What does the proposed SEC rule do?

On May 5, 2026, the Securities and Exchange Commission (SEC) proposed amendments to the Exchange Act reporting regime that would, for the first time in more than 50 years, allow domestic reporting companies to file interim reports on a semiannual basis instead of quarterly. Under the proposal, companies currently required to file Form 10‑Q could elect to file a single semiannual report on new Form 10‑S, covering a six-month period, in lieu of three quarterly reports each fiscal year. Companies that do not make this election would continue filing Form 10‑Q on the existing quarterly schedule.

The proposal also includes a broad suite of conforming amendments to Regulation S‑X, Regulation S‑K, and numerous SEC forms and rules, designed to align financial statement “age” requirements, Management’s Discussion and Analysis (MD&A), internal controls, safe harbors, and other disclosure obligations with the new optional semiannual framework. The SEC frames the initiative as one of “flexibility,” intended to reduce compliance burdens and give companies more latitude to determine the interim reporting frequency that best suits their circumstances, while preserving material and timely public information for investors.

Who is eligible and how would the election work?

All Exchange Act reporting companies that currently file Form 10‑Q would be eligible to elect semiannual reporting, regardless of filer status, revenues, public float, industry, or business model. The election would be company-level and indicated by a new check box on registration statements (Forms 10, S‑1, S‑3, S‑4, and S‑11) and annual reports on Form 10‑K.

Once elected, a company would generally be expected to maintain its chosen reporting frequency for a full fiscal year. An issuer that wishes to revert to quarterly reporting would do so by unmarking the semiannual reporting box on the cover page of its next Form 10‑K, and would then resume filing Form 10‑Q beginning with the first quarter of that fiscal year. The SEC is seeking comment on whether the semiannual option should be limited to specific categories of issuers, such as emerging growth companies or smaller reporting companies, and whether a pilot program or size-based thresholds would be appropriate.

What is Form 10‑S?

Form 10‑S would be the new semiannual interim report for companies that elect this option. It would require substantially the same disclosures as Form 10‑Q, but would cover a six-month period rather than a fiscal quarter.

Part I of Form 10‑S would include:

• Interim financial statements prepared in accordance with U.S. GAAP and reviewed (but not audited) by the company’s independent accountant, covering the first fiscal semiannual period and the corresponding period of the prior year.
• A requirement that the MD&A be tailored to semiannual periods
• Quantitative and qualitative disclosures about market risk
• Disclosure regarding controls and procedures, including the same certifications currently required for Form 10‑Q.

Part II would require:

• Disclosure of legal proceedings
• Material changes to risk factors (for non-smaller reporting companies)
• Unregistered sales of securities, defaults on senior securities, mine safety disclosures, and other matters currently covered by Form 10‑Q
• Companies would also be permitted to combine shareholder semiannual reports with Form 10‑S filings, provided specified conditions are met.

Filing deadlines for Form 10‑S would track those currently applicable to Form 10‑Q: 40 days after the end of the first semiannual period for large accelerated and accelerated filers, and 45 days for all other registrants.

What changes are proposed to Regulation S‑X?

The proposal includes significant amendments to the interim financial statement and “age of financial statements” framework in Regulation S‑X.

For semiannual filers, interim statements of comprehensive income and cash flows would be presented for the first fiscal semiannual period and the corresponding prior-year period, with an option to present cumulative twelve-month information. Balance sheets would be required as of the end of the first semiannual period and as of the end of the preceding fiscal year.

The proposal would also consolidate the existing “age of financial statements” rules, currently spread across Rules 3‑01 and 3‑12, into a single, streamlined rule governing the maximum age of financial statements in registration statements and proxy materials. Age requirements would be recalibrated so that semiannual filers are not forced to prepare quarterly financials solely to satisfy Securities Act or proxy statement timing requirements, ensuring that these companies can effectively access the capital markets without producing additional financial statements for “age” compliance alone.

What other conforming amendments are proposed?

The proposal includes extensive technical amendments across the SEC’s disclosure regime to insert references to Form 10‑S and semiannual periods wherever quarterly reporting is currently referenced. Key areas of conforming change include:

• Regulation S‑K and Exchange Act rules: References to Form 10‑S and semiannual periods would be added to key Regulation S‑K items, including those governing MD&A, internal controls, certifications, and exhibits, as well as Exchange Act rules governing disclosure controls, late filings, and the Rule 10b5‑1 cooling‑off period for insider trading plans.
• Securities Act registration forms: Forms S‑1, S‑3, S‑4, S‑11, F‑1, F‑3, F‑4, and F‑10 would be amended to add a semiannual reporting election check box and to require registrants incorporating by reference to describe material changes since the last Form 10‑K that have not been disclosed in a Form 10‑Q, Form 10‑S, or Form 8‑K.
• Form 8‑K, Item 2.02: The proposal would amend Item 2.02 to expressly reference completed semiannual periods, so that earnings releases for semiannual periods would be “furnished” (not “filed”) under the existing framework. Notably, the proposing release asks whether, for semiannual filers, quarterly earnings releases should instead be “filed” and subject to Section 18 liability, given the heavier investor reliance that may result from less frequent mandatory interim reports (Proposing Release, Appendix K, Form 8‑K Item 2.02).
• Other forms and rules: Forms 6‑K, 10‑K, 12b‑25, and various foreign issuer forms would be updated to include parallel references to Form 10‑S, semiannual periods, and the new reporting framework.

How would MD&A and internal control disclosures change?

The substantive requirements for MD&A and internal control reporting would remain largely the same, but would be keyed to semiannual periods where applicable.

For MD&A, semiannual filers would discuss material changes in results of operations for the most recent fiscal semiannual period compared to the corresponding prior‑year semiannual period, and would provide summary financial information for the comparison period or cross‑reference prior filings. Quarterly filers would continue their existing practice of discussing results on a quarter‑over‑quarter basis.

For internal controls, Item 308(c) of Regulation S‑K and the related Exchange Act rules would continue to require disclosure of material changes in internal control over financial reporting. For semiannual filers, however, these disclosures and the associated officer certifications would occur once per year in Form 10‑S rather than three times per year in Form 10‑Q. The SEC specifically requests comment on whether less frequent certifications could increase the risk that material misstatements or control deficiencies go undetected for longer periods.

What are the expected benefits?

The SEC identifies several potential benefits of optional semiannual reporting. The most tangible is a direct reduction in compliance costs: companies that elect semiannual reporting would prepare one interim report per year instead of three, with corresponding savings in financial statement preparation, MD&A drafting, XBRL tagging, and legal and accounting review.

Beyond direct cost savings, the SEC suggests that less frequent reporting could allow management and boards to redirect time and resources toward strategy, capital investment, and long‑term planning, and may help mitigate the “short‑termism” that some commentators associate with quarterly earnings pressure. The SEC also notes that aggregating data into six‑month periods could reduce the granularity of competitively sensitive information available to rivals, particularly where quarterly patterns reveal seasonality or business dynamics. Finally, the SEC posits that lower reporting burdens may, at the margin, make public company status more attractive and encourage some companies to pursue or maintain public listings.

How would companies likely respond?

The SEC anticipates that issuers will fall into three broad categories.

First, some companies will become semiannual reporters, electing Form 10‑S and discontinuing routine quarterly voluntary disclosures. These companies would realize the largest compliance cost savings and experience the most significant change in their public information environment, but may also need to renegotiate debt covenants, contracts, and incentive plans that currently reference quarterly reporting metrics.

Second, many companies will remain quarterly reporters, continuing to file Form 10‑Q despite the availability of the semiannual option. These companies may benefit from signaling a commitment to transparency, particularly if the market comes to view quarterly reporting as a quality signal.

Third, a number of companies may adopt a hybrid approach, electing semiannual mandatory filings on Form 10‑S while continuing to provide some voluntary quarterly disclosures such as earnings releases and conference calls. This approach would yield intermediate cost savings but would introduce complexity around the standardization, liability, and perceived reliability of voluntary versus mandatory disclosures.

The SEC notes that issuer choices will likely depend on size, complexity, growth stage, industry practices, investor base composition, contractual and regulatory obligations, capital‑raising plans, and competitive considerations.

What should companies do now?

The comment period is scheduled to expire on July 6, 2026. Companies, investors, and other market participants should consider whether and how to engage with the rulemaking process. In particular, companies should evaluate the potential impact of semiannual reporting on their existing disclosure practices, debt covenants, equity incentive plans, investor relations programs, and capital markets access.

In assessing whether to comment, consider providing data‑backed input on expected cost savings (or increased costs) if your company were to report semiannually, the practical impediments and risks associated with changing the cadence of financial reporting, and whether any alternatives to the proposed amendments would better achieve the Commission’s objectives.

Public companies should also begin evaluating how a different cadence could affect investor relations practices, financial reporting processes, and insider‑trading compliance. Given the legal, operational, and investor‑relations considerations, companies should consult experienced outside counsel when determining the best path forward. Winthrop & Weinstine’s Securities & Corporate Finance team includes attorneys with extensive experience in SEC rules and regulations, public disclosure requirements, and a wide range of capital markets transactions. We advise public and private companies on financing growth and acquisitions and on balance sheet management through tailored equity and debt offerings aligned with business needs.

If you have questions about this alert or would like to discuss the proposal and its potential impact, please contact Vince Pecora or another Winthrop securities law attorney.

Governor and Legislative Leaders Reach Agreement

Gov. Tim Walz, Senate Majority Leader Erin Murphy, House Speaker Lisa Demuth and House DFL Leader Zack Stephenson announced late Wednesday that they had reached a bipartisan supplemental budget agreement, releasing a signed spreadsheet outlining the framework of the deal. While legislative language is still being finalized, lawmakers now face a hard deadline to pass the implementing bills before adjournment at midnight Sunday. The agreement includes a $1.2 billion bonding package, $125 million in additional property tax relief, increased education funding, $75 million for county IT modernization, and a major healthcare stabilization package totaling roughly $705 million.

More on the Deal

The agreement reflects the realities of divided government, with Republicans and Democrats each securing major priorities after weeks of negotiations. Republicans highlighted a one-year, $250 million reduction in vehicle tab fees, anti-fraud reforms, and support for rural and critical access hospitals. Democrats emphasized preserving core government services, additional aid for counties and schools, and long-term healthcare funding. One unresolved issue remains the bonding bill itself, which will require bipartisan votes to pass — especially in the House — where leaders are signaling that members with local projects may be expected to support the package. Senate GOP Leader Mark Johnson did not sign the agreement, adding uncertainty as legislative leaders work to assemble final votes before Sunday’s deadline.

HCMC Funded

The largest single piece in the agreement is the state’s new funding structure for Hennepin County Medical Center. Under the deal, approximately $200 million will go to HCMC immediately, with additional funding support bringing the total package to as much as about $700 million through 2031. Rather than redirecting the expiring Hennepin County ballpark tax to support the hospital, negotiators chose to finance the package directly from the state’s general fund. The agreement also reportedly drops previously discussed transit and rail-related funding proposals, including train funding that had been part of earlier infrastructure conversations, allowing negotiators to consolidate available dollars around hospital stabilization and core budget priorities.

Tax Relief and Tab Fee Cuts

Tax relief emerged as one of the central components of the bipartisan budget agreement, with negotiators approving $125 million in expanded property tax refunds and a one-year, $250 million reduction in vehicle tab fees. Republicans framed the tab fee rollback as a direct response to voter frustration over sharply higher registration costs tied to changes approved in recent years, particularly for newer and electric vehicles. Under the agreement, tab fee rates would temporarily revert to 2022 levels without reducing transportation funding. Democrats, meanwhile, emphasized the property tax relief package as targeted assistance for homeowners and local governments facing mounting financial pressures. Together, the measures represent an attempt by both parties to address broader affordability concerns that have increasingly shaped legislative debates and local referendum outcomes across Minnesota.

House and Senate Agree on Housing Bill

The House and Senate yesterday approved a negotiated housing bill that ultimately stripped out several of the Senate’s more controversial tenant-protection proposals in order to secure final passage. Most notably, lawmakers removed manufactured home park language that would have imposed new protections for residents, including provisions viewed by opponents as a form of rent stabilization for lot rents in manufactured home communities. The final agreement also excluded a proposed amendment establishing rent control protections for senior housing, reflecting continued resistance among moderates and industry groups to statewide rent regulation policies. The decision to leave both measures out underscores how legislative leaders prioritized a narrower compromise focused on production, homelessness prevention, and financing over broader tenant-regulation reforms.

Funding remained the centerpiece of the final package. The bill includes roughly $184 million in appropriations for housing and homelessness prevention programs over the biennium, along with authorization for additional housing infrastructure bonds. Major investments include funding for rent assistance, the Housing Trust Fund, family homelessness prevention, workforce housing initiatives, and affordable rental preservation. Lawmakers also retained targeted appropriations for community stabilization efforts and infrastructure improvements, including funding connected to manufactured home parks, even as broader policy changes affecting those parks were dropped from the final agreement. Supporters framed the bill as a fiscally focused compromise aimed at maintaining affordable housing production and homelessness services amid a challenging budget environment.

228 Hours and Counting…

As of noon on Friday, May 8, there will be exactly 228 hours left in the 2026 Legislative Session before the required Constitutional adjournment deadline of midnight on Monday, May 18. With this deadline fast approaching, end-of-session negotiations remain focused on unresolved tax issues (including potential Hennepin County Medical Center funding and federal conformity), a deal on a capital investment infrastructure bill, fraud issues, and, to a lesser extent, supplemental budget targets. Health and Human Services is a sticking point, especially regarding conformity with new federal requirements via H.R. 1. A bonding agreement is still outstanding and will require a three-fifths vote, making a bipartisan, four-caucus agreement essential. With a 67–67 House and closely divided Senate margins, all final deals will hinge on leadership-level global agreements.

Senate Passes Gun Violence Prevention Bill on Party-Line Vote

The Senate on Monday approved a gun violence prevention package after hours of emotional debate, advancing legislation that would ban the future sale of assault-style weapons and high-capacity magazines while increasing funding for school safety and mental health programs. The measure passed 34-33 along party lines, with all DFL senators supporting the bill and all Republicans opposing it. Supporters said the legislation was driven in part by last summer’s mass shooting at Annunciation Catholic Church and School in Minneapolis, where two children were killed and many others were injured. Democrats argued the package takes a broader approach to public safety by combining firearm restrictions with investments in school security, behavioral health programs, and anonymous threat-reporting systems.

Republicans said they supported additional school safety and mental health funding but strongly objected to the gun restrictions, arguing the proposal infringes on the rights of lawful gun owners and would likely face constitutional challenges. GOP lawmakers contended the legislation would do little to prevent future acts of violence and accused Democrats of advancing a partisan agenda despite the bill’s uncertain prospects in the tied Minnesota House. During debate, several lawmakers on both sides spoke emotionally about school shootings and public safety concerns, underscoring the intensity of the issue at the Capitol.

Senate Approves Supplemental Budget Bill After Lengthy Floor Debate

On Tuesday, the Senate passed SF 4059, a wide-ranging omnibus supplemental finance bill that lawmakers described as a targeted attempt to address pressing state needs. The bill passed 35-31 after an extended floor debate that touched on education policy, workforce development, environmental regulation, labor standards, and government oversight. Senate Finance Chair John Marty, the bill’s chief author, defended the measure as a “slim” supplemental budget package focused on affordability and urgent state priorities. Supporters argued that the bill contained critical funding for workforce development programs, school funding stability, battery recycling initiatives, and additional resources for the Attorney General’s Medicaid Fraud Control Unit. Republican senators criticized the bill as an overly broad spending package that mixed unrelated policy provisions with supplemental appropriations. Senator Eric Pratt argued the legislation violated the state constitution’s single-subject requirement, calling it a “buffet bill” that added roughly $109 million in new spending.

Taxes in Limbo as Conference Dynamics Begin Without a House Bill

Organized by Department of Revenue Commissioner Paul Marquart, a joint House-Senate Tax Working Group began meeting on Wednesday as an informal conference committee despite the absence of a House tax bill. The Senate has already moved its bill out of committee, while the House remains without a vehicle, creating a compressed runway as the legislative session heads towards adjournment. The Working Group identified preliminary overlap, including several tax increment financing (TIF) provisions and roughly two dozen local option sales tax proposals that have been heard in both bodies, suggesting a baseline for eventual negotiations.

Key policy divisions between the House and Senate and the DFL and Republicans remain unresolved. House Republicans reiterated priorities around referendum-backed local option sales taxes and expanded federal conformity, while DFLers signaled continued adherence to existing statutory guardrails limiting local sales tax approvals. Hennepin County Medical Center funding also emerged as a central pressure point for inclusion in any final package. The discussion made clear that, absent a House bill, real progress is dependent on leadership-level budget agreements and the eventual convergence of tax targets.

Becoming Law

Typically, Minnesota’s Governor has three days (Sunday excluded) to sign or veto a bill passed by the legislature. If the Governor doesn’t explicitly sign or veto a bill during this time, it becomes law without his/her signature. The countdown for the three days begins after the Revisor presents the bill to the Governor.

However, this changes for bills that are passed in the last three calendar days of a session. All bills passed in the last three days of session must be acted on within 14 calendar days of adjournment (Sundays included). If a bill is not acted on during this period, the bill is considered vetoed.

Walz Highlights Policy Record and Future Priorities in Final State of the State

In his final State of the State address, Governor Tim Walz highlighted the key policy initiatives and investments that have defined his administration, with a focus on infrastructure improvements, public safety efforts, and reforms to Minnesota’s human services systems. He pointed to ongoing work to modernize Medicaid and strengthen service delivery, emphasizing the importance of making government programs more efficient and accessible. Walz framed his tenure around economic stability, support for working families, and long-term investments designed to position the state for continued growth.

Looking ahead, the governor underscored the need for continued collaboration among state leaders to address fiscal challenges and sustain recent policy gains. He called for a steady approach to budgeting and implementation, particularly as the state continues to refine oversight of major programs and adapt to evolving economic conditions. Walz closed by emphasizing continuity and shared responsibility in maintaining Minnesota’s progress beyond his time in office.

House Budget Resolution Sets Modest Spending Targets as Session Nears Final Weeks

The House Ways and Means Committee has approved a budget resolution outlining approximately $41.1 million in new spending for the 2026-27 biennium. The resolution, while not required in an even-numbered year, establishes funding targets for a range of finance bills already moving through the legislative process. Major allocations include $15.4 million for public safety, about $1.5 million for higher education, and smaller amounts for workforce development and elections, along with a proposed $2 million reduction in housing funding.

In addition, roughly $25.6 million is reserved for standalone bills that have been heard or are expected to be considered, signaling continued movement on individual policy priorities late in session. The resolution also sets limits on spending from the Workforce Development Fund and maintains key budget reserves, including $3.42 billion in the state’s reserve account. Lawmakers noted that additional budget resolutions may follow as more omnibus packages advance, with the Legislature facing a May 18 deadline to complete its work.

Senate Tax Committee Advances Omnibus Tax Bill

The Senate Tax Committee on Thursday advanced SF 5052, its omnibus tax bill for the 2026 session, setting up the chamber’s tax priorities for the final weeks of session. The package would reduce state revenues by $10.2 million in FY 2027, followed by a net increase in revenue of approximately $417 million in FY 2028–2029. While the committee has approved the measure, the Senate cannot yet take it up on the floor, as lawmakers are waiting for the House to release and pass its own tax bill. With divided control in the House, the proposal’s timing and scope remain uncertain as the legislature enters its final stretch.

The Senate package includes a mix of tax relief, new revenue measures, and policy changes. It adopts a limited approach to federal tax conformity, including bonus depreciation but excluding several other business-related provisions. The bill also creates a new social media excise tax based on subscriber levels, projected to raise significant revenue, and modifies incentives for sustainable aviation fuel production. Additional provisions establish a Department of Revenue ruling program to provide taxpayer guidance, increase funding for the homestead credit refund program, and authorize or extend dozens of local sales taxes. The bill also proposes changes to worker classification standards and extends and increases a Hennepin County sales tax to support hospital funding, among other provisions.

Pass-Through Entity Provision to Be Added on Senate Floor

During the Senate Tax Committee hearing on Thursday, Committee Chair Ann Rest said a key pass-through entity (PTE) provision—allowing certain businesses such as partnerships and S corporations to elect to pay state income taxes at the entity level rather than on individual owners’ returns—was intentionally excluded from the omnibus tax bill, SF 5052. She explained the provision will instead be offered as the first floor amendment, emphasizing that it previously received unanimous bipartisan support in committee. Rest noted that bringing it forward separately will give all senators the opportunity to vote on the policy, and she expressed hope that advancing it in this way will once again position the Senate to lead on the issue as discussions with the House move forward.

Bipartisan OIG Bill Likely to Make it to Finish Line

While there are still many issues waiting to be resolved, one of them—a bill to establish an Office of Inspector General (OIG)—passed a key committee Wednesday night and seems poised to become law. The OIG bill (S.F. 856, Sen. Gustafson / H.F. 1338, Rep. Norris) was first introduced in 2025 and passed by the full Senate in May 2025 with an overwhelming bipartisan vote of 60-7. Despite the bill advancing out of at least ten committees in the Senate, it stalled in the tied House. Throughout the 2026 legislative session, the House passed the bill through various committees, while supporters engaged in bipartisan and bicameral negotiations. Though the bill was placed on the April 29 agenda in the House Ways and Means Committee, the committee recessed for several hours while negotiations continued and it was unclear if the bill would make it out of committee that day. However, when the committee did reconvene, it was announced that a bipartisan agreement had been reached with the Senate. The bill was amended to reflect the agreement and passed out of committee. Its next stop will be the House floor. The OIG bill is considered a key component of the legislature’s attempts to address fraud in government programs.

On April 22, 2026, the Consumer Financial Protection Bureau (CFPB) took action that could reduce compliance and litigation risk for banks. The CFPB issued its final rule that amends provisions related to disparate impact, discouragement of applicants or prospective applicants, and special purpose credit programs under Regulation B, the regulation implementing the Equal Credit Opportunity Act (ECOA). The amendments clarify the compliance obligations imposed by the statute and eliminate disparate impact provisions. The final rule is effective July 21, 2026.

The final rule largely adopts the proposed rule issued in November 2025. In the CFPB’s explanation of the rulemaking, the CFPB notes that the U.S. Supreme Court (1) has not held that disparate-impact claims are available under all antidiscrimination statutes and (2) has not examined whether a disparate-impact claim is permitted under ECOA. The Supreme Court precedence only states that Age Discrimination in Employment Act authorizes disparate-impact claims and disparate-impact claims are cognizable under the Fair Housing Act. The CFPB concludes that “[the statutory] text of ECOA does not state that disparate-impact claims are cognizable under ECOA, nor does it contain effects-based language of the type that has been found in other statutes to invoke disparate-impact liability” and “[the Federal Reserve] Board’s regulations to implement [ECOA] explicitly and solely relied on [the] legislative history [of the 1976 amendments] to conclude that Congress intended for ECOA to permit an ‘effects test concept,’ i.e., disparate-impact proof of liability.”

The final rule provides that the ECOA does not authorize disparate-impact liability (effects test), further defines discouragement, and adds prohibitions and conditions for special purpose credit programs. These amendments to the definition of “discouragement” and removal of the “effects test” from the rules concerning evaluation of applications means that bank compliance under the ECOA will be viewed in a much different light.

The new rules are as follows:

• 1002.4(b) Discouragement. A creditor shall not make any oral or written statement, in advertising or otherwise, directed at applicants or prospective applicants that the creditor knows or should know would cause a reasonable person to believe that the creditor would deny, or would grant on less favorable terms, a credit application by the applicant or prospective applicant because of the applicant or prospective applicant’s prohibited basis characteristic(s). For purposes of this paragraph (b), oral or written statements are spoken or written words, or visual images such as symbols, photographs, or videos.
• 1002.6(a) General rule concerning use of information. Except as otherwise provided in the Act and this part, a creditor may consider any information obtained, so long as the information is not used to discriminate against an applicant on a prohibited basis. The Act does not provide that the “effects test” applies for determining whether there is discrimination in violation of the Act.

The CFPB amended Section 1002.15(d)(1)(ii) regarding the scope of privilege in incentives for self-testing and self-correction to remove the parenthetical “(including a prospective applicant who alleges a violation of § 1002.4(b)).”

The CFPB further revised the special purpose credit program provisions to expand the required information to include in a written plan in Section 1002.8(a)(3)(i) and to provide exceptions to the common characteristic provision in Section 1002.8(b)(2). Those exceptions are as follows:

(3) Prohibited common characteristics. A special purpose credit program described in paragraph (a)(3) of this section shall not use the race, color, national origin, or sex, or any combination thereof, of the applicant, as a common characteristic or factor in determining eligibility for the program.

(4) Otherwise prohibited bases in for-profit programs. Subject to paragraph (b)(3) of this section, a special purpose credit program described in paragraph (a)(3) of this section may require its participants to share one or more common characteristics that would otherwise be a prohibited basis only if the for-profit organization provides evidence for each participant who receives credit through the program that in the absence of the program the participant would not receive such credit as a result of those specific characteristics.

In Section 1002.8(c), the amendments to special rule concerning requests and use of information require that the special purpose credit program must satisfy the requirements for standards for program under Section 1002.8(a) and the controlling provisions under Section 1002.8(b). Prior to this amendment, the section only referenced Section 1002.8(a).

The CFPB also amended the official interpretations to Part 1002 for the following sections:

• Section 1002.2(P) Empirically Derived and Other Credit Scoring Systems
• Section 1002.4(B) General Rules related to Discouragement
• Section 1002.6(A) General Rule Concerning Use of Information
• Section 1002.8(A) Standards for Special Purpose Credit Programs
• Section 1002.8(B) Special Purpose Credit Program Controlling Provisions
• Section 1002.8(C) Special Rule Concerning Requests and Use of Information

Banks should review these amendments and official interpretations and make any necessary changes to their compliance policies, procedures, and fair lending plans before the compliance deadline. We expect that these changes will reduce the regulatory burden and litigation risk exposure that banks have historically faced with respect to disparate impact claims. However, we caution banks that a future administration could take a different stance on disparate impact and perform a lookback during an exam or enforcement despite the changes to the regulation. Winthrop’s regulatory attorneys can help you discuss compliance strategies and recommend any changes.

The reporting deadline under Amara’s Law, Minnesota Statute Section 116.943, has been delayed again. Now, initial reports on per- and polyfluoroalkyl substances (PFAS) in products distributed or sold in Minnesota are due on September 15, 2026.

Amara’s Law addresses the use of PFAS in consumer products. It has two primary functions: banning certain PFAS-containing products and gathering information about the prevalence of such products distributed or sold in Minnesota. Beginning January 1, 2025, eleven types of products were banned from sale or distribution if they contained intentionally added PFAS, and beginning January 1, 2032, the ban expands to any products with intentionally added PFAS. The law also allows the Minnesota Pollution Control Agency (MPCA) to gather information about PFAS usage through a new reporting requirement. Manufacturers are required to submit an initial report to the MPCA listing their products offered for sale, sold or distributed in Minnesota that contain intentionally added PFAS. The initial report must include: a description of the product, the reason PFAS was used in the product, the name of the PFAS chemical used and its concentration as well as contact information for the manufacturer.

The deadline for the initial report has been delayed once before to allow the MPCA to finalize the reporting software, PRISM. Since then, the MPCA has finalized PRISM and published guidance for the initial report (available here). Currently, eighteen companies have submitted initial reports and many of those are accessible on PRISM (searchable here).

In certain circumstances and for a fee, manufacturers can request an extension of the September deadline.

Winthrop and Weinstine is closely following the development of the PFAS rulemaking. For more information, please feel free to reach out to any member of our Environmental team.

Hospital Funding May Be a Key to Session-Ending Deal

Hospital funding may be a key component to any end of session deal. There has been significant debate this session regarding stabilizing Hennepin County Medical Center (HCMC) and the state’s financially vulnerable rural hospitals, with proposals aimed at both immediate relief and longer-term sustainability. For HCMC, lawmakers have debated a targeted state appropriation to keep the doors open for another year (which could also include funding for financially strapped hospitals around the state) and longer-term help via an expanded local funding authority. While these are both options that would provide some relief, most acknowledge that these fixes don’t address the causes of the financial crisis, including low Medicaid reimbursement rates and increasing numbers of patients without insurance. Regardless, it is likely that the legislative session won’t end without help for HCMC, and targeted help for other financially vulnerable hospitals may be included as well.

Why is Hospital Funding an Issue?

Hennepin County Medical Center (HCMC) and rural hospitals across Minnesota are facing intensifying financial pressure driven by a fundamental mismatch between the cost of care and how hospitals are paid. As a safety-net provider, HCMC serves a disproportionately high share of patients covered by Medicaid, Medicare, or no insurance at all—groups that typically reimburse below the actual cost of care. At the same time, policy changes and coverage losses are increasing the number of uninsured patients, leaving hospitals to absorb more uncompensated care. Rural hospitals face similar reimbursement challenges but are further constrained by low patient volumes, workforce shortages, and limited access to higher-margin specialty services that could offset losses. Rising labor and supply costs have only widened these gaps, leaving many facilities operating on thin or negative margins.

Compounding these structural issues is growing uncertainty around federal healthcare funding. Recent actions to delay or withhold Medicaid payments, along with longer-term federal policy changes expected to reduce Medicaid spending, are putting additional strain on hospital finances. Even when funding is not directly cut, reductions in coverage lead to fewer insured patients and more unpaid care, effectively diminishing federal support. The result is a steady erosion of financial stability: hospitals are projecting significant long-term losses, some have already reduced services, and a number are at risk of closure without intervention. For both urban safety-net systems like HCMC and rural providers, the current environment reflects not a single shock but an accumulating set of pressures that threaten access to care across the state.

Endgame Uncertainty at the Capitol: Structure, Not Just Substance

This year’s legislative endgame is being shaped as much by structure as by policy and finance differences. The Senate has advanced a full slate of omnibus policy and finance bills, while the evenly split House has moved far fewer, leaving the two chambers misaligned heading into conference committee season. In past sessions, leaders synchronized their approaches early—passing parallel vehicles to streamline negotiations and floor action. That has not happened this year, meaning legislators must now reconcile not only substantive differences in policy, but also the basic question of what the final legislative “vehicles” will look like.

The key issue is whether leaders consolidate priorities into a small number of large omnibus bills or attempt to pass many narrower bills. Fewer, larger packages would be more efficient and help meet looming adjournment deadlines, but they require significant bipartisan agreement—no small feat in a 67–67 House. Alternatively, moving many smaller bills allows for more targeted consensus but creates serious time constraints.

Floor Activity Picks Up

Floor activity picked up this week as the Senate met Monday through Thursday and passed roughly 20 bills, including several omnibus policy measures. Debate varied widely—some bills drew extended, party-line votes, while others moved quickly with little opposition. The House, by contrast, convened Monday and Thursday and focused primarily on broadly supported, noncontroversial legislation, though still managing to pass more than two dozen bills. Behind the scenes, most committees have now wrapped up their regular work for the session, with only a handful still meeting. Those remaining include the Senate Finance Committee and House Ways and Means Committee, which continue to process bills, as well as the tax committees in both chambers as work intensifies toward assembling a final tax package.

Senate Passes Limits on Local Government NDAs

On Monday, as part of the Omnibus State and Local Government bill, the Senate passed new limits on the use of nondisclosure agreements (NDAs) by local governments—which proponents argue will promote greater transparency. Senators Erin Maye Quade and Bill Lieske passed amendments that would prohibit municipalities from entering into agreements that restrict public access to information about development projects, economic development initiatives, or projects involving public funding. The bill also establishes additional transparency requirements for certain large projects, including mandating public disclosures and hearings prior to approval. The Maye Quade/Lieske language would apply to local government elected officials and staff. Senator Grant Hauschild’s compromise amendment was also approved. This amendment would restrict local government elected officials from signing NDAs but exclude staff from this restriction. It is unclear if the NDA language has a path to pass through the tied House.

Minnesota Revenues Fall Short of Forecast

Minnesota collected $3.78 billion in general fund revenues during February and March 2026, falling $182 million, or 4.6 percent, below the state’s February forecast, according to Minnesota Management and Budget. The shortfall was driven largely by weaker-than-expected individual income tax collections, which came in $126 million below projections due to significantly higher refunds. Corporate tax revenues and other revenue categories also underperformed, while sales tax receipts provided a modest bright spot, slightly exceeding expectations. Overall, the variance leaves fiscal year-to-date revenues tracking 0.8 percent below forecast, signaling softer-than-anticipated collections despite relatively stable consumer spending.

Minnesota’s Macroencomic Consultant Predicts Softer Economy in 2026

In its April 2026 forecast, Standard & Poor’s Global Market Intelligence (SPGMI), Minnesota’s macroeconomic consultant, predicted that the U.S. economy has weakened slightly since Minnesota’s February Forecast. Updated forecasts now show U.S. economic growth slowing to 2.1 percent in 2026, with higher inflation, rising unemployment, and sluggish job growth expected to weigh on activity. Analysts point to elevated energy prices, ongoing trade uncertainty, and cooling labor market conditions as key risks. While a recession is not currently projected, the outlook suggests continued pressure on consumer spending and business investment, leaving Minnesota’s budget outlook sensitive to national economic headwinds in the months ahead.

Addressing Impacts of Artificial Intelligence

As artificial intelligence (AI) becomes increasingly ubiquitous in our society, the Minnesota legislature has taken steps to regulate the technology in different ways. For example, it previously passed a law prohibiting use of AI in campaign ads in certain circumstances. During the current legislative session, many bills have been introduced to limit use of AI or mitigate AI’s impact. Despite the good intention of these initiatives, they have created a piecemeal approach to AI regulation. In response, more than two dozen entities sent a letter to Governor Walz and legislative leaders expressing their frustration with this disjointed approach. In addition to calling for a “pause” on AI regulations this session, the groups “urge the Legislature to take a more structured and collaborative approach moving forward…includ[ing] the creation of dedicated AI subcommittees in both the House and Senate with primary jurisdiction over AI-related policy, with mandatory referral for any AI bill.”

Lawmakers Consider Food Shelf Funding

Hunger relief advocates have been warning legislators that Minnesota food shelves are under intense strain as demand reaches historic levels, with nearly 9 million visits annually according to statewide data compiled by The Food Group in partnership with state agencies. As a response, lawmakers are considering proposals to increase funding for the Minnesota Food Shelf Program (MFSP) and provide more direct support to food banks. In the House, H.F. 3624, which is in the Ways and Means Committee, includes approximately $5.4 million in ongoing funding for the MFSP, while funding in the Senate will be added to the Health and Human Services supplemental budget bill. Despite these efforts, advocates say these measures may still fall short, particularly as recent federal SNAP benefit cuts push more families to rely on charitable food programs. With budget constraints and competing priorities complicating the debate, policymakers are confronting a widening gap between need and resources, leaving food shelves as an essential, but increasingly overburdened, safety net.

Partisan Spat over Impeachment

On April 15, the House Rules and Administration Committee held a hearing on Republican-backed resolutions to impeach Governor Tim Walz (and separately Attorney General Keith Ellison), led by GOP Representatives Drew Roach, Ben Davis, and Mike Wiener. The effort centered on allegations that the administration failed to adequately respond to a major fraud scheme and retaliated against whistleblowers, with testimony from Faye Bernstein, a state employee who works at the Department of Human Services. DFLers forcefully disputed the claims, and the committee ultimately deadlocked 8–8 along party lines, preventing the resolutions from advancing and leaving the impeachment effort stalled for now. Matt Gehring, director of House Research, outlined how impeachment works under Minnesota law, noting that impeachment is governed by the state constitution—not statute—with the House holding the power to impeach and the Senate responsible for conducting any trial, requiring a two-thirds vote for conviction.

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) issued a final rule to codify the elimination of reputation risk from their supervisory programs. The final rule, which becomes effective June 9, 2026, adopts the proposed rule with minor modifications and formalizes in federal regulations the removal of reputation risk. The final rule prohibits the OCC and FDIC from performing the following activities in supervisory programs:

• Criticizing or taking adverse action against an institution on the basis of reputation risk;
• Requiring, instructing, or encouraging an institution to (i) close an account, (ii) refrain from providing an account, product, or service, or (iii) modify or terminate any product or service on the basis of a person or entity’s political, social, cultural, or religious views or beliefs, constitutionally protected speech, or solely on the basis of politically disfavored but lawful business activities perceived to present reputation risk (excluding compliance for persons or entities sanctioned by the Office of Foreign Assets Control); and
• Taking any supervisory action or other adverse action against an institution, a group of institutions, or the institution-affiliated parties of any institution that is designed to punish or discourage an individual or group from engaging in any lawful political, social, cultural, or religious activities, constitutionally protected speech, or, for political reasons, lawful business activities that the agencies or its personnel disagree with or disfavor.

The final rule defines reputation risk to mean “any risk, regardless of how the risk is labeled by the institution or regulators, that an action or activity, or combination of actions or activities, or lack of actions or activities, of an institution could negatively impact public perception of the institution for reasons not clearly and directly related to the financial or operational condition of the institution.”

The final rule broadly defines “adverse action” to include:

• Any negative feedback delivered by or on behalf of the OCC to the supervised institution, including in a report of examination or a formal or informal enforcement action;
• A downgrade, or contribution to a downgrade, of any supervisory rating, including, but not limited to:
  • Any rating under the Uniform Financial Institutions Rating System (or any comparable rating system);
  • Any rating under the Uniform Interagency Consumer Compliance Rating System;
  • Any rating under the Uniform Rating System for Information Technology; and
  • Any rating under any other rating system;
• A denial of a licensing application;
• Inclusion of a condition on any licensing application or other approval;
• Imposition of additional approval requirements;
• Any other heightened requirements on an activity or change;
• Any adjustment of the institution’s capital requirement; and
• Any action that negatively impacts the institution, or an institution-affiliated party, or treats the institution differently than similarly situated peers.

The prohibition on the use of reputation risk is codified in 12 C.F.R. § 4.91 for the OCC and 12 C.F.R. § 302.100 for the FDIC.

The OCC and FDIC cite the following reasons, among others, for the prohibition:

• Using reputation risk as a basis for supervisory criticisms increases subjectivity and unpredictability without adding any material value from a safety and soundness perspective
• No clear evidence shows that supervisory interference to protect the banks’ reputations has actually protected banks from losses or improved banks’ performance
• Institutions and agencies should devote resources to managing concrete and quantifiable financial risks that have been shown to present significant threats to institutions, such as credit risk, liquidity risk, and interest rate risk
• Reputation risk does not predict bank failures.

The Federal Reserve Board (the Board) issued a notice of proposed rulemaking to codify the removal of reputation risk from the Board’s supervisory programs in February with comments due by April 27, 2026 that includes a general prohibition on the use of reputation risk in 12 C.F.R. § 262.9. We expect the Board’s final rule to include similar language from the FDIC and OCC’s final rule.

In 2025, the federal agencies signaled that these changes were coming. On March 20, 2025, the OCC removed reputation risk from its Comptroller’s Handbook booklets and guidance issuances and instructed its examiners that they should no longer examine for reputation risk. In a March 24, 2025 letter to the U.S. House Subcommittee on Oversight and Investigations, Acting FDIC Chairman Travis Hill stated that the FDIC has reviewed all mentions of reputational risk in regulation, guidance, examination manuals and other policy documents and planned to eradicate reputation risk from the FDIC’s regulatory approach. On June 23, 2025, the Board announced that reputational risk would no longer be a component of its bank examinations.

The removal or reputation risk from examinations is a positive development for the banking industry and will enable banks to focus on measurable risks.

Please reach out to Winthrop & Weinstine’s Banking Regulatory team if you have any questions about this final rule or regulatory compliance.

All banks operating in Minnesota must be aware of the recent decision in United Prairie Bank v. Molnau Trucking LLC. In that case, the Minnesota Supreme Court significantly reshaped the priority landscape between secured lenders and sureties in the public construction market. In brief, the Court held that a performing surety’s rights take priority over a bank’s perfected security interest in contract funds—even where the bank was first-in-time under the UCC.

For banks lending to contractors, this decision highlights a new material and underappreciated risk when borrowers engage in bonded public works projects.

Background Facts

The facts of the case are fairly straightforward: Molnau Trucking obtained loans from the secured bank, granting the bank a perfected security interest in its accounts receivable. Separately, Molnau entered into public works contracts requiring payment bonds issued by a surety (Granite Re, Inc.). When Molnau defaulted on both its loan obligations and its obligations to pay subcontractors and suppliers, Granite paid those claims under its bonds.

A dispute arose over remaining contract funds (including retainage). The bank claimed priority under its first-in-time perfected UCC security interest; the surety claimed priority through “equitable subrogation.”

Key Holdings

The Minnesota Supreme Court ruled in favor of the surety, holding:

• A performing surety is entitled to equitable subrogation regardless of its notice or failure to investigate UCC filings;
• A surety’s rights have priority over a secured lender over bonded contract funds, absent a “superior equity.”

The Court emphasized that a surety, having paid laborers and suppliers under compulsion of its bond, steps into the shoes of those parties (and the project owner), giving it rights superior to a lender whose claim derives only from the contractor.

The “Superior Equity” Exception

Not all is lost, though. The Supreme Court reaffirmed a narrow exception under which a lender may still prevail—often referred to as the “superior equity” scenario. A bank can obtain priority over a surety only if it effectively acts like a surety, meaning:

• The bank is obligated (not merely permitted) to advance funds;
• The funds are specifically earmarked for payment of laborers and suppliers; and
• The funds are actually used solely for those purposes.

General working capital loans—even if partially used on a bonded project—are insufficient. Thus, a bank must be able to document and prove the above requirements to meet the “superior equity” exception.

Practical Takeaways for Banks

This decision introduces meaningful priority risk for lenders financing contractors engaged in public works. Banks should consider the following risk-mitigation strategies:

• Loan documents should require borrower disclosure of bonded public projects and restrict entry into such projects without lender notice and consent.
• Where public projects are anticipated:
  • Engage with the surety at underwriting or project inception;
  • Seek subordination or intercreditor agreements where feasible;
  • Clarify expectations around contract funds and priority.
• If financing project costs:
  • Tie advances to specific obligations (labor/material payments);
  • Require segregation and tracing of funds;
  • Consider mechanisms (e.g., controlled disbursements) ensuring funds are used solely for bonded obligations.
• Accounts receivable arising from public works projects may be impaired or effectively unavailable as collateral in a default scenario. Thus, banks should require:
  • Affirmative reporting of bonded contracts and claims activity;
  • Restrictions on assignment of contract proceeds;
  • Enhanced monitoring of receivables tied to public entities.
• Given diminished priority, banks may need to rely more heavily on:
  • Equipment, real estate, or non-project collateral;
  • Guarantees or additional credit enhancements.

Summary

The Supreme Court’s decision underscores that traditional UCC-based priority assumptions do not hold in the public construction surety context, except in very narrow circumstances as discussed above. For lenders and credit officers, diligence, structuring, and coordination with sureties or underwriting to not include bonded A/R in certain situations are now critical to preserving expected collateral value and properly evaluate the credit at origination.

Banks navigating these issues after origination should work closely with experienced counsel to evaluate risk, collateral exposure, and overall credit structure to avail themselves of the exception identified by the Supreme Court—or contract and/or underwrite around it.