ADVANCING OPPORTUNITIES: NAPEO’S 2026 FEDERAL AFFAIRS PRIORITIES

In January, NAPEO’s Federal Government Affairs Committee met to establish the organization’s federal legislative and regulatory priorities for 2026. Committee members spent the day hearing from NAPEO staff and our trusted Washington D.C. partners at Groom Law Group, Mehlman Consulting and Davis & Harman. Together, we assessed the current policy environment, reviewed the progress achieved in 2025 and identified where NAPEO is best positioned to advance member interests in the year ahead.

Just as importantly, committee members shared their most pressing concerns, ensuring that NAPEO’s advocacy agenda remains closely aligned with the real-world issues facing PEOs.

Through this process, the committee reached consensus on a focused set of priorities designed to advance NAPEO’s strategic objectives, respond to emerging federal policy developments, and position the organization for effective engagement with Congress and the administration in 2026.

BUILDING ON 2025’s MOMENTUM

At the start of 2025, the industry identified tax reform as the most significant federal opportunity for PEOs. NAPEO prioritized addressing payroll tax credit liability and ensuring the PEO business model was fully understood as Congress considered changes to business-focused tax incentives.

Those efforts delivered meaningful results. NAPEO successfully secured favorable language protecting PEOs from being classified as ERTC promoters, which was enacted into law. We also helped advance industry-supported legislation, H.R. 3223 (Payroll Tax Credit Liability), introduced legislation to make Section 199A permanent, and secured immediate expensing for R&D tax credits.

While H.R. 3223 did not become law in 2025, the bill made considerable progress, gaining bipartisan support from 19 House members and securing a Republican lead sponsor for the Senate companion bill—an important foundation for continued momentum.

Beyond tax policy, NAPEO advanced other key priorities throughout the year. We responded to multiple requests for information to ensure the PEO perspective on Form 5500 was clearly understood by the new administration. We worked closely with congressional offices on bipartisan paid family leave legislation to ensure appropriate treatment of the PEO model. In addition, NAPEO collaborated with Rep. Richard Neal (D-MA) to secure favorable PEO language in his auto IRA legislation.

LOOKING AHEAD TO 2026

I joined NAPEO in the fourth quarter of last year and already have a strong appreciation for the foundation that is in place. NAPEO enters 2026 with real momentum, credibility on Capitol Hill and a clear sense of where our advocacy can make the greatest difference for members.

The priorities outlined below reflect the most pressing federal issues facing the PEO industry in the coming year. While not exhaustive, they represent where NAPEO will focus its efforts to protect the PEO model, reduce unnecessary regulatory risk and ensure PEO clients can continue to access the same benefits and opportunities as other employers.

2026 FEDERAL GOVERNMENT AFFAIRS PRIORITIES

H.R. 3223 – Payroll Tax Liability. Our primary objective remains finalizing Senate introduction and continuing to move the bill forward in the House. This will require securing a Senate co-lead, engaging committee staff, and continuing to expand bipartisan House support.

Appropriations Committee Engagement. Engaging with the House Appropriations Committee will be an important tactic in 2026. We will pursue opportunities for oversight to influence agency behavior. This approach positions us as a resource while maintaining pressure on agencies to address member concerns.

IRS Modernization. We will continue advocating for modernization of outdated IRS systems and processes that directly affect employers and PEOs. Our efforts will focus on Treasury and IRS engagement, monitoring funding and implementation decisions, and promoting improvements in processing efficiency, accuracy, and taxpayer service.

Department of Labor / Form 5500. Engagement with DOL and EBSA on Form 5500 will remain a priority. We will pursue opportunities with the department and oversight settings in Congress to elevate our concerns and priorities.

H.R. 1 Implementation. As agencies implement the One Big Beautiful Bill Act (H.R. 1) we will continue to engage in rulemaking and guidance development to pursue outcomes that align with member interests. This includes monitoring agency actions and submitting comments.

District-Level Member Engagement. We will seek to launch a district-level “fly-out” program to facilitate direct engagement between our members and their representatives. A pilot program in the spring will assess planning, messaging, and participation. The program will focus on targeted districts and representatives aligned with NAPEO’s legislative priorities.

Payroll Tax Credits Generally. We will engage in and monitor issues related to payroll tax credits and other employer benefits to ensure PEOs are appropriately considered and that PEO clients remain eligible for all tax credits and benefits available to employers absent the PEO relationship.

MEWA Clarification. We will begin raising awareness among industry stakeholders and policymakers regarding a potential ERISA legislative/regulatory change that would clarify that fully insured PEO health benefit plans are not considered multiple employer welfare arrangements (MEWAs).

Immigration Policy. We will monitor business immigration legislation and regulations and, if necessary, engage with Congress and the administration to make sure these proposals recognize the PEO business model and differentiate client and PEOs responsibilities.

Privacy/AI legislation. We will continue to monitor federal AI policy for potential PEO industry impact.

NAPEO’s advocacy work is strongest when it reflects the priorities of its members. I look forward to working closely with you throughout 2026 as we advance these efforts and continue to achieve success for the PEO industry in Washington.