The IRS in TD 9839 issued the final regulations outlining the rules applicable to the partnership representative under the Centralized Partnership Audit Regime (CPAR).  These regulations, found at Reg. §§301.6223-1 and 301.6223-2, outline the qualifications for a representative, how the representative resigns or is removed and the powers of the representative.

The IRS also finalized the regulations on the election to apply the CPAR rules to examinations of years beginning after the enactment of the Bipartisan Budget Act of 2015 but before January 1, 2018.  Those regulations, found at Reg. §301.9100-22, were adopted in final form without change and the temporary regulations were removed.

Partnership Representative Final Regulations

Proposed regulations had been issued in June of 2017 for the various items impacted by CPAR.  Prior to issuing these final regulations the IRS had finalized the regulations on opting out of CPAR by eligible partnerships.  The regulations dealing with the new and very powerful partnership representative are now the next set out, likely due to fact that partnerships will need to make an appointment of this person on partnership returns for any year beginning after January 1, 2018.

Most of the remaining regulations that have not been finalized primarily impact the actual examinations to be conducted under these rules.  The IRS may be thinking that those are not crucial to finalize before year end, since no CPAR exams are likely to be conducted for some time.  Thus, those final regulations might appear after the IRS completes the backlog of Tax Cuts and Jobs Act guidance that will be needed to file tax returns in the near future.

Major Changes in the Final Regulations

The IRS made certain changes in the partnership representative regulations based on the comments received.  Major changes include:

• Clarification that a partnership can designate itself as the partnership representative and that a disregarded entity can also serve in that role;
• Removal of the provisions that allowed the IRS to remove a representative who lacked capacity to act;
• Moving up the date when a partnership can revoke the partnership representative’s status to the date when the partnership receives a notice of administrative (NAP) proceeding for the year in question;
• Remove the ability of a resigning partnership representative to appoint his/her own successor or to file an AAR concurrently with resigning as representative;
• Any authorized partner, not just a general partner or LLC manager, can sign a revocation of a partnership representative;
• A revocation or resignation is to be effective when it is received by the IRS, rather than 30 days after receipt by the IRS as was outlined in the proposed regulations; and
• Providing that, in the cases where the IRS appoints a partnership representative, an IRS employee, agent or contractor will not be appointed unless the individual is a partner in the partnership subject to an administrative proceeding.

Final Regulations §§301.6223-1 and 301.6223-2

Under CPAR, the partnership representative fills a role that is similar to that of the TMP under the TEFRA regime—but there are significant differences.

Definition of the Partnership Representative

Under Reg. §301.6223-1(a), the basic provisions governing the partnership representative are outlined. Every partnership subject to CPAR must designate a partnership representative and the partnership can only have a single partnership representative at a time.

Once appointed, the partnership representative will remain in that position until:

·         a valid resignation takes place under the regulations;

·         a valid revocation takes place under the regulations; or

·         the IRS makes a determination that the designation is no longer in effect. [1]

The representative must update his contact information as required by forms, instructions, or other guidance the IRS may issue.

Eligibility to Serve as Partnership Representative

Any person or entity (not just a partner) who meets the requirements may serve as a partnership representative. [2] The final regulations clarified that the partnership can appoint itself as its own partnership representative. [3]

To serve as a partnership representative, the individual must have a substantial presence in the United States. A substantial presence exists if:

(i) The person makes themselves available to meet in person with the IRS in the United States at a reasonable time and place as determined by the IRS in accordance with §301.7605-1; and

(ii) The person has a United States taxpayer identification number, a street address that is in the United States and a telephone number with a United States area code. [4]

In addition to an individual, the partnership can designate an entity to be its partnership representative. In this case, there must be appointed a “designated individual.” The designated individual must be an individual who meets the requirements to have been the partnership representative. [5]

Although the proposed regulations contained a provision that treated the individual as not eligible to be a partnership representative if the representative lacked the capacity to act, those provisions were removed from the final regulations.

Example 1, Reg. 301.6223-1(b)(4)

Partnership designates PR as its partnership representative for its 2018 tax year on its timely filed 2018 partnership return. The IRS initiates an administrative proceeding with respect to Partnership’s 2018 tax year. PR has a United States taxpayer identification number, a United States street address, and a phone number with a United States area code. The IRS contacts PR and requests an in-person meeting with respect to the administrative proceeding. PR works with the IRS and agrees to meet. PR has substantial presence in the United States because she meets all the requirements under paragraph (b)(2) of this section.

Example 2, Reg. 301.6223-1(b)(4)

The facts are the same as in Example 1 of this paragraph (b)(4), except that PR is an entity and Partnership appointed DI, a designated individual to act on behalf of PR for its 2018 tax year on its timely filed 2018 partnership return. DI has a United States taxpayer identification number and a phone number with a United States area code. However, the address provided for DI is not a United States address. Accordingly, PR is not an eligible partnership representative because PR is an entity and DI does not satisfy the requirements of paragraph (b)(3)(i) of this section. Although DI does not have substantial presence in the United States under paragraph (b)(2) of this section and therefore PR is not an eligible partnership representative, until there is a resignation or revocation under paragraph (d) or (e) of this section or until the IRS determines the partnership representative designation is no longer in effect under paragraph (f) of this section, the designation of PR as the partnership representative remains in effect in accordance with paragraph (a) of this section, and Partnership and all its partners are bound by the actions of PR as the partnership representative.

Example 3, Reg. 301.6223-1(b)(4)

The facts are the same as in Example 1 of this paragraph (b)(4), except PR works in a foreign country and spends the majority of her time there. Unless PR otherwise fails to meet one of the requirements under paragraph (b)(2) of this section, PR has substantial presence in the United States. However, even if PR fails to meet one of the requirements under paragraph (b)(2) of this section, until there is a resignation or revocation under paragraph (d) or (e) of this section or until the IRS determines the partnership representative designation is no longer in effect under paragraph (f) of this section, the designation of PR as the partnership representative remains in effect in accordance with paragraph (a) of this section, and Partnership and all its partners are bound by the actions of PR as the partnership representative.

Designation of the Partnership Representative

A separate designation must be made each year for the partnership representative and the designation is only effective for that year. [6] The actual designation process is defined at Reg. §301.6223-1(c)(2).

Except in the case of a designation of a partnership representative (and the appointment of the designated individual, if applicable) after an event described in paragraph (d) of this section (regarding resignation), paragraph (e) of this section (regarding revocation by the partnership), or paragraph (f) of this section (regarding designation made by the IRS), or except as prescribed in forms, instructions, and other guidance, designation of a partnership representative (and the appointment of the designated individual, if applicable) must be made on the partnership return for the partnership taxable year to which the designation relates and must include all of the information required by forms, instructions, and other guidance, including information about the designated individual if paragraph (b)(3) of this section applies. The designation of the partnership representative (and the appointment of the designated individual, if applicable) is effective on the date that the partnership return is filed.

The IRS provides the following example of designating a partnership representative in Proposed Reg. Section 301.6223-1(c)(3):

Example, Reg. §301.6223-1(c)(3)

Partnership properly designates PR1 as its partnership representative for taxable year 2018 on its 2018 partnership return. Partnership designates PR2 as its partnership representative for taxable year 2021 on its 2021 partnership return. In 2022, the IRS mails Partnership a notice of administrative proceeding under section 6231(a)(1) with respect to Partnership’s 2018 taxable year. PR1 is the partnership representative for the 2018 partnership taxable year, notwithstanding the designation of PR2 as partnership representative for the 2021 partnership taxable year.

Resignation of the Partnership Representative

A partnership representative may resign his position by following the provisions in Reg. §301.6223-1(d) to notify the partnership and the IRS. The notification to the IRS is to be made in accordance with forms and instructions to be provided by the IRS. Unlike what the IRS had provided in the proposed regulations, the final regulations bar the partnership representative from designating a successor partnership representative. The resignation takes effect on the date the IRS receives the notice. [7]   In the proposed regulations, the resignation would not have taken effect for 30 days.

As of the date the IRS receives the notice (referred to as the effective date):

(i) The resigning partnership representative (and designated individual, if applicable) may not take any action on behalf of the partnership with respect to the partnership taxable year affected by the resignation;

(ii) The partnership representative designation is no longer in effect with respect to the partnership taxable year affected by the resignation;

(iii) In the case of a resigning entity partnership representative, the appointment of the designated individual is no longer in effect with respect to the partnership taxable year affected by the resignation; and

(iv) In the case of a resigning designated individual, the designation of the entity partnership representative is no longer in effect with respect to the partnership taxable year affected by the resignation. [8]

The IRS will notify the partnership within 30 days of the receipt of a resignation by the partnership representative.

The IRS allows the resignation to coincide with the filing of an Administrative Adjustment Request (AAR), upon receipt of a notice of a notice of administrative proceeding for the CPAR audit, or at other times the IRS may designate. [9]

Revocation of a Partnership Representative

The partnership itself can remove a partnership representative by following the procedures found in Reg. §301.6223-1(e). The partnership must submit the revocation as provided for by the IRS in forms and instructions and must designate a successor partnership representative at the same time or, if the partnership revokes the designated individual, must designate a new designated individual. The revocation is effective upon IRS receipt of the notice. [10]

Within 30 days of receipt of the revocation, the IRS will notify the partnership and the representative or designated individual whose status is being revoked, and the newly designated partnership representative. [11]

As of the effective date of the notification:

(i) The revoked partnership representative (and designated individual, if applicable) may not take any action on behalf of the partnership with respect to the partnership taxable year affected by the revocation;

(ii) The designation of the revoked partnership representative is no longer in effect, and the successor partnership representative designation (and designated individual appointment, if applicable) is in effect with respect to the partnership taxable year affected by the revocation;

(iii) In the case of a revoked entity partnership representative, the appointment of the designated individual is no longer in effect with respect to the partnership taxable year affected by the revocation; and

(iv) In the case of a revoked designated individual where the designation of the entity partnership representative has not been revoked, the revoked designated individual may not take any action on behalf of the partnership with respect to the partnership taxable year affected by the revocation, the appointment of the revoked designated individual is no longer in effect, and the appointment of the successor designated individual is in effect. [12]

More detailed rules on timing are provided for revocation than for resignation, but again the regulations provide for revocation either following the issuance of a selection for exam, a notice of administrative proceeding (NAP) or with an AAR. The regulations also provide that the IRS may provide other times during which the agency will allow a revocation to be made. [13]

If the partnership is submitting an AAR, the designation may be revoked at that time. However, an AAR may not be submitted solely to revoke the designation of a partnership representative (Proposed Reg. § 301.6223-1(e)(2)(ii)).

The IRS appears to be attempting to reduce the correspondence the agency will receive about either resignations or revocations by limiting the times when the actions may be taken. For partnerships, this creates some problems, since the partnership would likely become aware the representative no longer is willing to serve or the partnership may not wish the representative to serve at a time other than one when the action can be taken. The IRS received comments to this effect, but determined that since the partnership representative is not needed until either an exam is underway or an AAR is filed, allowing for partnerships to file changes before either event would result in having to process a number of change requests for representatives that are never needed.

The partnership, representative, or both will need to ensure the proper actions are taken when the opportunity first arises to make the submission.

Revocation has one additional problem—who can sign the revocation on behalf of the partnership? Under the general rules applicable to CPAR exams, only the partnership representative may act on behalf of the partnership, but presumably a partnership is revoking the status because the partnership representative is not willing to resign. Reg. Section 301.6223-1(e)(3) provides the rules for who may sign a designation.

The revocation must be signed by “a person who was a partner at any time during the partnership taxable year to which the revocation relates or as provided in forms, instructions, and other guidance prescribed by the IRS.” [14]

A valid revocation must contain each of the following elements:

(i) A certification under penalties of perjury that the person signing the notification is a partner described in paragraph (e)(4) of this section authorized by the partnership to revoke the designation of the partnership representative (or appointment of the designated individual, if applicable).

(ii) A statement that the person signing the notification is revoking the designation of the partnership representative (or appointment of the designated individual, if applicable);

(iii) A designation of a successor partnership representative (and appointment of a designated individual, if applicable) in accordance with this section and forms, instructions, and other guidance prescribed by the IRS; and

(iv) In the case of a revocation of an appointment of a designated individual, appointment of a successor designated individual in accordance with this section and forms, instructions, and other guidance prescribed by the IRS. [15]

If the IRS receives more than one revocation of designation of a partnership representative within a 90-day period, the IRS may determine that no designation is in effect. [16] Not surprisingly, Reg. Section 301.6223-1(f)(4) provides that in a case of multiple revocations, the IRS will appoint the representative and will not give the partnership the right to appoint one. As well, the partnership also cannot revoke an IRS designation without permission, so the partnership will be stuck with the IRS choice.

The IRS provides two examples of the revocation process in Reg. Section 301.6223-1(d)(8), both of which deal with invalid revocations.

Example 1, Reg. 301.6223-1(d)(8)

Partnership properly designates PR, an individual, as partnership representative for its 2018 taxable year on its timely filed 2018 partnership return. In 2020, Partnership mails written notification to the IRS to revoke designation of PR as its partnership representative for Partnership’s 2018 taxable year. The revocation is not made in connection with an AAR for Partnership’s 2018 taxable year, and the IRS has not mailed Partnership a notice of selection for examination or a NAP under section 6231(a)(1) with respect to Partnership’s 2018 taxable year. Because the revocation was not made when permitted under paragraph (e)(2) of this section, the revocation is not effective and B remains the partnership representative for Partnership’s 2018 taxable year unless and until B’s status as partnership representative is properly revoked under paragraph (e) of this section or terminated in accordance with paragraph (d) (regarding resignation) or (f) (regarding IRS designation) of this section.

Example 2, Reg. 301.6223-1(d)(8)

During an administrative proceeding with respect to Partnership’s 2018 taxable year, Partnership provides the IRS with written notification to revoke its designation of PR, an individual, as its partnership representative for the 2018 taxable year. The written notification does not include a designation of a new partnership representative for Partnership’s 2018 taxable year. Because the revocation does not include a designation of a new partnership representative as required under paragraph (e)(1) of this section, the revocation is not effective and PR remains the partnership representative for Partnership’s 2018 taxable year unless and until B’s status as partnership representative is properly revoked under paragraph (e) of this section or terminated in accordance with paragraph (d) (regarding resignation) or (f) (regarding IRS designation) of this section.

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Designation of the Partnership Representative by the IRS

The law provides that if no partnership representative is properly designated by the partnership, the IRS is given the power to select the partnership representative (IRC §6223(a)).

The IRS must first determine that no partnership representative designation is in effect for the year. If this is what the IRS’s determines:

the IRS will notify the partnership that a partnership representative designation is not in effect. The IRS will also notify the most recent partnership representative for the partnership taxable year, except as described in paragraph (f)(2)(iii) [17] of this section. In the case of an entity partnership representative, the notification will be sent to the entity partnership representative, to the attention of the designated individual. The determination that a designation is not in effect is effective on the date the IRS mails the notification. [18]

Except in a case where the IRS has received multiple revocations within a 90-day period as described earlier, the IRS gives the partnership 30 days to designate a successor before the agency does so. If the partnership fails to make the designation in accordance with the conditions provided in Reg. §301.6223-1(f)(3), the IRS will appoint a representative in accordance with the guidance found in Reg. §301.6223-1(f)(5) [19]

The partnership that has been notified of the opportunity to designate a partnership representative may do so during the 30 day period by complying with the following conditions:

Designation of a partnership representative (and appointment of a designated individual, if applicable) by the partnership during the 30-day period described in paragraph (f)(1) of this section must be made in accordance with forms, instructions, and other guidance prescribed by the IRS. If the partnership fails to provide all information required by forms, instructions, and other guidance, the partnership will have failed to make a designation (and appointment, if applicable). If the partnership does not fully comply with the requirement of this paragraph (f)(3) within the 30-day period described in paragraph (f)(1) of this section, the IRS will designate a partnership representative (and appoint a designated individual, if applicable). [20]

Reg. §301.6223-1(f)(2) provides a list of situations in which the IRS may, but is not required to, determine that no partnership representative designation is in effect. 

• The partnership representative or the designated individual does not have substantial presence in the United States (as described in Reg. §301.6223-1(b)(2));
• The partnership failed to appoint a designated individual if entity is appointed as the designated representative (as described in Reg. §301.6223-1(b)(3));
• The partnership failed to make a valid designation of a designated representative;
• The partnership representative or designated individual resigns;
• The partnership has made multiple within 90 days; or
• The partnership representative designation is no longer in effect as described in other published guidance.

The final regulations added the provision that the IRS is not required to find that no designation is in effect.  That gives the IRS the discretion to continue to work with the representative the partnership designated even if it is later discovered that the representative did not meet the requirements to be a partnership representative, as well to waive the issue that multiple designations were made during a 90 day period.

As well, the regulations make clear the IRS is not required to search for the factors that allow the agency to determine no partnership representative designation is in effect, nor does the fact that the IRS is aware of the facts require the agency to determine that no designation is in effect. [21]

Thus, a disgruntled partner will apparently not be able to challenge the results of the partnership examination by arguing that the IRS failed to notice that there was no valid partnership representative, at least absent a showing that the IRS abused its discretion by failing to act to force the designation of a new representative.

If the partnership has failed to designate a representative during the 30 day period, or the IRS has declared there is no partnership representative due to multiple revocations within 30 days, the IRS will designate a partnership representative.

If the IRS designates a partnership representative, the proposed regulations describe the notification process as follows:

The IRS designates a partnership representative under this paragraph (f)(5) by notifying the partnership of the name, address, and telephone number of the new partnership representative. If the IRS designates an entity partnership representative, the IRS will also appoint a designated individual to act on behalf of the entity partnership representative. The designation of a partnership representative (and appointment of a designated individual, if applicable) by the IRS is effective on the date on which the IRS mails the notification of the designation (and appointment, if applicable) to the partnership. The IRS will also mail a copy of the notification of the designation (and appointment, if applicable) to the new partnership representative (through the new designated individual, if applicable) that has been designated (and appointed, if applicable) by the IRS under this section. [22]

Reg. Section 301.6223-1(f)(5)(ii) provides information on how the IRS is to go about designating a partnership representative in this case. The proposed regulation notes that the IRS may appoint any person to be the partnership representative.

The regulation notes that the key guiding principal for the IRS in selecting a partnership representative is the following:

Although the IRS may designate any person to be the partnership representative, a principal consideration in determining whom to designate as a partnership representative is whether there is a reviewed year partner that is eligible to serve as the partnership representative in accordance with paragraph (b)(1) of this section or whether there is a partner at the time the partnership representative designation is made that is eligible to serve as the partnership representative. [23]

The regulation provides other factors that will ordinarily be considered by the IRS in determining the new partnership representative the IRS will appoint:

• The views of the partners having a majority interest in the partnership regarding the designation;
• The general knowledge of the person in tax matters and the administrative operation of the partnership;
• The person’s access to the books and records of the partnership;
• Whether the person is a United States person (within the meaning of IRC §7701(a)(30)); and
• The profits interest of the partner in the case of a partner. [24]

The final regulations addressed a concern some had expressed—since the IRS has the power under the law to appoint anyone as a partnership representative, would the IRS use that power to appoint an IRS employee as representative, especially in cases of the multiple revocation rule where the partnership would need IRS permission to change the representative.

The IRS provided that an IRS employee, agent or contractor will not be appointed as the partnership representative “unless that employee, agent, or contractor was a reviewed year partner or is currently a partner in the partnership.” [25]

The IRS provides four examples of situations involving the IRS designation of a representative at Reg. §301.6223-1(f)(6).

Example 1, Reg. §301.6223-1(f)(6)

The IRS determines that Partnership has designated a partnership representative that does not have substantial presence in the United States as defined in paragraph (b)(2) of this section. The IRS may, but is not required to, determine that the designation is not in effect and designate a new partnership representative after following the procedures in this paragraph (f).

Example 2, Reg. §301.6223-1(f)(6)

Partnership designates as its partnership representative a corporation but fails to appoint a designated individual to act on behalf of the corporation as required under paragraph (b)(3) of this section. The IRS may, but is not required to, determine that the partnership representative designation is not in effect and may designate a new partnership representative after following the procedures in this paragraph (f).

Example 3, Reg. §301.6223-1(f)(6)

The partnership representative resigns pursuant to paragraph (d) of this section. The IRS mails Partnership a notification informing Partnership that no designation is in effect and that the IRS plans to designate a new partnership representative. Partnership fails to respond within 30 days of the date the IRS mails the notification. The IRS must designate a partnership representative pursuant to this paragraph (f).

Example 4, Reg. §301.6223-1(f)(6)

Partnership designated on its partnership return a partnership representative, PR1. After Partnership received a NAP, Partnership submits to the IRS the form described in paragraph (e)(4) of this section requesting the revocation of PR1’s designation as partnership representative and designating PR2 as the partnership representative. Sixty days later, Partnership signs and submits a form described in paragraph (e)(4) of this section requesting the revocation of PR2’s designation as partnership representative and designating PR3 as the partnership representative. The IRS accepts the revocation of PR2 and designation of PR3 as valid and effective upon receipt pursuant to paragraph (e)(3) of this section. However, because PR2’s revocation was within 90 days of PR1’s revocation, the IRS may determine within 90 days of IRS’s receipt of PR2’s revocation, pursuant to paragraphs (e)(7) and (f)(2) of this section, that there is no designation in effect due to multiple revocations. The IRS may then designate a new partnership representative pursuant to this paragraph (f) without allowing Partnership an opportunity to designate a partnership representative within the 30-day period described in paragraph (f)(1) of this section.

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Binding Effect of Actions of Partnership Representative

Reg. Section 301.6223-2 outlines the powers of the partnership representative. The CPAR exam regime gives the partnership representative complete powers to represent the partnership in most circumstances, and the actions of the partnership representative are binding on the partnership and the partners for any matter covered by the CPAR exam regime (Proposed Reg. § 301.6223-2(a)).

Proposed Reg. Section 301.6223-2(a) provides:

The actions of the partnership and the partnership representative taken under subchapter C of chapter 63 of the Internal Revenue Code (subchapter C of chapter 63) and any final decision in a proceeding brought under subchapter C of chapter 63 with respect to the partnership bind the partnership, all partners of the partnership (including partnership-partners as defined in §301.6241-1(a)(7) that have a valid election under section 6221(b) in effect for any taxable year that ends with or within the taxable year of the partnership), and any other person whose tax liability is determined in whole or in part by taking into account directly or indirectly adjustments determined under subchapter C of chapter 63 (for example, indirect partners as defined in §301.6241-1(a)(4)). For instance, a settlement agreement entered into by the partnership representative on behalf of the partnership, a notice of final partnership adjustment (FPA) with respect to the partnership that is not contested by the partnership, or the final decision of a court with respect to the partnership if the FPA is contested, binds all persons described in the preceding sentence.

Even if the representative’s designated is terminated, any actions taken before the termination date remain binding on the partnership. The regulation gives, as an example, a representative who consented to extend the statute of limitations for assessments pursuant to IRC Section 6235(b). Even if the partners, perhaps upset over that extension, were to move to terminate the partnership representative’s status and appoint a new one, the extension would remain valid. [26]

If the IRS, after issuing a notice of administrative proceeding (NAP) to the partnership, withdraws the NAP prior to commencing a CPAR examination, the regulations provide:

If the IRS issues a notice of administrative proceeding (NAP) under section 6231(a)(1) and subsequently withdraws such NAP pursuant to §301.6231-1(f), any actions taken by a partnership representative (or successor partnership representative after a change to the partnership representative that occurred after the issuance of the NAP and before the NAP was withdrawn) are binding as described in paragraph (a) of this section even though the NAP has been withdrawn and has no effect for purposes of subchapter C of chapter 63. [27]

The regulation notes that the power to act on behalf of the partnership rests exclusively with the partnership representative. If an entity is appointed as the partnership representative, the power to act effectively resides with the designated individual. The regulations provide specifically:

Except for a partner that is the partnership representative or the designated individual, no partner, or any other person, may participate in an administrative proceeding without the permission of the IRS. The failure of the partnership representative to follow any state law, partnership agreement, or other document or agreement has no effect on the authority of the partnership representative or the designated individual as described in section 6223, §301.6223-1, and this section. [28]

That last sentence is important for all parties to understand—you can’t directly limit the authority of the partnership representative via the partnership agreement. At best, it would appear you could only hold the representative liable for taking actions with regard to the exam that go beyond what the partners had agreed the representative could do.

However, the partnership representative can still appoint a third party (such as a CPA or attorney) to represent the partnership in the examination via properly executed power of attorney. [29]

If the partnership is required to appoint a designated individual (that is, it appointed an entity as the partnership representative), then that individual is the party with the power to bind the partnerhip. [30]

The IRS provides the following five examples of the actions of a partnership representative:

Example 1, Reg. 301.6223-2(e)

Partnership designates a partnership representative, PR, on its timely filed partnership return for 2020. PR is a partner in Partnership. The partnership agreement for Partnership includes a clause that requires PR to consult with an identified management group of partners in Partnership before taking any action with respect to an administrative proceeding before the IRS. The IRS initiates an administrative proceeding with respect to Partnership’s 2020 taxable year. During the course of the administrative proceeding, PR consents to an extension of the period of limitations on making adjustments under section 6235(b) allowing additional time for the IRS to mail an FPA. PR failed to consult with the management group of partners prior to agreeing to this extension of time. PR’s consent provided to the IRS to extend the time period is valid and binding on Partnership because, pursuant to section 6223, PR, as the designated partnership representative, has authority to bind Partnership and all its partners.

Example 2, Reg. 301.6223-2(e)

Partnership designates a partnership representative, PR, on its timely filed partnership return for 2020. PR is not a partner in Partnership. During an administrative proceeding with respect to Partnership’s 2020 taxable year, PR agrees to certain partnership adjustments and within 45 days after the issuance of the FPA elects the alternative to payment of the imputed underpayment under section 6226. Certain partners in Partnership challenge the actions taken by PR during the administrative proceeding and the validity of the section 6226 statements furnished to those partners, alleging that PR was never authorized to act on behalf of Partnership under state law or the partnership agreement. Because PR was designated by Partnership as the partnership representative under section 6223 and this section, PR was authorized to act on behalf of Partnership for all purposes under subchapter C of chapter 63, and the IRS may rely on that designation as conclusive evidence of PR’s authority to act on behalf of Partnership.

Example 3, Reg. 301.6223-2(e)

Partnership designates an entity partnership representative, EPR, and appoints an individual, A, as the designated individual on its timely filed partnership return for 2020. EPR is a C corporation. A is unaffiliated with EPR and is not an officer, director, or employee of EPR. During an administrative proceeding with respect to Partnership’s 2020 taxable year, A, acting for EPR, agrees to an extension of the period of limitations on making adjustments under section 6235(b) from March 15, 2024 to December 31, 2024. The IRS mails an FPA with respect to the 2020 partnership taxable year on December 13, 2024, before expiration of the extended period of limitations on making adjustments as agreed to by EPR, but after the expiration of the unextended period of limitations on making adjustments. Partnership challenges the FPA as untimely, alleging that A was not authorized under state law to act on behalf of EPR and thus the extension agreement was invalid. Because A was appointed by the partnership as the designated individual to act on behalf of EPR, A was authorized to act on behalf of EPR for all purposes under subchapter C of chapter 63, and the IRS may rely on that appointment as conclusive evidence of A’s authority to act on behalf of EPR and Partnership.

Example 4, Reg. 301.6223-2(e)

The partnership representative, PR, consents to an extension of the period of limitations on making adjustments under section 6235(b) and §301.6235-1(d) for Partnership for the partnership taxable year. After signing the consent, PR resigns as partnership representative in accordance with §301.6223-1(d). The consent to extend the period of limitations on making adjustments under section 6235(b) remains valid even after PR resigns.

Example 5, Reg. 301.6223-2(e)

Partnership designates a partnership representative who does not make themselves available to meet with the IRS in person in the United States as required by §301.6223-1(b). Although the partnership representative does not have substantial presence in the United States within the meaning of §301.6223-1(b)(2), until a termination occurs under §301.6223-1(d) or (e) or the IRS determines the partnership representative designation is no longer in effect under §301.6223-1(f), the partnership representative designation remains in effect, and Partnership and all its partners are bound by the actions of the partnership representative.

Example 5, Reg. 301.6223-2(e)

Partnership designates PR1 as the partnership representative on its timely filed partnership return for 2020. On September 1, 2022, the IRS sends a NAP for the 2020 taxable year to Partnership and PR, and Partnership revokes PR1’s designation and designates PR2 as the partnership representative in accordance with §301.6223-1(e). On November 1, 2023, PR2 consents to an extension of the period of limitations on making adjustments under section 6235(b) and §301.6235(d) for Partnership’s 2020 taxable year. On December 1, 2023, the IRS then withdraws the NAP. PR2 remains the partnership representative, and the consent to extend the period of limitations on making adjustments under section 6235(b) remains valid even after the NAP is withdrawn.

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[1] Reg. §301.6223-1(a)

[2] Reg. §301.6223-1(b)

[3] Reg. §301.6223-1(b)(1)

[4] Reg. §301.6223-1(b)(2)

[5] Reg. §301.6223-1(b)(3)

[6] Reg. § 301.6223-1(c)(1)

[7] Reg. § 301.6223-1(d)(1)

[8] Reg. §301.6223-1(d)(3)

[9] Reg. §301.6223-1(d)(2)

[10] Reg. §301.6223-1(e)(1)

[11] Reg. §301.6223-1(e)(1)

[12] Reg. §301.6223-1(e)(3)

[13] Reg. §301.6223-1(e)(2)(i)

[14] Reg. §301.6223-1(e)(4)

[15] Reg. §301.6223-1(e)(4)

[16] Reg. §301.6223-1(e)(7)

[17] The partnership had failed to appoint an eligible partnership representative, likely by failing to include the designation on the tax return for the year in question.

[18] Reg. §301.6223-1(f)(1)

[19] Reg. §301.6223-1(f)(1)

[20] Reg. §301.6223-1(f)(3)

[21] Reg. §301.6223-1(f)(3)

[22] Reg. §301.6223-1(f)(5)(i)

[23] Reg. §301.6223-1(f)(5)(ii)

[24] Reg. §301.6223-1(f)(5)(ii)

[25] Reg. §301.6223-1(f)(5)(iii)

[26] Reg. §301.6223-2(b)

[27] Reg. §301.6223-2(c)

[28] Reg. §301.6223-2(d)(1)

[29] Reg. §301.6223-2(d)(1)

[30] Reg. §301.6223-2(d)(ii)