Minnesota Details Tax Treatment of Paid Leave Program
Minnesota has issued guidance outlining the federal and state tax treatment of premiums and benefits under the state’s new Paid Leave program, which became effective January 1, 2026. Under this guidance, employer premium contributions are deductible as an excise tax pursuant to IRC § 164. Any additional amounts paid by the employer on behalf of an employee are deductible as an ordinary and necessary business expense under IRC § 162. However, these amounts must be included in the employee’s taxable wages. Employees who itemize deductions may treat their contributions as state income taxes for federal purposes, subject to the applicable SALT deduction limitations.
With respect to benefits, paid family leave benefits are taxable but are not treated as wages and will be reported on Form 1099. Medical leave benefits receive split tax treatment. The portion attributable to employer contributions (generally 50% for most employers and 33% for qualifying small employers) is treated as taxable wages subject to federal income tax withholding and applicable payroll taxes. The portion attributable to employee contributions is excluded from federal gross income.
Employers are responsible for remitting the employer share of Social Security and Medicare taxes on the taxable portion of medical leave benefits. In addition, all premium contributions must be reported in Box 14 of Form W-2, Wage and Tax Statement, using the designation “MNPFML.”
For more information: Taxes and Paid Leave | Last updated October 1, 2025
IRS Releases Guidance on New Special Depreciation Allowance
The Treasury Department and the IRS have released interim guidance addressing the new special depreciation allowance for Qualified Production Property (QPP) enacted by the One Big Beautiful Bill Act (OBBBA). Notice 2026-16 provides guidance under IRC § 168(n), which permits taxpayers to elect a depreciation deduction of up to 100% of the unadjusted depreciable basis of eligible QPP placed in service during the taxable year. For purposes of the provision, Qualified Production Property generally consists of nonresidential real property used as an integral part of a qualified production activity, including manufacturing, chemical production, agricultural production, or refining activities.
To qualify, the property generally must be placed in service after July 4, 2025, and before January 1, 2031. In addition, construction must begin after January 19, 2025, and before January 1, 2029. Notice 2026-16 sets forth detailed definitions and eligibility requirements, outlines the procedures for making the QPP election, and explains the applicable depreciation recapture rules. Taxpayers may rely on this interim guidance pending issuance of proposed regulations. The IRS has requested public comments on the notice, which are due by April 20, 2026.
Prior to enactment of IRC § 168(n) under OBBBA, there was no special depreciation category specifically for Qualified Production Property (QPP). Instead, property that would qualify as QPP was generally treated as nonresidential real property and depreciated under the normal Modified Accelerated Cost Recovery System (MACRS) rules. Under IRC § 168(n), eligible QPP can now receive up to 100% immediate depreciation in the placed-in-service year (if elected), rather than being recovered over 39 years. This represents a significant acceleration of deductions compared to prior law.
Supreme Court Invalidates Presidential Tariffs Imposed under IEEPA
On February 20, 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to unilaterally impose tariffs. Furthermore, the Court invalidated specific tariff actions that had been implemented under IEEPA. In response to the decision, U.S. Customs and Border Protection (CBP) announced that it will stop collecting the affected duties on goods entered on or after 12:00 a.m. EST on February 24, 2026.
At this time, CBP has not provided specific guidance regarding the availability of refunds for duties previously collected. However, precedent from the Court of International Trade suggests that importers may be entitled to refunds even for entries that have been liquidated. Generally, importers have a two-year window to file a refund claim in the Court of International Trade, although there is uncertainty regarding when the limitations period begin to run.
IRS Releases Additional Interim Guidance on CAMT
The U.S. Department of the Treasury and the IRS have issued additional interim guidance addressing the corporate alternative minimum tax (CAMT). This latest notice updates and clarifies several previously issued notices as taxpayers await forthcoming proposed regulations. The guidance provides new adjustments to adjusted financial statement income (AFSI), including modifications related to certain deductible repair costs, amortization of Section 197 intangibles, domestic research and experimental expenditures, and qualified production costs under Section 181.
In addition, the notice clarifies the treatment of financially distressed corporations emerging from bankruptcy and outlines adjustments applicable to certain transactions involving intangible property subject to Section 367(d). The guidance also revises a previously proposed anti-avoidance rule applicable to certain “covered asset transactions.” Rather than applying a strict two-year rule, the revised approach establishes a rebuttable presumption framework.
