IRS may retain foreign-resident partnership representative designation

Plain-English summary

A partnership designated a representative who had a U.S. taxpayer identification number but lived abroad. The partnership supplied its own U.S. street address and telephone number for the representative, while IRS records showed the representative's foreign address from the representative's most recently filed return. Chief Counsel advised that the IRS may continue treating the designation as effective even if there is uncertainty about whether the representative satisfies the substantial-presence test, because the regulations permit but do not require the IRS to invalidate the designation. The IRS may therefore continue dealing with the representative. A notice of administrative proceeding is sufficient if mailed to the representative's last known address, ordinarily the foreign address on the most recently filed and properly processed federal return unless the IRS received clear notice of another address.

Ruling snapshot

• Question: May the IRS retain the partnership representative designation, and where should it mail the representative's copy of the notice of administrative proceeding?
• Outcome: advice given
• Key authorities: IRC §§ 6223, 6231; Treas. Reg. §§ 301.6212-2, 301.6223-1, 301.6231-1; Rev. Proc. 2010-16

Full text (IRS public release)

 ID:         CCA_2024022715295410
 UILC:       6223B.00-00, 6231B.00-00

Number: 202417020
Release Date: 4/26/2024
From: -------------------
Sent: Tuesday, February 27, 2024 3:29:54 PM
To: ------------
Cc: -------------------------------------------------------------------------------------
Bcc:
Subject: Substantial Presence Test


Hi --------,

You have requested our assistance determining whether to treat the designation by a
partnership (“PRS”) of a partnership representative (“PR”) for a taxable year (“TY”) as in
effect, and, if it is, identifying the address to be used to mail the copy of the notice of
administrative proceeding (“NAP”) for the PR.

Facts
PRS designated PR as a partnership representative for purposes of section 6223 on
PRS’s partnership return for TY as provided in Treas. Reg. §301.6223-1(c)(2). PR has a
United States taxpayer identification number (“U.S. TIN”), and, in order to satisfy the
requirements of Treas. Reg. §301.6223-1(b)(2) (the “substantial presence test”), PRS
provided the PRS street address in the United States (“U.S. address”) and the PRS
telephone number with a United States area code (“U.S. phone number”) for PR in
connection with the designation. PR is a resident of a foreign country (“FC”) and files tax
returns reflecting an address in FC, which is reflected in the Service’s records as the
taxpayer’s last known address. PR was also a partner of PRS for TY, and PRS issued a
Schedule K-1 for TY to PR at an address in FC.

Issues
Based on the foregoing facts, you have asked:
       1. May the Service treat the designation of PR as partnership representative for TY as in
          effect?
       2. If so, what address should be used to mail the copy of the NAP for the TY to PR?
Summary of Conclusions
Based on the law and analysis discussed below:
       1. The Service may treat the designation by PRS of PR as partnership representative for
          TY as in effect.
       2. The NAP will be sufficient if mailed to PR’s last known address, which we understand to
          appear on PR’s most recently filed and properly processed Federal tax return.

Law and Analysis
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     1. May the Service treat the designation of PR as partnership representative for PRS for
        TY as in effect?

Treas. Reg. §301.6223-1(b)(1) provides that a person designated under Treas. Reg.
§301.6223-1 as a partnership representative is deemed to be eligible to serve as the
partnership representative unless and until the Service determines that the person is ineligible.
Treas. Reg. §301.6223-1(b)(4), Example 2, illustrates this concept by concluding that even
though a U.S. address was not provided as required, until there is a resignation or revocation or
until the Service determines the partnership representative designation is no longer in effect, the
designation of the partnership representative remains in effect. Furthermore, Treas. Reg.
§301.6223-1(f)(2) provides that the Service may, but is not required to, determine that a
partnership representative designation is not in effect. It elaborates that the IRS is not obligated
to search for or otherwise seek out information related to the circumstances in which the Service
may determine a partnership representative designation is not in effect, and the fact that the
Service is aware of any such circumstances does not obligate the Service to determine that a
partnership representative designation is not in effect. Thus, regardless of whether the
substantial presence test is considered met by PR, the IRS can continue to deal with PR, rather
than determining that a partnership representative designation is not in effect. See, e.g., Treas.
Reg. §301.6223-1(f)(6), Example 1. Consistent with the statement in IRM 4.31.9.7.6.6(2) that
“[i]t is a best practice for taxpayers to choose a representative who can best serve them,” we
generally do not advise determining that a partnership representative designation is not in effect
unless it is necessary, and thus would advise continuing to deal with PR, including by sending
the NAP to PR, as discussed under question 2 below.

     2. What address should be used to mail the copy of the NAP for TY to PR?

Section 6231(a) requires the Service to mail the NAP for TY to both PRS and PR. Consistent
with the flush language in section 6231(a), Treas. Reg. §301.6231-1(c) provides that a NAP is
sufficient if mailed to the last known address of the partnership representative and partnership.
Under Treas. Reg. §301.6212-2(a), the last known address is generally that which appears on
the most recently filed and properly processed Federal tax return, unless the IRS is given clear
and concise notification of a different address. See also Rev. Proc. 2010-16, section 5.03
(defining “address on return” as the address shown on the upper portion of the front page of a
return). Accordingly, assuming the Service has not received notification of a different address,
the address in FC that is reflected on PR’s tax returns is appropriately reflected in the Service’s
records as PR’s last known address. The fact that PR gave PRS an address for purposes of
Schedule K-1 mailing and PRS included such address on the Schedule K-1 issued to PR would
not have resulted in notification of a different address for purposes of determining PR’s last
known address. Therefore, under Treas. Reg. §301.6231-1(c), the NAP would be sufficient if
mailed to the address in FC that is reflected on PR’s most recently filed and properly processed
Federal tax return and accordingly in the Service’s records as PR’s last known address.

Please let us know if you have any additional questions.

Regards,

-------

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