TEI comments on revisions to APA revenue procedure.

• Position: Tax Executives Institute, advanced pricing agreements

On March 10, 2014, TEI submitted comments to the IRS regarding Notice 2013-79, which proposes substantial revisions to Revenue Procedure 2006-9 for requesting advanced pricing agreements (APA) from the IRS. TEI's comments focused on, among other things, the volume of information required to be submitted to the IRS under the proposed procedure, the pre-filing process, and Institute concerns with the authority of the IRS's advanced pricing and mutual agreement program to expand the scope of an APA request. TEI's comments were prepared under the aegis of TEI's U.S. International Tax Committee, whose chair is Jim Silvestri of Capsugel. Benjamin R. Shreck, TEI tax counsel, coordinated the preparation of TEI's comments.

On November 22, 2013, the Internal Revenue Service (IRS) and Treasury Department released Notice 2013-79, (1) proposing revisions to the procedures for advanced pricing agreement (APA) requests. (2) The proposed revenue procedure reflects structural changes undertaken by the IRS since the publication of Revenue Procedure 2006-9, which currently governs the procedures for APA requests. These changes include the establishment of the IRS's Large Business & International (LB&I) Division, the realignment and consolidation of the IRS's transfer pricing resources under its Director of Transfer Pricing Operations, and the creation of the Advance Pricing and Mutual Agreement (APMA) program.

The IRS and Treasury Department requested comments on the proposed revisions to Revenue Procedure 2006-9 on or before March 10, 2014. On behalf of Tax Executives Institute, Inc. (TEI), I am pleased to respond to the request for comments.

Tax Executives Institute

TEI is the preeminent association of in-house tax professionals in North America. Our approximately 7,000 members represent 3,000 of the leading corporations in the United States, Canada, Europe, and Asia. TEI represents a cross-section of the business community, and is dedicated to developing and effectively implementing sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. As a professional association, TEI is firmly committed to maintaining a tax system that works--one that is administrable and with which taxpayers can comply in a cost-efficient manner.

TEI's members are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises, including submitting APA requests, both in the United States and around the world. We believe that the diversity and professional training of our members enable us to bring a balanced and practical perspective to the issues raised by the proposed revisions to the current APA revenue procedure.

Overall Comments on the Revised APA Procedure

Notice 2013-79 proposes substantial revisions to Revenue Procedure 2006-9, many of which reflect the current practice of the APMA program. The proposed changes in the revised APA revenue procedure (New APA Procedure) include additional details regarding the "pre-filing" process, a detailed appendix regarding the materials and information that a taxpayer must include in an APA request, and rules for when the IRS may cancel or revoke a completed APA.

TEI commends the IRS and Treasury Department for revising Revenue Procedure 2006-9 to reflect changes in the IRS's transfer pricing operations and organization and the current practice of the APMA program with respect to APAs. Regrettably, the New APA Procedure, while substantially improved in many respects, takes an audit-like approach that significantly undermines the benefits of an APA for both taxpayers and the government.

The APA program has historically been a collaborative process between the taxpayer and the IRS, aimed at promoting trust and providing certainty for both parties. Indeed, the New APA Procedure notes that an APA request is a "voluntary process" for solving transfer pricing issues "in a principled and cooperative manner on a prospective basis." (3) TEI believes the revised processes and additional information required by the New APA Procedure will only lengthen the time it takes to complete an APA request, significantly decreasing its utility. The New APA Procedure appears to treat the process as an examination by giving APMA sole control over aspects of the process that were, in the past, more collaborative. In addition, the New APA Procedure significantly broadens the scope of the information required for a complete submission. TEI's members view the advance...