U.S. APAs: Impressive Output, But How Long Can the IRS Keep This Up?

Today’s issue of Transfer Pricing Report had the following items on advance pricing agreements:

1. U.S. statistics from the Advance Pricing and Mutual Agreement Program director showing that in 2012, for the first year on record, the IRS completed more APAs (140) than it took in (130);

2. Canadian statistics showing a drop in both completed and accepted APAs for the 2011-12 year; and

3. a letter from a group of Silicon Valley tax directors saying they do not expect India to moderate its transfer pricing positions in APAs.

The previous issue contained the latest statistics on China’s APA program, which completed eight agreements in 2011—leaving another 94 requests pending.

We have reported previously that Canada has become more selective in the APA requests it accepts, and the Silicon Valley group’s letter is not surprising after an IRS official’s recent statement that he is being cautious about APAs with India given the countries’ lack of progress in resolving double tax cases. And  Chinese practitioners said even before the State Administration of Taxation issued its report that the government has limited resources to devote to APAs.

Over the years, bilateral cases have come to make up the vast majority of U.S. APA requests, and in those cases, the U.S. can only move as fast as the country it is negotiating with. Given the importance of Canada, China, and India as U.S. trading partners, how long the IRS can keep up its impressive output?

Molly Moses, Managing Editor, Transfer Pricing Report