On April 25, 2023, the IRS’s Advance Pricing and Mutual Agreement (“APMA”) program issued new interim guide for its review of taxpayer Advance Pricing Agreement (“APA”) requests. Specifically, the guidance introduces an “optional pre-filing review” for taxpayers who wish to file a prefiling memorandum before filing a formal APA application. Based on the pre-submission review, the APMA will issue a preliminary opinion on whether it believes an APA is suitable to achieve tax certainty for the proposed covered transactions. The new interim guidance also instructs APMA staff on how to review taxpayers’ formal APA requests for program acceptance or whether to suggest an “alternative workflow” such as the International Compliance Assurance Program (“ICAP”).(1) or a joint audit.
Overall, the recent interim guidance is significant for taxpayers considering seeking both new and renewal APAs. While the interim guidance is not intended to limit the number of APA applications accepted by the APMA program, the clear message is that taxpayers should no longer take acceptance into the APA process as a given. The impact of the new guidance will likely be a new emphasis on early engagement with the APMA program and treaty partners and effective advocacy starting at the prefiling stage. This blog post is a preliminary report of this development, with further analysis to follow in a legal update.
(1) See our previous post on the ICAP program for more information: ICAP, a New Tool in the Multinational Tax Dispute Management Multiverse (May 25, 2021).