• The Fifth Circuit held that a “limited partner” for purposes of the self-employment tax means a partner in a state law limited partnership who has limited liability. 
• The court rejected the IRS’s “passive investor” interpretation and instead held that generally, a limited partner with limited liability under state law qualifies for the exclusion from the self-employment tax on the partner’s share of partnership income. 
• The Fifth Circuit’s decision could lead to a potential circuit split, ultimately setting up the issue for consideration before the Supreme Court. 

On May 22, 2025, the House of Representatives passed H.R. 1-119th Congress (2025-2026), titled as the “One, Big, Beautiful Bill Act” (the “Act”), a budget bill that, among other things, addresses soon to sunset provisions of the Tax Cuts and Jobs Act (the “TCJA”) while also making modifications to U.S. tax policy and spending. Commentators and economists estimate the Act, if passed by the Senate and signed into law by President Trump, may have a net cost of $3.8 trillion over 10 years, and would increase the federal statutory debt limit by $4 trillion.