Mandatory consultation required between LB&I exam and APMA on transfer pricing issues

Tax Hot Topics newsletter The IRS revised the Internal Revenue Manual in Memorandum LB&I-04-0219-001, issued Feb. 19, to require IRS examination teams to consult with the Advance Pricing and Mutual Agreement (APMA) program when the examination could generate transfer pricing adjustments involving a country with which the United States has a tax treaty.

This consultation requirement applies regardless of whether the taxpayer currently has a mutual agreement procedure (MAP) or Advance Pricing Agreement (APA) case with APMA.

At the beginning of the exam team’s review of the taxpayer’s transactions involving a treaty partner, the exam team manager will request APMA consultation on procedural and substantive matters. APMA can help the exam team understand relevant treaty background and experience with the treaty partner or transfer pricing issues. The early consultation requirement is intended to improve the efficiency and effectiveness of the resolution of transfer pricing issues. Further, such consultations give APMA the opportunity to learn from the experiences of the exam teams and use that information in APMA’s MAP case negotiations.

David Sites
Partner, Washington National Tax Office
T +1 202 861 4104

Steven Wrappe
Managing Director, Washington National Tax Office
T +1 202 521 1542

Cory Perry
Senior Associate, Washington National Tax Office
T +1 202 521 1509

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