Accounting
Ending Chevron deference has implications for alternative investment firms
With its decision in
While neither of the cases is a tax case, the decision in Loper has broad implications for the tax regulations written and administered by the Department of the Treasury and the IRS as well as the agencies tasked with the regulation of the alternatives industry.
Under Chevron, the examination of regulations was subject to a two-step approach:
1. Determination of whether there is ambiguity in the statutory language, and if there is,
2. Whether the regulatory agency provided a permissible interpretation of the statute.
To the extent both conditions were met, agency interpretation of the statute would receive deference, even if the interpretation was not one that would have been reached by the courts. Over the years there has been a move toward making ambiguity in the statutory language a given, leaving the courts with the determination of the reasonableness of the interpretation by the agencies.
Loper intends to return the task of determining the best (as opposed to permissible) interpretation of the legislation to the courts. The Loper decision has the potential to have widespread implications for tax regulations and administration and provide opportunities for taxpayers, while creating a more uncertain regulatory environment. As it relates to tax provisions relevant for alternative investment firms, two could be specifically impacted.
Code Section 1061 was enacted by the Tax Cuts and Jobs Act of 2017 and is intended to limit carried interest earned by alternative funds managers taxed at preferential long-term rates to amounts earned from the sale of assets held for greater than three years. While simple on the surface, the details of getting the goal of the legislation accomplished are quite complex and were largely left to the regulations to work out.
One of the exceptions provided for in the Code, by Section 1061(c)(4)(A), is the exception for carried interest held by a corporation. On its surface, by the plain reading of the statute, the exception means provisions of Section 1061 should not apply to carried interest held by a corporation. However, Regulation Section 1.1061-3(b)(2)(i) was published to interpret Section 1061(c)(4)(A) and provides that the exception should not apply to a corporation that has made an election to be treated as an S corporation or a passive foreign investment company that has made a Qualified Electing Fund election.
While many commentators have expressed a view that exclusion of certain corporations from the definition of a corporation for purposes of Section 1061 by regulation is an overreach and is contrary to the plain reading of the statute, to date taxpayers have been reluctant to take positions contrary to the regulation or to litigate the matter. As with other positions taken contrary to regulation, taxpayers’ decisions with respect to the application of the Section 1061 regulations may need to be reexamined in light of the Loper decision. Without the same deference awarded to the Treasury’s interpretation of the legislative intent and the statute, the courts may take a broader view of what “corporation” means for purposes of Section 1061. And the government, for its part, may need to take legislative action if its true intent was to exclude certain corporations from the exception provided for in Section 1061.
The other area to watch with particular interest for alternative asset managers is the saga surrounding regulations under IRC Section 1402(a)(13). Broadly, Section 1402(a)(13) exempts income earned by limited partners from self-employment taxes. The exemption has been relied on by alternative asset managers, most commonly structured as limited partnerships, to exempt large portions of their net management fees from self-employment taxes. The struggle to define “limited partner” for purposes of Section 1402 has been undertaken by the Treasury when it issued proposed regulations in 1997 and by courts on numerous occasions, but most recently in the case of Soroban Capital Partners v. Commissioner.
The 1997 proposed regulations tried to provide a functional test to determine whether an individual was a limited partner for the purposes of Section 1402. These regulations were withdrawn after the Senate specifically expressed concerns that the proposed regulations exceed the regulatory authority of the Treasury and indicated that “Congress, not the Department of the Treasury or the Internal Revenue Service, should determine the tax law governing self-employment income for limited partners.”
In the Soroban case, the court has chosen to continue pursuing the functional analysis in determining whether limited partners in asset managers were limited partners for purposes of Section 1402(a)(13), most recently ruling that they were not. The IRS, however, has included regulation under Section 1402(a)(13) on its priority guidance plan for fiscal year 2023-2024. The year ended June 30, 2024, and the plan for 2024-2025 fiscal year has yet to be released, but if the self-employment for limited partners guidance remains on the priority guidance list, and the IRS in fact undertakes the task of providing regulations defining a limited partner, there could be tension between what impact the Loper and Soroban decisions would have on the direction the IRS takes in its rulemaking. It also can cause further confusion for the principals of asset management firms (as well as other service-type businesses operating as limited partnerships) and serve as a reminder to Congress that it indicated that the guidance on the matter should come from them.
While the Loper decision does not provide any clarity or guidance on the complicated and uncertain tax issues facing alternative asset firms, it might provide opportunities for taxpayers to refine and redefine their tax positions in cases where current or prospective tax regulations do not provide the best interpretation of the statute.
Accounting
Developing future leaders in accounting: the new imperative in an AI and automation driven era
As technology continues to automate routine tasks, the role of finance professionals is evolving, demanding deeper capabilities in critical thinking, communication and business acumen.
Many of PrimeGlobal’s North American firms are focused on cultivating these skills in their future leaders. Carla McCall, managing partner at AAFCPAs, Randy Nail, CEO of HoganTaylor, and Grassi managing partner Louis Grassi shared their views with PrimeGlobal CEO Steve Heathcote on the need for future leaders to balance technological proficiency with human-centered skills to thrive.
AI is transforming the sector by streamlining workflows, automating data analysis and reducing manual processes. However, rather than replacing accountants, AI is reshaping their roles, enabling them to focus on higher-value tasks. In the words of Louis Grassi, AI can be seen as a strategic partner, freeing accountants from routine tasks, enabling deeper engagement with clients, more thoughtful analysis, and ultimately better decision-making.
Nail emphasized the importance of embracing AI, warning that those who fail to adapt risk being replaced by professionals who leverage the technology more effectively. HoganTaylor’s “innovation sprint” generated over 100 ideas for AI integration, underscoring why a proactive approach to adopting new technologies is so necessary and valuable.
McCall advocates for an educational shift that equips professionals with the skills to interpret AI-generated insights. She stressed that accounting curricula of the future must evolve to incorporate advanced technology training, ensuring future accountants are well-versed in AI tools and data analytics. Moreover, simulation-based learning is becoming increasingly crucial as traditional methods of education become obsolete in the face of automation.
Talent development and leadership growth
As AI reshapes the profession, firms must rethink how they develop and nurture their future leaders. To attract and retain top talent, firms need to prioritize personalized development plans that align with individual career goals.
HoganTaylor’s approach to talent development integrates technical expertise with leadership and communication training. These initiatives ensure professionals are not only proficient in accounting principles but also equipped to lead teams and navigate complex client interactions.
Nail underscored the growing importance of writing and presentation skills, as AI will handle routine tasks, leaving professionals to focus on higher-level analytical and decision-making responsibilities.
Soft skills are the success skills
While technical proficiency remains vital, future leaders must also cultivate critical thinking, communication and adaptability — skills McCall refers to as the “success skills.” McCall highlights the necessity of business acumen and analytical communication, essential for interpreting data, advising clients and making strategic decisions.
Recognizing teamwork and collaboration remain crucial in the hybrid work environment, McCall explained in detail how AAFCPA fosters collaboration through structured remote engagement strategies such as “intentional office time,” alcove sessions and stand-up meetings. Similarly, HoganTaylor supports remote teams by offering training for career advisors to ensure effective mentorship and engagement in a dispersed workforce.
McCall emphasized why global experience can be valuable in leadership development. Exposure to diverse markets and accounting practices enhances professionals’ adaptability and broadens their perspectives, preparing them for leadership roles in an increasingly interconnected world.
Grassi reminded us that an often-overlooked leadership skill is curiosity. In his view the most effective leaders of tomorrow will be inherently curious — not just about emerging technologies but about clients, market shifts and global trends. Encouraging curiosity and continuous learning within our firms will distinguish the true industry leaders from those simply reacting to change.
A balanced future
What’s clear from speaking to our leaders is PrimeGlobal’s role in fostering trust, community and knowledge sharing. McCall recommended member-driven panels to discuss AI implementation and automation strategies and share best practice. Nail, on the other hand, valued PrimeGlobal’s focus on addressing critical industry issues and encouraged continuous evolution to meet professionals’ changing needs.
The future of leadership in the accountancy profession hinges on a balanced approach, leveraging AI to enhance efficiency while cultivating essential human skills that technology cannot replicate, which Grassi highlights skills including leadership and building client trust.
As McCall and Nail advocate, the next generation of accountants must be agile thinkers, skilled communicators and strategic decision-makers. Firms that invest in these competencies will not only stay competitive but will also shape the future of the industry by developing well-rounded leaders prepared for the challenges ahead.
By investing in both AI capabilities and essential human skills, firms can not only future proof their leadership but also shape a resilient and forward-thinking profession ready to meet the challenges of the future.
As Grassi concluded, while technical skills provide the foundation, leadership in accounting increasingly demands emotional intelligence, empathy and adaptability. AI will change how we perform our work, but human connection, trust and nuanced judgment are irreplaceable. Investing in these human-centric skills today is critical for firms aiming to build resilient leaders of tomorrow. To remain relevant and thrive, professionals must prioritize developing strong success skills that will define the leaders of tomorrow.
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Employment rose by a stronger than expected 228,000 jobs in March, although the unemployment rate inched up one-tenth of a point to 4.2%, the U.S. Bureau of Labor Statistics reported Friday.
Despite the mostly upbeat jobs report, the stock markets nevertheless plunged amid widespread concern over the
The professional and business services sector added 3,000 jobs, but lost 700 jobs in accounting, tax preparation, payroll and bookkeeping services. The biggest job gains occurred in health care, social assistance, transportation and warehousing. Employment also grew in the retail trade industry, in part due to the return of workers from a strike in the food and beverage industry. But federal government employment declined by 4,000 in March, after a loss of 10,000 in February, amid job cuts ordered by the Elon Musk-led Department of Government Efficiency. However, the Internal Revenue Service is
Average hourly earnings rose in March by 9 cents, or 0.3%, to $36.00. Over the past 12 months, average hourly earnings have increased 3.8%.
Trump boasted about the jobs report in an all-caps
Congressional Democrats disagreed. “Unemployment is rising, and this seems to be the last report buoyed by Democrats’ blockbuster job creation,” said House Ways and Means Committee ranking member Richard Neal, D-Massachusetts, in a statement. “Recession odds are getting higher by the day as Trump plagues our economy with the largest tax hike in decades. Wages would need to skyrocket for the people to weather Trump’s higher prices and needless uncertainty. This report doesn’t yet reflect the dangerous firings of thousands of public servants or the layoffs that started hours after he announced the Trump Tariff Tax. This administration is ruling through the lens of billionaires — sacrificing workers’ paychecks, destroying trillions of dollars in savings and retirement wealth, readying
Economists are predicting fallout from the historic tariff increases announced by Trump. “We now have more clarity on the trade policy following ‘Liberation Day’ on April 2,” wrote Appcast chief economist Andrew Flowers. “The average effective tariff rate is now above the level set by the Smoot-Hawley tariffs in 1930. This is one of the largest changes to economic and global trade policy since President Nixon’s decision to move away from the gold standard more than 50 years ago. The impending fallout from retaliatory tariffs from our trading partners across Europe and Asia will radically shift employment growth across manufacturing, retail and construction as consumer goods prices rise.”
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