I added details post-Convention but I no longer see that comment on this thread. Here's what was posted after Convention:

Systems Committee recommended changes based on discussion at the 2023 IAIABC Convention-Systems Committee meeting: 
One change is needed: Modify the IAIABC Release 3.1 XML schema for DN0104 Test/Production Code to add the value = D (Development). 

Notes:
DN0104 Test/Production Code of D (Development) will not be added to the IAIABC Release 3.1 standards documentation. Currently there are values of T (Test) and P (Production). 
The value of D (Development) will be added to the IAIABC Release 3.1 XML schema and will only be used internally by a jurisdiction. 
The value of D (Development) will not be sent to the jurisdiction in a IAIABC Release 3.1 XML File or IAIABC Release 3.1 Flat File from the Trading Partner. 
The jurisdiction may set DN0104 Test/Production Code value = D (Development) for internal use on internal applicable files only for either IAIABC XML File or IAIABC Flat File.

I agree with Jeremy and Suzanne. No impact to other trading partners, vendors, etc. which would also mean no impact to the standards. Internal coding in DN0104 would not feed outside.

I also agree.  I am not sure why the standard needs to be changed if this is internal to MN and not something a trading partner is sending.  I remember talking about this at the 2023 Convention and we discussed this same concern.  I looked for minutes to see if there was something more to this conversation that I don't remember, but do not see any minutes posted.  

If xml is to retain it's one standard xsd format, then accommodating some requests like this will be necessary to ensure the xsd retains its integrity. Otherwise, there won't be one universal and current R3.1 xsd used always by everyone. The new value is a pretty simple request.

The Final 14 Day Review period for this IRR has begun and will extend through Friday, December 29, 2023. Please respond with any final feedback or objections.

It is my understanding that no one outside of MN (no trading partner, etc) will be reporting this new value. It is used for internal purposes. If it is used for internal purposes only, I believe you should be able to update your XSD to include a value of "D" for internal usage. I may be missing the bigger picture, but this seems simplest to me rather than modifying the standard.