015-0, Right to Repair (2025) (to be codified at Duluth City Code Ch. 29A).

[5] Duluth, Minn., Ordinance No. 25-015-0, Deduction; reimbursement, (c) (2025) (to be codified at Duluth City Code Ch. 29A).

[6] See Duluth, Minn., Ordinance No. 25-015-0, Tenant contracting repairs; notice; eligible repairs, (d) (2025) (to be codified at Duluth City Code Ch. 29A).

[7] Id.

[8] Id.

[9] Duluth, Minn., Ordinance No. 25-015-0, Definitions, (b) (2025) (to be codified at Duluth City Code Ch. 29A).

[10] Duluth, Minn., Ordinance No. 25-015-0, Right to Repair (2025) (to be codified at Duluth City Code Ch. 29A).

[11] Duluth, Minn., Ordinance No. 25-015-0, Tenant contracting repairs; notice; eligible repairs, (c) (2025).

[12] Id.

[13] Id.

[14] Duluth, Minn., Ordinance No. 25-015-0, Right to Repair, (c) (2025) (to be codified at Duluth City Code Ch. 29A).

[15] Id.

[16] Duluth, Minn., Ordinance No. 25-015-0, Tenant contracting repairs; notice; eligible repairs, (b) (2025) (to be codified at Duluth City Code Ch. 29A).

[17] Duluth, Minn., Ordinance No. 25-015-0, Deduction; reimbursement, (a) (2025) (to be codified at Duluth City Code Ch. 29A).

[18] Duluth, Minn., Ordinance No. 25-015-0, Enforcement; Penalty, (a) (2025) (to be codified at Duluth City Code Ch. 29A).

[19] Id.

[20] Duluth, Minn., Ordinance No. 25-015-0, Eviction or Retaliation Prohibited (2025) (to be codified at Duluth City Code Ch. 29A).

[21] Accessory Home Share is a habitable bedroom or bedrooms in an owner-occupied dwelling offered for trade or sale for a period of 29 nights or less. (Duluth, Minn. Code, art. 6, § 50-41.1)

[22]Vacation Dwelling Unit is a residential unit offered for trade or sale for a period of 2 to 29 nights. (Duluth, Minn. Code, art. 6, § 50-41.22).

This past legislative session, Minnesota enacted a new statute, Minn. Stat. § 609.2334, creating an order-for-protection (OFP) mechanism specifically targeting the financial exploitation of vulnerable adults. Beginning January 1, 2026, courts across the state are authorized to issue protective orders aimed at preventing, mitigating, or halting suspected or ongoing financial exploitation.

The statute is focused on protecting vulnerable adults from financial harm and has direct operational implications for financial institutions requiring compliance with court-issued orders including but not limited to placing transactional holds on accounts, restricting access to accounts or assets, and furnishing records. Those in the banking and financial services industry must be aware of the implications of the new statute and, in anticipation of the new statute taking effect January 1, 2026, should take action to implement the law’s requirements, through policy updates, workflow changes, training, and documentation protocols.

Key Provisions and Definitions Relevant to Financial Institutions

The law was created to be intentionally broad to allow flexibility to address bad behavior, which poses potential issues in implementing a Court’s Order. While the precise terms of any individual order will be case-specific, financial institutions should anticipate the following features as typical of this type of protective regime:

1. The statute authorizes petitions by or on behalf of a vulnerable adult, and it empowers courts to grant relief tailored to prevent or remedy financial exploitation. Relief may include prohibiting respondents from initiating or completing financial transactions; restricting access to accounts, property, or payment instruments; directing the safeguarding or return of funds; and authorizing disclosures necessary to effectuate the order. Orders may be issued on an expedited or ex parte basis where immediate protection is warranted, with subsequent hearings for longer-term relief.
2. The statute imports or aligns with Minnesota’s existing definitions surrounding vulnerable adults and financial exploitation, which generally encompass adults who, due to age, disability, or dependency, are susceptible to abuse, neglect, or exploitation, and conduct that includes the wrongful taking, use, or retention of funds or assets, or undue influence to obtain control over assets or decision-making. Financial institutions should use these benchmarks in assessing how to operationalize requests and in training frontline staff.
3. Orders may expressly direct financial institutions to implement holds or restrictions, decline certain transactions, freeze or segregate funds pending a hearing, or provide account-level information to the court or certain parties, consistent with confidentiality requirements. Orders may also address or impose requirements on instruments such as powers of attorney, fiduciary accounts, beneficiary designations, and access credentials, that are implicated in suspected exploitation.
4. The statute  compels compliance with court orders and may include liability protections for good-faith compliance. Conversely, willful noncompliance with a duly issued order will likely carry legal consequences, including contempt exposure. Institutions should confirm the availability and contours of any safe harbors and immunities under the statute and related Minnesota law with their legal counsel.
5. The Court has the ability to issue an ex parte temporary order for up to 14 days. Prior to or on the 14^th day, the Court is required to hold a hearing, at which point the order may be extended  by an additional 14 days.
6. Each Order will be case-specific and will have different timelines as to account freezes and the release of those freezes. Proper review and interpretation of each Order is important to ensure correct compliance with the Order.
7. Note, any assets held in a conservatorship account may only be frozen by an Order entered by the Court overseeing the conservatorship proceeding. If an institution is served with an OFP under the new law, it should be accompanied by a second Order from the Court overseeing the conservatorship proceeding.

Effective Date as a Compliance Milestone: January 1, 2026

January 1, 2026, is the operative date for institutional readiness. By that date, institutions must be capable of promptly recognizing, routing, and implementing qualifying orders. Internal systems should be calibrated to ensure accurate identification of these court orders and efficient execution without violating customer rights, privacy obligations, or other legal duties. Given intersecting operational and legal issues, a cross-functional readiness program should be completed by the close of 2025.

Operational Impacts for Banks and Financial Institutions

The statute will affect multiple functions across banking organizations. At the front line, branch and call-center personnel must be trained to recognize court instruments specific to financial exploitation and to escalate immediately to legal or specialized teams, ensuring that exploitation concerns are triaged alongside ongoing fraud investigations and suspicious activity monitoring, without duplicative or conflicting actions.

For payments and transaction processing, institutions will need mechanisms to apply temporary holds or restrictions in response to an order while observing regulatory timelines and network rules for ACH, wire, card, and P2P transactions. Where Orders intersect with Regulation E error resolution, UCC Article 4A wire rules, or network chargeback requirements, the bank will want to have escalation protocols that address timing and documentary requirements.

Account operations will need procedures to segregate or restrict funds, halt disbursements, or suspend access to online and mobile channels when ordered, with clear parameters for what remains permitted (e.g., essential living expenses if the order so provides). Fiduciary and wealth management units should prepare for Orders affecting powers of attorney, trustee or conservator authority, or beneficiary designations, including steps to validate the identity and authority of purported fiduciaries and to reconcile the Order with existing account agreements and governing instruments.

Legal and subpoena teams will need standardized templates and checklists for intake, validation, scope interpretation, and response, along with guidance on permissible disclosures under state law, the Gramm-Leach-Bliley Act’s exceptions for fraud prevention and legal process, and bank secrecy obligations.

Recordkeeping and audit functions should ensure that holds and order compliance actions are fully documented and retrievable to support examinations, litigation defense, or law enforcement inquiries.

Preparing for Compliance

Financial institutions should adopt a structured readiness plan that addresses governance, people, process, and technology. Steps could include:

1. Designation of a point person at the bank and owner of the internal process to cover  legal, BSA/AML, fraud, operations, payments, digital banking, retail, wealth, and privacy areas.
2. Policies should be updated to recognize the new orders bank may receive in light of the new law, articulate escalation thresholds, and set decision rights for initiating or lifting holds on accounts in conformity with court directives.
3. Procedurally, transactional controls should allow for partial or tailored holds when an order specifies affected accounts, instruments, or counterparties. Where orders contemplate releasing funds for essential expenses or setting spending limits, workflows should support those parameters without blanket freezes that exceed the order’s scope.
4. Risk management protocols should include enhanced monitoring for attempted circumvention, such as opening new accounts, cash withdrawals at different locations, or third-party transfers designed to evade restrictions.
5. Communication protocols should be carefully managed. All customer or third-party communications about a Court Order should be centralized through designated teams to avoid misstatements, protect privacy, and reduce litigation risk.
6. Institutions should coordinate with Adult Protective Services and law enforcement only through approved channels and consistent with the Court Order’s terms and applicable confidentiality laws.

Potential Legal Risks and Liability Considerations

The principal risk of noncompliance is exposure to court sanctions for failing to implement the Order as directed, including contempt. There is also the risk of civil claims brought by the protected adult or their representatives if an institution negligently permits transactions in violation of the Order, resulting in loss. Conversely, overly broad or prolonged holds that exceed the Order’s scope may prompt claims by respondents or accountholders for wrongful restriction, contractual breach, or unfair practices, particularly if essential transactions are blocked without legal basis.

Privacy and confidentiality risks may arise when responding to requests for records or information. Institutions should ensure disclosures are limited to those authorized by the Order or permitted by law. Institutions should also be attentive to conflicts between this statute and other legal directives, such as existing guardianship or conservatorship orders, powers of attorney, or prior court decrees; legal review should reconcile competing instruments and, where necessary, seek clarification from the issuing court.

Operational errors, such as delayed implementation, system misconfigurations, or failure to release holds upon expiration or modification of an order, present additional risk.

Key Takeaways

Minn. Stat. § 609.2334 introduces a court-administered tool to prevent and remediate the financial exploitation of vulnerable adults, with meaningful operational consequences for financial institutions. With the statute taking effect on January 1, 2026, institutions should treat the remaining time in 2025 as an implementation runway to update governance policies, processes, systems, and training. Early, coordinated preparation will reduce risk, strengthen customer protection, and support timely and accurate compliance with court directives under the new law.

If you have questions about how this new law may impact your organization, or want to learn more about how you can prepare for a smooth transition, please reach out to any member of our Trusts, Wills & Estates team for guidance.

Pursuant to an October 29, 2025, press release, Governor Tim Walz has directed the Minnesota Department of Human Services (“DHS”) to audit fourteen Medical Assistance (“Medicaid”) services identified as high-risk for billing irregularities or potential fraud. According to reports, during the audit period, payments for these services will be paused for up to 90 days while claims undergo a third-party prepayment review process.

This pre-payment audit follows heightened scrutiny of DHS’ oversight of Medicaid billing and program integrity. In an October 27, 2025, letter to the Centers for Medicare and Medicaid and CHIP Services, Interim Commissioner Shireen Gandhi acknowledged that “existing claims edits and ‘pay and chase’ post-payment review processes alone have not sufficiently addressed inappropriate and fraudulent billing in our programs.” In response, Governor Walz has directed this aggressive pre-payment audit that, while intended to rebuild public trust in the Medicaid program, represents a significant and arguably overbroad shift in policy that will penalize compliant providers and disrupt the delivery of care for essential services.

Using funding authorized during the 2025 legislative session, DHS has contracted with Optum to conduct data analytics on Medicaid fee-for-service claims. Optum’s review is intended to identify anomalies such as incomplete documentation, unusually high billing volumes, or inconsistencies that may indicate a claim does not meet program requirements.

DHS will review and verify claims flagged through Optum’s analytics and refer any suspected improper billing to the DHS Office of Inspector General for investigation or the Medicaid Fraud Control Unit of the Minnesota Attorney General’s Office. DHS suggests it will not hold all submitted claims for 90 days, but that providers can expect some submitted fee-for-service claims to be suspended for up to that full time period. DHS states that this practice complies with law, as Minnesota Health Care Programs has 30 days to pay or deny clean claims and 90 days to pay or deny complex claims. Despite acknowledging that this program will delay payments for providers, DHS expects providers to continue to provide services to members as normal.

DHS states that the prepayment review will become a permanent, new business process for the following fourteen Medicaid services, which DHS has designated as high-risk:

• Adult Companion Services
• Adult Day Treatment
• Adult Rehabilitative Mental Health Services
• Assertive Community Treatment
• Community First Services and Supports
• Early Intensive Developmental and Behavioral Intervention
• Housing Stabilization Services
• Individualized Home Supports
• Integrated Community Supports
• Intensive Residential Treatment Services
• Night Supervision Services
• Nonemergency Medical Transportation Services
• Recovery Peer Support
• Recuperative Care

Given the heightened scrutiny of claims by a third-party, providers of these “high-risk” services should ensure their internal documentation and billing procedures are compliant with DHS requirements. In addition, providers should prepare for reimbursement delays and increased payment denials, as well as stricter oversight requirements, including, among other things, initial screening visits and unannounced site visits.

If you are an affected provider and have questions regarding the new pre-payment audit process, or are facing wrongful payment denials, reach out to the health care regulatory attorneys at Winthrop & Weinstine, P.A.

On October 1, 2025, the Internal Revenue Service issued IR-2025-99, providing important updates on the ongoing rollout of the revised Form 6765, Credit for Increasing Research Activities, commonly referred to as the R&D Tax Credit. The announcement extends the comment period for the draft instructions, delays the requirement to complete Section G and lengthens the transition period to perfect research credit refund claims.

When the IRS first released the revised Form 6765 in mid-2024, one of the most significant changes was the introduction of Section G. This section would have required taxpayers to provide far more granular information on their research credit claims, including detailed disclosures about research activities, itemized expenses broken out by category and component-level reporting tied to each business unit.

In total, the proposed Section G imposed over 600 new data points that taxpayers would need to provide at the time of filing.

For many businesses, this raised concerns about administrative burden and compliance costs. The R&D Tax Credit has long been intended to spur innovation and investment, but the prospect of such detailed disclosures threatened to shift resources away from R&D efforts and toward compliance and data collection.

Section G Still Optional 2025 Filings

When the IRS released the draft instructions in December 2024, it announced that Section G reporting would be optional for 2024 filings but required beginning with tax year 2025. That timeline has now shifted. In response to widespread feedback from taxpayers, practitioners and industry groups, the IRS has determined that Section G will also be optional for 2025 filings (i.e. processing year 2026). Revised instructions are expected in January 2026 and the requirement to complete Section G will now begin with tax year 2026, subject to limited exceptions for certain qualified small businesses and filers with lower levels of qualified research expenses. This delay reflects the agency’s recognition of the significant compliance challenges posed by Section G and its willingness to continue engaging with stakeholders before making the reporting mandatory.

Refund Claim Transition Period Extended

Separately, the IRS also announced an extension of the transition period for research credit refund claims. Taxpayers will continue to have 45 days to perfect a refund claim before the IRS makes a final determination, with this transition period now running through January 10, 2027.

To be considered valid, refund claims must still include identification of the business components to which the credit relates, a description of research activities performed and totals of qualified wages, supply expenses and contract research expenses. Taxpayers will still need to demonstrate that claims meet detailed documentation standards even as the 45-day “perfecting” window remains in place through January 2027. Reviewing refund claim procedures now will ensure that businesses are well-positioned to withstand IRS scrutiny and avoid delays in obtaining valuable refunds.

Practical Implications for Businesses

The IRS’s decision to postpone the mandatory implementation of Section G provides taxpayers temporary reprieve, but it should not be mistaken for a signal to pause preparations. Businesses that claim the R&D credit should use this extension as an opportunity to evaluate whether their internal systems and processes are capable of capturing the detailed information Section G will eventually require. Because the proposed version of the Form would have required more than 600 new data points, most companies will need to review their current recordkeeping practices and consider whether additional tracking, software tools or coordination among finance, tax and R&D departments will be necessary.

Taxpayers should also take advantage of the extended comment period, which runs through March 31, 2026. This is an important chance to engage directly in the rulemaking process by identifying aspects of Section G that are unclear, unduly burdensome or that may unintentionally disadvantage certain industries or company sizes. Providing this feedback not only helps shape the final instructions but also ensures that the IRS better understands the practical realities businesses face in complying with these requirements.

While Section G will be optional for 2025, businesses should consider treating the year as a “trial run” to test their ability to compile and report the required data. Doing so now can help identify gaps and ease the transition to mandatory compliance in 2026, rather than facing a steep learning curve once the reporting becomes unavoidable.

Conclusion

The IRS’s announcement underscores the balance it must strike between ensuring integrity in the R&D Tax Credit program and minimizing undue taxpayer burden. Businesses now have more time to provide feedback, prepare systems and adjust compliance strategies before Section G becomes mandatory. Proactive planning today will help mitigate disruption when the rules take full effect.

If you have questions about the IRS’s announcement or Section G, please feel free to reach out to any member of our Tax team.

Artificial intelligence (AI) is transforming industries across the board, and the legal field is no exception.  Although law firms can typically be cautious adopters of new technology, and while AI in particular remains the subject of debate within many firms, AI is beginning to play a role in how lawyers deliver services. For clients, the key questions are: How are my lawyers using AI?  How does it impact the quality and cost of my legal work?  And should I be using AI tools myself?

As early adopters of AI for use in legal services, we believe AI has real potential to improve outcomes for clients, but it must be used thoughtfully, strategically, and with the right safeguards.

WHY AI MATTERS FOR CLIENTS

One of the most practical reasons AI matters is cost.  Used correctly, AI can help lawyers work more efficiently, reducing the bills sent out to clients.

For example, AI can quickly review volumes of large documents, summarizing and flagging key provisions ahead of time to help speed up attorney review.  AI can act as a supercharged search engine, instantly locating obscure statutory provisions, case law, or informal guidance that might otherwise have taken an attorney hours to find.  And, while it may be impractical to have AI create an entire document—such as a purchase agreement—from scratch, an attorney can easily upload a familiar form and request that the AI add a few additional provisions needed for the transaction at hand, significantly cutting down on drafting time.  These time savings have clear potential to translate into lower bills.

But AI isn’t just about speed.  It can also improve thoroughness and accuracy.  AI tools can catch details buried in hundreds of pages that a human might overlook, offer perspective on varying ways to define key terminology, or highlight unusual contract terms that deserve closer scrutiny.  When used properly, this means clients get more reliable and thorough legal analysis.  It can be the equivalent of having an extra set of sharp eyes on a project without having an extra attorney billing on the matter.

WHERE AI FALLS SHORT

The biggest potential downsides of AI are confidentiality risks and inaccurate output.

Certain AI models are able to protect client data within a closed environment, i.e., one that is walled-off from third-party access.  However, in general, uploading confidential documents for AI review can expose sensitive information to third-party servers, triggering contractual violations or violations of internal policies, or potentially waiving attorney-client privilege and allowing such entered information and the corresponding outputs to be discoverable in a litigation.[1]  It’s also possible that an AI model could “train” itself on such confidential information and later inadvertently reproduce it for other users.[2]

Since it is often advantageous to consult multiple AI models on a given issue, one workaround attorneys can use, for example, is to ask a protective AI to summarize a document, removing all sensitive or client-specific data, then allowing the attorney to input that summary into other AI models for second or third opinions.

Similarly concerning is AI’s propensity to “hallucinate” and confidently deliver false information.  In addition to studies documenting this phenomenon in the legal context, there have been several prominent examples of attorneys getting themselves into trouble by reproducing hallucinated information.[3]  Any lawyer who has worked with AI can likely give several examples of their preferred AI tool providing them with materially inaccurate legal information.  In comes cases, a given AI model can even provide widely differing answers, depending on how the question is phrased.

Attorneys should be carefully reviewing and verifying all information received from an AI tool.  It may also be prudent for them to ask multiple AI models the same question, or even ask a given AI model the same question in multiple ways, to ensure more complete coverage of the specified subject matter.  Perhaps most importantly, your attorney should not be using AI as a substitute for competency in a given practice area.

Finally, AI lacks the common sense of a lawyer with years of experience and, unless explicitly provided bit by bit, will lack legal context related to the specific client and matter, causing it to always follow instructions precisely, when what may actually be needed is an approach entirely different from the brief prompt provided.  This can be especially likely to happen when, for example, clients ask an AI model to provide an initial draft of a document and then ask their attorney to review.  While it may feel like a cost-saving measure, in practice it can backfire, with the attorney spending more time untangling and correcting an AI-generated draft than they otherwise would have spent on the project.

The better approach is to ask your lawyer how they can use AI to meet your legal needs.

GOOD QUESTIONS TO ASK

As a client, you don’t need to know the technical details of how AI works.  But you should feel empowered to ask your legal team questions like:

• Does your firm use AI in reviewing materials, conducting due diligence, or drafting documents?
• What safeguards are in place to protect my confidential information if AI is used?
• How do you ensure that AI-generated insights are accurate and legally reliable?
• Can AI help reduce my legal costs in a meaningful way without compromising quality?

These questions signal to your lawyer that you value efficiency but also expect careful stewardship of your business and legal risks.

CONCLUSION: ASK YOUR LAWYER ABOUT AI

AI likely will not replace lawyers any time soon, but it can help them serve clients better.  The firms that use AI thoughtfully will be able to deliver faster, more accurate, and potentially more cost-effective results.  However, AI needs to be used with proper guardrails in place, including policies, training, and secure systems.

We encourage clients to proactively discuss AI with their attorneys, asking them how they plan to use AI to benefit their clients and how they plan to do so responsibly.

[1] https://www.reuters.com/legal/legalindustry/rules-use-ai-generated-evidence-flux-2024-09-23/; https://www.jdsupra.com/legalnews/discovery-pitfalls-in-the-age-of-ai-1518070/

[2] https://www.pcmag.com/news/samsung-software-engineers-busted-for-pasting-proprietary-code-into-chatgpt

[3] https://hai.stanford.edu/news/ai-trial-legal-models-hallucinate-1-out-6-or-more-benchmarking-queries; https://www.reuters.com/legal/government/trouble-with-ai-hallucinations-spreads-big-law-firms-2025-05-23/

The Minnesota Supreme Court recently issued a new decision that affects the ability to obtain pre-judgment interest, except as otherwise provided by contract (such as loan documents), and cuts off the ability to obtain that interest (at a rate of 10% per annum in most cases) if a non-contractual claim is not commenced promptly. Creditors and businesses generally should take notice, as this may affect the ability to obtain prejudgment interest on tort claims ranging from fraudulent transfer to preference claims.

In Scheurer v. Shrewsbury, 24 N.W.3d 670 (Minn. 2025), the Supreme Court held that a party must commence a lawsuit no later than within two years after service of a written notice of its claim in order for prejudgment interest to begin accruing from the date of that notice. This holding has significant implications for all businesses, including banks involved in litigation outside of loan enforcement—especially involving situations in which these financial institutions have made notice of a claim but are delaying the commencement of litigation.

Case Background

The Scheurer case arose from a personal injury lawsuit following a car accident. After the plaintiff served a notice of his personal injury claim on the defendant in 2017, he did not commence his case until more than three years later. At trial, the jury awarded him damages, but the district court limited prejudgment interest to the date the lawsuit was filed rather than the earlier notice-of-claim date, citing the two-year requirement in Minn. Stat. § 549.09. On review, the Supreme Court affirmed that prejudgment interest did not begin to accrue until the action was commenced, because the plaintiff waited to do so more than two years after giving notice.

Key Legal Holdings

In its decision, the Supreme Court first confirmed that the statute has a firm two-year commencement requirement. Except as otherwise provided by contract or allowed by law, prejudgment interest accrues from the date of the written notice of claim only if the plaintiff files a lawsuit within two years of the notice. If the plaintiff delays beyond that period, the interest clock does not begin until the lawsuit is actually commenced. Importantly, the Court held that this rule applies even when the parties have exchanged written offers of settlement; such offers do not suspend or override the statutory requirement. The Court then also held that prejudgment interest accrues only on the judgment after deduction of collateral sources from the jury verdict.

Practical Implications

The decision highlights the importance of acting promptly after a written demand has been issued. The plaintiff must then commence a legal action within two years if it wishes to recover prejudgment interest from the date of the notice, except as otherwise provided by contract or allowed by law. Delaying beyond that period will result in interest accruing only from the commencement of the lawsuit, which may significantly reduce the amount recoverable. Indeed, in a recent large case, Kelley v. BMO Harris Bank, the prejudgment interest exceeded $500 million!

The Court’s decision also makes clear that settlement negotiations will not rescue a party who fails to meet the two-year deadline. Even when the parties are actively exchanging offers, the statutory limit remains strict, and interest cannot accrue from the earlier notice unless the action is timely filed. The decision also means that when a lender recovers amounts from insurance or other collateral sources, the lender may not charge interest on those amounts already recovered.

Takeaways

The Minnesota Supreme Court’s decision is a reminder to act promptly once demand letters or notices of claim are issued and expect interest to be calculated only on net recoverable amounts after payments from collateral sources are deducted. Delaying the filing of an action beyond two years can result in a substantial loss of prejudgment interest, which may significantly affect overall damages. All businesses should ensure their internal litigation protocols provide for tracking of demand dates, early involvement of counsel, and careful monitoring of settlement negotiations in light of these clarified restrictions.

Entities operating under an agency payment withhold should take notice of a new law that went into effect on May 24, 2025. Minnesota Statutes Section 15.013 adds specificity and clarification regarding timing and notice requirements that agencies must comply with to withhold payments when an “agency head determines that a preponderance of the evidence shows that the program participant has committed fraud to obtain payments under the [applicable] program.”

Under the law, the term “fraud” is the “ intentional or deliberate act to deprive another of property or money or to acquire property or money by deception,” and includes “knowingly submitting false information” to a government entity for the “purpose of obtaining a greater compensation or benefit than the person is legally entitled,” as well as committing crimes, such as theft, perjury, or forgery under state or federal law. The new law affects “program participants,” which are defined as “an entity, or an individual on behalf of an entity, that receives, disburses, or has custody of funds or other resources transferred or disbursed under a program.” “Agency” is also broadly defined to include any state officer, employee, board commission, authority, department, or other agency of the executive branch of state government and also includes Minnesota State Colleges and Universities.

The new administrative payment withhold law is of particular significance to health care providers, especially those that receive Medical Assistance (“MA”) reimbursement through the Department of Human Services (“DHS”). Recent investigations by DHS have led to widespread and well-publicized allegations of fraud and abuse within Minnesota’s MA program, which has resulted in DHS shutting down an entire reimbursement program, including housing stabilization services, as well as targeted accusations of fraud aimed at numerous personal care assistance programs, among other programs.

The new statute requires that an agency provide “at least 24 hours” notice of the decision to withhold payments “before withholding a payment” and directs that the withholding period cannot “exceed 60 days.” The notice must cite to the new law, include the effective date of the payment withhold, list the reasons for the payment withhold, and include the date that the administrative withholding period terminates. Importantly, entities have a right to appeal the payment withhold decision by requesting a contested case hearing under Minnesota Statutes Chapter 14, “or by petitioning the court for relief, including injunctive relief.”

These new requirements both complement and significantly update current laws regulating DHS administrative payment withholds. For example, under the existing law, DHS is not required to give prior notice of a payment withhold and the payment withhold typically went into effect before recipients had notice. The standard for initiating a withhold is now better defined, affording providers greater procedural fairness. Under the existing law, DHS could withhold based on a “credible allegation of fraud” which only required fraud allegations that had “an indicium of reliability.” Now, under Section 15.013, a higher standard of proof is required, and the agency has authority to withhold only if it “determines that a preponderance of the evidence shows that the program participant has committed fraud.”

Lastly, perhaps the most important update is the 60-day limit on payment withholds. DHS investigations routinely extend for months (and sometimes years) without resolution. This has resulted in an extreme burden for providers, and in some instances forcing a business to shut its doors, even when no wrongdoing occurred. Although investigations can still extend beyond 60 days, limiting the payment withhold will help level the playing field for providers impacted as collateral during DHS’ sweeping investigations in response to Minnesota’s Medicaid fraud crisis.

If you are an entity facing an administrative payment withhold implemented by a government agency, Winthrop & Weinstine, P.A. can help you assert your legal rights and protect your business.