Transfer Pricing Report Celebrates Its 25th Anniversary

Transfer Pricing Report is now 25 years old! The very first issue, which ran May 13, 1992, had stories on: 

  • the implications of an IRS loss in a case involving Procter & Gamble ( and;
  • announcements by two banks that they had received some of the very first advance pricing agreements issued by the IRS (; and
  • a Canadian official’s comment that proposed IRS regulations might cause too much income to be claimed by U.S. affiliates of Canadian companies (

Back in the early 1990s, the IRS was about to undertake a comprehensive rewrite of the transfer pricing regulations under Section 482, which hadn’t been updated since 1968. That was pretty radical stuff at the time—the new guidance ended up creating a new transfer pricing method—but it pales in comparison with the possibility of a 15 percent U.S. tax rate and the destination-based cash flow tax regime being discussed now. For more on that, join us in Washington June 7-8 at the next Global Transfer Pricing Conference.

The GOP tax plan now being considered is unlike anything Transfer Pricing Report covered in its early days. On the other hand, the P&G decision has some parallels in recent transfer pricing cases: At the time, the IRS worried the decision--which precluded the IRS from making income allocations from a foreign company when the foreign country had laws to prevent that--didn’t bode well for its position in cases involving Exxon Corp. and Texaco Inc., and it was right. The IRS ended up losing those cases in the Tax Court in 1993, and later on appeal. 

The more recent Veritas and Amazon cases involved cost-sharing arrangements rather than foreign blocking laws, but the IRS in Amazon made very similar arguments to those it relied on unsuccessfully in the Veritas case—a fact the Tax Court pointed out in its decision for Amazon ( 

Another story in the first issue chronicles two of the first APAs ever completed. Since 1992, of course, APAs have become a huge and essential part of companies’ international tax planning. The IRS has seen well over 2,000 APA applications filed and has completed over 1,500 agreements.

In “U.S. Proposal Might Cause Subsidiaries to Overstate Income, Gouin-Toufsaint Says,” a Canadian tax official worried that the IRS’s approach in proposed regulations would cause more income to arise in the U.S., increasing the U.S. tax take while decreasing Canada’s. What strikes me about this story is that the official seemed to be worrying about a Canadian parent-U.S. subsidiary dynamic, which is fairly uncommon. 

The original issue also contained these items: 

  • a story on a list of tax haven countries put out by the Italian Ministry of Finance;
  • a Tax Court judge’s testimony before the House Ways and Means Committee, where he revealed that 101 transfer pricing cases (!!) were pending in the court; and
  • an economist’s analysis of the “profit interval test” in the proposed Section 482 rules, which appears to be an early version of the comparable profits method.

Happy birthday, Transfer Pricing Report! What will the next 25 years bring?