Who is authorized to sign a corporate return?

Sec. 6062 generally provides that a corporation's income tax return must be signed by the president, vice-president, treasurer, assistant treasurer, chief accounting officer or any other officer duly authorized to sign; the fact that an individual's name is signed on the return is prima facie evidence that the individual has such authority.

However, Sec. 6062 leaves at least three important issues unresolved. First, what procedures must a corporation follow to authorize an officer other than the specified five officers (an "unspecified officer") to sign the return? Second, can a representative of a U.S. corporation sign its return under a power of attorney? Third, when a corporation ceases to exist as the result of a merger, who can sign the corporation's return for the tax year resulting from the merger (or any other unfiled returns)?

Signature Authority

There are no set rules that a corporation must follow in authorizing an unspecified officer to sign a return. However, if an officer who intends to sign a return is not one of the specified officers, his signature authority should be clearly evident. The best way to document such a grant of authority is to have it appear in the by-laws or resolutions of a corporation's board of directors. Signature authority can be granted only to an officer, and not, for example, to a nonofficer tax director.

Power of Attorney 

A representative of a U.S. corporation cannot sign its return under a power of attorney. Regs. Sec. 1.6012-1(a)(5) provides that an individual's tax return may be signed by an agent under certain specific circumstances. Regs. Sec. 1.6012-2, which deals with corporate returns, does not contain similar provisions.

The instructions to Form 1120 reiterate the Code requirement that the return must be signed by a corporate officer. In addition, the instructions to Form 2848, Power of Attorney (and Declaration of Representative), state that a representative may be authorized to sign an income tax return only if the requirements of Regs. Sec. 1.6012-1 (a)(5) are satisfied; as noted, however, that provision only applies to returns of individuals. Regs. Sec. 1.6012-2(g)(3), however, does permit a responsible representative or agent of a foreign corporation within the U.S. to sign the foreign corporation's return.

Effect of a Merger

There appears to be little, if any, authority directly addressing the issue of who can sign an income tax return of a corporation that has been merged out of existence for the tax year resulting from the merger (or any other unfiled returns). Therefore, it is necessary to look to IRS guidance in analogous situations, such as the signing of statute extension agreements and refund claims.

Rev. Rul. 59-399 addressed the situation in which two or more corporations merged under state law, with fusion of assets and liabilities, so that the resulting corporation became in effect the same taxable entity as its absorbed constituents. In that situation, a Form 872, Consent to Extend the Time to Assess Tax, executed by the resulting corporation on behalf of an absorbed constituent, was a valid agreement to extend the time for assessment under Sec. 276(b) of the 1939 Code (a predecessor of current Sec. 6501); see also GCM 34970, concluding that for a merger or consolidation under state law, the government may obtain a Form 872 executed by the surviving or resulting corporation to extend the period of limitations for assessment of the constituent corporations' tax liabilities and send it a notice of primary liability for such taxes.

Similarly, Rev. Rul. 54-17 held that a claim for refund should be executed by the successor corporation in the name of (and on behalf of) the corporation liquidated by merger. This issue was also considered by the IRS in Letter Ruling (TAM) 8006011, which held that a successor corporation had the authority to sign Forms 870-C, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessments, as a successor-in-interest to three corporations that had been merged into it.

Additional support for the conclusion that officers of the successor corporation are the appropriate signatories on returns after a merger is found in Union Texas International Corp., 110 TC 321 (1998). In that case, the Tax. Court held that the successor corporation was equitably estopped to deny the validity of consents signed by officers of the predecessor corporation after the merger was consummated and the predecessor corporation was dissolved. Because the officers of the predecessor corporation were aware of their lack of authority while the Service was not, the Tax Court held for the IRS based on equitable estoppel grounds. Thus, the court's reliance on estoppel indicates that it believed that the consents signed by the predecessor corporation's officers were legally invalid.

Based on the foregoing, when a corporation (1) is merged with or into another corporation (with the other corporation surviving) or (2) is one of two or more corporations that merge to form a new corporation, an officer of the surviving or resulting corporation appears to be the proper person to sign the income tax return of the merged corporation for the tax year resulting from the merger (or any other unfiled returns). The signature should be formatted as follows: "John Smith, President, XYZ Corporation, Successor-in-Interest by Merger to ABC Inc."

In this example, Mr. Smith may have limited knowledge of ABC's tax liability and thus be hesitant to sign its return. Nevertheless, Mr. Smith (or another authorized XYZ officer) must sign the return, not one of ABC's former officers. At the same time, ABC's participation in (or supervision of) the return's preparation may be both necessary and appropriate.

FROM RUTH PEREZ,J.D., AND MICHAEL A. URBAN,J.D., MLT, WASHINGTON, DC