On March 27, 2025 the IRS’s Advance Pricing Mutual Agreement Program (“APMA” or the “Program”) released Announcement 2025-13 which provides APMA’s annual Advance Pricing Agreement (“APA”) report (the “Report”). Key takeaways and our observations are noted here.
Continue Reading 2024 APA Annual Report Shows Strong Year Despite Slight Decrease in Completions
In January, the IRS issued a generic legal advice memo on periodic adjustments and the arm’s length standard. Although the “GLAM” states that it merely “clarifies” and “updates” a prior memo, it contains insights into the IRS’s aggressive thinking on this topic. And the very fact that the IRS issued the memo now suggests that disputes over periodic adjustments are heating up in audits and litigation.
Background. The new memo “addresses the relationship” between “the general arm’s length standard” and “the specific periodic adjustments rules” in the section 482 regulations. Since 1986, the second sentence of section 482 has required the income from the transfer of intangible property to “be commensurate with the income attributable to the intangible.” The agency takes the position that this statutory language authorizes the IRS (and only the IRS) to adjust the income of a transferor of IP based on the actual income earned by the transferee. The agency views these “periodic adjustments” as a necessary palliative when considering IP with a high—but uncertain—profit potential.
Continue Reading A “Capacious” Arm’s Length Standard?
On Wednesday, October 9, 2024, the Treasury Department and the Internal Revenue Service (“IRS”) released final regulations (TD 9994), confirming that the application of section 367(d) to intangible property (“IP”)—e.g., patents, copyrights, trademarks, licenses, etc.—is terminated when the IP is repatriated to the United States (“U.S.”) under certain circumstances.
Continue Reading Repatriate Intangible Property to the U.S. and Turn Off Section 367(d) Inclusions
Last week, the US Treasury released long-awaited proposed regulations on the corporate alternative minimum tax or “CAMT.” In a press release, Treasury estimated “that around 100 of the largest and most profitable companies will pay the CAMT annually.” According to Janet Yellen, the new rules will help combat “egregious U.S. corporate tax avoidance” that has led, in her view, to artificially low tax liabilities. Transfer pricing practitioners take note: one tool that Treasury plans to use in this effort to combat “abuse” is Section 482.
Continue Reading When Worlds Collide: Transfer Pricing and the CAMT
Multinational groups constantly evolve, grow, and consolidate, and operational facts and circumstances always change. Say a growing company decides to expand internationally. It may choose to incorporate new foreign subsidiaries that will operate a manufacturing facility in one country and a limited-risk distributor in another.
The tax department will probably pay a lot of attention to the proper transfer pricing for transactions between these related parties of the growing multinational group. When it does so, it should ensure that the intercompany transactions, including the arm’s-length pricing, are memorialized in written intercompany agreements. We’ll address the most common questions you might have about these agreements.
Continue Reading How Intercompany Agreements Can Mitigate Transfer Pricing Risk
In most transfer pricing disputes, the taxpayer squares off with the IRS or some other taxing authority, and the issue is the amount of tax due. But, in some cases, a company’s transfer pricing policies can lead to disputes between private parties. It is important for tax-department personnel to be aware of the risks from these private disputes so that they can take them into account when setting up intercompany documentation and transfer pricing policies. Examples include:
Continue Reading Private Transfer Pricing Disputes
On March 22, 2024 the IRS’s Advance Pricing Mutual Agreement Program (“APMA” or the “Program”) released Announcement 2024-16 which provides their annual Advance Pricing Agreement (“APA”) report (the “Report”), and the statistics show a record-breaking result for 2023 – 156 APAs resolved. APMA resolves actual and potential transfer pricing disputes and other competent authority matters through United States’ bilateral income tax conventions. This Report focuses on APAs (a solution to prevent future transfer pricing disputes) during calendar year 2023 and provides statistical information about the APA applications received and resolved, including countries involved, types of transactions, and transfer pricing methods. Key takeaways and our observations are noted here.
Continue Reading APA Statutory Report Reveals Successful 2023 for APMA
On February 19, 2024, the OECD Inclusive Framework on BEPS published its long-awaited final report on Pillar One – Amount B.[i] The report details guidance on the “simplified and streamlined approach” (formerly known as Amount B) for applying the arm’s length principle to certain “baseline marketing and distribution activities.” While offering some potential benefits in terms of reducing the need for comparables analyses and avoiding some disputes about comparables selection and adjustments, it is nevertheless narrow in scope, complex in application, and will likely give rise to inconsistencies in implementation throughout the world and more controversy.
Continue Reading Amount B: Some Benefits, More Burdens
The IRS has made it clear once again that transfer pricing remains a key focus in its ongoing enforcement efforts.[1] And with significant additional resources to do so over the next decade, the IRS is likely to focus some of these resources on taxpayers who have not undergone a transfer pricing audit in recent years or, perhaps, ever. For example, while the IRS is onboarding the many new transfer pricing experts it hired in 2023, it has sent compliance alerts to certain U.S. subsidiaries of foreign corporations that distribute goods in the U.S. where the IRS thinks that these subsidiaries are not paying their fair share of tax on the profit they earn on their U.S. activity.[2] Taxpayers would be wise to take this time to prepare for an audit by reviewing their material intercompany transactions and undertaking a transfer pricing risk assessment.
Continue Reading Transfer Pricing Audits: What Taxpayers Can Do to Prepare
On January 29, 2024, the OECD released the results and statistics for its growing International Compliance Assurance Program (“ICAP”).[1] The data spans the life of the ICAP program, dating back to the first pilot program that began in January 2018, through its full program operations as of October 2023. In all, the statistics generally suggest that the program has been efficient and productive, with most participants receiving mostly low-risk outcomes from tax administrations.
Continue Reading ICAP: Life in the Fast Lane