The Transfer Pricing Examination Process (TPEP) provides a guide to best practices and processes to assist with the planning, execution, and resolution of transfer pricing examinations consistent with the Large Business & International (LB&I) Examination Process (LEP), Publication 5125. This guide will be shared with taxpayers at the start of a transfer pricing examination, so they understand the process and can work effectively with the examination team.
Transfer pricing examinations are factually intensive and require a thorough analysis of functions performed, assets employed, and risks assumed along with an accurate understanding of relevant financial information. They are resource intensive for both the IRS and taxpayers. To ensure resources are applied effectively, LB&I is
using data analytics to identify issues for examination that have the most significant risk for non-compliance. In addition, teams should continually assess the merits of issues during an examination.
Our goal in a transfer pricing examination is to determine an arm’s length result under the facts and circumstances of the case.
Teams should keep an open mind during an examination to new facts as they are identified. Arm’s length results are rarely a precise answer, but instead may be a range of results. If the facts of the case show that the taxpayer’s results fall within an appropriate arm’s length range, then our resources should be applied elsewhere.
Likewise, teams should continually assess opportunities for issue resolution with taxpayers during the examination process.
The TPEP provides a framework and guide for transfer pricing examinations. Every transfer pricing issue is unique, and teams should exercise their judgment on how to best apply this guide. This guide will be updated regularly based on feedback from examiners, taxpayers, practitioners and others.