Powers of attorney for partnerships

Editor: Mary Van Leuven, J.D., LL.M.

Tax practitioners need a valid Form 2848, Power of Attorney and Declaration of Representative, to practice before the IRS on behalf of a taxpayer. Form 2848 allows (1) IRS personnel to disclose taxpayer information to the listed representatives and (2) listed representatives to act on behalf of the taxpayer before the IRS.

When the taxpayer is a partnership, who should sign Form 2848 for the partnership? Surprisingly, this can be a fraught question. This item examines two sets of rules that govern who can sign Form 2848 for a partnership: the conference and practice requirements, set forth in Regs. Secs. 601.501 through 601.509 (and collected as IRS Publication 216, Conference and Practice Requirements), and the centralized partnership audit regime established by the Bipartisan Budget Act of 2015 (BBA), P.L. 114–74. A third set of rules under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), P.L. 97–248, which was supplanted by the BBA, is referenced when applicable but is not discussed in detail.

Conference and practice requirements

A Form 2848 for an extant partnership “must be executed by all partners, or if executed in the name of the partnership, by the partner or partners duly authorized to act for the partnership, who must certify that he/she has such authority” (Regs. Sec. 601.503(c)(5)). The regulations do not specify how a partner must certify. While line 7 of Form 2848 provides that a signature by an individual other than the taxpayer constitutes certification that that individual has the legal authority to sign the form, the instructions for Form 2848 (revised September 2021) further require that, if one partner is acting on behalf of the partnership, a copy of that partner’s authorization (such as the relevant provision in the operating agreement) must be included with the Form 2848.

As most tax practitioners realize, the conference and practice requirements and instructions for Form 2848 oversimplify partnership operations in the 21st century. Partnerships can often be part of tiered partnership structures. Determining who signs Form 2848 in these situations can be challenging. For example, in Chief Counsel Advice memorandum (CCA) 201522005, the IRS considered who should sign a Form 2848 on behalf of a non–TEFRA limited liability company (LLC) with two members, where one member, the member–manager (Member 1), was a subsidiary corporation included on the consolidated return of a parent corporation.

The IRS recognized that, ordinarily, an officer of Member 1 would sign Form 2848. However, because the parent corporation was the “sole agent [with limited exceptions] for each member of the [consolidated] group for all matters related to income tax liability for the consolidated return year,” the IRS determined that an officer of the parent corporation must sign Form 2848 on behalf of a non–TEFRA LLC. The CCA recommended that the Form 2848 should be signed in the following format: “[John Doe], [Corporate Office Title] Parent (EIN) [employer identification number], as the common parent and agent for Parent and Subsidiaries, including Member 1, as Member Manager of LLC Partnership.”

Even if the proper signatory for a partnership is identified as a partner under the regulations, securing the signature of that individual may not be appropriate in all cases. For example, an LLC that is not managed by its members may delegate authority to bind the entity to named officers (either in the operating agreement or pursuant to a separate legal document). These officers typically handle the partnership’s day–to–day operations. Recognizing this reality, the IRS has considered nonpartners signing Form 2848 in a few instances:

• In Field Service Advisory memorandum (FSA) 2236 (Dec. 15, 1997), the IRS considered who could sign a Maryland LLC’s Form 2848. The LLC’s operating agreements provided that (1) only a board of directors controlled the affairs of the LLC and (2) the board of directors could appoint officers to manage the LLC’s day-to-day business. The IRS concluded that the current members of the board of directors and the current officers of the LLC could sign Form 2848 because both groups could act for the company.
• In CCA 201316018 (April 19, 2013), the IRS acknowledged that, because an LLC may be managed by a nonmember, “the requirements in the Conference and Practice Requirements do not match up with state law provisions as to who has the authority to act for an LLC.” While acknowledging that it had not researched the relevant state law, the IRS relied on the taxpayer’s LLC agreement to conclude that the taxpayer’s tax matters partner (TMP, a TEFRA concept) could sign Form 2848 because the TMP had the general authority to bind the LLC as an LLC member and manager. By contrast, the IRS concluded that the CFO of the taxpayer could not sign Form 2848 because the taxpayer’s LLC agreement did not appear to give the CFO “authority to enter into agreements or other written instruments on behalf of the LLC.”
• Similarly, Generic Legal Advice Memorandum AM 2015-004 (April 3, 2015), which primarily addressed disclosure issues in a TEFRA examination, discussed the application of Regs. Sec. 601.503(c). In particular, the IRS stated the following in a footnote:

The operating agreement of the partners or members of the entity, as approved under state or foreign law where the entity was formed, will generally dictate who is authorized to act for (i.e. manage) the entity itself and the extent of any authorization. A manager may operate under many potential titles such as president, general partner, tax director, chief executive office [sic], board of directors, etc. However, it is the operating agreement that ultimately dictates whether the pertinent titled position has authorization to act for the entity.

• Legal Advice Issued by a Field Attorney (LAFA) 20153901F (released Sept. 25, 2015), which incorporated AM 2015-004 by reference, discussed the Delaware law relevant in determining who has the authority to manage an LLC.

While the above guidance is instructive, tax practitioners may struggle to explain these concepts to an IRS Practitioner Priority Service line customer–service representative when presenting a Form 2848 to the customer–service representative. Accordingly, to facilitate acceptance of a partnership’s Form 2848, the partnership might consider drafting its operating agreements to specify (1) the titles of the individuals delegated authority to bind the partnership and (2) signing Form 2848 as one of the delegated powers. Tax practitioners should have this documentation in hand when preparing Forms 2848 for partnerships.

In the case of a dissolved partnership, Regs. Sec. 601.503(c)(6) generally requires all former partners to sign Form 2848 (except in circumstances when a former partner is deceased). While the formality of this provision may be difficult to overcome, a partnership may also consider drafting its operating agreements to address this situation as well.

Centralized partnership audit regime

For partnership tax years beginning after Dec. 31, 2017, Sec. 6223 requires a partnership subject to the centralized partnership audit regime under the BBA (a BBA partnership) to designate “a partner (or other person) with a substantial presence in the United States as the partnership representative who shall have the sole authority to act on behalf of the partnership” with respect to an examination of the BBA partnership. Regs. Sec. 301.6223–2(d)(1) allows a partnership representative to “authorize a person to represent the partnership representative, in the partnership representative’s capacity as the partnership representative, before the IRS under a valid power of attorney” in an examination of the BBA partnership.

For centralized partnership audit regime matters (i.e., a BBA partnership examination), the instructions for Form 2848 require the partnership representative (or, if the partnership representative is an entity, the designated individual) to sign Form 2848. If the partnership representative is signing the Form 2848, they must use the title “Partnership Representative.” If a designated individual is signing Form 2848, they must use the title “Designated Individual of [name of Partnership Representative].” These rules also apply to an examination of a dissolved BBA partnership.

In sum, a partnership representative only signs Form 2848 for BBA partnership examinations. By contrast, a “partner” (as contemplated under the conference and practice requirements) signs Form 2848 for all other matters (such as obtaining IRS transcripts and discussing partnership return information with IRS Practitioner Priority Service line representatives). One cannot help but wonder whether a partnership representative could be allowed to sign a Form 2848 for all matters. The disclosure considerations in a BBA partnership examination would appear to be comparable to matters outside the BBA partnership examination context. Moreover, a partnership representative arguably makes decisions with greater potential economic consequences than those occurring during calls to the IRS Practitioner Priority Service line. Nevertheless, until these two regimes are reconciled, tax practitioners should be aware of the nuances of preparing Forms 2848 for partnerships to avoid unnecessary delays when contacting IRS personnel.

Editor Notes

Mary Van Leuven, J.D., LL.M., is a director, Washington National Tax, at KPMG LLP in Washington, D.C.

For additional information about these items, contact Van Leuven at mvanleuven@kpmg.com.

Contributors are members of or associated with KPMG LLP.

The information in these articles is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of Section 10.37(a)(2) of Treasury Department Circular 230. The information contained in these articles is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. The articles represent the views of the authors only and do not necessarily represent the views or professional advice of KPMG LLP.