Patricia Lewis Discusses Advance Pricing Agreements with Bloomberg BNA

Corporate taxpayers should give the IRS all the information associated with a transaction to be covered in an advance pricing agreement—and provide the same material to the foreign tax authority, an agency official said.

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John Hughes, [the acting director of the Internal Revenue Service's Advance Pricing and Mutual Agreement Program (APMA)], said he's witnessed many situations in which a taxpayer will provide varying information from one tax authority to another, which adds months to a case. Both tax authorities need to have the same basic information that is material to the negotiations, Hughes said.

Patricia Gimbel Lewis, a member of Caplin & Drysdale, Chartered, in Washington, said she was surprised to hear taxpayers aren't simultaneously sharing information because Revenue Procedures 2015-40 and 2015-41 require them to do so.

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Guidance on Drafted Agreements

An innovation in Rev. Proc. 2015-41 for APAs is that a draft of the final agreement itself can be submitted with the initial application submission.

The drafted version of the final agreement can help streamline the end of the APA process, but practitioners have put a hold on it because they're waiting for more guidance, Lewis said.

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Lewis said a template for drafting the final agreement in the early stages of the APA process would be helpful: “It really puts the eye on the ball early on and makes things clear.”