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Fifth Circuit Says Tax on Limited Partners Hinges on Text

6/12/2026

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Summary

Story summary

The Fifth Circuit ruled in Sirius Solutions LLLP v. Commissioner (24-60240, 2026) that Section 1402’s text, not activity, sets limited-partner self-employment tax.
The court stressed limited partners’ rights and limited-liability status, departing from Soroban.
Analysts say the ruling may let U.S. investors in structures like German KGs claim the Section 1402(a)(13) exception.
The IRS said it will keep pressing its activity-based test while pending appeals could create a split reaching the Supreme Court.

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Story summary

The Fifth Circuit ruled in Sirius Solutions LLLP v. Commissioner (24-60240, 2026) that Section 1402’s text, not activity, sets limited-partner self-employment tax.
The court stressed limited partners’ rights and limited-liability status, departing from Soroban.
Analysts say the ruling may let U.S. investors in structures like German KGs claim the Section 1402(a)(13) exception.
The IRS said it will keep pressing its activity-based test while pending appeals could create a split reaching the Supreme Court.