APAs Should Remain Confidential, TEI Says in Brief.

Advance Pricing Agreements -- settlements negotiated between taxpayers and the Internal Revenue Service that can eliminate costly and time-consuming transfer pricing audits and litigation -- should not be subject to public disclosure under the Freedom of Information Act, Tax Executives Institute contended in a brief amicus curiae filed with the United States District Court for the District of Columbia on February 25 in the case of BNA v. IRS. TEI filed its comments (reprinted beginning on page 155) in opposition to a Bureau of National Affairs motion calling for the IRS to release APA documentation.

Until recently, the IRS had opposed BNA's attempt to secure access to the APAs. On January 8, the IRS abruptly reversed its opposition to the disclosure of APAs, and now asserts that APAs should not be considered tax return information and, as such, are not subject to the privacy and non-disclosure protection of section 6103 of the Internal Revenue Code. Instead, the IRS said, APAs are "written determinations" and thus subject to disclosure under section 6110, with certain sensitive items being redacted. APA documents, according to TEI and corporate taxpayers that have participated in the APA program, contain highly sensitive financial and commercial tax return information, and should not be made public. Even redacting specific references to a company's identity, TEI said, provides inadequate protection.

"In 1976, Congress implemented measures to ensure that tax return information remained confidential," said TEI President Lester D. Ezrati, who is General Tax Counsel for Hewlett-Packard Company in Palo Alto, California. "And when the APA program was launched in 1991, it was specifically provided that APAs and supporting information would be subject to the confidentiality provisions of section 6103. The IRS's abrupt about-face on the confidentiality of APAs has jeopardized what has been one of the true `success stories' of IRS reform in this decade. Public disclosure of APAs would significantly decrease the desirability of entering into these agreements in the future and would deprive both taxpayers and governments of this valuable method of addressing tax liability issues."

The importance of the issue of APA confidentiality, said Ezrati, led TEI to call upon the services of Donald C. Alexander, who was IRS Commissioner at the time sections 6103 and 6110 were enacted. Now with the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP, which prepared...