The IRS recently issued guidance on the process for requesting and obtaining advance pricing agreements (APAs). In Revenue Procedure 2015-41, the IRS also provides guidance on the administration of executed APAs.
The IRS guidance is being issued concurrently with procedures and guidance on the process for requesting assistance from the U.S. competent authority under the provisions of U.S. tax treaties.
APAs are agreements between the IRS and a taxpayer on the transfer pricing methodology to be used in allocating income, deductions, credits or allowances between two or more organizations or businesses controlled by the same interests. The APA program is designed as an alternative dispute resolution process that supplements the traditional administrative, judicial and treaty mechanisms for resolving transfer pricing issues.
APAs come from the IRS Advance Pricing and Mutual Agreement (APMA) program.
The new guidance sets out the procedures, rules and guidelines relevant to filing an APA request. It also addresses a taxpayer’s obligations before and after filing the request.
There are differences between Rev. Proc. 2015-41 and the proposed version (IRS Notice 2013-79). For example, the new guidance clarifies that, if the APMA requires — as a condition of continuing with the advance pricing agreement process — the taxpayer to expand the proposed scope of its request to cover interrelated matters, the APMA will do so with due regard to considerations of principled, effective and efficient tax administration.
This will occur only after considering the views of the taxpayer and the applicable foreign competent authority. (Interrelated matters are issues in the same years, covered issues or interrelated issues in other years, and covered issues or interrelated issues in the same or other years as applied to other countries.)
User fees increased
User fees for APA requests are increased under the new guidance, but total user fees may be reduced for multiple APA requests filed by the same controlled group within a 60-day period.
The new guidance also addresses rollback years — generally, a year covered by an APA ending before the first tax year covered by an agreement for which the taxpayer has filed a complete request. It provides that rollback years may be formally covered within an APA.
A rollback (the application of the covered methods to the specific back years) will be included in an APA when it is either 1) requested by the taxpayer and approved after coordination and collaboration between the APMA and other offices within the IRS, or 2) required by the APMA, after coordination and collaboration with other offices.
Effective date and transition rule
Rev. Proc. 2015-41 applies to all APA requests filed under its procedure. However, there is a transition rule. An APA request filed after August 31, 2015, may instead be filed under earlier guidance (IRS Rev. Proc. 2006-9) if a substantially complete APA request is filed under that Revenue Procedure no later than December 29, 2015.
For this purpose, the 120-day allowance of Rev. Proc. 2006-9 won’t apply in determining the date on which a substantially complete APA request is considered filed. APA requests filed on or before December 29, 2015, should clearly state under which Revenue Procedure they are filed.