In light of the new final and temporary regulations issued by the IRS and the U.S. Department of Treasury (Reg. 301.7701-2T), partnerships that have been using wholly-owned disregarded entities to “employ” partners (in order to provide access to various tax benefits, including cafeteria plans, parking and transit benefits, and other employee benefit plans) will need to reevaluate their structure and treatment of partner/employee classification. In the new rules, which were published on May 4th, 2016, the IRS moved to halt this practice, providing that where partners of a partnership are separately working for a second (disregarded) subsidiary legal entity, such individuals may not be treated as employees of the subsidiary. Instead, they are considered self-employed individuals for both self-employment and employment benefit plan purposes.
In this blog, Nutter's Executive Compensation and Employee Benefits attorneys will provide updates on key developments and offer practical tips and best practices relating to executive compensation, employee benefits, and corporate governance matters.