Transfer Pricing

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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

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

Mayer Brown announced today that Sonal Majmudar, former international tax counsel with the Internal Revenue Service (IRS), joined its Tax practice as a partner. Sonal will be resident in the firm’s Washington DC office. Her arrival bolsters Mayer Brown’s market-leading, global tax offerings, particularly with regard to transfer pricing controversies and high-stakes international disputes.