On August 12, 2026, the Court of Appeals for the Fifth Circuit (Fifth Circuit) issued a substitute opinion in K Alain, L.L.L.P. v. Commissioner (K Alain), holding that, for purposes of the exclusion from self-employment tax under Section 1402(a)(13) of the Internal Revenue Code, a “limited partner” is a partner who plays no significant role in managing or running a business. In doing so, the Fifth Circuit retracted its January 2026 opinion in Sirius Solutions, L.L.L.P. v. Commissioner, which had tied the definition of “limited partner” more closely to state law limited liability status. Just over a month later, on September 17, 2026, the Court of Appeals for the Second Circuit unanimously affirmed the Tax Court’s decision in Soroban Capital Partners LP v. Commissioner (Soroban), holding that partners who run, manage or otherwise exercise managerial control over a partnership’s business do not qualify as “limited partners” for purposes of Section 1402(a)(13) and that their distributive shares are therefore subject to self-employment tax. This guest article by McDermott Will & Schulte attorneys David S. Griffel, David S. Wermuth and Lauren E. Exnicios examines the K Alain and Soroban decisions; discusses relevant cases pending in Tax Court and the Court of Appeals for the First Circuit; and presents key considerations for fund managers in light of these recent rulings and ongoing litigation. See “Soroban’s Functional Analysis Test Hits Sirius Roadblock” (Mar. 12, 2026); and “IRS Wins Round One Over Meaning of ‘Limited Partner’ for Self-Employment Income Purposes” (Feb. 15, 2024).