Transfer Pricing Alert: U.S. IRS Issues Eighth Annual APA Report—Record Year for APA Program (06/03/2007)

by Darrin Litsky (New York); reviewed by Richard McAlonan (Washington, D.C.)

On February 26, the Internal Revenue Service released Announcement 2007-31, the Advance Pricing Agreement (APA) annual report covering the activities of the APA program during calendar year 2006. The annual report is issued under §521(b) of Pub. L. 106-170, the Ticket to Work and Work Incentives Improvement Act of 1999, which requires the Secretary of the Treasury to report annually to the public on APAs and the APA program.

The annual report provides a brief summary of recent developments in the APA program and a statistical snapshot of the APA program's activities during 2006. Highlights of the APA annual report are as follows:

Completed APAs: The IRS executed 82 APAs (42 unilateral, 39 bilateral, and 1 multilateral) representing an increase of 29 APAs from the prior year. Eighty-two executed APAs is a near-record, bettered only in 2002, when 85 APAs were executed (including approximately 30 bilateral Mexican maquiladora APAs agreed to with Mexico using "streamlined" procedures). Renewal APAs represented 35 (21 unilateral and 14 bilateral) of the 82 APAs executed. There were three revised or amended APAs.
Small Business Taxpayer APAs: 19 small business taxpayer APAs were executed in 2006 (15 unilateral and four bilateral), representing an increase of nine APAs (or almost a doubling) from the prior year.
Months to complete APAs: In 2006, the median time to complete a unilateral APA was 18.7 months, and 43.7 months for a bilateral APA, compared to 18.1 months for a unilateral APA and 45.1 months for a bilateral APA in 2005. New data provided in this year's annual report indicates that the IRS was successful in 2006 in reducing the time cases are in inventory; the hope is that this will result in reduced processing times for 2007 and beyond.
Requests for APAs: The IRS received a record 109 APA applications (42 unilateral and 67 bilateral) in 2006, a substantial increase from the 82 received in 2005.
Inbound v. Outbound: While inbound cases accounted for the majority of the APA program's caseload in 2006, with 51 percent of the APAs executed involving foreign multinationals with U.S. subsidiaries, U.S. multinationals with foreign subsidiaries substantially increased their participation in the APA Program based on executed APAs. In 2006, foreign multinationals were represented in 42 APAs executed, and U.S. multinationals were represented in 36 APAs executed, representing increases of eight and 20 APAs, respectively, from 2005. Four partnership APAs were also executed during 2006.
Boilerplate and Balance Sheet Adjustments: The annual report also includes the latest versions of the APA program's boilerplate APA agreement and formulas for balance sheet adjustments.

Page Last Updated: 07 March 2007

Source: Deloitte - Belgium (English)

Transfer Pricing Alert: U.S. IRS Issues Eighth Annual APA Report—Record Year for APA Program (06/03/2007) - Belçika