Treasury and IRS Revisiting Guidance on Limited Partner Exception

Tax Controversy and Litigation attorney Lee Meyercord was recently quoted in a Tax Notes article about a new project appearing in the 2023-2024 priority plan from the U.S. Department of the Treasury and IRS regarding the limited partner exception of the Self-Employment Contributions Act (SECA) tax. Although the scope and details of the project are not defined in the plan, tax professionals speculate that this project will aim to more clearly define the meaning of “limited partner” as it pertains to SECA. The IRS has tried to implement regulations defining “limited partner” in the past, but has been met with criticism and questions of whether or not previously proposed definitions overstep the regulatory authority of the Treasury Department.

“I do not think the IRS can issue regulations that would cause a state-law limited partner to be excluded from the exception in section 1402(a)(13) because that would be contrary to the plain language of the statute,” Ms. Meyercord explained, going on to cite when “the IRS tried to do this in regulations proposed in 1997, and Congress imposed a moratorium on finalizing those regulations because the proposed rules would exceed the regulatory authority of the Treasury Department, effectively amounting to a change in the law without Congressional action.”

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