Law360 Quotes Peter Barnes on Record Number of U.S. Companies Seeking APAs in 2018

Applications for U.S. advance pricing agreements reached an all-time high in 2018 — a fact mainly attributable to an increase in fees for companies using the IRS' agreements program, an agency official said Wednesday.

The Internal Revenue Service’s latest annual report on APAs, dated March 22, showed 274 companies submitted requests for the agreements in 2018. The previous record was 197 requests in 2015. Both years saw an increase in user fees. Beginning in July 2018, the fee rose to $86,750 from $60,000.

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A transfer pricing practitioner noted that the report shows APMA personnel spending more time on transactions involving tangible property than intangible property — something the practitioner acknowledged was out of the IRS' control.

Approximately 21 percent of the 107 APAs executed in 2018 involved intangibles, while 44 percent involved tangible property, noted Peter Barnes, a professor of tax at Duke University School of Law and former senior international tax counsel at General Electric Co. [Mr. Barnes is also Of Counsel to Caplin & Drysdale.]

"Intangibles represent a much, much bigger percentage of the important transfer pricing disputes," he said. "I continue to worry whether the APA program is spending too much time on smaller matters involving less-critical transfer pricing transactions."

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Excerpt taken from the article “Record Number of U.S. Companies Sought APAs in 2018” by Molly Moses for Law360 Tax Authority.