Nutter lawyers Elizabeth Norman and Crescent Moran Chasteen recently contributed an article to Tax Notes that reviewed the legal requirements, common practices, and resulting tax consequences of, or relating to, profits interests. In the article, “When Reality Collides With Legality: Profits Interests in Practice,” Elizabeth and Crescent discussed best practices that companies should consider when granting profits interests prospectively. Please contact the authors for more information if you’d like to learn more about this topic.
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.