In a previous post on TaxProf Blog, I highlighted the Fifth Circuit’s decision in Sirius Solutions, LLLP v. Commissioner in holding that the limited partner, as defined in section 1411(a)(13) (the so-called “limited partner exception”) is “a partner in a limited partnership that has limited liability.” I also noted that the First Circuit is reviewing a similar case in Denham Capital Management LP v. Bessent. The Second Circuit, in Sorobon Capital Partners, LP v. Commissioner, is also reviewing the issue, and the Tax Law Center just submitted an amicus brief in support of the IRS’s position that the term “limited partner” refers to passive investors. The taxpayer’s reply brief is due April 29, at which point the case will be fully briefed. In Denham Capital, the case was argued on February 5, and late last week, the First Circuit asked for supplemental briefing on the application of Keener v. United States to the case. That should be fully briefed on May 4.

In Sirius Solutions, the IRS has been granted a one-month extension to file a petition for rehearing en banc, suggesting that may be the next step for the IRS to take. As a side note, the rationale proffered by the Ellen DelSole, the lead attorney representing the government, for a 30-month stage is revealing in itself:

I am an Assistant Director of the Appellate Section of the Civil Division’s Tax Litigation Branch at the United States Department of Justice, and I am the supervisory attorney assigned to this case. Paul Allulis, the lead attorney responsible for briefing and arguing this case, left the Department of Justice and withdrew from this case in late May 2025. Samuel Jones was reassigned as the lead attorney, but Mr. Jones is currently out of the office for an extended period on parental leave. The Appellate Section has lost over 40% of its attorneys since February 2025, due to retirement, resignation, or temporary transfer. Therefore, at this time, it is not possible for me to assign this case to yet another attorney, who would need to devote time to learning the issues in this case. Accordingly, I am now handling this matter myself, in addition to my managerial duties.