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Reflections on Transfer Pricing Law and Policy

September 15, 2021

On September 9, 2021, the Treasury Department and the Internal Revenue Service (“IRS”) issued its Priority Guidance Plan for 2021-2022. The Priority Guidance Plan gives the public a sense of what regulations and other guidance the Treasury Department and the IRS might develop over the following 12 months. Among dozens of other pending and potential guidance projects, the Priority Guidance Plan lists the following two new potential section 482 regulations projects: Regulations under §482…

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Standard of Review in Transfer Pricing Litigation

By John T. Hildy, Anthony D. Pastore & Tyler M. Johnson

August 31, 2021

A recent Tax Notes article analyzes the “standard of review” that the Tax Court will apply to the IRS’s transfer pricing adjustments. In transfer pricing cases, the Tax Court determines whether the IRS has abused its discretion by proposing an adjustment that is “arbitrary, capricious, or unreasonable.” Although courts often describe this standard as a “heavy” burden for the taxpayer to prove, the Tax Notes article concludes that “recent experience suggest[s] that taxpayers and the…

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Whither FDII — OECD Discusses FDII in Harmful Tax Practices Update

By Jason M. Osborn & Michael Lebovitz

August 11, 2021

The concept of business, technology, the Internet and the network. A young entrepreneur working on a virtual screen of the future and sees the inscription: Intellectual property

On August 5, 2021, the OECD released updated Peer Review Results for preferential tax regimes reviewed by the OECD Forum on Harmful Tax Practices (“FHTP”) in connection with BEPS Action 5. Of particular interest to Multinational Enterprises (“MNEs”), the Peer Review Results report that the Foreign-Derived Intangible Income (“FDII”) regime is already “in the process of being eliminated” and that “the United States has committed to abolish this regime.” The possibility that FDII might be…

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No Secrets are Safe in an Era of Global Tax Information Exchange

By Jenny A. Austin & Tyler M. Johnson

August 2, 2021

Many taxpayers are familiar with information document requests where taxpayers are notified that taxing authorities are inquiring into certain transactions based on their receipt of the request. But today, many types of foreign tax information exchanges occur without the taxpayer’s knowledge. Moreover, tax administrations around the world are expanding tax information exchange programs. For example, on May 19, 2021, the European Union (“EU”) approved a measure to spend an additional € 270 million to improve…

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Profitability Threshold

By Elena B. Khripounova

July 29, 2021

On April 15, 2020, OECD released the report titled “Tax and Fiscal Policy in Response to the Coronavirus Crisis: Strengthening Confidence and Resilience” (the “COVID-19 Response”). The COVID-19 Response discussed the decisive action many governments have taken to contain and mitigate the spread of the virus and to limit the adverse impacts on their citizens and their economies, and outlined various tax policy options as available tools. Included in the tax policy discussion is the…

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IRS Memo on 482 Adjustments for CSAs with Reverse Claw-Back Provisions

By Paul DiSangro & Megan K. Hall

July 20, 2021

After Altera’s victory in Tax Court in 2015,[1] many companies with cost sharing arrangements (“CSA”) ceased sharing stock-based compensation (“SBC”) costs. To address the possibility of a reversal on appeal, many of these companies added reverse claw-back provisions to their CSAs. Under these provisions, in the year a reversal of Altera becomes final, the US participant typically “claws back” from the foreign participants the amount of SBC costs not shared in prior years (the…

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G20 Agrees on Framework for Pillars One and Two and Targets 2023 Effective Date

By Michael Lebovitz, Jenny A. Austin, Warren S. Payne, Kenneth Klein, Lucas Giardelli & Tyler M. Johnson

July 14, 2021

On July 10, 2021, the G20 endorsed a broad framework to advance Pillars One and Two, which includes an aggressive timetable for bringing the new rules into force in 2023. The endorsement came in a Communiqué, which approved the July 1 statement by the 139-country Inclusive Framework. The G20 agreement represents a political consensus on a substantial revision to global tax policy. As discussed in our recent article, there is still much work to do to…

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The Elusive “Amount A”

By Elena B. Khripounova & Michael Lebovitz

July 8, 2021

For over a decade, countries have been looking for ways to tax the digital economy. On July 1, 130 countries announced an agreement that would provide a new taxing right to enable a country to tax a portion of digital profits even in the absence of traditional taxable nexus with the country. This new taxing right is known as “Amount A”. The quantum of Amount A remained a mystery until the publication of the OECD’s…

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One Small Step but (Perhaps) One Giant Leap for Global Tax Reform: The G7 Agrees on a Broad Framework for Pillar One and Two

By Michael Lebovitz, Jenny A. Austin, Warren S. Payne, Kenneth Klein, Lucas Giardelli, Astrid Pieron & Tyler M. Johnson

June 28, 2021

On June 5, 2021, the Finance Ministers and Central Bank Governors of the G7 countries issued a Communiqué announcing their agreement on the conceptual framework for a substantial revision to global tax policy (the “Communiqué”). The Communiqué puts the G7’s stamp of approval on recent efforts by the OECD (supported by a big push by the Biden administration) toward finalizing the broad architecture of the OECD’s Pillar One and Two models. The Communiqué will form the basis…

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OECD’s Pillar One Blueprint: Elimination of Double Taxation

By Scott Stewart

June 24, 2021

As discussed in prior blog posts, Amount A will apply as an overlay to the existing profit allocation rules. As the profit of an MNE group is already allocated under the existing profit allocation rules, a mechanism to reconcile the new taxing right (calculated at the level of a group or segment) and the existing profit allocation rules (calculated at an entity basis) is necessary to prevent double taxation. This is the purpose of the…

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Reflections on Transfer Pricing Law and Policy

Blog Authors

Priority Guidance Plan Portends New Transfer Pricing Guidance

Standard of Review in Transfer Pricing Litigation

Whither FDII — OECD Discusses FDII in Harmful Tax Practices Update

No Secrets are Safe in an Era of Global Tax Information Exchange

Profitability Threshold

IRS Memo on 482 Adjustments for CSAs with Reverse Claw-Back Provisions

G20 Agrees on Framework for Pillars One and Two and Targets 2023 Effective Date

The Elusive “Amount A”

One Small Step but (Perhaps) One Giant Leap for Global Tax Reform: The G7 Agrees on a Broad Framework for Pillar One and Two

OECD’s Pillar One Blueprint: Elimination of Double Taxation

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