Does My Partnership Need To Select A Partnership Representative?
At US Partnership Representative, Inc., our skilled tax advocates are equipped to guide your partnership through tax assessments and other issues pertaining to your tax status. We have extensive experience resolving the tax issues of our clients through the law firm of Moore Tax Law Group, LLC.
Under the Bipartisan Budget Act, or BBA, beginning in filing season for 2018 returns due in 2019, all partnerships subject to taxation in the United States were required to select a partnership representative unless the partnership elects out of the BBA under I.R.C. § 6621(b).
In general, partnerships may elect out of the BBA if the partnership has (1) 100 or fewer partners in the tax year at issue, and (2) all partners are “eligible partners” during the tax year at issue. As a result, an eligible partner does not include “partnerships, trusts, disregarded entities, nominees or other similar persons that hold an interest on behalf of another person, foreign entities that are not eligible foreign entities and estates that are not estates of a deceased partner”.
For example, a partnership that has three partners, one of which is another partnership or a disregarded entity, is not eligible to elect out of the BBA and must select a partnership representative. To determine whether your partnership is eligible to elect out of the BBA, consult with your attorney or tax professional. If you know your partnership is not eligible to elect out of the BBA, your partnership must select a partnership representative when IRS Form 1065, U.S. Return of Partnership Income.
TEFRA has been repealed and the role of TMP has been eliminated. This means that even a partnership that can elect out of the BBA will no longer have a TMP.
What If A Partnership Does Not Select A Partnership Representative?
The failure to select an eligible Partnership Representative could be catastrophic to a partnership subject to BBA. Why? Because the partnership representative has absolute, final authority to bind a partnership in all disputes with the IRS and, if disputes cannot be resolved at the IRS level, in litigation. And if the partnership does not appoint an eligible partnership representative, then under the applicable Treasury Regulations, the IRS will designate a partnership representative for the partnership.
As incredible as that may seem, it is true; if the partnership does not select a partnership representative at all or a partnership representative who is eligible to serve in that capacity, the IRS can unilaterally appoint a representative who can irrevocably bind the partnership in all IRS matters. Therefore, we encourage you to contact US Partnership Representative, Inc., to make sure you have the partnership representative you need.