On January 16, 2026, in Sirius Solutions, L.L.L.P. v. Commissioner,[1] No. 24-60240 (5th Cir. Jan. 16, 2026), the U.S. Court of Appeals for the Fifth Circuit reversed the Tax Court and held that, for self-employment tax purposes, a “limited partner” means “a partner in a limited partnership that
Final Regulations Issued on Allocation of Partnership Liabilities Under Section 752
Introduction
On December 2, 2024, the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) published final regulations (the “Final Regulations”) on section 752[1] regarding the allocation of partnership recourse liabilities in situations in which multiple partners and related parties bear part or all of
Tax Court Reaffirmed Soroban’s Holding that Active Limited Partners of State Law Limited Partnerships May Be Subject to Self-Employment Tax
On December 23, 2024, in Denham Capital Management LP v. Commissioner (T.C. Memo. 2024-114), the Tax Court reaffirmed its earlier ruling in Soroban Capital Partners LP v. Commissioner (161 T.C. No. 12.) that active limited partners of a state law limited partnership are not entitled to the “limited partner exception”
Tax Court Holds That Active Limited Partners of State Law Limited Partnerships May Be Subject to Self-Employment Tax
Introduction
Section 1402(a)(13) of the Internal Revenue Code provides that the distributive share of “limited partners, as such” from a partnership is not subject to self-employment tax.[1] Managers of private equity and hedge funds are routinely structured as limited partnerships to exclude management and incentive fees from self-employment
President Biden Signs Inflation Reduction Act into Law
On August 16, 2022 President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.
The IRA includes a 15% corporate alternative minimum tax, a 1% excise tax on stock buybacks and a two-year extension of the excess business loss limitation rules. The IRA also contains a number
A Summary of Inflation Reduction Act’s Main Tax Proposals
On July 27, 2022, Senator Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer (D-N.Y.) released the Inflation Reduction Act of 2022 (the “IRA”). The IRA contains only two non-climate and non-energy tax proposals – a 15% corporate alternative minimum tax and a provision significantly narrowing the applicability of preferential
Summary of the Biden Administration’s Fiscal Year 2023 Green Book Tax Proposals
On March 28, 2022, the Biden Administration released the Fiscal Year 2023 Budget, and the “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals,” which is commonly referred to as the “Green Book.” The Green Book summarizes the Administration’s tax proposals contained in the Budget. The Green Book is
The Biden Administration Re-Proposes to Tax Carried Interests as Ordinary Income
On March 28, 2022, the Biden Administration proposed to tax “profits” or “carried” interests as ordinary income and impose self-employment tax on income and gains from these interests for certain partners in investment partnerships. The proposal is identical to the proposal made by the Administration last year.
Under current law, a “carried” or “profits” interest in a partnership received in exchange for services is generally not taxable when received and the recipient is taxed on their share of partnership income based on the character of the income at the partnership level. Section 1061 requires certain carried interest holders to satisfy a three-year holding period – rather than the normal one-year holding period – to be eligible for the long-term capital gain rate.
Senator Manchin Announces That He Will Not Support the Build Back Better Act – Where Things Stand Now
Today, December 19, 2021, Senator Joe Manchin (D., W.Va.) said that he opposes the Build Back Better Act, which effectively prevents its passage. While there are no immediate prospects for the Build Back Better Act to become law, future tax acts tend to draw upon earlier proposals. With a view
Section 1446(f) Proposed Regulations: Key Guidance on Partnership Interest Transfers by Non-U.S. Persons
On May 13, 2019, the U.S. Internal Revenue Service (“IRS”) and Treasury Department published proposed regulations providing guidance on the rules imposing withholding and reporting requirements under the Code[1] on dispositions of certain partnership interests by non-U.S. persons (the “Proposed Regulations”). The Proposed Regulations expand and in important ways modify earlier Notice 2018-29[2] on dispositions of non-publicly traded partnership interests.[3] Unless otherwise specified, this post focuses on the aspects of the Proposed Regulations affecting transfers of interests in non-publicly traded partnerships.
Enacted as part of the “Tax Cuts and Jobs Act”, Section 1446(f) generally requires a transferee, in connection with a disposition of a partnership interest by a non-U.S. person, to withhold and remit 10 percent of the “amount realized” by the transferor, if any portion of any gain realized by the transferor would be treated as effectively connected with the conduct of a trade or business in the United States under the substantive sourcing rule of Section 864(c)(8).[4]
Prior to issuing the Proposed Regulations, the IRS issued Notice 2018-08 and Notice 2018-29 to provide interim guidance with respect to these withholding and information reporting requirements. On December 27, 2018, the IRS issued proposed regulations under Section 864(c)(8), providing rules determining the amount of gain or loss treated as effectively connected gain or loss with a U.S. trade or business.