Comments on Revenue Procedure 2015-41

Abstract

Submission to IRS Re Rev Proc 2015-41 (Procedures for Advance Pricing Agreements)

On the expectation that Rev Proc 2015-41 will be reissued at some point in the future, this submission to the IRS makes a number of suggestions for improvement. The principal suggestions made revolve around our belief that in recent decades the primary use (maybe the only use) by taxpayers of cost sharing agreements is in implementing profit-shifting structures. As such, we recommend that the IRS cease granting APAs for CSAs. Alternatively, if the IRS decides to continue granting APAs, we suggest various standards and requirements that could be applied so as to discourage their use in profit-shifting structures. Also, in order to make the application of the “periodic adjustment” mechanism of Reg. section 1.482-7(i)(6) easier for the IRS, we suggest that any APA for a CSA include required actions toward that end. The submission also includes considerable background on CSAs and why the IRS should be discouraging their use.

Keywords: Transfer Pricing, periodic adjustment, section 482, Reg. section 1.482-7(i)(6), cost sharing agreement, CSA, intangible transfers, effectively connected income

JEL Classification: H21, H25, K34, E62