Tag Archive for Transfer Pricing Examination Process And Updates

Department of Treasury – Transfer Pricing Examination Process And Updates – Appeals Phase (Part VIII)

Transfer Pricing Examination Process, Appeals Phase

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

C. Appeals Phase
As a best practice, the issue team will begin preparing the pre-Appeals presentation immediately after closing the case. Upon contact from Appeals that the case has been assigned, the issue team should:
• Request a pre-Appeals conference using Forms 3198 and 4665
• Contact the Appeals Officer and request examination’s presence at the taxpayer’s portion of the presentation
• Determine which LB&I team members should attend the pre-Appeals conference
• Determine the roles and responsibilities of the issue team members
• Hold mock presentations to prepare for the pre-conference meeting
• Hold the Appeals pre-conference meeting

Request a post-Appeals Conference and attend the meeting. The issue team should:
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Department of Treasury – Transfer Pricing Examination Process And Updates – Resolution Phase (Part VII)

Transfer Pricing Examination Process Part VII

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

III. Resolution Phase
The goal of the resolution phase is to reach agreement, if possible, on the tax treatment of each issue examined and, if necessary, issue a Revenue Agent Report (RAR) to the taxpayer. Starting with the development of the issue and continuing through resolution,
early and frequent discussions with the taxpayer are crucial for a complete understanding of the respective merits of an issue.

A. Issue Presentation and Resolution
The issue team should meet with the taxpayer to discuss results of all issues prior to finalizing the NOPA and the Economist Report.

Focus taxpayer discussions on the following:
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Department of Treasury – Transfer Pricing Examination Process And Updates (Part VI)

Transfer Pricing Examination Process, Part VI

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

E. Issue Development

1. Economic Analysis
The issue team should work with the economist to perform an economic analysis consistent with the working hypothesis to:

• Evaluate the taxpayer’s best method analysis
– Consider whether the taxpayer’s method, as applied, or whether the method with adjustments, would reflect an arm’s length result. If not, refer to Revised Instructions for LB&I on Transfer Pricing Issue Selection and Scope of Analysis – Best Method Selection
• Analyze the facts, including accounting data, to determine the applicable legal analysis
• Prepare a draft Economist Report, as appropriate. Arrange a meeting with the taxpayer to discuss the economic analysis to date

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Department of Treasury – Transfer Pricing Examination Process And Updates (Part V)

Transfer Pricing Examination Process Part V

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

Execution Stage
1. Issue IDRs and/or Summonses

The issue team will request any additional information not obtained during the Planning Phase, including:

• Follow-up on the financial statement orientation, transfer pricing/supply chain orientation, Treas. Reg. Sec. 1.6662-6(d)(2)(iii) documentation, and other data and information necessary to test the working hypothesis and the best method assessment. Clarify any items that do not reconcile or that have missing
information.

Issue IDRs or summonses for factual development, including requests for interviews, plant tours, and site visits:
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Department Of Treasury – Transfer Pricing Examination Process And Updates (Part III)

IRS, Transfer Pricing Examination Process

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

D. IRC Section 6662(e) Documentation Request
The Initial Transfer Pricing Documentation IDR (formerly known as the Mandatory Transfer Pricing IDR) is no longer required for all cases. Follow the Interim Instructions on Issuance of Mandatory Transfer Pricing IDR in LB&I Examinations. The Senior Revenue Agent/Team Coordinator and the issue team members will collaborate on the issuance of the IDR. It is important to issue the IDR early in the audit process to start working the issue as soon as possible to close the case timely. Please review IRM Exhibit 4.46.3-4 – Transfer Pricing Compliance Processes for specific language:

• Treas. Reg. Sec. 1.6662-6(d)(2)(iii) IDR includes a request for principal documents and an index for background documents
• Internal Revenue Code Section (IRC Sec.) 6662(e) and Treas. Reg. Sec. 1.6662- 6(d)(2)(iii) require that the taxpayer respond within 30 calendar days. The 30 days starts with the date of the IRC Sec. 6662(e) IDR
• The 30 day response time is defined by statute and is an exception to the new IDR and related enforcement processes as described in LB&I Directive on IDR Enforcement Process
• The issue team should use this 30 day period to perform analysis of currently available information, which may include prior tax returns and financial statements

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Department Of Treasury – Transfer Pricing Examination Process And Updates (Part I)

IRS, Transfer Pricing Examination Process Update

(The Transfer Pricing Examination Process was recently updated by the Department of Treasury – June 2018. TaxConnections posts this valuable eight part a series to keep you informed of these changes.)

The Transfer Pricing Examination Process 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, assets, and risks 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 Transfer Pricing Examination Process 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.

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