The Internal Revenue Service has made organizational and administrative changes in the programs governing agreements between large businesses and the IRS over how tax transactions can be reported, particularly for multinational corporations using transfer pricing.
The IRS said Tuesday that the changes and transitional procedures relate to the agency’s recent creation of an Advance Pricing and Mutual Agreement, or APMA, program. Until late last month, the Advance Pricing Agreement was part of the Office of the Associate Chief Counsel (International), and the functions of the U.S. Competent Authority were generally exercised by the office of the director of the Competent Authority & International Coordination within the IRS’s Large Business and International Division.
Beginning Feb. 26, the APA program and the Competent Authority functions (including mutual agreement procedures) related to transfer pricing and other allocation issues, along with determinations of permanent establishment status, have been realigned and consolidated into the APMA program, a single program within LB&I.
Last July, the IRS announced that it planned to carry out the reorganization to bolster its international tax compliance and enforcement efforts (see IRS Realigns International Tax Operations). The Advance Pricing Agreement program is designed to work out pre-filing agreements on transfer pricing issues with multinational corporate taxpayers. Transfer pricing has become a sensitive issue as multinational corporations face accusations of using sophisticated transactions to shift their profits to offshore subsidiaries in low-tax countries. Multinationals have banded together to lobby Congress for a territorial-based tax system in which only profits earned in the U.S. can be taxed in the U.S. and to press for a lower tax rate.
The IRS said Tuesday that that the director of the APMA would report to the director of transfer pricing operations. Other Competent Authority functions will now become the responsibility of a new LB&I Treaty Assistance and Interpretation team within the office of the Assistant Deputy Commissioner (International), LB&I.
The IRS noted that under the realignment, the administration of requests for Competent Authority assistance will now be shared by two separate units within LB&I. Requests for advance pricing agreements or regarding other transfer pricing, permanent establishment and allocation issues will be addressed by the APMA. Competent Authority requests regarding non-allocation issues will addressed by the LB&I Treaty Assistance and Interpretation team.
The IRS said it intends to revise the existing published guidance with respect to requests for APAs and Competent Authority assistance. Before issuing the updated guidance, the IRS will seek public comment. Pending the issuance of the revised guidance, the IRS recommended that taxpayers should continue to follow and rely on Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-31, 2008-1 C.B. 1133 with respect to requests for APAs and Rev. Proc. 2006-54, 2006-2 C.B. 1035 with respect to requests for Competent Authority assistance, except as follows:
(i) References to the APA program should be understood to refer to APMA.
(ii) For determinations regarding limitation on benefits, the user fee under Rev. Proc. 2006-54, §14.02 is $27,500, effective for requests received after Feb. 4, 2012. See Rev. Proc. 2012-1 (Appendix A), 2012-1 I.R.B. 1.
(iii) Taxpayers should send APA requests and requests for Competent Authority assistance to the following address:
Deputy Commissioner (International)
Large Business and International Division
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Attention: Katina Cooper
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