A recent response by the Internal Revenue Service Chief Counsel (CCA) to an inquiry from one of its field office agents addressed the question of whether management fees earned by an investment manager organized as a limited liability company (LLC) and allocated to its members—all individuals—were subject to self-employment tax. (The CCA response is not a formal ruling and is not reviewed by the Treasury Department before its issuance, but does indicate the current thinking of the IRS National Office.) The CCA concluded that the individual members of the LLC could not exclude their share of the LLC’s income from self-employment tax because they are actively participating in the LLC’s provision of management services to the investment funds paying the applicable management fees. By statute (Internal Revenue Code Section 1402(a)(13)), a “limited partner’s” share of partnership income generally is not subject to self-employment tax. The CCA determined that LLC members are not “limited partners” under local law and that the individuals in question were not receiving allocable shares of the LLC’s management income in a passive capacity. The CCA did not address whether management fee income earned by a limited partnership and allocated to its limited partners is subject to self-employment tax. It is possible that the IRS may issue future guidance in this area, and is therefore important to make sure that individuals who are limited partners in investment managers formed as limited partnerships should be careful not to perform services for the partnership in their capacity as partners in the partnership.