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In November, the IRS Office of Chief Counsel issued a generic legal advice memorandum (“GLAM”) AM-2022-006, titled “Realistic Alternatives and Tax Considerations in the Application of Sections 482 and 367(d).” As the title suggests, the GLAM analyzes the realistic alternatives principle, which was codified in section 482 by the Tax Cuts and Jobs Act (Pub. L. No. 115-97).

The realistic alternatives principle, of course, is not new and has been part of the section 482 regulations since 1993. See Treas. Reg. § 1.482-1(d)(3)(iv); 58 Fed. Reg. 5253, 5266, 5275 (Jan. 21, 1993). But the realistic alternatives regulatory provisions were short on practical substantive guidance. Thus, the GLAM provides new insight into how the IRS currently thinks the realistic alternatives principle ought to be applied. In sum, the GLAM applies concepts from the corporate finance discounted cash flow (“DCF”) valuation method to make its realistic alternative comparisons.

Continue Reading GLAM’s Realistic Alternatives Analysis Adopts Corporate Valuation DCF Concepts

On September 28, 2022, the OECD published the Bilateral Advance Pricing Arrangement (“BAPA”) Manual. The manual proposes best practices for jurisdictions to streamline, expedite and improve BAPA processes based on member surveys. Most notably, the BAPA manual encourages jurisdictions to conclude BAPAs within 30 months and to work to further reduce completion times to 24 months or less.

Continue Reading Prepare for Warp Speed: New Goal to Conclude APAs is 24–30 Months

On December 20, 2021, the OECD released the Model Rules for Pillar Two or the “Global Anti-Base Erosion” (GloBE) Rules.[1] The GloBE Rules are the first step towards implementing the groundbreaking international agreement reached by more than 135 countries announced by the OECD/G20 Inclusive Framework in October 2021.[2] Pillar Two provides for a minimum 15% tax on corporate profits for multinational enterprises (MNEs) with more than EUR 750 million in consolidated revenues.
Continue Reading The OECD’s Pillar Two Model Rules Have Arrived

On October 13, 2021, the G20 Finance Ministers and Central Bank Governors issued a Communiqué formally endorsing the political agreement reached by 136 countries of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (IF) on a two-pillar framework to dramatically change the taxation of multinational enterprises (MNEs). The  Communiqué calls on the IF

A recent Tax Notes article analyzes the “standard of review” that the Tax Court will apply to the IRS’s transfer pricing adjustments. In transfer pricing cases, the Tax Court determines whether the IRS has abused its discretion by proposing an adjustment that is “arbitrary, capricious, or unreasonable.” Although courts often describe this standard as a

Many taxpayers are familiar with information document requests where taxpayers are notified that taxing authorities are inquiring into certain transactions based on their receipt of the request. But today, many types of foreign tax information exchanges occur without the taxpayer’s knowledge. Moreover, tax administrations around the world are expanding tax information exchange programs. For example, on May 19, 2021, the European Union (“EU”) approved a measure to spend an additional € 270 million to improve national information exchange programs with a particular emphasis on upgrading information technology systems and financing joint audits.

Taxpayers should: 1) refresh themselves on the major types of tax information exchanges, 2) know how that information is used, and 3) be prepared that anything they provide to one tax administration could likely end up in the hands of another.
Continue Reading No Secrets are Safe in an Era of Global Tax Information Exchange

On July 10, 2021, the G20 endorsed a broad framework to advance Pillars One and Two, which includes an aggressive timetable for bringing the new rules into force in 2023. The endorsement came in a Communiqué, which approved the July 1 statement by the 139-country Inclusive Framework. The G20 agreement represents a political consensus on

On June 5, 2021, the Finance Ministers and Central Bank Governors of the G7 countries issued a Communiqué announcing their agreement on the conceptual framework for a substantial revision to global tax policy (the “Communiqué”). The Communiqué puts the G7’s stamp of approval on recent efforts by the OECD (supported by a big push by

In February 2021, the Organisation for Economic Co-operation and Development (“OECD”) issued a handbook linked with the official roll-out of its International Compliance Assurance Programme (“ICAP”). ICAP was first  introduced as a pilot in January 2018 (“ICAP 1.0”) as a voluntary program where MNE groups may receive “comfort and assurance” from multiple tax administrations as to the veracity of the MNE group’s transfer pricing allocations and numerous types of international transactions. While some notable countries did not participate in ICAP 1.0 (for example, Germany), the pilot program received positive reviews by a number of MNE groups. In March 2020, the OECD enhanced the pilot program (“ICAP 2.0”) to encourage more countries to join. On March 22, 2021, the OECD announced an initial list of twenty countries that are participating in the official program.[1]

Continue Reading ICAP, a New Tool in the Multiverse of Multinational Tax Dispute Management

On March 23, 2021, the United States’ Advance Pricing and Mutual Agreement Program (“APMA Program”) released its 2020 annual report (“2020 Annual Report”) to the public concerning advance pricing agreements (“APAs”). COVID-19 has caused unprecedented disruptions  to taxpayers and tax administrations alike, but the 2020 Annual Report shows that the APMA Program remained highly productive in 2020. Last year taxpayers filed 121 APA requests—the same amount as in 2019. And in 2020, APMA executed 127 APAs—seven more than the prior year.

Continue Reading APMA to COVID-19: Don’t Stop Me Now