Dragging a sequence to New Item creates a sequence with "Composite in Linear Color Mode" enabled instead of preserving the source sequence setting

Premiere Version

• 26.3.0 (macOS)

Issue

Dragging an existing sequence onto the New Item button creates a new sequence whose Composite in Linear Color Mode setting does not match the original sequence.

Steps to Reproduce

1. Create a sequence.
2. Disable Sequence Settings → Composite in Linear Color Mode.
3. Add a clip.
4. Add a Color Matte above the clip with a blend mode such as Overlay or Soft Light and adjust opacity so the effect is obvious.
5. Drag the sequence onto the New Item button to create a parent sequence.
6. Open Sequence Settings for the newly created sequence.

Expected Result

The new sequence should inherit Composite in Linear Color Mode = Off, matching the source sequence, so nested compositing is visually identical.

Actual Result

The newly created sequence has Composite in Linear Color Mode = On, causing blend modes to render differently (lighter in this example).

Workaround

Instead of dragging the sequence to New Item:

1. Duplicate the original sequence.
2. Delete all clips.
3. Drag the original sequence into the duplicate.

The duplicated sequence preserves Composite in Linear Color Mode, and the appearance matches correctly.