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Gene Bowman Gene Bowman

Limited Partners and Self-Employment Tax: What Alabama Business Owners Should Know

The Fifth Circuit withdrew its January 2026 opinion on the limited partner exception to self-employment tax, and the Second Circuit has now ruled as well. Both courts focus on whether a partner manages or runs the business. Neither decision binds Alabama taxpayers, whose Tax Court cases generally remain governed by the Tax Court’s own passive-investor analysis.

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