APA Confidentiality Provisions Should Be in Tax Bill.

Tax Executives Institute has urged the House Ways and Means Committee to support a bill that would preserve the confidentiality of advance pricing agreements (APAs) and background documents relating to APAs. In a July 8 letter to committee chair Bill Archer, TEI called for the substance of H.R. 2378 to be included in the tax bill the committee was crafting.

The APA program is designed to forestall contentious and expensive transfer pricing disputes between taxpayers and the Internal Revenue Service. A voluntary venture, the APA program represents one of the IRS's success stories of the 1990s, for it furthers the goals of reducing taxpayer burdens and minimizing disputes between the IRS and taxpayers. The information set forth in APAs is highly fact specific and involves sensitive financial and commercial information. Almost 200 APAs have been negotiated since the program began in 1991. "The program is a model for minimizing double taxation of income and settling costly transfer pricing disputes before they occur," said TEI President Lester D. Ezrati. "By reducing taxpayer burden and enhancing taxpayer certainty, the APA program strengthens the competitiveness of participating American businesses and facilitates the more efficient use of resources."

H.R. 2378, introduced by Rep. Amo Houghton and other House members, would provide that APAs (and their background information) would be considered confidential tax return information under section 6103 of the Internal Revenue Code. Since the inception of the APA program until January 8 of this year, the IRS treated APAs and APA background files as protected tax return information, providing taxpayers with assurances that...

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