IRS Consolidates Transfer Pricing Programs and Bolsters International Coordination

Aug 01, 2011   

On July 27, IRS officials announced restructuring changes aimed at improving its international operations.  First, the Advance Pricing Agreement (“APA”) Program and Mutual Agreement Program (“MAP”), will consolidate under a single executive in the Large Business and International Division.  Second, the IRS is creating a new position, the Assistant Deputy Commissioner (International), to facilitate agency coordination with treaty partners amid an increasingly global environment.

The New “Advance Pricing and Mutual Agreement Program”

The APA Program is concerned exclusively with reaching pre-filing agreements with taxpayers on transfer pricing.  However, the lengthy APA process can exceed 40 months for a small business, which deters many candidates from using the service.  Until now, the MAP was separately concerned with the bilateral resolution of transfer pricing disputes with U.S. treaty partners.  Now, the APA Program will shift from the Office of Chief Counsel to consolidate with the MAP in the Large Business and International Divisions international operation.  The combination, which aims to reduce processing times, was recently announced at a transfer pricing conference where practitioners and IRS officials discussed solutions to the problematic APA delays.  Read our coverage of APAs and the transfer pricing conference here

The new “Advance Pricing and Mutual Agreement Program” will have increased staffing available and should allow the IRS to more efficiently handle APA agreements and transfer pricing disputes with treaty partners.  Although the combined program will be headed by a single executive, the Office of Chief Counsel will remain a vital partner in the analysis and resolution of legal issues.

Assistant Deputy Commissioner for International Coordination

Next, the IRS plans to adjust its competent authority and international coordination functions under an Assistant Deputy Commissioner (International).  The new commissioner will be responsible for coordinating international activities, exchanges of information, and participation in the Joint International Tax Shelter Information Center (JITSIC). The Assistant Deputy Commissioner (International) will also pursue competent authority agreements with treaty partners on issues other than transfer pricing and support the Department of the Treasury in its negotiations of tax treaties and tax information exchange agreements.  With respect to non-governmental organizations, the commissioner will coordinate participation at the Organisation for Economic Cooperation and Development (OECD) and other programs.

Ideally, these two organizational changes will effect more cohesive transfer pricing operations and successful coordination with treaty partners.  IRS Commissioner Don Shulman announced, “These latest changes move forward to fulfilling one of my top priorities”meeting the challenge of tax administration in a global economy.”

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