With U.S. and Canadian officials' recent comments that procedures for arbitration of double tax disputes are nearly finished, a big question is how those procedures, due out Dec. 15, will cover advance pricing agreements. When he announced that the guidelines were close to done in late September, IRS Deputy Commissioner (International) Michael Danilack said he and his Canadian counterpart Lucie Bergevin had reached a "meeting of the minds" on the APA issue, and added, "I think the solution is one everyone will find rational and reasonable."

Looking to APA provisions under other U.S. treaties, the procedures agreed to with Belgium (http://www.irs.gov/businesses/small/international/article/0,,id=137376,00.html) allow broad coverage of APAs--both rollback and future years. On the other hand, the U.S.-German procedures (http://www.irs.gov/businesses/international/article/0,,id=201209,00.html) allow arbitration only for rollback years of an APA, and only for years in which a tax return has been filed. According to practitioners, U.S. negotiators have been pushing for broader APA coverage and have met with some resistance on the Canadian side.

So what kind of deal would satisfy both sides? Allowing rollback years would seem to be a given if APAs are covered at all--and the treaty specifies that they are. So what will the compromise be on future years? Will there perhaps be some limit on the future years for which an arbitration can apply?

One thing is certain--we'll know by Dec. 15.

--Molly Moses, BNA Tax & Accounting

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