In Alain, L.L.L.P. v. Commissioner, ___ F.4th ___ (5th Cir. 8/12/26), CA5 here; GS [to come], the Court on panel rehearing (also denying en banc rehearing), stuck to its guns and rejected the Tax Court and IRS interpretation of the limited partner exception to the “self-employment income” in § 1402(1)(13). Readers paying attention in the tax procedure universe are surely familiar with that issue. Basically, active service participants in a business enterprise who would have had self-employment income in straight-forward characterization of their earnings have tried to avoid that tax on self-employment income by the magic of labeling their income as a distributive share for share for limited partners.
Alain was originally decided in Sirius Solutions, L.L.L.P. v. Commissioner, 165 F.4th 374 (5th Cir. 2026), GS here, which the Court withdrew on the rehearing. The judges on the panel rendered opinions to the same effect as before. The Sirius majority opinion was nominally authored by Judge Oldham. The panel rehearing opinion is per curiam with neither of the majority judges stepping up as the author.
I critiqued the majority in Sirius Solutions in Fifth Circuit Knows a Limited Partner When Reads It (Federal Tax Procedure Blog 1/24/26; 1/20/26), here. I don’t think there is anything significant in the new majority opinion. Other than stating that the bottom-line result is the same, with the judges' reasoning is pretty much as before, except neither judge in the majority claims credit, I can’t add anything useful to what I said before.
Except:
