Replacement of Tax Matters Partner with Partners Representative - Legal Update June 2018
Members of LLCs, Limited Partners in Partnerships and other participants in entities treated as partnerships for U.S tax purposes should be aware of important changes to the prior "tax matters partner" role in representing the partnership entity before the IRS. Until now tax matter partners had limited rights to bind the entity as to certain tax determinations in an IRS tax audit. Individual partners could in certain circumstances appeal partnership audit determinations. The new "Partnership Representative" will have much more broad authority to deal with the IRS and bind the other partners with respect to IRS determinations, and will have authority to waive such matters as statute of limitation defenses. The Partnership Representative, if not a U.S individual, will be required to have a substantial presence in the U.S and have a U.S tax identification number (usually a Federal Employer Identification Number). The change to Partnership Representative will may require partners to examine the provisions of their partnership agreements to see what powers the Partnership Representative shall have. In addition, entities should review who is currently appointed as the Tax Matters Partner to ensure it meets the foregoing requirements and that it is an appropriate party to represent the partnership and the partners.
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