The US IRS on August 12 released guidance specifying new procedures to request assistance from the US competent authority under income tax treaties and to obtain an advance pricing agreement (APA) from IRS’s Advance Pricing and Mutual Agreement program.
New guidance on the competent authority procedure, Rev. Proc. 2015-40, replaces Rev. Proc. 2006-54, 2006-2 C.B. 1035, and finalizes proposed rules released for public comment in Notice 2013-78, 2013-50 I.R.B. 633.
The final guidance states that Notice 2013-78 was changed in the following ways:
- The new revenue procedure, in section section 3.02, limits the scope of requests to which mandatory pre-filing procedures apply to requests involving taxpayer-initiated positions.
- Taxpayers are not required to expand the scope of a competent authority request to include interrelated issues as a condition of receiving competent authority assistance. Taxpayers may still be required to provide information that will allow the US competent authority to evaluate the appropriateness of the relief sought under the applicable US tax treaty in light of the taxpayer’s positions on interrelated issues.
- The revenue procedure clarifies that the US competent authority may consult with taxpayers with respect to certain additional issues that may arise in connection with competent authority requests, such as issues relevant to the determination of foreign tax credits and repatriation payments.
- The revenue procedure provides additional guidance on requesting discretionary determinations under the limitation on benefits articles of US tax treaties, including time frames for taxpayers to provide notification of material changes in fact or law and the introduction of a triennial statement procedure to maintain a favorable grant of discretionary benefits.
- The guidance provides that the US competent authority will not condition assistance on the taxpayer’s notification of the US competent authority, or on obtaining its concurrence, with respect to signing a standard Form 870 with IRS Examination. A taxpayer will also not be required to obtain the US competent authority’s agreement prior to entering into a closing agreement or similar agreement with IRS Examination, but in these cases the assistance provided by the US competent authority will be limited to seeking correlative relief from the foreign competent authority, thus potentially not eliminating double taxation.
- The revenue procedure provides additional information about the process followed by the US competent authority in conducting its review under the simultaneous appeals procedure.
- The revenue procedure clarifies and refines the bases on which the US competent authority may decline to accept a competent authority request or may cease providing assistance, consistent with US tax treaty policy that taxpayers should have broad access to the US competent authority to resolve instances of taxation not in accordance with the applicable U.S. tax treaty.
- The revenue procedure increases the user fee for requests for discretionary limitation on benefits relief from $27,500 to $37,000 in two stages. The user fee will increase to $32,500 for requests filed on or after October 30, 2015 and prior to September 30, 2016. The fee will further increase to $37,000 for requests filed on or after September 30, 2016.
- The revenue procedure substantially restructures the proposed guidance in Notice 2013-78 to improve clarity, readability, and organization.
APA program guidance
The new APA program guidance, Revenue Procedure 2015-41, replaces Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008- 31, 2008-1 C.B. 1133. The new guidance finalizes proposed guidance issued for public comment in Notice 2013-79, 2013-2 C.B. 653.
Revenue Procedure 2015-41 states that the draft guidance in Notice 2013-79 was changed in following ways:
- The new revenue procedure, in section 2.02(4), clarifies that if APMA requires, as a condition of continuing with the APA process, that the taxpayer expand the proposed scope of its APA request to cover interrelated matters (interrelated issues in the same years, covered issues or interrelated issues in other years, and covered issues or interrelated issues in the same or other ears as applied to other countries), APMA will do so with due regard to considerations of principled, effective, and efficient tax administration and only after considering the views of the taxpayer and the applicable foreign competent authority. Further, APMA will communicate to the taxpayer any concerns about interrelated matters and possible scope expansion as early as possible. Examples are provided of interrelated matters.
- The guidance provides that rollback years may be formally covered within an APA. A rollback will be included in an APA when a rollback is either requested by the taxpayer and approved after coordination and collaboration between APMA and other offices within the IRS or, in some cases, is required by APMA, after coordination and collaboration with other offices within the IRS, as a condition of beginning or continuing the APA process.
- This revenue procedure provides expanded guidance in section 3.03(3) regarding when an APA request will be considered complete.
- The required contents of APA requests specified in the appendix have been retained and refined.
- As stated in Notice 2013-79, taxpayers are required to execute consent agreements to extend the period of limitations for assessment of tax for each year of the proposed APA term, and the required consent could be either general or restricted. The new revenue procedure expressly provides that APMA will coordinate and collaborate with other offices within the IRS and with the taxpayer on the type of consent the taxpayer will be instructed to execute, which, if restricted, will follow standardized language provided by APMA. The revenue procedure also provides that in certain cases, only general consents will be used.
- The revenue procedure provides for increased user fees for APA requests but reduces total user fees for multiple APA requests filed by the same controlled group within a sixty-day period.
- The revenue procedure substantially restructures Notice 2013-79 to improve clarity, readability, and organization.
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