Latest news with #SECA
Forbes
18-06-2025
- Business
- Forbes
New Self-Employment Tax Risks For U.S. Investors In Global Funds
A new Tax Court ruling is a warning for U.S. limited partners in global funds, imposing new ... More self-employment (SECA) tax risks. U.S. limited partners in foreign funds like Cayman or Luxembourg partnerships must ensure passive roles to avoid costly SECA tax liabilities. The U.S. Tax Court decided Soroban Capital Partners LP v. Commissioner (T.C. Memo 2025-52) in May 2025 leaving financial, tax and legal advisors concerned. The court upended assumptions about the self-employment tax exemption for limited partners in hedge funds, and by analogy to venture capital, and private equity partnerships both in the U.S. and abroad. U.S. citizens and green card holders who are limited partners in hedge funds or similar businesses, including those in foreign countries, should understand the effects of this decision. The case signals a shift away from a state or local law definition of a 'limited partner' toward a more comprehensive evaluation of the partner's actual role to determine if the 'limited partner' exclusion from Self-Employment Contributions Act taxes should apply. The Soroban court applied a 'functional analysis test' to determine whether limited partners' distributive share of partnership income is subject to SECA taxes. The decision has far-reaching SECA implications for how limited partners will structure their roles and manage their tax obligations. This article explores the Soroban ruling, what it means for U.S. limited partners, especially for those working with hedge funds or other businesses abroad that use a limited partnership structure. First, it is helpful to understand generally why funds often use a limited partnership vehicle. A limited partnership for U.S. purposes is comprised of both general and limited partners. General partners manage the fund and have unlimited liability. Limited partners contribute capital, and their liability is limited to their investment. The limited partnership structure is tax transparent for U.S. tax purposes, meaning it provides pass-through taxation of income, credits and deductions to its partners. The partnership entity itself is not subject to U.S. income tax, and the partners report their distributive shares on their individual U.S. tax returns. The structure also provides significant flexibility in governance. For all these reasons, the limited partnership is often ideal for private funds. Self-employment income is taxed at a rate of 15.3% (12.4% for Social Security and 2.9% for Medicare). A SECA exclusion exists under Internal Revenue Code Section 1402(a)(13) for a limited partner's distributive share of partnership income. The Tax Court rejected the notion that state law classifications of limited partners should be determinative for purposes of this exclusion. Instead, it applied a functional analysis test to Soroban's limited partners and concluded that these partners were 'limited in name only.' As such, the limited partners' distributive share did not qualify for the SECA exclusion. The court carefully examined the activities of the limited partners and found they were heavily involved in generating the partnership's income by overseeing day-to-day management, working full-time for the business, and that marketing material listed them as essential to the success of the partnership. In addition, the capital contributions made by the limited partners were viewed as insignificant when compared to the fees Soroban charged. This comparison suggested that the limited partner's distributive share was not a passive return on investment but rather compensation for active participation. The label 'limited partner' alone, is not enough to guarantee the SECA exclusion. Instead, the functional analysis test requires a thorough analysis of the facts and a careful examination of the partner's role in the enterprise. The factors include how integral the partner is in generating revenue, the degree of participation in the business, whether the partner is working full-time in the business, whether marketing materials indicate the partner plays a key role and whether the partner's capital investments truly reflect a passive investment. For U.S. limited partners, particularly those in hedge funds or other investment vehicles, the Soroban holding invites the IRS and courts to closely scrutinize the actual activities of limited partners to determine SECA liability. While the Soroban case focused on a U.S. hedge fund, its principles can apply to any partnership structure in which U.S. citizens or green card holders are limited partners. The holding can apply to a vast range of industries operating globally where U.S. partners are contributing expertise and management. Private equity firms, venture capital funds, and other businesses often use a limited partnership structure. A limited partner in an overseas real estate partnership or tech startup fund could face scrutiny if the role involves active management or income generation. Only truly passive investors are meant to benefit from the SECA exclusion and while local law will be important in the analysis, the IRS will be looking beyond any local law label of 'limited partner' to scrutinize eligibility. Various jurisdictions have limited partnership structures closely resembling the U.S. model. The most popular jurisdictions having limited liability for limited partners as well as generally having flow-through tax treatment include the Cayman Islands, British Virgin Islands, Luxembourg, Hong Kong and Ireland. While these jurisdictions appeal to global funds because of their tax and regulatory regimes which parallel the U.S. in important respects, limited partners should be ready to consider a heightened compliance burden given the holding in Soroban. Adding to the additional possible tax burden, the U.S. limited partner abroad will be unhappy to learn that self-employment income subject to SECA tax is not reduced by the foreign earned income exclusion. U.S. limited partners should reassess their involvement in the partnership to make sure they qualify as passive investors entitled to the SECA exclusion. This may mean a significant reduction of day-to-day management responsibilities or restructuring their roles to emphasize capital investment over active participation. For U.S. limited partners in foreign funds, the statute of limitations for SECA tax assessments is generally three years from the due date or actual filing date of the income tax return, whichever is later. However, the statute of limitations for tax matters can be extended several years and even indefinitely, depending on the facts. Crucially, if a U.S. partner fails to file a required foreign information return, such as Form 8938 (Statement of Specified Foreign Financial Assets) or Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships), the statute of limitations does not start for the entire tax return. This gives the IRS the ability to assess SECA tax at any time in the future. U.S. limited partners should be proactive and planning for a possible IRS challenge to a claimed exclusion from SECA. U.S. limited partners should first consult an experienced tax advisor to assess their involvement in the fund and optimize tax outcomes. Next, meticulously document management roles, time commitments, and public representation to ensure compliance with IRS scrutiny and minimize the risk of tax exposure. Partnership agreements should be examined. If feasible, partnership agreements may need to be amended to clarify the role of limited partners as passive investors, emphasizing capital contributions over operational involvement. Limited partners who blur the line between passive investment and active management could find a surprising increase in their U.S. tax liability with their distributive shares subject to SECA taxes. The Soroban case may be appealed, and staying informed on this topic is critical. Investors should be looking out for any future IRS guidance or legislation that might refine the functional analysis test. I help with tax matters around the globe. Reach me at vljeker@ Visit my US tax blog
Medscape
12-05-2025
- Health
- Medscape
Aspirin Continuation vs Discontinuation in Brain Surgery
Perioperative discontinuation of acetylsalicylic acid (ASA) treatment for 12 days was not associated with a reduction in 6-month recurrence of chronic subdural hematoma (cSDH) in older patients undergoing burr hole surgery compared with continued ASA use, according to new findings that challenges current practice norms. METHODOLOGY: The placebo-controlled, randomized SECA clinical trial included 155 adult patients (mean age, 78 years; 84% men) undergoing burr hole drainage for cSDH at six neurosurgical centers in Switzerland from February 2018 to June 2023. All received ASA treatment prior to the onset of cSDH. Participants received continuous ASA treatment (100 mg/d; n = 78) or matching placebo (n = 77) for 12 days during the perioperative phase. The primary outcome was the recurrence of cSDH necessitating reoperation within 6 months. Secondary outcomes included cardiovascular or thromboembolic events, intracranial bleeding events, and mortality. Adverse events were monitored for 6 months. TAKEAWAY: The 6-month recurrence rates of cSDH did not differ significantly between the ASA (14%) and placebo (10%) groups. The recurrence rate with ASA was lower than previously reported estimates of 25%-33%. The risk for cardiovascular, cerebrovascular, or thromboembolic events was slightly but not significantly lower in the ASA group than in the placebo group (hazard ratio [HR], 0.9; 95% CI, 0.5-1.8). The risk for intracranial bleeding events other than recurrent cSDH was slightly but not significantly higher in the ASA group than in the placebo group (HR, 1.2; occurrence, six vs five participants), as was the risk for all-cause mortality (HR, 1.9; occurrence, four vs two participants). Any severe adverse event occurred in 7.7% vs 2.6%. Results of sensitivity and per-protocol analyses were consistent with the main findings. IN PRACTICE: 'Current clinical practice in cSDH is to discontinue blood thinner treatment, including ASA, before surgical treatment and to delay the resumption of ASA for at least 12-30 days after surgery,' the authors wrote. 'Based on this trial's data concerning the risk of recurrence and bleeding events vs the risk of cardiovascular or cerebrovascular and thromboembolic events, clinicians can conduct a data-driven risk-benefit analysis' to determine ASA continuation or discontinuation in their own patients undergoing the procedure, they added. SOURCE: This study was led by Maria Kamenova, MD, Department of Neurosurgery, University Hospital of Basel, Basel, Switzerland. It was published online on April 27 in JAMA Neurology . LIMITATIONS: This trial had limited statistical power because of overestimated recurrence rates in the ASA group during trial design, which may have affected sample size estimation and subgroup analyses. Generalizability was limited to European populations and those undergoing burr hole drainage under aspirin therapy. Additionally, surgical technique variations across centers may have influenced outcomes, and the lack of follow-up imaging may have missed covert ischemic events. DISCLOSURES: This study was funded by the Swiss National Science Foundation, the Gottfried und Julia Bangerter-Rhyner-Stiftung, and the propatient Research Foundation of the University Hospital of Basel. Several investigators reported receiving support and having various ties with a number of sources, including pharmaceutical companies. Full details are provided in the original article.
Chicago Tribune
24-03-2025
- Politics
- Chicago Tribune
Conflict between SEIU and CTU escalates with allegations of ‘bullying'
The leader of a local chapter of the Service Employees International Union on Monday issued a fiery internal message to members accusing Chicago Teachers Union leadership of 'bullying and dishonesty,' the latest escalation of a conflict between two influential labor organizations that were once close allies. SEIU 73 President Dian Palmer disputed assertions CTU president Stacy Davis Gates made in social media posts over the weekend, delivering her strongest comments yet on the monthslong dispute between the two unions over jobs at Chicago Public Schools. 'Working with CTU in 2019 was one of my proudest achievements,' Palmer wrote in the email to members. 'I have no idea why they picked this fight seemingly out of nowhere against one of their strongest allies…But I can no longer sit back and watch leadership engage in bullying and dishonesty — especially regarding our up-and-coming leaders.' In contract negotiations with CPS, CTU has proposed language that Palmer's union argues would allow certain classroom assistants who are under CTU to do work now done by special education classroom assistants represented by SEIU. Last month, SEIU 73 signed onto a statewide union resolution declaring that it was 'under attack' by CTU, a remarkable turn of events for two labor groups whose strong partnership helped elect Mayor Brandon Johnson two years ago. The conflict took another turn last week, when word began to spread about an alleged altercation between SEIU Illinois State Council Executive Director Anthony Driver and Davis Gates. In a version of the exchange Driver later confirmed on social media, Davis Gates approached Driver earlier this month at a fundraiser hosted by Illinois House Speaker Emanuel 'Chris' Welch and extended her hand. Driver reached out to shake her hand but Davis Gates pulled hers back and said, 'Y'all ain't s—- and you ain't s—-,' according to the account Driver confirmed. Over the weekend, Davis Gates disputed Driver's description of the exchange, saying in a private Facebook group for CTU members that it 'did NOT happen.' She also wrote she sat down with Palmer recently and they 'agreed to NOT talk to press.' In the post, Davis Gates said she and Palmer had agreed to visit schools together to help resolve the conflict over teachers aides and special education classroom assistants. Palmer responded with an email to members on Monday saying she was surprised by the Davis Gates posts because had agreed not to make 'media posts.' But now, Palmer said in the email, 'the 'truce' has been broken.' 'I never agreed to anything that would compromise our Special Education Classroom Assistants (SECAs),' Palmer wrote. 'I made this clear in our conversation; I restated it in my letter to the CTU president in November 2024 and again when CTU sent us their proposals to settle the SECA issue. I will say it again – there will be no negotiations over the SECA position.' Palmer also defended Driver, who she called 'honest and hardworking.' 'While I did not personally hear the bullying statement that the CTU president directed at him, I saw the impact,' Palmer wrote. 'Anthony came to me directly, looking troubled, concerned not just for himself but for me as well. He wanted to make sure I knew so that I could avoid the same humiliating treatment that others had witnessed him endure.' She also took issue with Davis Gates challenging Driver's credibility: 'Let's be clear. … As black women and mothers of sons, we ought to know and thus should act better.' When asked on Thursday about Driver's description of their exchange, Davis Gates declined to comment. Driver later that evening posted on 'X 'about his encounter with Davis Gates, saying that 'it was unprovoked, unhelpful, and uncalled for.'
Chicago Tribune
07-03-2025
- Politics
- Chicago Tribune
Letters to the Editor: Holzhauer's positive actions stand out on divisive council; Mendrick wrong on almost every point in gubernatorial bid
Holzhauer's positive actions stand out on divisive council 'Public debate,' 'fight' and 'heated' are some of the words used in the last two years to describe Naperville City Council meetings. They have become openly partisan and divisive in the last two years, lacking the cooperation and good governance goals of previous councils that resulted in many accolades being bestowed upon Naperville. Council member Ian Holzhauer has been the target of some of the partisan attacks, yet he has managed to rise above the political fray and even defend fellow council members also singled out on the dais. Holzhauer has deep connections to Naperville, as a resident and public servant, and it shows in his consistent efforts to support such things as housing for disabled adults, increased funding for mental health for our police and firefighters, and the planned extension of the Riverwalk to Edward Hospital. And who can forget his support of the LGBTQ+ community when members of this same council singled out NaperPride and wanted to eliminate their SECA funding? His pushback resulted in their regaining funding for their event at Naper Settlement. He also recently used his knowledge as a contract lawyer in the discussion regarding the early contract renewal requested by the Illinois Municipal Electric Agency, offering some cogent reasons as to why the city should be wary of their request. Local bodies of government are likely to feel the effects of the turmoil in Washington, D.C., in the coming years before the next election, and Naperville will benefit from having council members like Ian Holzhauer dedicated to serving Naperville and working with his colleagues towards a common goal. We also recommend fellow incumbent Councilman Benny White and newcomers Mary Gibson and Ashfaq Syed to voters as candidates who believe in cooperation, instead of the sniping and partisan stunts we have seen from the present council. Steve and Nancy Turner, Naperville Mendrick wrong on almost every point in gubernatorial bid I read with skepticism the March 2 article regarding DuPage County Sheriff James Mendrick's run for governor. His first problem is the city of Chicago, which he says, based on everyone he's asked, should be run more like DuPage County. Obviously he didn't get outside of his own circle with that question. Next he disparages the state's SAFE-T Act, which eliminates cash bail for nonviolent offenders. His jail would be pretty full and taxpayers would be paying a lot more money if criminals like shoplifters were kept in jail just because they couldn't make bail. Then he moves on to the sanctuary laws barring local law enforcement from cooperating with federal immigration authorities. This is clearly a stab at people of color. They don't look like you so you don't want them here. Next, he was among several county sheriffs who said they would not enforce provisions of the state's ban on certain high-powered, semiautomatic weapons while also saying he will make our state safe again. How are we supposed to be safe when anyone can own a high-powered, semiautomatic weapon? Next he's on to taking away freedoms. 'Your entire way of life is changing,' he says. Does he mean my freedom to go to a movie or the mall without fear of being mowed down because he doesn't want to enforce the state's gun laws? Or does he mean the freedom of white men to run the show and no one else counts? And then there was the zinger I knew was coming: God. Democrats have taken God out of society. 'I'm a strong believer in God. I believe that's how I get to where I go,' he said. No arrogance there. Democrats, who want equal rights and freedoms for all, safety for all and the ability to live without the fear of being shot? Who want to protect the freedom to love who you want, have a family when you want, live where you want? Democrats took God out of society? Democrats are the party that wants all people treated as human beings. Yes, our entire way of life is changing and under Republican ideology, not for the better. The citizens of this county and this country need to work toward leaving a better world for our children and grandchildren. That picture should include welcoming everyone to our society, banning weapons that eliminate dozens of people in seconds and not electing arrogant men who think God has called them to do exactly the opposite of what God has told everyone to do. Brenda McDowell, Naperville Council candidates need to say how they'll achieve change The several candidates for Naperville City Council all sound alike. They seem to want what they perceive we the voters want. How do we tell the difference? They need to tell us how they plan on achieving these goals. That would be something of substance to help us decide. Dave Parta, Naperville Proposed massive EPA cuts endanger environment, health President Trump and Environmental Protection Agency Administrator Lee Zeldin announced at the recent cabinet meeting that they plan to cut EPA staffing and budget up to 65%. Hundreds of EPA staff have already been terminated. The EPA has a permanent staff of about 15,000. A cut of 65% would reduce the staffing to the level the agency had when it was created in 1970 — about 5,000. That would in effect almost eliminate what EPA is all about, protecting the environment and public health. In an op-ed in The New York Times, three former EPA administrators reported that 'between 1970 and 2019 EPA cut emissions of common air pollutants by 77 percent while private sector jobs grew 223 percent and our gross domestic product grew almost 300 percent.' In addition, thousands of toxic contaminated sites have been cleaned up; water pollution has been greatly reduced, making most streams 'fishable and swimmable' throughout the country; and safe drinking water was achieved throughout the country. Multiple studies have shown that the health benefits of work done by EPA outweigh the costs by more than 30 to 1. Such large spending and staffing cuts as being proposed would eliminate such things as monitoring air and water quality, responding to natural disasters and lead abatement in our water supply, among many other agency functions. Critical to Naperville citizens, there have been truly major actions taken by EPA to protect the waters of the Great Lakes, the source of our drinking water. Naperville has received millions of dollars in grant money from EPA to improve our wastewater treatment plant and to improve our infrastructure for water supply. The draconian and reckless cuts to EPA, an effective agency with a record of huge successes, are unwise and extremely shortsighted. It is up to Congress to ensure the EPA has the resources to do its job. Weakening environmental protections isn't just bad policy, it's a direct threat to public health and future generations. Every citizen should protest these planned cuts by contacting their elected representatives to stop this insanity. Dale Bryson, Naperville McBroom's revisionist history bolsters Gibson's candidacy Regarding Naperville City Councilman Josh McBroom's recent column about city council candidates (Naperville Sun, Feb. 24), anyone who follows the council and park board knows his revisionist history regarding the ethics inquiry against him stems from his violation of Naperville Park Board policy by condemning a board action, undermining the executive director and staff's ability to do their job, and from posting a smiley emoji in response to a Facebook comment body-shaming women. Although park district counsel found that he violated board policy, counsel felt it didn't warrant censure since Mr. McBroom 'learned his lesson.' He apologized to then-park district Executive Director Ray McGury and staff. Why is he now playing the victim? Perhaps remembering this brush with censure, he voted to revoke city council's ethics ordinance. He also caused Naperville to be negatively portrayed nationally by exploiting the difficulties of undocumented people finding shelter. Why? To 'show the hypocrisy of progressives.' Do we want council members who persist in creating controversy and sowing conflict among fellow council members, or are we better served by council and park district members who are committed to working collaboratively and constructively for Naperville residents? A candidate for city council who will do that is Mary Gibson. Her tenure on the park board has been exemplary. She developed and implemented the current three-year strategic plan, stretching the budget while championing inclusive and accessible park and facility designs, and expanding programs and partnerships to reflect the rich diversity of our community. These successes led to her being awarded master board member status from the Illinois Association of Park Districts. Elected unanimously as board president three times by her fellow commissioners, even Mr. McBroom voted for her when he was on the board. She is running a grassroots campaign, unlike Derek McDaniel and Meghna Bansal, who have both received $20,000 from a business PAC. Mary will represent Naperville residents and will bring her effective collaborative style to Naperville City Council. I'm looking forward to it.
