Chief Counsel Advice 202505027 addresses the validity of extensions to the statute of limitations for partnership adjustments under the Bipartisan Budget Act of 2015 (BBA) audit rules. The memorandum concludes that the extensions in question were invalid because they were not signed by the designated partnership representative (PR) or designated individual (DI) as required by law.

Facts

The partnership, identified as --------------------, did not elect out of the BBA audit rules for the 2018 and 2019 tax years. For 2018, the partnership designated an individual, -------------------, as its PR and -------------------as the DI. However, the taxpayer identification number provided for the designated PR corresponded to an entity, ----------------------------------------------------------. For 2019, the partnership designated an entity, ---------------, as its PR and -----------------as its DI.

Several Forms 872-M, Consent to Extend the Time to Make Partnership Adjustments, were signed by --------------------, who was listed as the CFO and Treasurer of -------------. These forms purported to extend the period of limitations for making partnership adjustments. Specifically:

The first Form 872-M, signed on October 27, 2021, purported to extend the limitations period for the 2018 tax year until September 13, 2023.
The second Form 872-M, signed on November 3, 2022, purported to extend the limitations period for the 2018 and 2019 tax years until September 15, 2024.
The third Form 872-M, signed on April 19, 2024, purported to extend the limitations period for the 2018 and 2019 tax years until December 31, 2024.
The fourth Form 872-M, signed on August 6, 2024, purported to extend the limitations period for the 2018 and 2019 tax years until April 30, 2026.

Law and Analysis

The BBA audit rules apply to all partnership returns unless a valid election out is made under section 6221(b). The partnership in this case did not make such an election, so the BBA rules apply. Under the BBA, the PR has the sole authority to act on behalf of the partnership. The PR can be an entity, but in that case, the entity must designate an individual to act on its behalf, the DI. According to Treasury Regulations, there may only be one PR and one DI for a partnership taxable year at any time and their designation remains in effect until resignation or revocation. The memorandum emphasizes that the PR or DI, if the PR is an entity, has the sole authority to sign a Form 872-M to extend the statute of limitations.

The Chief Counsel’s office determined that all four Forms 872-M were invalid because they were signed by --------------------, who was not the designated PR or DI for either the 2018 or 2019 tax years. The memorandum explains that because --------------------was neither the PR nor DI, they had no authority to sign the Forms 872-M, and the forms do not extend the period of limitations for making adjustments. The document states:

The initial Form 872-M purported to extend the period of limitations until September 13, 2023, for the 2018 tax year. This Form 872-M was invalid because it was signed by --------------------------------. The PR/DI, --------------------------------had the sole authority to sign the extension.

The same analysis was applied to each subsequent Form 872-M.

The memorandum further explains that under section 6235(a), the IRS generally has three years from the date a partnership return is filed or its original due date, whichever is later, to make a proposed adjustment. This period can be extended by agreement under section 6235(b).

For the 2018 tax year, the Form 1065 was filed on September 13, 2019, making the statute of limitations expire on September 13, 2022. For the 2019 tax year, the Form 1065 was filed on September 14, 2020, making the statute of limitations expire on September 14, 2023. The memorandum notes that because the Forms 872-M were invalid, the Notice of Proposed Partnership Adjustment (NOPPA) had to be mailed by the statute of limitations date for each of those years.

Conclusion

The Chief Counsel’s office concluded that because the Forms 872-M were signed by an unauthorized individual, they were invalid and did not extend the statute of limitations for the 2018 and 2019 tax years. The period of limitations for the 2018 tax year expired on September 13, 2022, and the period of limitations for the 2019 tax year expired on September 14, 2023.

Relevant Citations

Bipartisan Budget Act of 2015 (BBA): The memorandum discusses the audit rules introduced by the BBA, which govern how the IRS audits partnerships.
Section 6221(b): This section of the Internal Revenue Code allows certain partnerships to elect out of the BBA audit rules.
Section 6223(a): This section designates that the PR has the sole authority to act on behalf of the partnership.
Section 6235(a): This section establishes the three-year statute of limitations for partnership adjustments.
Section 6235(b): This section provides for the extension of the statute of limitations by agreement.
Section 6231(b)(1): This section relates to the mailing of the Notice of Proposed Partnership Adjustment (NOPPA), which must be mailed by the statute of limitations date.
Treas. Reg. § 301.6223-1(a): This regulation clarifies the role and authority of the PR.
Treas. Reg. § 301.6223-1(b): This regulation states that a DI must be named when a partnership designates an entity as its PR.
Treas. Reg. § 301.6223-1(c)(2): This regulation indicates that a PR may be designated on the Form 1065 or Form 8979.

Prepared with assistance from NotebookLM.

The memorandum can be read at https://www.irs.gov/pub/irs-wd/202505027.pdf