Officer of Parent of Member-Manager Corporation Included in Consolidated Return Must Sign Form 2848 for Partnership

The question of who is able to sign a Form 2848, Power of Attorney and Declaration of Representative is sometimes not a simple one to answer.  Chief Counsel Advice 201522005 looks at a fact pattern involving a LLC taxed as a partnership and a member manager that is an indirect subsidiary included in the consolidated return of a parent corporation—and you may find the IRS’s conclusion surprising.

In this case the LLC partnership, which was a non-TEFRA partnership, was looking to appoint a representative for an issue before the IRS.  The LLC had two members, both of which were domestic C corporations.  One of the corporations was a member only, while the other was a member-manager designed as the Tax Matters Partner on the Form 1065.  The member-manager is a subsidiary included on the consolidated return of its parent corporation.

The ruling notes that generally for an affiliated group of corporations that file a consolidated return generally must be signed by the group’s agent for the consolidated return, normally the common parent.  Since a corporation is not a true person (but rather a legal one), it clearly can’t sign the form—rather, an officer of the corporation with the power to bind the corporation must sign.

For a partnership a power of attorney either must be executed by all partners or by a partner or partners duly authorized to act for the partnership—that is, a partner that, under state law, has the authority to bind the partnership.

The memorandum concludes that, due to the interaction of these provisions, an officer of the parent corporation (an entity that is not a member of the LLC) will be required.  As the memorandum explains:

The taxpayer being represented on the Form 2848 is an LLC Partnership, and Member 1 is a member manager of LLC Partnership. Ordinarily, since Member 1 is a corporation, the Form 2848 would be signed by a corporate officer of Member 1. Member 1, however, is also a member of a consolidated group, and under Treas. Reg. § 1.1502-77(a), the common parent is the sole agent for each member of the group for all matters relating to the income tax liability for the consolidated return year, unless it is a matter reserved to a subsidiary under Treas. Reg. § 1.1502-77(a)(3).

Signing a Form 2848 for an LLC is not a matter reserved to a subsidiary under the consolidated return regulations. Indeed, Treas. Reg. § 1.1502-77(a)(2)(iv) provides that a parent of a consolidated group executes “all other documents” not listed therein.

Accordingly, we recommend that the taxpayer secure the signature of an officer of the common parent on the Form 2848. The common parent should be described as “[John Doe], [Corporate Office Title] Parent (EIN), as the common parent and agent for Parent and Subsidiaries, including Member 1, as Member Manager of LLC Partnership. See IRM Exhibit 4.31.2-7 “Formats for TMP Signatures When Signing Extensions.”

Thus, the IRS has determined that an officer of a corporation that is not itself a member of the LLC will be the party that must sign to authorize a representative to represent the partnership before the IRS.