26 CFR § 301.6223-2. Binding effect of actions of the partnership and partnership representative.

(a)Binding nature of actions by partnership and final decision in a partnership proceeding. The actions of the partnership and the partnership representative taken under subchapter C of chapter 63 of the Internal Revenue Code (subchapter C of chapter 63) and any final decision in a proceeding brought under subchapter C of chapter 63 with respect to the partnership bind the partnership, all partners of the partnership (including partnership-partners as defined in §301.6241-1(a)(7) that have a valid election under section 6221(b) in effect for any taxable year that ends with or within the taxable year of the partnership), and any other person whose tax liability is determined in whole or in part by taking into account directly or indirectly adjustments determined under subchapter C of chapter 63 (for example, indirect partners as defined in §301.6241-1(a)(4)). For instance, a settlement agreement entered into by the partnership representative on behalf of the partnership, a notice of final partnership adjustment (FPA) with respect to the partnership that is not contested by the partnership, or the final decision of a court with respect to the partnership if the FPA is contested, binds all persons described in the preceding sentence.

(b)Actions by the partnership representative before termination of designation. A termination of the designation of a partnership representative because of a resignation under §301.6223-1(d) or a revocation under §301.6223-1(e), or as a result of a determination by the Internal Revenue Service (IRS) under §301.6223-1(f) that the designation is not in effect, does not affect the validity of any action taken by that partnership representative during the period prior to such termination. For example, if a partnership representative properly designated under §301.6223-1 consented to an extension of the period of limitations on making adjustments under section 6235(b) in accordance with §301.6235-1(d), that extension remains valid even after termination of the designation of that partnership representative.

(c)Actions by the partnership representative upon withdrawal of notice of administrative proceeding. If the IRS issues a notice of administrative proceeding (NAP) under section 6231(a)(1) and subsequently withdraws such NAP pursuant to §301.6231-1(f), any actions taken by a partnership representative (or successor partnership representative after a change to the partnership representative that occurred after the issuance of the NAP and before the NAP was withdrawn) are binding as described in paragraph (a) of this section even though the NAP has been withdrawn and has no effect for purposes of subchapter C of chapter 63.

(d)Partnership representative has the sole authority to act on behalf of the partnership.

(1)In general. The partnership representative has the sole authority to act on behalf of the partnership for all purposes under subchapter C of chapter 63. In the case of an entity partnership representative, the designated individual has the sole authority to act on behalf of the partnership representative and the partnership. Except for a partner that is the partnership representative or the designated individual, no partner, or any other person, may participate in an administrative proceeding without the permission of the IRS. The failure of the partnership representative to follow any state law, partnership agreement, or other document or agreement has no effect on the authority of the partnership representative or the designated individual as described in section 6223, §301.6223-1, and this section. Nothing in this section affects, or otherwise restricts, the ability of a partnership representative to authorize a person to represent the partnership representative, in the partnership representative’s capacity as the partnership representative, before the IRS under a valid power of attorney in a proceeding involving the partnership under subchapter C of chapter 63.

(2)Designation provides authority to bind the partnership.

(i) Partnership representative. A partnership representative, by virtue of being designated under section 6223 and §301.6223-1, has the authority to bind the partnership for all purposes under subchapter C of chapter 63.

(ii) Designated individual. A partnership that is required to appoint a designated individual described under §301.6223-1(b)(3)(i) acts through such designated individual. By virtue of being appointed as part of the designation of the partnership representative under §301.6223-1, the designated individual has the sole authority to bind the partnership representative and therefore the partnership, its partners, and any other person as described in paragraph (a) of this section for all purposes under subchapter C of chapter 63 so long as the partnership representative designation and designated individual appointment are in effect.

(e)Examples. The following examples illustrate the rules of this section.

Example (1). Partnership designates a partnership representative, PR, on its timely filed partnership return for 2020. PR is a partner in Partnership. The partnership agreement for Partnership includes a clause that requires PR to consult with an identified management group of partners in Partnership before taking any action with respect to an administrative proceeding before the IRS. The IRS initiates an administrative proceeding with respect to Partnership’s 2020 taxable year. During the course of the administrative proceeding, PR consents to an extension of the period of limitations on making adjustments under section 6235(b) allowing additional time for the IRS to mail an FPA. PR failed to consult with the management group of partners prior to agreeing to this extension of time. PR’s consent provided to the IRS to extend the time period is valid and binding on Partnership because, pursuant to section 6223, PR, as the designated partnership representative, has authority to bind Partnership and all its partners.

Example (2). Partnership designates a partnership representative, PR, on its timely filed partnership return for 2020. PR is not a partner in Partnership. During an administrative proceeding with respect to Partnership’s 2020 taxable year, PR agrees to certain partnership adjustments and within 45 days after the issuance of the FPA elects the alternative to payment of the imputed underpayment under section 6226. Certain partners in Partnership challenge the actions taken by PR during the administrative proceeding and the validity of the section 6226 statements furnished to those partners, alleging that PR was never authorized to act on behalf of Partnership under state law or the partnership agreement. Because PR was designated by Partnership as the partnership representative under section 6223 and this section, PR was authorized to act on behalf of Partnership for all purposes under subchapter C of chapter 63, and the IRS may rely on that designation as conclusive evidence of PR’s authority to act on behalf of Partnership.

Example (3). Partnership designates an entity partnership representative, EPR, and appoints an individual, A, as the designated individual on its timely filed partnership return for 2020. EPR is a C corporation. A is unaffiliated with EPR and is not an officer, director, or employee of EPR. During an administrative proceeding with respect to Partnership’s 2020 taxable year, A, acting for EPR, agrees to an extension of the period of limitations on making adjustments under section 6235(b) from March 15, 2024 to December 31, 2024. The IRS mails an FPA with respect to the 2020 partnership taxable year on December 13, 2024, before expiration of the extended period of limitations on making adjustments as agreed to by EPR, but after the expiration of the unextended period of limitations on making adjustments. Partnership challenges the FPA as untimely, alleging that A was not authorized under state law to act on behalf of EPR and thus the extension agreement was invalid. Because A was appointed by the partnership as the designated individual to act on behalf of EPR, A was authorized to act on behalf of EPR for all purposes under subchapter C of chapter 63, and the IRS may rely on that appointment as conclusive evidence of A’s authority to act on behalf of EPR and Partnership.

Example (4). The partnership representative, PR, consents to an extension of the period of limitations on making adjustments under section 6235(b) and §301.6235-1(d) for Partnership for the partnership taxable year. After signing the consent, PR resigns as partnership representative in accordance with §301.6223-1(d). The consent to extend the period of limitations on making adjustments under section 6235(b) remains valid even after PR resigns.

Example (5). Partnership designates a partnership representative who does not make themselves available to meet with the IRS in person in the United States as required by §301.6223-1(b). Although the partnership representative does not have substantial presence in the United States within the meaning of §301.6223-1(b)(2), until a termination occurs under §301.6223-1(d) or (e) or the IRS determines the partnership representative designation is no longer in effect under §301.6223-1(f), the partnership representative designation remains in effect, and Partnership and all its partners are bound by the actions of the partnership representative.

Example (6). Partnership designates PR1 as the partnership representative on its timely filed partnership return for 2020. On September 1, 2022, the IRS sends a NAP for the 2020 taxable year to Partnership and PR, and Partnership revokes PR1’s designation and designates PR2 as the partnership representative in accordance with §301.6223-1(e). On November 1, 2023, PR2 consents to an extension of the period of limitations on making adjustments under section 6235(b) and §301.6235(d) for Partnership’s 2020 taxable year. On December 1, 2023, the IRS then withdraws the NAP. PR2 remains the partnership representative, and the consent to extend the period of limitations on making adjustments under section 6235(b) remains valid even after the NAP is withdrawn.

(f)Applicability date.

(1)In general. Except as provided in paragraph (f)(2) of this section, this section applies to partnership taxable years beginning after December 31, 2017.

(2)Election under §301.9100-22 in effect. This section applies to any partnership taxable years beginning after November 2, 2015 and before January 1, 2018 for which a valid election under §301.9100-22 is in effect.

 

T.D. 9839, 08/06/2018 .