IRS advised on TEFRA consents for a subsidiary partner that is not the tax matters partner

Plain-English summary

The IRS advised that both a consolidated group’s common parent and a subsidiary that is a partner in a TEFRA partnership should execute the partner-level consent when the subsidiary is not the tax matters partner. It provided a sample caption, explanatory language for Form 872, and signature blocks for the parent and subsidiary.

Ruling snapshot

• Question: Which entities should sign a TEFRA partner-level consent when a subsidiary is a partner but not the tax matters partner?
• Outcome: Advice given
• Key authorities: IRC §§ 1502 and 6501; Forms 872, 872-I, and 872-IA.

Full text (IRS public release)

ID: CCA-423001-10 Number: 201025070
Release Date: 6/25/2010
Office: --------------
UILC: 1502.77-00, 6501.04-05, 6501.08-
00

From: ------------------------
Sent: April 16, 2010 4:13 pm
To: -----------------
Cc: --------------------------------------------
Subject: Response to your inquiry

Here is a generic write up that covers your situation.

  TEFRA (Forms 872, 872-I and 872-IA) – Subsidiary is Partner, but not TMP
     The common parent for the year of the flow through and the subsidiary partner
     both should execute the partner-level consent.
     Example – S-1 is a member of the P and Subsidiaries Consolidated group and a
     partner in the ABC Partnership (a TEFRA partnership). The Service seeks to
     extend the group’s consolidated taxable Year 1, which corresponds to the year of
     the ABC Partnership flow-through. P is the common parent of the P and
     Subsidiaries Consolidated group in Year 1. P will execute, and S-1 should
     execute, the consent extending the P and Subsidiaries consolidated taxable
     Year 1 with regard to the ABC Partnership flow-through items.


     CONSENT CAPTION: the consent caption should read: P (EIN: XX-XXXXXX)
     and Subsidiaries Consolidated group; S-1, partner in the ABC Partnership.*
     Place an asterisk after “group”. At the bottom of the Form 872, indicate: *this is
     with respect to the consolidated tax of the P and Subsidiaries consolidated
     group.

     SIGNATURE BLOCK:

     Parent’s:
     [name of parent corporation] by [name of authorized representative, official title in
     parent corporation], on behalf of the members of the [name of consolidated
     group], including [name of subsidiary corporation], Partner of [name of TEFRA
     entity].

     Sub’s:
     [name of subsidiary corporation] by [name of authorized representative, official
     title in subsidiary corporation], Partner of [name of TEFRA entity].