IRS Issues Final 367 Regulations
The IRS issued final regulations relating to certain transfers of property by United States persons to foreign corporations. The final regulations affect United States persons that transfer certain property, including foreign goodwill and going concern
value, to foreign corporations in nonrecognition transactions described in section 367 of the Internal Revenue Code.
December 16, 2016
US Regulations Under Section 385
The IRS issued final and temporary regulations under section 385 of the Internal Revenue Code that establish threshold documentation requirements that ordinarily must be satisfied in order for certain related-party interests in a corporation to be treated as indebtedness for federal tax purposes, and treat as stock certain related-party interests that otherwise would be treated as indebtedness for federal tax purposes. The final and temporary regulations generally affect corporations, including those that are partners of certain partnerships, when those corporations or partnerships issue purported indebtedness to related corporations or partnerships.
Effective October 21, 2016
Country by Country Reporting
On June 30, 2016 the IRS issued the final Country-by-Country Reporting regulations, following up on the proposed regulations that were issued on December 22, 2015 and incorporating comments received on the proposed regulations. The final regulations maintained the proposed reporting threshold such that the regulations apply to entities residing in the United States that are the ultimate parent of multinational enterprise groups with annual revenue of USD $850,000,000 or more for the preceding annual accounting period.
In December 2016, the IRS issued the draft Form 8975 and its accompanying draft Schedule A for reporting the country-by-country information, and in February 2017, the IRS issued draft instructions for completing the Form 8975 and Schedule A.
The IRS has also issued Revenue Procedure 2017-23, which describes the process for filing Form 8975 and Schedule A by ultimate parent entities of U.S. multinational enterprise groups for annual accounting periods that begin on or after January 1, 2016, but before June 30, 2016. This process would apply to multinationals that must comply with foreign country requirements that have earlier effective dates than the U.S. regulations.
June 2016, December 2016, January 2017, and February 2017
The IRS has a page on its website devoted to Country-by-Country Reporting Guidance. It contains the items described above as well as other resources, such as a section for Frequently Asked Questions.
Revenue Proc. 2015 - 40
This Revenue Procedure, effective as of October 30, 2015, provides guidance on the process of requesting and obtaining assistance under U.S. tax treaties from the U.S. competent authority, acting through the Advance Pricing and Mutual Agreement Program and the Treaty Assistance and Interpretation Team of the Deputy Commissioner (International), Large Business & International Division of the Internal Revenue Service.
Coordination of Transfer Pricing Rules with Other Code Provisions
This document includes final and temporary regulations, effective on September 14, 2015, that clarify the coordination of the application of the arm’s length standard and the best method rule under section 482 of the Internal Revenue Code in conjunction with other provisions of the Internal Revenue Code. There is particular emphasis on the analysis of transfers of intangible property, including examples demonstrating coordination of section 482 with other sections of the Internal Revenue Code.
September 16, 2015
Revenue Proc. 2015 - 41
On August 12, 2015 Revenue Procedure 2015-41 was published, which provides guidance on the process of requesting and obtaining advance pricing agreements from the Advance Pricing and Mutual Agreement program, as well as guidance on the administration of executed APAs.
IRS Finalizes Cost Sharing Rule Describing New Specified
Application of Income Method
Cost sharing rule that describes a new specified
application of the income method in Section 482-7(g)(4)
for directly determining the arm's length charge for
platform contribution transactions, or buy-in payments.
August 27, 2013
Final Cost Sharing Regulations - Effective December 16, 2011
In August 2005, proposed regulations relating to cost sharing arrangements were
issued. The Treasury Department and the IRS collected
extensive comments on a variety of issues addressed in
the August 2005 regulations. In response to these
comments, temporary regulations (released on
January 5, 2009) made several significant changes to the rules provided in the
August 2005 proposed regulations. On December
16, 2011 the IRS released the
final cost sharing regulations.
The final regulations implement practically all of the requirements contained in the
temporary regulations. These regulations provide
guidance regarding methods under section 482 to
determine taxable income in connection with a cost
sharing arrangement. These regulations affect controlled taxpayers within the
meaning of section 482 that enter into cost sharing
Final Services Regulations - Effective July 31, 2009
This document contains final regulations that provide
guidance regarding the treatment of controlled services
transactions under section 482 and the allocation of
income from intangible property, in particular with
respect to contributions by a controlled party to the
value of intangible property owned by another controlled
party. This document also contains final regulations
that modify the regulations under section 861 concerning
stewardship expenses to be consistent with the changes
made to the regulations under section 482. These final
regulations potentially affect controlled taxpayers
within the meaning of section 482. They provide updated
guidance necessary to reflect economic and legal
developments since the issuance of the current guidance.
IRS Revenue Procedure
2007-13 identifies specified covered services that
are support services and generally do not involve a
significant arm's length mark-up. The identified
services must meet the other conditions set forth in the
Services regulations in order to be evaluated under the
Report Concerning Advance Pricing Agreements in 2016
On March 27, 2017 the Secretary of the Treasury issued its annual report concerning advance pricing agreements (APAs) and the Advance Pricing and Mutual Agreement Program for calendar year 2016. The report includes information on the structure, composition, and operation of the program, presents statistical data, and includes general descriptions of various elements of the APAs executed in 2016, including the types of transactions covered, the transfer pricing methods used, and completion time.
IRS Compliance Campaigns
The Large Business and International Division of the IRS has selected 13 compliance campaigns. Included is (i) a Related Party Transactions campaign, and (ii) an Inbound Distributor campaign. For the former, the IRS wants to "determine the level of compliance in related party transactions of taxpayers in the mid-market segment." For the latter, the IRS notes that "U.S. distributors of goods sourced from foreign-related parties have incurred losses or small profits on U.S. returns, which are not commensurate with the functions performed and risks assumed."
GAO Report on Transfer Pricing
The Government Accountability Office ("GAO") issued a report entitled "Information on the Potential Impact on IRS and U.S. Multinationals of Revised International Guidance on Transfer Pricing." The report analyzes the potential effects of the OECD's revised transfer pricing guidelines and new transfer pricing documentation, including country-by-country reporting. More specifically, GAO examined (1) how likely it is that the action would reduce BEPS, (2) what is known about the potential administrative and compliance costs of the action, and (3) what is known about the potential effects the actions could have on the U.S. economy.
IRS Memorandum on Exchange of Tax Information
This memorandum from the IRS Associate Chief Counsel (International) addresses the issue of when legal responsibilities to protect tax return information arise in the context of electronic data transmission through the Common Transmission System (CTS). The CTS is being developed under the OECD Forum on Tax Administration in order to facilitate the automatic exchange of financial account information, country-by-country reporting, and other exchanges of information between tax administrations. The IRS determined that information that will be transmitted by the IRS to foreign tax administrations (outbound transmissions) through the CTS is return information under section 6103 in the hands of the IRS, so throughout the exchange process should be protected as required by section 6103. Furthermore, that information becomes treaty-protected information in the hands of the foreign country when the information is exchanged pursuant to a tax convention or other international agreement on taxes. In the case of information provided to the IRS by foreign tax administrations (inbound transmissions) through the CTS, the moment when legal protection arises is less certain.
June 17, 2016 (released October 14, 2016)
Barriers exist to properly evaluating transfer pricing issues
The Treasury Inspector General for Tax Administration ("TIGTA") issued a report entitled "Barriers Exist to Properly Evaluating Transfer Pricing Issues." TIGTA found that: (i) the IRS provided external stakeholders adequate education and outreach related to the transfer pricing examination process; (ii) some IRS employees may not be consistently following the Transfer Pricing Audit Roadmap; (iii) the IRS does not have a process to ensure that all transfer pricing issues are identified for specialized review because 20 percent of the transfer pricing inventory is received from the Specialist Referral System; (iv) Transfer Pricing Practice ("TPP") employees do not have access to the Specialist Referral System and are reliant on International Business Compliance ("IBC") function management to share any transfer pricing referrals with them; (v) the Rules of Engagement between the TPP and the IBC function are not always being followed for working transfer pricing-related examinations; and (vi) there are no separate performance measures related to quantifiable results to determine the success of the IRS’s transfer pricing efforts, including Appeals determination information that could be used to better refine the approach for identifying and working cases.
September 28, 2016
U.S. Treasury White Paper on the European Commission's State Aid Investigations
The U.S. Department of the Treasury has issued a White Paper on the state aid investigations being undertaken by the European Commission. Treasury states that these investigations, if continued, have considerable implications for the U.S. government and for U.S. companies—in the form of potential lost tax revenue and increased barriers to cross-border investment. The White Paper discusses Treasury's concerns with respect to these investigations, which include a concern that the European Commission is not adhering to the OECD's Transfer Pricing Guidelines but rather is employing a different arm’s length principle that is derived from EU treaty law.
August 24, 2016
IRS Releases Competent Authority Statistics
On April 27, 2016 the Internal Revenue Service released its competent authority statistics for 2015, comprising data from the Office of the United States Competent Authority, which includes both the Advance Pricing and Mutual Agreement Program and the Treaty Assistance and Interpretation Team. The report contains statistics on cases handled by both; however does not include Advance Pricing Agreement information, which is published in a separate report. Information presented includes number of requests received, cases resolved and pending cases.
April 27, 2016
Report Concerning Advance Pricing Agreements
On March 31, 2016 the Secretary of the Treasury issued its annual report to the public concerning advance pricing agreements and the Advance Pricing and Mutual Agreement Program corresponding to calendar year 2015. The report includes information on the structure, composition and operation of the Program, statistical data for 2015, and general descriptions of diverse elements in the advance pricing agreements executed during 2015, such as transactions covered, transfer pricing methods applied, and completion time.
March 31, 2016
IRS Releases Transfer Pricing Audit Roadmap
The IRS has developed a Transfer Pricing Audit Roadmap to provide transfer pricing practitioners with audit techniques and tools to assist with the planning, execution and resolution of transfer pricing examinations.
February 17, 2014
IRS Releases Draft Procedure Related to APA Transparency
Proposal reflects structural changes undertaken by the IRS since 2006, including the establishment of the Large Business & International Division and the creation of the Advance Pricing and Mutual Agreement Program.
November 22, 2013
Proposed Revocation of a Customs Ruling Letter Relating
to Post-Importation Adjustments; Transfer Pricing;
Related Party Transactions; and Reconciliation
U.S. Customs is proposing to consider recognizing
downward adjustments in a transfer price for imported
merchandise, made after the date of entry, when the
reduction in price is in conformity with an existing
corporate transfer pricing policy. The recognition of a
post-entry decrease in price would prompt a right to a
refund in duties. The specific issue addressed in the
policy statement will be whether a post-entry adjustment
which was made to conform to an international transfer
pricing tax compliance program will be recognized for
December 28, 2011
IRS Guidance on Uncertain Tax Positions
The IRS offered guidance to taxpayers about reporting
their uncertain tax positions to the government,
addressing key questions surrounding the recording of a
July 19, 2011
Ruling on Advance Pricing Agreements
The U.S. Customs and Border Protection addressed the acceptability and
documentation requirements of transfer pricing between
related parties, the significance of Advance Pricing
Agreements in determining customs value, and the
treatment of downward price adjustments made after
importation. The Agency reaffirmed that the burden
lies with the importer to establish that an APA
methodology is an appropriate basis for customs value,
as does the responsibility to provide sufficient
documentary evidence of compliance.
December 10, 2010
Memorandum by Office of Chief Counsel of the IRS
Discusses Treatment of Difference between a Taxpayer’s
Valuation for Customs Law Purposes and for Income Tax
The IRS Office of Chief Counsel concluded that the difference between valuations for customs
purposes and for income tax purposes—resulting from a
correct application of the “first sale” rule—does not
violate IRC section 1059A when this difference qualifies
under an exception provided by Reg. section 1.1059A-1(c)(2)(iv).
October 29, 2010