Common parent's officer must sign power of attorney for subsidiary LLC manager

Plain-English summary

A non-TEFRA LLC partnership had a corporate member-manager that belonged to a consolidated corporate group. The IRS considered who had to sign Form 2848 to authorize representation of the partnership. Ordinarily, an officer of a corporate member-manager could sign, but the consolidated-return rules make the common parent the sole agent for group members on matters relating to the consolidated year. Signing the form was not a matter reserved to the subsidiary. The IRS therefore advised that an authorized officer of the common parent must sign the power of attorney.

Ruling snapshot

• Question: Who must sign Form 2848 for an LLC partnership whose corporate member-manager is a subsidiary in a consolidated group?
• Outcome: Advice given that an authorized officer of the common parent must sign.
• Key authorities: Treas. Reg. §§ 1.1502-77(a), 601.503(c)(3), and 601.503(c)(5); Instructions for Form 2848; Publication 3402

Full text (IRS public release)

Office of Chief Counsel
Internal Revenue Service
Memorandum
Number: 201522005
Release Date: 5/29/2015
CC:PA:01:MEHara Third Party Communication: None
POSTN-101642-15 Date of Communication: Not Applicable

UILC: 6501.08-09, 1502.77-00

date: February 18, 2015

to: Kenneth C. Peterson
Attorney
CC:LB&I:CTN:LN:1

from: Bridget Tombul
Senior Technician Reviewer
Branch 2
(Procedure & Administration)

subject: ----------------------------------------

This memorandum responds to your request for assistance. This advice may not be
used or cited as precedent.

LEGEND

LLC Partnership = -------------------------------------
Member 1 = ---------------------------------------
Member 2 = ---------------------------------------------
Parent = --------------------------------------------

ISSUE

Who must sign a Form 2848, Power of Attorney and Declaration of Representative, for
a non-TEFRA LLC partnership, where the LLC member manager is an indirect
subsidiary and included on the consolidated group return of a parent corporation.

CONCLUSION

The Form 2848 must be signed by a corporate officer of the common parent for the
consolidated year to which representation applies.

POSTN-101642-15 2

FACTUAL BACKGROUND

The partnership entity, LLC Partnership, is a non-TEFRA entity. It has two members:
Member 1 and Member 2. Both members are domestic C corporations. On the
Schedule K-1s attached to the return, Member 1 is identified as an LLC member-
manager and Member 2 is identified as an LLC member. Member 1 is also designated
as Tax Matters Partner on the Form 1065. Member 1 is a subsidiary and included on
the consolidated group return of Parent.

LAW AND ANALYSIS

A power of attorney is required for the representation of taxpayers before the Internal
Revenue Service (Service). A taxpayer uses a Form 2848 to authorize an individual
who is authorized to practice before the Service to represent the taxpayer before the
Service. The individual who must execute a Form 2848 depends on the type of taxpayer
involved. Treas. Reg. § 601.503(c).

In the case of an affiliated group of corporations that file a consolidated return, a power
of attorney should be signed by the group’s agent for the consolidated return year to
which the representation applies. In general, the common parent for the consolidated
return year is the group’s agent for that year.

Under Treas. Reg. § 1.1502-77(a), applicable for return years beginning on or after
June 28, 2002, 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).

In the case of a corporation, a power of attorney must be signed by an officer of the
corporation, having the authority to legally bind the corporation, who must certify that he
or she has that authority. Treas. Reg. § 601.503(c)(3).

In the case of a partnership, a power of attorney must be executed by all the partners,
or if executed in the name of the partnership, by the partner or partners duly authorized
to act for the partnership, who must certify that it has that authority. A partner is
authorized to act in the name of a partnership if, under state law, the partner has
authority to bind the partnership. See Treas. Reg. § 601.503(c)(5), and Instructions for
Form 2848 (Rev. July 2014).

In Publication 3402, Taxation of Limited Liability Companies, the Service defines a
member manager as any owner of an interest in the LLC who, alone or together with
others, has the continuing authority to make the management decisions necessary to
conduct the business for which the LLC was formed.

POSTN-101642-15 3

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.”

This writing may contain privileged information. Any unauthorized disclosure of this
writing may undermine our ability to protect the privileged information. If disclosure is
determined to be necessary, please contact this office for our views.

Please call (202) 317-5417 if you have any further questions.