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Sonal Majmudar is a partner in Mayer Brown's Washington DC office and a member of the Tax practice. Prior to joining Mayer Brown she was former international tax counsel with the Internal Revenue Service (IRS).

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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 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

Last week, the IRS released a mysterious new audit “campaign” that may implicate – inadvertently or otherwise – transfer pricing practices. The campaign, which was announced on August 8, is simply entitled “Inflated Cost of Goods Sold.”   

The only glimmer of explanation the IRS gives as to what exactly this is all about is the brief statement that the campaign “focuses on LB&I taxpayers that have indications of inflated Cost of Goods Sold to reduce taxable income.”

But this tells us very little. Absent book-tax differences (e.g., FIFO/LIFO materials inventory conventions), an increase in COGS will always decrease taxable income. This is hardly revelatory. Two old IRS practice units from 2014 (“Purchase of Tangible Goods from Foreign Parent – CUP Method” and “Sale of Tangible Goods from a CFC to USP – CUP Method”) recognize the truism that increasing COGS reduces taxable income. So what? What facets of COGS gives the IRS concern? Direct Labor? Overhead? Standard Material Costs? Variances?Continue Reading Compliance Campaign: COGS Cops Coming