Patricia Lewis Comments on Concerns Over Revised APA and Competent Authority Procedures

At the December 12, 2013 session of the annual Institute on Current Issues in International Taxation, co-sponsored by George Washington University Law School and the IRS, Patricia Gimbel Lewis noted the potential efficiency benefits of proposed revisions to IRS advance pricing agreement and competent authority revenue procedures, but expressed some concerns about unintended consequences.  For the full article, please visit Tax Notes' website (subscription required).

Excerpt taken from the article "Practitioners Raise Concern Over Revised APA and Competent Authority Procedures" by David D. Stewart for Tax Notes.

Patricia Gimbel Lewis of Caplin & Drysdale expressed concern that the draft APA revenue procedure requires disclosure of all information given to foreign tax authorities in a bilateral APA negotiation. She noted that in the later stages of an APA negotiation, one side may seek informal advice on positions to take. Lewis said that under the current draft, those informal consultations would need to be disclosed and could create a chilling effect on the discussions.

Lewis noted that the new procedures establish that the competent authority will be involved earlier in the process of U.S.-initiated adjustments than it has been. She said that the process limits the ability of taxpayers to negotiate with the field. Lewis said that the positive aspect of the change is that it may achieve quicker resolutions, but that it does so by limiting the ability of taxpayers to tailor their procedural strategy to the facts of the case.

Lewis said that she is also concerned that this new procedure could lead to higher adjustments in the field in anticipation of the competent authority process. However, she said it remains to be seen how this process will work in practice.