CCA 200851096: Only a member-manager can be the tax matters partner of an LLC

Plain-English summary

Two sentences on who may serve as the tax matters partner of an LLC, and they cut in opposite directions depending on one fact about the company's management.

In the unified partnership audit regime then in force, the tax matters partner was the partnership's representative. That person received notices, could bind the partnership in some respects and signed consents extending the period for assessing tax attributable to partnership items. Because so much turned on the role, the regulations limited who could hold it. For an LLC, Treas. Reg. section 301.6231(a)(7)-2 restricts eligibility to a member-manager, meaning a member with continuing authority to make the management decisions necessary to conduct the business.

That restriction creates an obvious problem for member-managed LLCs, where nobody holds a distinct manager title. The regulation solves it with the last sentence of subsection (b)(3), which the release cites directly: if no member is a manager, every member is treated as a member-manager. The advice states the consequence. Where no other member is a manager, all members are deemed member-managers and all are eligible to be designated.

The second sentence states the converse, and it is the one with teeth. If any other member is a manager under state law and the designated member is not, the designation is invalid. The presence of even one actual manager shuts off the deeming rule, and eligibility collapses back to the managers. A member outside that group cannot be designated, and the attempt does not merely fail going forward. It was never effective.

State law does the decisive work here. Whether someone is a manager is not a matter of what the designation form says, or of what the members understood, but of how the company is organized under the law of its state, so the operating agreement and the state filings are where the question is settled.

The subject line is "Consent," which suggests the question reached Chief Counsel because someone signed a consent as tax matters partner and the designation was later doubted. The release does not say so, and does not address what follows from an invalid designation, so that connection is an inference from the subject line rather than something the document decides.

This is a clean digital release rather than a scan, so no OCR correction was needed. Kept as released: the regulation cited as "Treas. Reg. 301.6231(a)(7)-2(b)(3)(last sentence)," without a section symbol and with the parenthetical pointer attached; and "all members are deemed to be member-managers eligible to be designated as TMP," using the abbreviation without expanding it.

Ruling snapshot

• Question: Which members of an LLC are eligible to be designated tax matters partner?
• Outcome: Advice given. If no other member is a manager, all members are deemed member-managers and all are eligible, under the last sentence of Treas. Reg. section 301.6231(a)(7)-2(b)(3). If any other member is a manager under state law and the designated member is not, the designation as tax matters partner is invalid.
• Key authorities: IRC section 6231(a)(7); Treas. Reg. section 301.6231(a)(7)-2(b)(3).

Full text (IRS public release)

ID: CCA-916830-08 Number: 200851096
Office: -------------- Release Date: 12/19/2008

UILC: 6231.07-00

From: -------------------
Sent: Tue 9/16/2008 8:30 AM
To: --------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
-------------------------
Subject: Consent

If no other member is a manager, then all members are deemed to be member-
managers eligible to be designated as TMP. Treas. Reg.
301.6231(a)(7)-2(b)(3)(last sentence)

If any other member is a manager under state law, and the designated member
is not, then the designation as TMP is invalid.