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IRS Issues Guidance on Who May Sign a Power of Attorney for TEFRA Partnership-Level Proceedings


The IRS Office of Chief Counsel has provided guidance on who is authorized to sign a power of attorney (POA) for a partnership or limited liability company in various situations.
The IRS published a legal advice memo (AM2015-004) about who is authorized to sign a POA on behalf of a partnership or limited liability company for purposes of a Tax Equity and Fiscal Responsibility Act (TEFRA) partnership-level examination, among other tax purposes.
TEFRA created the unified partnership audit and litigation procedures for TEFRA partnerships adding  certain Internal Revenue Code sections (§6221 through 6234). TEFRA determines the tax treatment of partnership items at the partnership level for partnerships and limited liability companies (LLCs) that file as partnerships. Generally, a partnership with 11 or more partners at any one time during the partnership’s tax year is a TEFRA partnership. A partnership item is any item more appropriately determinable at the partnership level. Typically, the partnership or LLC itself is not a party to the TEFRA partnership proceeding, instead the partners whose tax liabilities will be affected are the parties-in-interest.
IRS Legal Advice Memorandum Conclusions
POAs from Direct and Indirect Partners

  • A general partner, or in the case of an LLC the member-manager, may sign a POA for purposes of a TEFRA examination. 
  • The IRS may also make inquiries and disclose details of a TEFRA partnership-level examination to any person who is a party to, or has the authority to represent a party in, the partnership examination. Such parties generally include any direct or indirect partner of the partnership, or member of an LLC treated as a partnership, for the tax year at issue.  An indirect partner is a person holding an interest in a partnership through one or more pass-thru partners. The IRS also has the authority to allow a partner, member or a partner’s attorney-in-fact to inspect partnership items. A POA from a partner of the partnership, including a member of an LLC taxed as a partnership, during the taxable year at issue allows the Service to solicit and discuss partnership-level issues with the person appointed. The POA from the partner should be done in the partner’s individual capacity as a partner.

POAs from Non-Owner LLC Managers

  • Where a manager of an LLC has no ownership interest, he is not treated as a “partner” to whom partnership return information can be disclosed under Code section 6103(e). The non-member manager, as well as the LLC itself, are also not generally considered parties in the TEFRA examination. Section 6103(k)(6) authorizes the Service to request documents and discuss details of the partnership-level examination with any individual where the Service employee reasonably believes such discussion is helpful and appropriate for obtaining information to determine partnership items. A non-member manager may sign a POA on behalf of an LLC to help establish the reasonableness and appropriateness of discussion issues in the partnership-level examination with the individual designated by the entity.

POAs to Extend Statute of Limitations

  • The authorization from a partner or a person with the authority to act for the partnership may not be sufficient to provide authority to extend the period of limitations for all of its partners. If the partnership wishes to authorize someone other than the tax matters partner to extend the period with respect to all partners, the partnership should provide a statement in accordance with Treas. Reg. Sec. 301.6229(b)-1.

What Does CohnReznick Think?
Typically the IRS will interact with the Tax Matters Partner or their representative when handling IRS audits. The Tax Matters Partner should consult with their tax advisor and agree upon a strategy for providing the IRS with the appropriate information necessary to complete their examination, as well as consult on whether it is in the interests of the partnership to agree to extend the statute of limitations.

For more information, please contact Thomas Nice, a CohnReznick partner, at or 301-961-5542.

Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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