On September 9, 2021, the Treasury Department and the Internal Revenue Service (“IRS”) issued its Priority Guidance Plan for 2021-2022. The Priority Guidance Plan gives the public a sense of what regulations and other guidance the Treasury Department and the IRS might develop over the following 12 months. Among dozens of other pending and potential guidance projects, the Priority Guidance Plan lists the following two new potential section 482 regulations projects:

  • Regulations under §482 clarifying the effects of group membership (e.g., passive association) in determining arm’s length pricing, including specifically with respect to financial transactions.
  • Regulations under §482 further clarifying certain aspects of the arm’s length standard, including (1) coordination of the best method rule with guidance on specified methods for different categories of transactions, (2) discretion to determine the allocation of risk based on the facts and circumstances of transactions and arrangements, and (3) periodic adjustments.


Continue Reading Priority Guidance Plan Portends New Transfer Pricing Guidance

Prior to the Tax Cuts and Jobs Act of 2017 (“TCJA”), the appeal of cost sharing was driven largely by the deferral of U.S. taxation on foreign earnings. Now that excess foreign returns are currently taxable as “global intangible low-taxed income” (“GILTI”), cost sharing is attractive mostly to corporate taxpayers that have decided to continue

Last week, the IRS issued new guidance that addresses “telescoping” in mutual agreement procedure (“MAP”) and advance pricing agreement (“APA”) cases. Very generally, the guidance disallows (subject to a $10 million materiality exception) telescoping for tax years starting in 2018, when the Tax Cuts and Jobs Act (“TCJA”) came into effect, while continuing to allow telescoping for pre-2018 years in appropriate cases. According to the IRS’s Advance Pricing and Mutual Agreement (“APMA”) program, the new guidance was needed to address the impact of the TCJA “and its many interlocking provisions that require careful determination (and redetermination, as needed) of a U.S. taxpayer’s taxable income and tax attributes.” The new guidance has the potential to drive up compliance costs by increasing the number of tax returns that taxpayers must file to resolve MAP and APA resolutions for post-TCJA years (and resolutions spanning both pre- and post-TCJA years).

Continue Reading Telescoping into the Void