# Bulletin No. 2023–16

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A3343469e5fa9f987

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2023–16
April 17, 2023

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

ADMINISTRATIVE
Announcement 2023-10, page 663.

This Announcement is issued pursuant to § 521(b) of
Pub. L. 106-170, the Ticket to Work and Work Incentives
Improvement Act of 1999, which requires the Secretary
of the Treasury to report annually to the public concerning
advance pricing agreements (APAs) and the Advance Pricing
and Mutual Agreement Program (APMA Program), formerly
known as the Advance Pricing Agreement Program (APA Program). This twenty-fourth report describes the experience,
structure, and activities of the APMA Program during calendar year 2022.

EXCISE TAX
REG-105954-22, page 713.
This notice of proposed rulemaking provides guidance
related to sections 4661, 4662, 4671, and 4672 of the
Internal Revenue Code, collectively referred to as the
Superfund chemical taxes. Section 4661(a) imposes an
excise tax on the sale or use of “taxable chemicals” by
manufacturers, producers, or importers. Section 4671(a)
imposes an excise tax on the sale or use of “taxable substances” by importers. The Superfund chemical taxes
previously expired on December 31, 1995, but were reinstated with certain modifications, effective July 1, 2022,
by section 80201 of the Infrastructure Investment and

Finding Lists begin on page ii.

Jobs Act (IIJA), Public Law 117-58, 135 Stat. 429 (November 15, 2021).

INCOME TAX
Notice 2023-31, page 661.

This Notice announces that when proposed regulations
under section 903 (REG-112096-22) are finalized, the Treasury Department and the IRS intend to extend the transition
period for the single-country exception’s documentation
requirement from May 17, 2023 to 180 days after the
final regulations are filed with the Federal Register. The single-country exception provides relief from the source-based
attribution requirement under section 903 for foreign withholding taxes on royalties paid for the use of intellectual
property within the withholding jurisdiction.

REG-120080-22, page 746.

This document contains proposed regulations regarding the
credit for clean vehicles under section 30D of the Internal Revenue Code (Code). These proposed regulations will
affect persons seeking to claim the § 30D credit and qualified manufacturers of the clean vehicles.

Rev. Rul. 2023-2, page 658.

Revenue Ruling 2023-2 confirms that the basis adjustment
under section 1014 generally does not apply to the assets
of an irrevocable grantor trust not included in the deceased
grantor’s gross estate for Federal estate tax purposes.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede,
revoke, modify, or amend any of those previously published
in the Bulletin. All published rulings apply retroactively unless
otherwise indicated. Procedures relating solely to matters
of internal management are not published; however, statements of internal practices and procedures that affect the
rights and duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

April 17, 2023 

Bulletin No. 2023–16

Part I
Section 671.—Trust
Income, Deductions, and
Credits Attributable to
Grantors and Others as
Substantial Owners; §
1014.—Basis of Property
Acquired from a Decedent
26 CFR 1.1014-1: Basis of Property Acquired from
a Decedent

Rev. Rul. 2023-2
ISSUE
Is there a basis adjustment under
§ 1014 of the Internal Revenue Code
(Code) to the assets of a trust on the death
of the individual who is the owner of the
trust under chapter 1 of the Code (chapter
1) if the trust assets are not includible in
the owner’s gross estate pursuant to chapter 11 of the Code (chapter 11)1?
FACTS
In Year 1, A, an individual, established
irrevocable trust, T, and funded T with Asset
in a transfer that was a completed gift for
gift tax purposes. A retained a power over
T that causes A to be treated as the owner of
T for income tax purposes under subpart E
of part I of subchapter J of chapter 1 (subpart E). A did not hold a power over T that
would result in the inclusion of T’s assets
in A’s gross estate under the provisions of
chapter 11. By the time of A’s death in Year
7, the fair market value (FMV) of Asset had
appreciated. At A’s death, the liabilities of T
did not exceed the basis of the assets in T,
and neither T nor A held a note on which
the other was the obligor.
LAW
Section 671 provides that, where subpart E treats the grantor or another person
as the owner of any portion of a trust, the

taxable income and credits of the grantor
or the other person include those items of
income, deductions, and credits against
tax of the trust that are attributable to that
portion of the trust to the extent that these
items would be taken into account under
chapter 1 in computing taxable income
or credits against the tax of an individual.
Any remaining portion of the trust is subject to subparts A through D of part I of
subchapter J.
Section 1012(a) provides that the basis
of property is its cost, except as otherwise provided in subchapter O of chapter
1 (subchapter O) (relating to gain or loss
on disposition of property) and subchapters C (relating to corporate distributions
and adjustments), K (relating to partners
and partnerships), and P (relating to capital gains and losses) of chapter 1. One of
the provisions set forth in subchapter O is
§ 1014.
Section 1014(a)(1) generally provides
that, except as otherwise provided in
§ 1014 (including § 1014(f) requiring the
use of consistent basis), the basis of property in the hands of a person acquiring the
property from a decedent or to whom the
property passed from a decedent, if not
sold, exchanged, or otherwise disposed of
before the decedent’s death by that person,
is the FMV of the property at the date of
the decedent’s death.
Section 1014(b) lists the seven types of
property that are considered to have been
acquired from or to have passed from the
decedent for purposes of § 1014(a). The
types of property are:2
• Section 1014(b)(1) – Property
acquired by bequest, devise, or inheritance, or by the decedent’s estate
from the decedent;
• Section 1014(b)(2) – Property transferred by the decedent during life in
trust to pay the income for life to or
on the order or direction of the decedent, with the right reserved to the
decedent at all times before death to
revoke the trust;
• Section 1014(b)(3) – In the case of
decedents dying after December 31,

•

•

•

1951, property transferred by the
decedent during life in trust to pay
the income for life or on the order
or direction of the decedent with
the right reserved to the decedent at
all times before death to make any
change in its enjoyment through the
exercise of a power to alter, amend,
or terminate the trust;
Section 1014(b)(4) – Property
passing without full and adequate
consideration under a general power
of appointment exercised by the decedent by will;
Section 1014(b)(6) – Property which
represents the surviving spouse’s onehalf share of community property held
by the decedent and the surviving
spouse under the community property
laws of any State, or United States
territory or any foreign country, if at
least one-half of the whole of the community interest in such property was
includible in determining the value of
the decedent’s gross estate under chapter 11 or § 811 of the Internal Revenue
Code of 1939 (1939 Code);
Section 1014(b)(9) – Property
acquired from the decedent by reason of death, form of ownership, or
other conditions (including property
acquired through the exercise or
non-exercise of a power of appointment), if by reason thereof the
property must be included in determining the value of the decedent’s
gross estate under chapter 11 or under
the 1939 Code. In this case, if the
property is acquired before the death
of the decedent, the basis commencing on the death of the decedent is the
amount determined under § 1014(a)
reduced by the amount allowed to the
taxpayer as deductions in computing
taxable income under subtitle A of
the Code or prior income tax laws
for exhaustion, wear and tear, obsolescence, amortization, and depletion
on the property before the death of
the decedent. However, § 1014(b)(9)
does not apply to:

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
Section 1014(b)(5) applies only to decedents dying before January 1, 2005. Section 1014(b)(7) and (8) were repealed by section 221(a)(74)(B) of the Tax Increase Prevention Act of 2014,
Public Law 113-295, 128 Stat. 4010, 4049 (December 19, 2014).
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April 17, 2023

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Bulletin No. 2023–16

(A) annuities described in § 72;
(B) stock or securities of a foreign
corporation that would have been
a foreign personal holding company prior to the repeal of § 552
of its next preceding taxable year
prior to the decedent’s death to
which § 1014(b)(5) would apply
if the stock or securities had been
acquired by bequest; and
(C) property described in any other
paragraph of § 1014(b); and
• Section 1014(b)(10) – Property
includible in the gross estate of the
decedent under § 2044 (relating to
certain property for which the marital
deduction was previously allowed).
In any such case, the basis is determined under § 1014(b)(9) as if such
property were described in the first
sentence of § 1014(b)(9).
Section 1.1014-1(a) generally provides that the basis of property acquired
from a decedent is equal to the value
placed upon such property for purposes
of chapter 11. Accordingly, generally the
basis of property acquired from a decedent is the FMV of such property at the
date of the decedent’s death, or, if the
decedent’s executor so elects, at the alternate valuation date prescribed in § 2032.
Property acquired from a decedent
includes, principally, property acquired
by bequest, devise, or inheritance, and,
in the case of decedents dying after
December 31, 1953, property required
to be included in determining the value
of the decedent’s gross estate under any
provision of the Internal Revenue Code
of 1954 or the 1939 Code.
Section 1.1014-2(a)(1) provides that
property acquired by bequest, devise, or
inheritance, or by the decedent’s estate
from the decedent, whether the property
was acquired under the decedent’s will
or under the law governing the descent
and distribution of the property of decedents, is considered to have been acquired
from a decedent and the property’s basis
is determined under the general rule in §
1.1014-1.
Section 1.1014-2(b)(2) generally provides that property is considered to have
been acquired from a decedent to the
extent such property is includible in the
decedent’s gross estate if the decedent
died after December 31, 1953.

Bulletin No. 2023–16

In Rev. Rul. 84-139, 1984-2 C.B. 168,
D, a citizen and resident of foreign country Z, died owning real property located in
Z. B, a United States citizen, inherited the
real property in accordance with the laws
of Z. At the time of D’s death, the property had a basis of $100x and a FMV of
$1,000x. Because the property was located
outside the United States and D was a
nonresident alien, the value of the property was not includible in D’s gross estate
under § 2103 for purposes of chapter 11.
B sold the property the following year for
$1050x, claiming a basis of $1,000x and
gain of $50x. The ruling concludes that,
because B inherited the property from D,
and the property is within the definition of
property acquired from a decedent under
§ 1014(b)(1), it received a basis adjustment to FMV at D’s death and B had
correctly calculated B’s basis and gain. In
Rev. Rul. 84-139, which did not involve
a grantor trust, the property at issue was
acquired by a bequest.
ANALYSIS
For property to receive a basis adjustment under § 1014(a), the property must
be acquired or passed from a decedent.
For property to be acquired or passed
from a decedent for purposes of § 1014(a),
it must fall within one of the seven types
of property listed in § 1014(b). Asset does
not fall within any of the seven types of
property listed in § 1014(b).
First, upon A’s death, Asset was not
”bequeathed,” “devised,” or “inherited”
within the meaning of § 1014(b)(1). A
“bequest” is the act of giving property
(usually personal property or money)
by will. Black’s Law Dictionary (11th
ed. 2019). The Supreme Court defined
“bequest” as a “gift of personal property
by will” for purposes of the predecessor
provision of § 102 that, as today, excluded
gifts, bequests, devises, or inheritance
from gross income for income tax purposes. United States v. Merriam, 263 U.S.
179, 184 (1923).
A “devise” is the act of giving property,
especially real property, by will. Black’s
Law Dictionary (11th ed. 2019). Volume
97 of the Corpus Juris Secundum notes
that although “bequest” and “bequeath”
strictly refer to a gift by will of personal property, the words may be given

659

a broader meaning to include real property which, under the narrower definition,
would be a devise. See 97 C.J.S. Wills §
1861 (2022).
An “inheritance” is property received
from an ancestor under the laws of intestacy or property that a person receives by
bequest or devise. Black’s Law Dictionary
(11th ed. 2019).
In Bacciocco v. United States, 286
F.2d 551, 554-55 (6th Cir. 1961), the
court found that property transferred in
trust prior to the decedent’s death is not
bequeathed or inherited because it did not
pass either by will or intestacy. The court
stated, “[w]e construe those terms [bequest
and inheritance] according to their usual
and normal meaning” and noted that the
decedent’s death did not transfer the assets
to the trust. Id. at 554-56. This does not
imply that property in a trust could never
fall within the meaning of § 1014 (such as
property included in the decedent’s gross
estate or property specifically described
by §§ 1014(b)(2), (3), or (4)); however, in
the facts outlined above, the trust property
does not fall within the meaning of those
terms.
The Congressional committee report
explaining the basis of property acquired
from a decedent for purposes of § 1014(b)
(then designated § 113(a)(5) of the 1939
Code) stated that the provision “applies
basically to property in the decedent’s
probate estate and includible in his gross
estate under § 811(a) [the predecessor provision of § 2031(a)]. In addition, it applies
to property acquired by certain specifically described methods of disposition
which are treated as though the acquisition
was by bequest, devise, or inheritance.”
H.R. Rep. No 83-1337 at 4407-08 (March
9, 1954). Citing that report, the court in
Collins v. United States, 318 F. Supp. 382,
386 (C.D. Cal. 1970) stated, “[i]t seems
clear that property cannot be said to come
from a decedent by ‘bequest, devise, or
inheritance’ unless it is part of the decedent’s probate estate under the laws of the
state of his domicile.”3 The court determined that payments made to a widow by
her deceased husband’s employers, under
contracts negotiated by her husband,
did not pass from the decedent under
§ 1014 and so would not acquire a basis
determined by the contract’s FMV at the
decedent’s death but instead were income

April 17, 2023

with respect to a decedent that would not
receive a basis adjusted to date of death
value.
Second, Asset does not fall within any
of the remaining types of property listed
in § 1014(b). Asset is not described in
§§ 1014(b)(2), (3), or (4) because A did
not retain a power to revoke or amend T or
hold a power to appoint Asset. Asset also
is not described by § 1014(b)(6) because it
is not community property. Finally, Asset
is not described by §§ 1014(b)(9) or (10)
because it is not included in A’s gross
estate under the provisions of chapter 11.
Because at A’s death Asset does not fall
within any of the seven types of property
listed in § 1014(b), Asset does not receive

a basis adjustment under § 1014(a) at A’s
death.
HOLDING
A creates T, an irrevocable trust, retaining a power which causes A to be the
owner of the entire trust for income tax
purposes under chapter 1 but does not
cause the trust assets to be included in A’s
gross estate for purposes of chapter 11.
If A funds T with Asset in a transaction
that is a completed gift for gift tax purposes, the basis of Asset is not adjusted
to its fair market value on the date of A’s
death under § 1014 because Asset was
not acquired or passed from a decedent as

defined in § 1014(b). Accordingly, under
this revenue ruling’s facts, the basis of
Asset immediately after A’s death is the
same as the basis of Asset immediately
prior to A’s death.4
DRAFTING INFORMATION
The principal authors of this revenue
ruling are Cynthia D. Morton and Daniel J. Gespass of the Office of Associate
Chief Counsel (Passthroughs & Special Industries). For further information
regarding this revenue ruling, please
contact Ms. Morton at (202) 317-5279
or Mr. Gespass at (202) 317-6859 (not a
toll-free number).

The court in Collins also determined that the wording of § 1014(b) indicated that the list was exclusive, marking the limits of property acquired from a decedent or passing from a decedent,
and that a transfer must therefore be within that list before it could be considered as eligible for a basis adjustment under § 1014(a). Id. at 385-86.
4
This revenue ruling does not alter the result in Rev. Rul. 84-139. Property acquired from a non-resident non-citizen decedent that is not included in his or her gross estate may receive a basis
adjustment under § 1014 if the property is acquired by bequest, devise, or inheritance within the meaning of § 1014(b)(1) or is otherwise specifically described in § 1014(b).
3

April 17, 2023

660

Bulletin No. 2023–16

Part III
Extension of the Transition
Period for the SingleCountry Exception Under
Section 903 of the Internal
Revenue Code
Notice 2023-31
SECTION 1. PURPOSE
This notice announces that the
Department of the Treasury (Treasury
Department) and the Internal Revenue
Service (IRS) intend to provide a longer
transition period for the documentation
requirement in proposed § 1.903-1(c)(2)
(iv)(D) (the documentation requirement)
when the exception to the source-based
attribution requirement in proposed
§ 1.903-1(c)(2)(iii)(B) (the single-country
exception) is finalized.1
SECTION 2. BACKGROUND
Section 901 of the Internal Revenue
Code (Code) allows a credit for foreign
income, war profits, and excess profits
taxes, and section 903 provides that such
taxes include a tax in lieu of a generally-imposed foreign income, war profits,
or excess profits tax. A foreign tax is a
creditable net income tax only if the determination of the foreign tax base conforms
in essential respects to the determination of taxable income under the Code.
To meet this test, a foreign tax must
satisfy the net gain requirement, which
comprises the realization requirement,
the gross receipts requirement, the cost
recovery requirement (formerly the net
income requirement), and the attribution
requirement.
The attribution requirement in § 1.9012(b)(5) requires that a foreign tax conform
to the concepts of taxing jurisdiction
reflected in the Code that define an income
tax in the U.S. sense. With respect to
a foreign tax imposed on nonresident
taxpayers, the attribution requirement

limits the scope of gross receipts and
costs included in the base of a foreign tax
to those that satisfy the activities-based
attribution, source-based attribution, or
property-based attribution tests. § 1.9012(b)(5)(i).
Under the source-based attribution
requirement in § 1.901-2(b)(5)(i)(B), a
foreign tax imposed on the nonresident’s
income on the basis of source meets the
attribution requirement only if the foreign
tax law’s sourcing rules are reasonably
similar to the sourcing rules that apply
for Federal income tax purposes. In the
case of gross income arising from royalties, § 1.901-2(b)(5)(i)(B)(2) provides that
the foreign tax law must source royalties
based on the place of use of, or the right
to use, the intangible property, consistent with how the Code sources royalty
income.
For foreign withholding taxes,
§ 1.903-1(c)(2)(iii) provides that the
foreign withholding tax must meet the
source-based attribution requirement
in § 1.901-2(b)(5)(i)(B) to qualify as a
‘‘covered withholding tax’’ that may be
creditable as a tax in lieu of an income tax.
Thus, a withholding tax on a royalty payment is creditable only if the foreign tax
law sources royalties based upon the place
of use of, or the right to use, the intangible
property, consistent with how the Code
sources royalty income.
On November 22, 2022, the Treasury
Department and the IRS published proposed regulations (REG-112096-22) in
the Federal Register (87 FR 71271) (the
2022 FTC proposed regulations). The
2022 FTC proposed regulations provide
a limited exception to the source-based
attribution requirement for withholding taxes on certain royalty payments.
Under proposed § 1.903-1(c)(2)(iii), a
tested foreign tax satisfies the sourcebased attribution requirement if the tax
meets either the source-based attribution requirement or the single-country
exception. In general, the single-country exception applies if (1) the income
subject to the tested foreign tax is char-

acterized as royalty income under the
foreign tax law,2 and (2) the payment
giving rise to such income is made pursuant to a single-country license (such
license, the required agreement). Proposed § 1.903-1(c)(2)(iii)(B).
Under the documentation requirement,
the required agreement pursuant to which
the royalty is paid must be executed no
later than the date on which the royalty is
paid. However, recognizing that the single-country exception is proposed to be
applicable to periods preceding the release
of the 2022 FTC proposed regulations,
proposed § 1.903-1(c)(2)(iv)(D) provides
a special transition documentation rule
for royalties paid on or before May 17,
2023 (the transition documentation rule).
Under the transition documentation rule,
the required agreement must be executed
no later than May 17, 2023, and the agreement must state (whether in the terms of
the agreement or in recitals) that royalties paid on or before the execution of the
agreement are considered paid pursuant to
the terms of the agreement. According to
the preamble to the 2022 FTC proposed
regulations, taxpayers may choose to rely
on the provisions addressing the attribution requirement for royalty payments
(proposed § 1.901-2(b)(5)(i)(B)(2) and
(d)(1)(iii) and proposed § 1.903-1(c)(2)
and (d)(3), (4), and (8) through (11)) for
foreign taxes paid in taxable years beginning on or after December 28, 2021, and
ending before the effective date of final
regulations adopting these rules.
The Treasury Department and the IRS
have received comments with respect
to the 2022 FTC proposed regulations,
including with respect to the documentation requirement for the single-country
exception. The Treasury Department and
the IRS are considering those comments.
SECTION 3. EXTENSION OF THE
TRANSITION PERIOD FOR THE
DOCUMENTATION REQUIREMENT
To allow for an orderly implementation
of the requirements of the single-country

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
Income from the sale of a copyrighted article (as determined under rules similar to § 1.861-18) is not characterized as royalty income regardless of the characterization of the income under
the foreign tax law.
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661

April 17, 2023

exception, including for relevant periods
before the finalization of the single-country exception, the Treasury Department and
the IRS intend to modify the transition documentation rule when the single-country
exception in proposed § 1.903-1(c)(2)(iii)
(B) is finalized to provide that the required
agreement must be executed no later than
180 days after the date final regulations
adopting the single-country exception are
filed with the Federal Register.

April 17, 2023

SECTION 4. TAXPAYER RELIANCE
Consistent with the preamble to the
2022 FTC proposed regulations, taxpayers may rely on Section 3 of this notice for
foreign taxes paid in taxable years beginning on or after December 28, 2021, and
ending before the effective date of final
regulations adopting the single-country
exception, provided that the foreign tax is
otherwise eligible for the single-country

662

exception under the 2022 FTC proposed
regulations.
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice is
Teisha M. Ruggiero of the Office of Associate Chief Counsel (International). For
further information regarding this notice,
contact Ms. Ruggiero at (646) 259-8116
(not a toll-free number).

Bulletin No. 2023–16

Part IV
Announcement and Report Concerning Advance Pricing Agreements
March 27, 2023
Announcement 2023-10
This Announcement is issued pursuant to § 521(b) of Pub. L. 106-170, the Ticket to Work and Work Incentives Improvement Act of
1999, which requires the Secretary of the Treasury to report annually to the public concerning advance pricing agreements (APAs)
and the Advance Pricing and Mutual Agreement Program (APMA Program), formerly known as the Advance Pricing Agreement
Program (APA Program). The first report covered calendar years 1991 through 1999. Subsequent reports covered each calendar year
2000 through 2021 separately. This twenty-fourth report describes the experience, structure, and activities of the APMA Program
during calendar year 2022. It does not provide guidance regarding the application of the arm’s length standard.
Part I of this report includes information on the structure, composition, and operation of the APMA Program; Part II presents statistical data; and Part III includes general descriptions of various elements of the APAs executed in 2022, including types of transactions
covered, transfer pricing methods used, and completion time.
John M. Wall
Acting Director, APMA Program

Bulletin No. 2023–16

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April 17, 2023

Part I. The APMA Program – Structure, Composition, and Operation
[Pub. L. 106-170 § 521(b)(2)(A)]
In February 2012, the former APA Program was moved from the Office of Chief Counsel to the Office of Transfer Pricing Operations1
within the Large Business and International Division of the IRS and combined with the U.S. Competent Authority staff responsible
for transfer pricing cases, thereby forming the APMA Program (APMA).
As of December 31, 2022, APMA’s APA cases were handled by 59 team leaders, 26 economists, 9 managers, and 3 assistant directors.2 Each assistant director oversees three managers who lead teams consisting of both team leaders and economists. APMA’s main
office is in Washington, DC, and it also has offices in northern California (San Francisco and San Jose), southern California (Los
Angeles and Laguna Niguel), Chicago, and New York.
On August 31, 2015, a new revenue procedure governing APA applications was published in 2015-35 I.R.B. on page 263. Revenue
Procedure (Rev. Proc.) 2015-41 provides guidance, information and instructions on APA requests and the administration of APAs.
Rev. Proc. 2015-41 updates and supersedes Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-31, 2008-1 C.B.
1133, which is also superseded.
Model APAs appear as appendices to this report. Appendix 1 is the model for APAs covered by Rev. Proc. 2006-9. Appendix 2 is the
current model APA for APAs covered by Rev. Proc. 2015-41. A list of primary APMA contacts is available at https://www.irs.gov/
businesses/corporations/apma-contacts.

In 2017, Transfer Pricing Operations became Treaty & Transfer Pricing Operations (“TTPO”).
In late 2020, TTPO’s Treaty Assistance and Interpretation Team (TAIT) joined APMA, bringing the total number of groups in APMA to four. The three legacy APMA groups have primary
responsibility for cases arising under the business profits and associated enterprises articles of U.S. tax treaties. TAIT endeavors to resolve competent authority issues arising under all other
articles of U.S. tax treaties including issues arising under U.S. tax treaties relating to estate and gift taxes. As such, TAIT is separate from APMA’s APA program, and the total numbers of
team leaders and managers handling APA cases do not include TAIT analysts and managers.
1
2

April 17, 2023

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Part II. APMA Program
Statistical
Data Statistical Data
Part
II. APMA Program

[Pub. L.
L. 106-170
[Pub.
106-170§ 521(b)(2)(C)(i-viii)]
§ 521(b)(2)(C)(i-viii)]

Table 1: APA
Applications
Filed
Table
1: APA Applications
Filed
§ 521(b)(2)(C)(i)3

§ 521(b)(2)(C)(i)

Filed 1991-1999

3

Unilateral

Unilateral

Filed 1991-19993
Filed 2000-2021
Filed 2000-2021
Filed in 2022
Filed in 2022
Filed 1991-2022
Total FiledTotal
1991-2022

653
22

Bilateral

Multilateral

1,845 1,845
154
154

37
7

Bilateral

653
22

Multilateral

37
7

Total
Total
401
401
2,535
2,535
183
183
3,119
3,119

Applications Filed
2013-2022
250
200
150
100
50
0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Bilateral APAs

Netherlands
Filed by Country 2022
3%
All Other Countries
Germany
9%
3%
Japan
Switzerland
29%
4%
Mexico
5%
United Kingdom
6%
India
Italy
14%
6%
Korea
Canada
10%

11%

The charts above illustrate the number of complete applications filed per year and the percentage

The charts above illustrate the number of complete applications filed per year and the percentage of bilateral requests received in
of bilateral requests received in 2022 per foreign country. As of December 31, 2022, APMA had
2022 per foreign country. As of December 31, 2022, APMA had also received 34 user fee filings that were not yet accompanied by a
also
received
user fee filings
thattowere
not
yet accompanied
by a substantially complete APA
substantially
complete
APA34
application,
in addition
the 183
complete
APA applications.

application, in addition to the 183 complete APA applications.

3

The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number
of applications for those years by submission type, so the cumulative totals cannot be reported in that manner.

3
The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number of applications for those years by submission type, so the cumulative totals
cannot be reported in that manner.

3

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665

April 17, 2023

Table 2: Executed4 and Pending APAs
§ 521(b)(2)(C)(ii-vi)56
4

Table 2: Executed and Pending APAs
§ 521(b)(2)(C)(ii-vi)
Unilateral
Unilateral
Total Executed 1991-2021
687
Total Executed 1991-2021
687
Total Executed in 2022
10
Total Executed in 2022
10
Total Executed 1991-2022
697
Total Executed 1991-2022
697
Total Pending as of 12/31/2022

54

Renewals Executed in 20225

10
37

Total Pending as of 12/31/2022

Renewals
in 20225
Renewals
Pending6Executed
as of 12/31/2022
Renewals Pending6 as of 12/31/2022

Bilateral

Multilateral

Bilateral
Multilateral
1,483
21
1,483
21
66
1
66
1
1,549
22
1,549
22

54
10
37

480

30

480

30

32
185 32

0
0
15

185

15

Total

Total
2,191
2,191
77
77 2,268
2,268
564

564
42

42 237
237

APAs Executed
2013-2022
150
100
50
0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Bilateral APAs
Executed by Country 2022

China
Belgium 3%

Finland
United Kingdom All Other Countries
3%
3%
6%

3%
Korea
5%
Italy
4%

Germany
4%
Switzerland
8%

Japan
39%

Canada
14%

India
8%

In 2022,
percentage
of renewals
decreased
(55decreased
percent of all
executed
2022 versus
63 percent
In the
2022,
the percentage
ofexecuted
renewals
executed
(55APAs
percent
of allin APAs
executed
in in 2021). The
charts above illustrate trends in the number of APAs executed per year and the countries involved in the bilateral APAs that were
executed
in 2022.
4
“Executed APAs” refers to APAs that were finalized and includes both initial and renewal APAs.
5
The number of renewals executed is included in the total number of APAs executed during the year.
6
The number of renewals still pending as of year-end is also included in the total number of pending APAs.
4
5
6

4

“Executed APAs” refers to APAs that were finalized and includes both initial and renewal APAs.
The number of renewals executed is included in the total number of APAs executed during the year.
The number of renewals still pending as of year-end is also included in the total number of pending APAs.

April 17, 2023

666

Bulletin No. 2023–16

2022 versus 63 percent in 2021). The charts above illustrate trends in the number of APAs
executed per year and the countries involved in the bilateral APAs that were executed in 2022.
Pending APAs
2013-2022
600
400
200
0

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Pending Bilateral APAs
by Country

All Other Countries
Switzerland
14%
3%
United Kingdom
4%
Germany
4%
Mexico
5%
Italy
Korea
Canada
6%
7%
11%

Japan
24%

India
22%

As the top chart illustrates, the number of pending requests increased relative to December 31,

As the
top chart
illustrates,
the number
of pending
relative
to December
2021. As
of December 31, 2022,
2021.
As of
December
31, 2022,
almostrequests
half ofincreased
the pending
bilateral
APA 31,
requests
involved
almost half of the pending bilateral APA requests involved either Japan or India.

either Japan or India.

Table 3: APAs Revoked or Cancelled and Applications Withdrawn
78
Table 3: APAs
Revoked or Cancelled and Applications Withdrawn
§ 521(b)(2)(C)(vii)

§ 521(b)(2)(C)(vii)

7

Revoked
or Cancelled
1991-2000
Revoked
or Cancelled
1991-2000
Revoked
or Cancelled
2001-2021
Revoked
or Cancelled
2001-2021
Revoked
or
Cancelled
in
2022
Revoked or Cancelled in 2022
Total Revoked or Cancelled 1991-2022
7

Unilateral
Unilateral
8
0

Total Revoked or Cancelled 1991-2022

8
0

Bilateral
Bilateral
2
0

2
0

Multilateral
Multilateral
0
0

0
0

TotalTotal
11
10 10
00
11 11

Withdrawn 1991-20008
Withdrawn 1991-20008
49 49
Withdrawn 2001-2021
75
152
2
229
Withdrawn 2001-2021
75
152
2
229
Withdrawn in 2022
1
5
0
6
Withdrawn
1991-2022
284
7
The first APA Statutory Report, which compiled APA data from 1991-1999, and the second APA Statutory
Report, which compiled APA data for 2000, did not report the cumulative number of applications for those years by
submission type, so the cumulative totals cannot be reported in that manner.
8
See supra note 7.

5
7
The first APA Statutory Report, which compiled APA data from 1991-1999, and the second APA Statutory Report, which compiled APA data for 2000, did not report the cumulative number
of applications for those years by submission type, so the cumulative totals cannot be reported in that manner.
8
See supra note 7.

Bulletin No. 2023–16

667

April 17, 2023

Withdrawn in 2022

1

5

TableWithdrawn
4: APAs Executed
in 2022 by Industry
1991-2022
§ 521(b)(2)(C)(viii)
Table 4: APAs Executed in 2022 by Industry

§ 521(b)(2)(C)(viii)

0

6
284

Industry

Industry

Wholesale/Retail Trade
Wholesale/Retail Trade
Manufacturing
Manufacturing
Services
Services
Finance, Insurance, and Real Estate
Finance, Insurance, and Real Estate
All Other Industries

32
31
10
3
1

All Other Industries

APAs Executed
in 2022 by Industry
Manufacturing
40%

32
31
10
3
1

Services
13% Finance, Insurance
and Real Estate
4%
All Other Industries
1%
Wholesale/Retail
Trade
42%

Table 4a: Manufacturing APAs Executed in 2022

Table 4a: Manufacturing
APAs
in 20229
Type
ofExecuted
Manufacturing

Chemical
Type of Manufacturing
Computer
and Electronic Product
Chemical
Transportation
Computer
and ElectronicEquipment
Product
9
Miscellaneous
Transportation
Equipment
9
Miscellaneous
All Other
Manufacturing
All Other Manufacturing

13
9
6
2
1

13
9
6
2
1

Types of Manufacturing APAs
Executed in 2022

Transportation
Equipment
Manufacturing
19%
Miscellaneous
Manufacturing
7%
9
Industries in the Miscellaneous Manufacturing subsector (NAICS Code 339) make a wide range of products that
Computer
and
cannot readily be classified
specific NAICS manufacturing subsectors.
All in
Other
Electronic Product
Manufacturing
Manufacturing
3%
29%
6
Chemical
Manufacturing
42%

Table 4b: Wholesale/Retail Trade APAs Executed in 2022
Type of Wholesale/Retail Trade
Industries in the Miscellaneous Manufacturing subsector (NAICS Code 339) make a wide range of products that cannot readily be classified in specific NAICS manufacturing subsectors.
Merchant Wholesalers, Durable Goods
24
Merchant Wholesalers, Nondurable Goods
4
April All
17,Other
2023Wholesalers
668
Bulletin No. 2023–16
4
9

Manufacturing
7%
Computer and
Electronic Product
Manufacturing
29%

All Other
Manufacturing
3%
Table 4b: Wholesale/Retail Trade APAs Executed in 2022

Table 4b: Wholesale/Retail Trade APAs Executed in 2022
Type of Wholesale/Retail Trade
Type of Wholesale/Retail Trade
Merchant Wholesalers, Durable Goods
24
Merchant Wholesalers, Durable Goods
24
Merchant Wholesalers, Nondurable Goods
4
Merchant Wholesalers, Nondurable Goods
4
All Other Wholesalers
4
All Other Wholesalers
4
Types of Wholesale/Retail Trade APAs
Executed in 2022
All Other
Wholesalers
12.5%
Merchant
Wholesalers,
Nondurable Goods
12.5%

Merchant
Wholesalers, Durable
Goods
75%

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669

April 17, 2023

Part III. General Descriptions of APAs Executed in 2022
Part
III. General
Descriptions
of APAs Executed
[Pub.
L. 106-170
§ 521(b)(2)(D)
and (E)]in 2022
[Pub. L. 106-170 § 521(b)(2)(D) and (E)]

Nature
of the Relationships
Nature
of the Relationships
§ 521(b)(2)(D)(i)
§ 521(b)(2)(D)(i)
Relationships between Controlled Parties

U.S. Parent &
Non-U.S. Subsidiary
31%
Sister Companies
7%

Non-U.S. Parent &
U.S. Subsidiary
62%

As in prior years, more than half of the APAs executed in 2022 involved transactions between non-U.S. parents and U.S. subsidiaries.

As in prior years, more than half of the APAs executed in 2022 involved transactions between
non-U.S. parents and U.S. subsidiaries.
Covered Transactions, Functions and Risks, and Tested Parties
§ 521(b)(2)(D)(ii-iii)

Covered Transactions, Functions and Risks, and Tested Parties
§ 521(b)(2)(D)(ii-iii)
Types of Covered Transactions
Sale of Tangible
Property from the
U.S.
14%
Sale of Tangible
Property into the U.S.
23%
All Other Types of
Transactions
2%

8

Use of Intangible
Property by a U.S.
Entity
10%
Use of Intangible
Property by a NonU.S. Entity
12%
Provision of Services
by a U.S. Entity
23%

Provision of Services
by a Non-U.S. Entity
16%

10

10
the transactions
in APAs
executed
involve
saleorof
Most Most
of the of
transactions
covered incovered
APAs executed
in 2022
involvein
the2022
sale of
tangiblethe
goods
thetangible
provisiongoods
of services. Twenty-twoorpercent
of the transactions
involve
the use of intangible
which can beinvolve
among the
transactions in
the provision
of services.
Twenty-two
percent property,
of the transactions
themost
usechallenging
of intangible
APMA’s
inventory.
property,
which can be among the most challenging transactions in APMA’s inventory.

In the majority of APAs, the covered transactions involve numerous business functions and risks. For instance, with respect to funcIn the majority of APAs, the covered transactions involve numerous business functions and risks.
tions, APAs involving manufactured products typically involve a controlled group that conducts research and development (R&D),
Forininstance,
with and
respect
to functions,
APAsthe
involving
products
involve
engages
product design
engineering,
manufactures
product, manufactured
markets and distributes
the typically
product, and
performs support
a controlled
group
thatand
conducts
researchRegarding
and development
(R&D),group
engages
in product
design
functions
such as legal,
finance,
human resources.
risks, the controlled
may assume
a variety
of risks, including
and
engineering,
theand
product,
markets
and distributes
theand
product,
and performs
market
risks,
R&D risks, fimanufactures
nancial risks, credit
collection
risks, product
liability risks,
general business
risks. In the APA evaluationsupport
process,functions
a significantsuch
amount
of timefinance,
and effortand
is devoted
understanding
how the functions
andcontrolled
risks are allocated among
as legal,
humantoresources.
Regarding
risks, the
the controlled
groupassume
of companies
that are
the coveredmarket
transactions.
methods
requiring
the selection
of a tested party, the
group may
a variety
of party
risks,toincluding
risks,ForR&D
risks,
financial
risks, credit
testedand
partycollection
chosen generally
will
be
the
least
complex
of
the
controlled
taxpayers.
risks, product liability risks, and general business risks. In the APA evaluation

process, a significant amount of time and effort is devoted to understanding how the functions
and risks are allocated among the controlled group of companies that are party to the covered
APAs often cover more than one type of transaction.
transactions. For methods requiring the selection of a tested party, the tested party chosen
generally will be the least complex of the controlled taxpayers.
April 17, 2023
670
Bulletin No. 2023–16
Types of Tested Parties
10

and risks are allocated among the controlled group of companies that are party to the covered
transactions. For methods requiring the selection of a tested party, the tested party chosen
generally will be the least complex of the controlled taxpayers.
Types of Tested Parties
U.S. Distributor
34%

All Other Types of
Tested Parties
1%
Non-U.S. Service
Provider
18%

U.S. Manufacturer
21%

Non-U.S. Distributor
19%

U.S. Service Provider
7%

Consistent with prior years, a majority of tested parties11 in 2022 were U.S. distributors, U.S. manufacturers, or U.S. service providers.
10
APAs often
cover
more than
one type of transaction.
Transfer
Pricing
Methods
Used
§ 521(b)(2)(D)(iv)

9 (TPM) for both the sale of tangible property and the use of intangible
In 2022, the most commonly used transfer pricing method
property continued to be the comparable profits method/transactional net margin method (CPM/TNMM). The CPM/TNMM was used
for 77 percent of these types of transactions.
For covered transactions involving tangible and intangible property that used the CPM/TNMM, the operating margin (OM) is still the
most common profit level indicator (PLI) used to benchmark results. It was used 73 percent of the time. Other PLIs, such as the Berry
Ratio and return on total cost, made up the other 27 percent. As used here, “OM” is defined as the ratio of operating profit to sales,12
and “Berry Ratio” is defined as the ratio of gross profit to operating expenses.13 Most services transactions (80 percent) also used the
CPM/TNMM with the OM and operating profit to operating expense being the most common PLIs (used 53 percent of the time).14
Sources of Comparables, Comparables Selection Criteria, and Nature of Adjustments to Comparables or Tested Party Data
§ 521(b)(2)(D)(v-vii)
For the APAs executed in 2022 that involved the CPM/TNMM with a North American tested party, the most widely used data source
for comparables was Standard and Poor’s Compustat/Capital IQ database. Different sources were used in other cases (e.g., where the
tested party was not a U.S. or Canadian entity or where transaction-based methods were applied). The other most commonly used
databases are listed in the table below.
Table 5: Sources of Comparable Data
Bureau van Dijk (BvD)

Prowess

Global Vantage

RoyaltySource

ktMINE

RoyaltyStat

Orbis
In making comparability adjustments, typical balance sheet adjustments, as identified in Treas. Reg. §§ 1.482-1(d)(2) and 1.482-5(c)
(2)(iv), were made in most cases, including where appropriate, adjustments for payables, receivables, inventory, and fixed assets.
In addition, where appropriate, adjustments for different accounting practices were made to convert from LIFO to FIFO inventory
accounting, and a small number of cases involved the accounting reclassification of expenses, e.g., from COGS to operating expenses.

Not all the executed APAs involve a tested party.
See Treas. Reg. § 1.482-5(b)(4)(ii)(A).
13
See Treas. Reg. § 1.482-5(b)(4)(ii)(B).
14
The majority of APAs that covered services transactions also included tangible/intangible transactions and are not tested under a separate PLI.
11

12

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April 17, 2023

Ranges, Goals, and Adjustment Mechanisms
§ 521(b)(2)(D)(viii-ix)
Most transactions covered in APAs target an interquartile range or point within the interquartile range as described in Treas. Reg.
§ 1.482-1(e)(2)(iii)(C), and other targeted arm’s length ranges. Where the transaction involves a royalty payment for the use of
intangible property, both specific royalty rates and ranges have been used. Where the covered transaction is the sale or license of
intangible property, and the payment for such transfer would be a royalty based solely on external comparable uncontrolled transactions, a secondary or confirming method, e.g., a test of the post-royalty operating margin or cost-plus mark-up, has sometimes also
been used. The testing periods of the APAs executed in 2022 were either a single year, the term of the APA only, or the term of the
APA plus rollback years.
APAs executed in 2022 included several mechanisms for making adjustments to the tested party’s results when the results fall outside
the interquartile range or do not match the point required by the APA. Examples of the mechanisms used include an adjustment bringing the tested party’s results for a single year to either the closer edge of the range or the median of the range, an adjustment to bring
the results over the APA term to the closer edge of the range, or an adjustment to bring the results to a specified point or royalty rate.
Critical Assumptions
§ 521(b)(2)(D)(v)
The model APAs used by the IRS (included as Appendix 1 and Appendix 2 of this report) include standard critical assumptions that
there will be no material changes to the taxpayer’s business or to its tax or financial accounting practices during the APA term. A few
bilateral cases have also included critical assumptions tied to the taxpayer’s profitability in a certain year or over the term of the APA.
Pursuant to § 7.06(3) of Rev. Proc. 2015-41, APMA will cancel an APA in the event of a failure of a critical assumption unless the
parties agree to revise the APA.
Term Lengths of APAs Executed in 2022
§ 521(b)(2)(D)(x)
Table 6: Term Lengths of APAs Executed in 2022
Term Length (years)
1
2
3
4
5
6
7
8
9
10
11
Average

Number of APAs
1
1
2
1
37
12
9
5
3
4
2
6

As described in § 3.03(1) of Rev. Proc. 2015-41, taxpayers should request an APA term that will cover at least five prospective years
and may also request that the APA be “rolled back” to cover one or more earlier taxable years, although the appropriate APA
term is decided on a case-by-case basis. Of the APAs executed in 2022, 16 percent included rollback years. A substantial number
of those APAs with terms of greater than five years were submitted as a request for a five-year term, and the additional years were
agreed to between the taxpayer and the IRS (or, in the case of a bilateral APA, between the IRS and the foreign government upon the
taxpayer’s request) to ensure a reasonable amount of prospectivity in the APA term.

April 17, 2023

672

Bulletin No. 2023–16

term, and the additional years were agreed to between the taxpayer and the IRS (or, in the case of
a bilateral APA, between the IRS and the foreign government upon the taxpayer’s request) to
ensure a reasonable amount of prospectivity in the APA term.
Amount of Time Taken to Complete New and Renewal APAs
§ 521(b)(2)(E)

Amount of Time Taken to Complete New and Renewal APAs
Table§7:
Months to Complete New and Renewal APAs Executed in 2022
521(b)(2)(E)
Unilateral New and Renewal
Bilateral APAs Executed
Unilateralin&2022
Bilateral
Table 7: Months to Complete
Average Bilateral
Median
Average
UnilateralMedian
& Bilateral
N/A
Average N/A
Median 53.0
Average 53.0
Median 53.0
Average 53.0
Median

Average Unilateral
Median
New
Renewal
New

22.9

New Renewal
& Renewal

22.9

New & Renewal

N/A 17.7 N/A 36.6
22.9 17.7 17.7 44.7
22.9
17.7

53.0 30.6 53.0 33.6
36.6 45.7 30.6 42.0
44.7
45.7

53.0 28.3
33.6 43.4
42.0

53.0
28.3
43.4

Months to Complete New and Renewal APAs Executed in 2022

Months to Complete New and Renewal APAs Executed in 2022
Months to Complete

60

New

50
40

Renewal

30

New &
Renewal

20
10
0

Average

Median

Unilateral

Average

Median

Bilateral
Type of APA

Average

Median

Unilateral &
Bilateral

Median completion time continued to rise in 2022 to 43.4 months (from 35.1 months in 2021and 32.7 months in 2020).
Efforts to Ensure Compliance with APAs
§ 521(b)(2)(F)

12

As described in § 7.02(1) of Rev. Proc. 2015-41, taxpayers are required to file annual reports to demonstrate compliance with the
terms and conditions of their APAs. The filing and review of these annual reports are critical parts of the APA process. Through annual
report review, the APMA Program monitors taxpayer compliance with APAs on a contemporaneous basis. Annual report review also
provides current information on the success or problems associated with the various TPMs adopted in the APA process.

Bulletin No. 2023–16

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April 17, 2023

Nature of Documentation Required in Annual Report
§ 521(b)(2)(D)(xi)
APAs require taxpayers to file timely and complete annual reports describing their operations and demonstrating compliance with
the APA’s terms and conditions. Not every annual report will include each of the items listed in the following table; they are required
where the facts demonstrate a need for such documentation. The requirements for the information to be included in a specific APA
annual report is included in Appendix C of the executed APA.

1.

2.
3.
4.
5.

6

7.

Statement regarding all material differences between Taxpayer’s business operations during APA year and description of
Taxpayer’s business operations contained in Taxpayer’s APA request. If there are no material differences, a statement to
that effect.
Statement concerning all material changes in Taxpayer’s accounting methods and classifications, and methods of
estimation, from those described or used in Taxpayer’s request for the APA. If there has been no material change in
accounting methods and classifications or methods of estimation, a statement to that effect.
Any change to the Taxpayer notice information.
Description of any failure to meet critical assumptions. If there has been none, a statement to that effect.
Statement identifying whether any material information submitted while the APA request was pending is discovered to be
false, incorrect, or incomplete.
The amount, reason for, and financial analysis of any compensating adjustment, for the APA year, including but not
limited to the amounts paid or received by each affected entity; the character (such as capital or ordinary expense) and
country source of the funds transferred, and the specific line item(s) of any affected U.S. tax return; and any change to any
entity classification for federal income tax purposes of any member of Taxpayer’s group that is relevant to the APA.
The amounts, description, reason for, and financial analysis of any book-tax difference relevant to the TPM for the APA
year, as reflected on Schedule M-1 or Schedule M-3 of the U.S. return for the APA year.

8.

Statement regarding whether Taxpayer contemplates requesting, or has requested, to renew, modify, or cancel the APA.

9.

Financial statements and any necessary account detail to show compliance with the TPM, with a copy of the opinion from
an independent certified public accountant or other documentation required by paragraph 5(f) of the APA.

10.

Financial analysis demonstrating Taxpayer’s compliance with TPM.

11.

Organizational chart.

12.

A copy of the APA and any amendment.

13.

A penalty of perjury statement.

Approaches for Sharing of Currency or Other Risks
§ 521(b)(2)(D)(xii)
In appropriate cases, APAs may provide specific approaches for dealing with risks, including currency risk, such as adjustment mechanisms and/or critical assumptions.

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APPENDIX 1– Model APA (based on Rev. Proc. 2006-9)

ADVANCE PRICING AGREEMENT
between
[Insert Taxpayer’s Name]
and
THE INTERNAL REVENUE SERVICE

PARTIES
The Parties to this Advance Pricing Agreement (APA) are the Internal Revenue Service (IRS) and [Insert Taxpayer’s Name], EIN
________.
RECITALS
[Insert Taxpayer Name] is the common parent of an affiliated group filing consolidated U.S. tax returns (collectively referred to as
“Taxpayer”) and is entering into this APA on behalf of itself and other members of its consolidated group.
Taxpayer’s principal place of business is [City, State]. [Insert general description of taxpayer and other relevant parties].
This APA contains the Parties’ agreement on the best method for determining arm’s-length prices of the Covered Transactions
under I.R.C. section 482, the Treasury Regulations thereunder, and any applicable tax treaties.
{If renewal, add} [Taxpayer and IRS previously entered into an APA covering taxable years ending _____ to ______, executed on
________.]
AGREEMENT
The Parties agree as follows:
1.

Covered Transactions. This APA applies to the Covered Transactions, as defined in Appendix A.

2.

Transfer Pricing Method. Appendix A sets forth the Transfer Pricing Method (TPM) for the Covered Transactions.

3.

Term. This APA applies to the APA Term, as defined in Appendix A.

4.

Operation.

5.

a.

Revenue Procedure 2006-9 governs the interpretation, legal effect, and administration of this APA.

b.

Nonfactual oral and written representations, within the meaning of sections 10.04 and 10.05 of Revenue Procedure 2006-9
(including any proposals to use particular TPMs), made in conjunction with the APA Request constitute statements made in
compromise negotiations within the meaning of Rule 408 of the Federal Rules of Evidence.

Compliance.
a.

Taxpayer must report its taxable income in an amount that is consistent with Appendix A and all other requirements of this
APA on its timely filed U.S. Return. However, if Taxpayer’s timely filed U.S. Return for any taxable year covered by this
APA (APA Year) is filed prior to, or no later than 60 days after, the effective date of this APA, then Taxpayer must report its
taxable income for that APA Year in an amount that is consistent with Appendix A and all other requirements of this APA
either on the original U.S. Return or on an amended U.S. Return filed no later than 120 days after the effective date of this
APA, or through such other means as may be specified herein.

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b.

{Use or edit the following when U.S. Group or Foreign Group contains more than one member.} [This APA addresses the
arm’s-length nature of prices charged or received in the aggregate between Taxpayer and Foreign Participants with respect
to the Covered Transactions. Except as explicitly provided, this APA does not address and does not bind the IRS with respect
to prices charged or received, or the relative amounts of income or loss realized, by particular legal entities that are members
of U.S. Group or that are members of Foreign Group.]

c.

For each APA Year, if Taxpayer complies with the terms and conditions of this APA, then the IRS will not make or propose
any allocation or adjustment under I.R.C. section 482 to the amounts charged in the aggregate between Taxpayer and Foreign Participant[s] with respect to the Covered Transactions.

d.

If Taxpayer does not comply with the terms and conditions of this APA, then the IRS may:
i.

enforce the terms and conditions of this APA and make or propose allocations or adjustments under I.R.C. section 482
consistent with this APA;

ii. cancel or revoke this APA under section 11.06 of Revenue Procedure 2006-9; or
iii. revise this APA, if the Parties agree.
e.

Taxpayer must timely file an Annual Report (an original and four copies) for each APA Year in accordance with Appendix C
and section 11.01 of Revenue Procedure 2006-9. Taxpayer must file the Annual Report for all APA Years through the APA
Year ending [insert year] by [insert date]. Taxpayer must file the Annual Report for each subsequent APA Year by [insert
month and day] immediately following the close of that APA Year. (If any date falls on a weekend or holiday, the Annual
Report shall be due on the next date that is not a weekend or holiday.) The IRS may request additional information reasonably necessary to clarify or complete the Annual Report. Taxpayer will provide such requested information within 30 days.
Additional time may be allowed for good cause.

f.

The IRS will determine whether Taxpayer has complied with this APA based on Taxpayer’s U.S. Returns, the Financial
Statements, and other APA Records, for the APA Term and any other year necessary to verify compliance. For Taxpayer
to comply with this APA, {use the following or an alternative} an independent certified public accountant must render an
opinion that Taxpayer’s Financial Statements present fairly, in all material respects, Taxpayer’s financial position under U.S.
GAAP.

g.

In accordance with section 11.04 of Revenue Procedure 2006-9, Taxpayer will (1) maintain the APA Records, and (2) make
them available to the IRS in connection with an examination under section 11.03. Compliance with this subparagraph constitutes compliance with the record-maintenance provisions of I.R.C. sections 6038A and 6038C for the Covered Transactions
for any taxable year during the APA Term.

h.

The True Taxable Income within the meaning of Treasury Regulations sections 1.482-1(a)(1) and (i)(9) of a member of an
affiliated group filing a U.S. consolidated return will be determined under the I.R.C. section 1502 Treasury Regulations.

i.

{Optional for US Parent Signatories} To the extent that Taxpayer’s compliance with this APA depends on certain acts of
Foreign Group members, Taxpayer will ensure that each Foreign Group member will perform such acts.

6.

Critical Assumptions. This APA’s critical assumptions, within the meaning of Revenue Procedure 2006-9, section 4.05, appear in
Appendix B. If any critical assumption has not been met, then Revenue Procedure 2006-9, section 11.06, governs.

7.

Disclosure. This APA, and any background information related to this APA or the APA Request, are: (1) considered “return information” under I.R.C. section 6103(b)(2)(C); and (2) not subject to public inspection as a “written determination” under I.R.C.
section 6110(b)(1). Section 521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for public
disclosure that includes certain specifically designated information concerning all APAs, including this APA, in a form that does
not reveal taxpayers’ identities, trade secrets, and proprietary or confidential business or financial information.

8.

Disputes. If a dispute arises concerning the interpretation of this APA, the Parties will seek a resolution by the Director of the
Advance Pricing and Mutual Agreement Program, to the extent reasonably practicable, before seeking alternative remedies.

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9.

Materiality. In this APA the terms “material” and “materially” will be interpreted consistently with the definition of “material
facts” in Revenue Procedure 2006-9, section 11.06(4).

10. Section Captions. This APA’s section captions, which appear in italics, are for convenience and reference only. The captions do
not affect in any way the interpretation or application of this APA.
11. Terms and Definitions. Unless otherwise specified, terms in the plural include the singular and vice versa. Appendix D contains
definitions for capitalized terms not elsewhere defined in this APA.
12. Entire Agreement and Severability. This APA is the complete statement of the Parties’ agreement. The Parties will sever, delete,
or reform any invalid or unenforceable provision in this APA to approximate the Parties’ intent as nearly as possible.
13. Successor in Interest. This APA binds, and inures to the benefit of, any successor in interest to Taxpayer.
14. Notice. Any notices required by this APA or Revenue Procedure 2006-9 must be in writing. Taxpayer will send notices to the IRS
at the address and in the manner set forth in Revenue Procedure 2006-9, section 4.11. The IRS will send notices to:
Taxpayer Corporation
Attn: Jane Doe, Sr. Vice President (Taxes)
1000 Any Road
Any City, USA 10000
(phone: _________)
15. Effective Date and Counterparts. This APA is effective starting on the date, or later date of the dates, upon which all Parties
execute this APA. The Parties may execute this APA in counterparts, with each counterpart constituting an original.
WITNESS,
The Parties have executed this APA on the dates below.
[Taxpayer Name in all caps]
By: ___________________________
Jane Doe
Sr. Vice President (Taxes)

Date: ___________________, 201___

IRS
By: ___________________________
John M. Wall
Acting Director, Advance Pricing and Mutual
Agreement Program

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Date: ___________________, 201___

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APPENDIX A
COVERED TRANSACTIONS AND TRANSFER PRICING METHOD (TPM)

1.

Covered Transactions.
[Define the Covered Transactions.]

2.

APA Term.
This APA applies to Taxpayer’s taxable years ending __________ through ________ (APA Term).

3.

TPM.
{Note: If appropriate, adapt language from the following examples.}
[The Tested Party is __________.]
• CUP Method

The TPM is the comparable uncontrolled price (CUP) method. The Arm’s Length Range of the price charged for
_________ is between _______ and ___________ per unit.
• CUP Method
The TPM is the CUT Method. The Arm’s Length Range of the royalty charged for the license of ______is between
____% and ___ % of [Taxpayer’s, Foreign Participants’, or other specified party’s] Net Sales Revenue. [Insert definition of net sales revenue or other royalty base.]
• Resale Price Method (RPM)
 he TPM is the resale price method (RPM). The Tested Party’s Gross Margin for any APA Year is defined as folT
lows: the Tested Party’s gross profit divided by its sales revenue (as those terms are defined in Treasury Regulations
sections 1.482-5(d)(1) and (2)) for that APA Year. The Arm’s Length Range is between ____% and ___ %, and the
Median of the Arm’s Length Range is ___%.
• Cost Plus Method
 he TPM is the cost plus method. The Tested Party’s Cost Plus Markup is defined as follows for any APA Year: the
T
Tested Party’s ratio of gross profit to production costs (as those terms are defined in Treasury Regulations sections
1.482-3(d)(1) and (2)) for that APA Year. The Arm’s Length Range is between ___% and ___%, and the Median of
the Arm’s Length Range is ___%.
• CPM with Berry Ratio PLI
 he TPM is the comparable profits method (CPM). The profit level indicator is a Berry Ratio. The Tested Party’s
T
Berry Ratio is defined as follows for any APA Year: the Tested Party’s gross profit divided by its operating expenses
(as those terms are defined in Treasury Regulations sections 1.482-5(d)(2) and (3)) for that APA Year. The Arm’s
Length Range is between ____ and ___, and the Median of the Arm’s Length Range is ___.
• CPM using an Operating Margin PLI
 he TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested ParT
ty’s Operating Margin is defined as follows for any APA Year: the Tested Party’s operating profit divided by its sales
revenue (as those terms are defined in Treasury Regulations section 1.482-5(d)(1) and (4)) for that APA Year. The
Arm’s Length Range is between ____% and ___ %, and the Median of the Arm’s Length Range is ___%.

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• CPM using a Three-year Rolling Average Operating Margin PLI
 he TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested
T
Party’s Three-Year Rolling Average operating margin is defined as follows for any APA Year: the sum of the Tested
Party’s operating profit (within the meaning of Treasury Regulation section 1.482-5(d)(4) for that APA Year and the
two preceding years, divided by the sum of its sales revenue (within the meaning of Treasury Regulation section
1.482-5(d)(1)) for that APA Year and the two preceding years. The Arm’s Length Range is between ____% and
____%, and the Median of the Arm’s Length Range is ___%.
• Residual Profit Split Method
The TPM is the residual profit split method. [Insert description of routine profit level determinations and residual
profit-split mechanism].
[Insert additional provisions as needed.]
4.

Application of TPM.
For any APA Year, if the results of Taxpayer’s actual transactions produce a [price per unit, royalty rate for the Covered
Transactions] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating
Margin for the Tested Party] within the Arm’s Length Range, then the amounts reported on Taxpayer’s U.S. Return must
clearly reflect such results.
For any APA year, if the results of Taxpayer’s actual transactions produce a [price per unit, royalty rate] [or] [Gross Margin,
Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party]
outside the Arm’s Length Range, then amounts reported on Taxpayer’s U.S. Return must clearly reflect an adjustment that
brings the [price per unit, royalty rate] [or] [Tested Party’s Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin,
Three-Year Rolling Average Operating Margin] to the Median.
For purposes of this Appendix A, the “results of Taxpayer’s actual transactions” means the results reflected in Taxpayer’s
and Tested Party’s books and records as computed under U.S. GAAP [insert another relevant accounting standard if applicable], with the following adjustments:
(a) [The fair value of stock-based compensation as disclosed in the Tested Party’s audited financial statements shall be
treated as an operating expense]; and
(b) To the extent that the results in any prior APA Year are relevant (for example, to compute a multi-year average), such
results shall be adjusted to reflect the amount of any adjustment made for that prior APA Year under this Appendix A.

5.

APA Revenue Procedure Treatment
If Taxpayer makes an adjustment under paragraph 4 of this Appendix A (a “primary adjustment”), Taxpayer and its related
foreign entity may elect APA Revenue Procedure Treatment in accordance with section 11.02(3) of Revenue Procedure
2006-9 and avoid the possible adverse tax consequences of a secondary adjustment that would otherwise follow the primary
adjustment.
[Insert additional provisions as needed.]

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APPENDIX B
CRITICAL ASSUMPTIONS

This APA’s critical assumptions are:
1. The business activities, functions performed, risks assumed, assets employed, and financial and tax accounting methods and
classifications [and methods of estimation] of Taxpayer in relation to the Covered Transactions will remain materially the same as
described or used in Taxpayer’s APA Request. A mere change in business results will not be a material change.
[Insert additional provisions as needed.]

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APPENDIX C
APA RECORDS AND ANNUAL REPORT

APA RECORDS
The APA Records will consist of all documents listed below for inclusion in the Annual Report, as well as all documents, notes, work
papers, records, or other writings that support the information provided in such documents.

ANNUAL REPORT
The Annual Report (and each of the four copies required by paragraph 5(e) of this APA) will include:
1.

Two copies of a properly completed APA Annual Report Summary in the form of Appendix E to this APA, one copy of the form
bound with, and one copy provided separately from, the rest of the Annual Report.

2.

A table of contents, organized as follows:

3.

Statements that fully identify, describe, analyze, and explain:
a.

All material differences between the U.S. Group’s business operations (including functions, risks assumed, markets, contractual terms, economic conditions, property, services, and assets employed) during the APA Year from the business operations
described in the APA Request. If there have been no material differences, the Annual Report will include a statement to that
effect.

b.

All material differences between the U.S. Group’s accounting methods and classifications, and methods of estimation used
during the APA Year, from those described or used in the APA Request. If any change was made to conform to changes in
U.S. GAAP (or other relevant accounting standards) Taxpayer will specifically identify the change. If there has been no
material change in accounting methods and classifications or methods of estimation, the Annual Report will include a statement to that effect.

c.

Any change to the Taxpayer notice information in paragraph 14 of this APA.

d.

Any failure to meet any critical assumption. If there has been no failure, the Annual Report will include a statement to that
effect.

e.

Whether or not material information submitted while the APA Request was pending is discovered to be false, incorrect, or
incomplete.

f.

Any change to any entity classification for federal income tax purposes (including any change that causes an entity to be
disregarded for federal income tax purposes) of any Worldwide Group member that is a party to the Covered Transactions
or is otherwise relevant to the TPM.

g.

The amount, reason for, and financial analysis of (1) any primary adjustments made under Appendix A for the APA Year; and
(2) any (a) secondary adjustments that follow such primary adjustments or (b) accounts receivable that Taxpayer establishes,
in lieu of secondary adjustments, by electing APA Revenue Procedure Treatment pursuant to paragraph 5 of Appendix A and
Revenue Procedure 2006-9, section 11.02(3), for the APA Year, including but not limited to:
i.

the amounts due or owed, and paid or received by each affected entity;

ii. the character (such as capital, ordinary, income, expense) and country source of the funds transferred, and the specific
affected line item(s) of any affected U.S. Return;

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iii. the date(s) and means by which the payments are or will be made; and
iv. whether or not APA Revenue Procedure Treatment was elected pursuant to paragraph 5 of Appendix A and Revenue
Procedure 2006-9, section 11.02(3).
h.

The amounts, description, reason for, and financial analysis of any book-tax difference relevant to the TPM for the APA Year,
as reflected on Schedule M-1 or Schedule M-3 of the U.S. Return for the APA Year.

i.

Whether Taxpayer contemplates requesting, or has requested, to renew, modify, or cancel the APA.

4.

The Financial Statements, and any necessary account detail to show compliance with the TPM, including consolidating financial
statements, segmented financial data, records from the general ledger, or similar information if the assets, liabilities, income, or
expenses relevant to showing compliance with the TPM are a subset of the assets, liabilities, income, or expenses presented in
the Financial Statements.

5.

{Use the following or the alternative prescribed by paragraph 5(f) of this APA:} A copy of the independent certified public
accountant’s opinion required by paragraph 5(f) of this APA.

6.

A financial analysis that reflects Taxpayer’s TPM calculations for the APA Year. The calculations must reconcile with and reference the information required under item 4 above in sufficient account detail to allow the IRS to determine whether Taxpayer has
complied with the TPM.

7.

An organizational chart for the Worldwide Group, revised annually to reflect all ownership or structural changes of entities that
are parties to the Covered Transactions or are otherwise relevant to the TPM.

8.

A copy of the APA and any amendment.

9.

A penalty of perjury statement, executed in accordance with Revenue Procedure 2006-9, section 11.01(6) and (7).

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APPENDIX D
DEFINITIONS

The following definitions control for all purposes of this APA. The definitions appear alphabetically below:
Term
Annual Report
APA

Definition
A report within the meaning of Revenue Procedure 2006-9, section 11.01.
This Advance Pricing Agreement, which is an “advance pricing agreement” within the meaning of
Revenue Procedure 2006-9, section 2.04.
APA Records
The records specified in Appendix C.
APA Request
Taxpayer’s request for this APA dated _________, including any amendments or supplemental or
additional information thereto.
APA Year
This term is defined in paragraph 5(a) of this APA.
Covered Transaction(s)
This term is defined in Appendix A.
Financial Statements
Financial statements prepared in accordance with U.S. GAAP and stated in U.S. dollars.
Foreign Group
Worldwide Group members that are not U.S. persons.
Foreign Participants
[name the foreign entities involved in Covered Transactions].
I.R.C.
The Internal Revenue Code of 1986, 26 U.S.C., as amended.
Pub. L. 106-170
The Ticket to Work and Work Incentives Improvement Act of 1999.
Revenue Procedure 2006-9 Rev. Proc. 2006-9, 2006-1 C.B. 278.
Transfer Pricing Method
A transfer pricing method within the meaning of Treasury Regulation section 1.482-1(b) and
(TPM)
Revenue Procedure 2006-9, section 2.04.
U.S. GAAP
U.S. generally-accepted accounting principles.
U.S. Group
Worldwide Group members that are U.S. persons.
U.S. Return
For each taxable year, the “returns with respect to income taxes under subtitle A” that Taxpayer
must “make” in accordance with I.R.C. section 6012. {Or substitute for partnership: For each
taxable year, the “return” that Taxpayer must “make” in accordance with I.R.C. section 6031.}
Worldwide Group
Taxpayer and all organizations, trades, businesses, entities, or branches (whether or not
incorporated, organized in the United States, or affiliated) owned or controlled directly or indirectly
by the same interests.

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APPENDIX E
APA ANNUAL REPORT SUMMARY FORM

The APA Annual Report Summary on the next page is a required APA Record. The APA Team Leader supplies some of the information requested on the form. Taxpayer is to supply the remaining information requested by the form and submit the form as part of
its Annual Report.

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APA Annual Report
SUMMARY

APA Information

Department of the Treasury—Internal Revenue Service

APA No. _______________

Large Business and International Division

Team Leader ____________________________

Treaty and Transfer Pricing Operations

Economist _______________________________

Advance Pricing and Mutual Agreement Program

Intl Examiner _____________________________

Taxpayer Name: ___________________________________________________
Taxpayer EIN:_________________ NAICS:___________________
APA Term: Taxable years ending ________ to ____________
Original APA [ ] Renewal APA [ ]
Annual Report due dates:
_________________, 201__ for all APA Years through APA Year ending in 200__; for each APA Year
thereafter, on _________________ [month and day] immediately following the close of the APA Year
Principal foreign country(ies) involved in covered transaction(s): _______________________________________
Type of APA: [ ] unilateral [ ] bilateral with ________________
Tested party is [ ] US [ ] foreign [ ] both
Approximate dollar volume of covered transactions (on an annual basis) involving tangible goods and services:
[ ] N/A [ ] <$50 million [ ] $50-100 million [ ] $100-250 million [ ] $250-500 million [ ] >$500 million
APA tests on (check all that apply):
[ ] annual basis [ ] multi-year basis [ ] term basis
APA provides (check all that apply) a:
[ ] range [ ] point [ ] floor only [ ] ceiling only [ ] other_____________
APA provides for adjustment (check all that apply) to:
[ ] nearest edge [ ] median [ ] other point

APA Annual Report
Information

APA date executed: ______________, 201__
This APA Annual Report Summary is for APA Year(s) ending in 200__ and was filed on _____________, 201__

(to be completed

Check here [ ] if Annual Report was filed after original due date but in accordance with extension.

by the Taxpayer)

Has this APA been amended or changed? [ ] yes [ ] no

Effective Date: ______________________

Has Taxpayer complied with all APA terms and conditions? [ ] yes [ ] no
Were all the critical assumptions met? [ ] yes [ ] no
Has a Primary Compensating Adjustment been made in any APA Year covered by this Annual Report?
[ ] yes [ ] no If yes, which year(s): 200___
Have any necessary Secondary Compensating Adjustments been made? [ ] yes [ ] no
Did Taxpayer elect APA Revenue Procedure treatment? [ ] yes [ ] no
Any change to the entity classification of a party to the APA? [ ] yes [ ] no
Taxpayer notice information contained in the APA remains unchanged. [ ] yes [ ] no
Taxpayer's current US principal place of business: (City, State) _____________________________________
APA Annual Report

Financial analysis reflecting TPM calculations

[ ] yes [ ] no

Checklist of

Financial statements showing compliance with TPM(s)

[ ] yes [ ] no

Key Contents

Schedule M-1 or M-3 book-tax differences

[ ] yes [ ] no

(to be completed

Current organizational chart of relevant portion of world-wide group

[ ] yes [ ] no

Attach copy of APA

[ ] yes [ ] no

by the Taxpayer)

Other APA records and documents included:

Contact Information

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Authorized Representative

Phone Number

685

Affiliation and Address

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APPENDIX 2– Model APA (based on Rev. Proc. 2015-41)
TEMPLATE FOR ADVANCE PRICING AGREEMENT
UNDER REVENUE PROCEDURE 2015-41
_______________
The Advance Pricing and Mutual Agreement Program (“APMA”) of the Internal Revenue Service (“IRS”) is providing this
template for use in drafting advance pricing agreements (“APAs”) issued under IRS Revenue Procedure 2015-41, 2015-35 I.R.B.
263 (“Rev. Proc. 2015-41”). This template is designed to systematize how taxpayers propose terms for their APAs and standardize
language used in executed APAs. It will improve efficiency in the APA process and enhance consistency in the administration of the
APA program.
Rev. Proc. 2015-41 requires that taxpayers include as part of a complete APA request a draft APA and a “redline” comparison of the
proposed draft APA against the current model APA. See section 2.03, exhibit 15, of the Appendix to Rev. Proc. 2015-41. This template
serves as the model APA. A taxpayer is required to produce the “redline” comparison by following the instructions below to edit this
template with tracked changes. The draft APA and “redline” comparison are then to be included in Word format in the complete APA
request. (Before editing the template with tracked changes, a taxpayer should remove this introduction and the instructions below
from the Microsoft Word file.)
The assigned APMA team will review the APA’s terms proposed in the draft APA. If the APMA team accepts the proposed terms
in light of its review of the taxpayer’s complete APA request and other information obtained during the APA process, then the text of
the draft APA, edited as needed to fill in any information not available at the time of the APA Request, will be adopted as the text of
a finally executed APA. If the APMA team does not accept the proposed terms, it will discuss modifications to the draft APA with the
taxpayer during the APA process. For bilateral and multilateral APAs, the terms of the executed APA will of necessity be consistent
with the terms of the underlying mutual agreement between the United States and one or more treaty partners.
GENERAL INSTRUCTIONS
The template is designed to minimize editing by using an options-based format for selecting from terms presented in certain sections of the model APA. The options presented are those which APMA considers standard and which it has accepted in final APAs.
These options are not binding on APMA, however. APMA reserves the right to modify the option selections, the specific option language used, or any other terms before executing an APA with the taxpayer.
Options are indicated by square brackets (“[]”). An “x” should be inserted between the brackets to indicate the selected option
(“[x]”). Options that are not selected should not be deleted, but instead should be left in the text of the draft APA. The options to which
APMA and the taxpayer ultimately agree for the final APA will be indicated by the presence or absence of an “x”. The term associated
with the “x” will be given operative effect in the executed APA.
Certain options are flagged with an asterisk after the square brackets (“[]*”). To facilitate the APMA team’s subsequent review of
the draft APA, the asterisks should not be deleted. Taxpayers that select flagged options are required to specifically provide justification for the selection in the APA request. See section 1.02, Part 5, of the Appendix to Rev. Proc. 2015-41.
The template contains placeholder phrases consisting of a hashtag followed by one or more words in block capital letters
(e.g., “#COUNTRY”). Generally, the taxpayer should replace a placeholder phrase with appropriate text, subject to the following
conventions:
•

If a placeholder phrase occurs within an option that the taxpayer has rejected, the taxpayer should change the hashtag to a
caret (e.g., change “#COUNTRY” to “^COUNTRY”) but otherwise leave the phrase intact.15 The caret indicates that the
Taxpayer has rejected this option. For example, for a bilateral APA with Japan, the lines on the first page just below the title
would read:

15
As a result, almost all occurrences of the hashtag in the template will be replaced with a caret or other text in the taxpayer’s draft APA. The few remaining occurrences of the hashtag will
mark a placeholder phrase that cannot yet be replaced with appropriate text (see, for example, the placeholder phrase in paragraph 6(e) for a date that cannot be determined until the APA nears
execution). Searching the draft APA for the hashtag will locate all placeholder phrases that still need replacement.

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[x] Bilateral with Japan
[] Multilateral with ^COUNTRIES
[] Unilateral
•

The placeholder phrase “#CURRENCY” should be replaced, for example, with “U.S. dollars,” “Euros,” or “Japanese yen.”

•

The placeholder phrase “#DATE” should be replaced with a date in the format of “December 31, 2020.”

The APA Term will be expressed as dates certain, e.g., “January 1, 2017 to December 31, 2022, inclusive”, rather than as particular
tax years.
Taxpayers may need to draft custom text for situations or options not included in the template. For example, a taxpayer may
propose additional critical assumptions to address specific regulatory contingencies or conditions the taxpayer is expected to face
during the term of the APA. As another example, the provision titled “Limitation on Assistance” at the end of the Recitals might be
modified based on an understanding reached in the prefiling stage of the APA process. In some cases, a particular critical assumption
might facilitate reaching an agreement on an APA. Taxpayers that include custom text are required to specifically provide justification
for the inclusion in the APA request, just as selecting an option with an asterisk requires justification. Any custom text must also be
evident in the “redline” comparison of the proposed draft APA.
INSTRUCTIONS ON TABLES
The template contains certain tables that the taxpayer should edit. Entries in the tables will not contain hashtags, but taxpayers
nevertheless should fill in the information and add additional rows to the tables if needed. Taxpayers also should fill in the “APA
Information” in the table in Appendix D, to the extent available or proposed.
INSTRUCTIONS ON APPENDIX A
Appendix A of this template contains the description of the APA’s covered issue(s) and covered method(s). Taxpayers should note
the following points in completing Appendix A:
•

The template includes just one covered issue with one corresponding covered method. If there is more than one covered
Issue proposed for the APA, the taxpayer should add additional covered issues in Appendix A, section 3, with tracked
changes.

•

If there is more than one covered method, the taxpayer should first replicate the template’s entire text for Covered Method
1 in Appendix A, section 4, without tracked changes, to provide template text for each additional covered method, and then
edit the text for each covered method with tracked changes.

•

Normally, each covered issue will have its own corresponding covered method. However, in some cases, a covered method
may apply at once to more than one covered issue. For example, covered issues may be proposed to be aggregated and tested
by a single covered method. In such cases, the heading for that covered method could read, for example, “Covered Method
for Covered Issues 1-3”.

•

Any interaction between different covered methods should be adequately explained in the text, and in an appropriate manner. For example, an explanation might be provided in an introduction at the start of section 4 of Appendix A, preceding the
description of the respective covered methods.

Appendix A uses the term “Tested Party.” When applied in the context of methods that consider, or test, data from only one party
to a transaction, this term is similar in concept to the term “tested party” as discussed in the OECD Guidelines at paragraphs 3.18
and 3.19, and as defined in the U.S. Treasury Regulations section 1.482-5(b)(2). However, some methods consider, or test, data from
both parties to a transaction, where there is no singular “tested” party. Even in applying such methods, however, it is typically the
case that one particular party’s results are formally tested for compliance with the method. For purposes of this template, in such
circumstances, the party whose results are formally tested in applying any particular method is the “Tested Party”, even if that party
is not strictly a “tested party” as discussed in the OECD Guidelines paragraphs 3.18 and 3.19, or as defined in the U.S. Treasury
Regulations section 1.482-5(b)(2).

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ADVANCE PRICING AGREEMENT
between
#SIGNATORY
and
THE INTERNAL REVENUE SERVICE
[] Bilateral with #COUNTRY
[] Multilateral with #COUNTRIES
[] Unilateral
Term: #DATE to #DATE, inclusive
[] This APA is commonly referred to as #APA NAME.
PARTIES
The Parties to this APA are the Internal Revenue Service (“IRS”) and #NAME OF EACH NON-IRS SIGNATORY, WITH EIN.
[]

#SIGNATORY will be referred to as “U.S. Taxpayer.”

[]

#SIGNATORY is the common parent of an affiliated group filing consolidated U.S. tax returns and is entering into this APA
on behalf of both itself and the following members of its consolidated group: #MEMBERS OF GROUP. All members of this
consolidated group will be referred to collectively as “U.S. Taxpayer.”
RECITALS

[]

This APA is a renewal of one or more prior APAs, which are listed below in reverse chronological order:
Party(ies)

Execution Date

Term

Key:
•

Party(ies): The signatory(ies) to the prior APA, other than the IRS, with each signatory’s taxpayer identification number;

•

Execution Date: The date, or the later of the dates, on which the prior APA was executed;

•

Term: The term of the prior APA.

[]

This is a bilateral APA within the meaning of Rev. Proc. 2015-41 and implements the terms of a mutual agreement reached
between the United States and #COUNTRY.

[]

This is a multilateral APA within the meaning of Rev. Proc. 2015-41 and implements the terms of a mutual agreement reached
among the United States, #COUNTRIES.

[]

This APA is a unilateral APA within the meaning of Rev. Proc. 2015-41 and is not based on any mutual agreement.

The Parties to this APA are defined in the ”Parties” section above. Regarding the Party(ies) to this APA other than the IRS:
[]

No such Party has an immediate parent or owner that is not a U.S. entity.

[]

One or more such Parties has an immediate parent or owner that is not a U.S. entity, as follows:

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Party

Parent’s or Owner’s
Identifying Information

Parent’s or Owner’s
Contact Information

Key:
•

Party: Name of the Party having an immediate parent or owner that is not a U.S. entity;

•

Parent’s or Owner’s Identifying Information: Name of the immediate parent or owner of such Party, and the taxpayer
identification number of that parent or owner for income tax purposes in its country of residence;

•

Parent’s or Owner’s Contact Information: The immediate parent’s or owner’s address and phone number.

The term “Worldwide Group” is defined below in paragraph 12 of this APA. The ultimate parent entity or owner of Worldwide
Group is:
#ENTITY NAME, ADDRESS, AND PHONE
U.S. Taxpayer’s principal place of business is #CITY, #STATE. #BRIEF DESCRIPTION OF U.S. TAXPAYER AND NON-U.S.
TAXPAYER (DEFINED IN SECTION 1 OF APPENDIX A), AND SPECIFICALLY OF EACH COVERED ENTITY (DEFINED
IN SECTION 1 OF APPENDIX A).
This APA contains the Parties’ agreement on the Covered Method(s) for resolving the Covered Issue(s) under Code section 482 and
any other Code sections that are identified in Appendix A to this APA, the U.S. Treasury Regulations thereunder, and (if applicable):
[]

The income tax convention(s) between the United States and #COUNTRY(IES).

This APA shall not limit the authority of the IRS to (1) verify compliance with this APA as to the Covered Issue(s), or (2) audit
issues other than Covered Issue(s), including issues that arise under Code section 482 and any other Code sections identified in
Appendix A to this APA, and the U.S. Treasury Regulations thereunder.
LIMITATION ON ASSISTANCE
The Covered Issue(s) may relate to one or more countries which (i) have an income tax convention with the United States, but
(ii) are not a party to a mutual agreement whose terms are implemented by this APA. U.S. Taxpayer acknowledges that the IRS may
decline to provide competent authority assistance concerning taxation by such country(ies) that relates to the Covered Issue(s). See
section 2.02(4)(d) of Rev. Proc. 2015-41.

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AGREEMENT
The Parties agree as follows:
1.

Covered Entities. This APA’s Covered Entities are defined in Appendix A.

2.

Covered Issue(s). This APA applies to the Covered Issue(s), as defined in Appendix A.

3.

Covered Method(s). Appendix A sets forth the Covered Method(s) for the Covered Issue(s).

4.

Term. This APA applies to the APA Term, as defined in Appendix A.

5.

Operation.

6.

a.

Rev. Proc. 2015-41 governs the interpretation, legal effect, and administration of this APA.

b.

The APMA program provides a voluntary process whereby the IRS and taxpayers may resolve transfer pricing issues and
issues for which transfer pricing principles may be relevant in a principled and cooperative manner on a prospective basis.
As such, the APA process (as defined in Rev. Proc. 2015-41) is an alternative to dispute resolution that benefits both taxpayers and the IRS and that is intended to promote and encourage open communication. Accordingly, the IRS and U.S. Taxpayer
agree that neither party will attempt to use nonfactual oral or written representations, within the meaning of sections 6.04 and
6.05 of IRS Revenue Procedure 2015-41 (including any proposals to use particular Covered Method(s)), made in conjunction with the APA Request in any judicial or administrative proceeding. The IRS and U.S. Taxpayer also agree that factual
representations made in conjunction with the APA Request may be used in judicial and administrative proceedings.

Compliance.
a.

U.S. Taxpayer must report its taxable income in an amount that is consistent with Appendix A and all other requirements of
this APA. U.S. Taxpayer must so report its taxable income in the following manner:
i.

For any APA Tax Year for which U.S. Taxpayer timely files its original U.S. return prior to, or no later than 60 days after,
the U.S. Effective Date, U.S. Taxpayer must so report its taxable income for that APA Tax Year in one of the following
ways:
A. on such original U.S. return;
B. on an amended U.S. return submitted no later than 120 days after the U.S. Effective Date;
C. through a means proposed by U.S. Taxpayer and accepted by the applicable IRS practice area no later than 120 days
after the U.S. Effective Date (or by such other deadline as is agreed between U.S. Taxpayer and the applicable IRS
practice area); or
D. if applicable:
[]* no later than 120 days after the U.S. Effective Date through the following means: #DESCRIPTION OF
MEANS.

ii. For all other APA Tax Years, U.S. Taxpayer must so report its taxable income on its timely filed original U.S. return.
iii. The provisions of paragraphs 6(a)(i) and 6(a)(ii) are modified by this paragraph 6(a)(iii). If a Covered Method includes
a term test (including the case of an annual test with a supplemental term test) or a subterm test, as described in section
4 of Appendix A, then the APA Covered Year as of which the term test or subterm test applies would change in the event
of an Early Termination. Specifically, while in the absence of an Early Termination a term test would apply as of the last
APA Covered Year, in the event of an Early Termination the term test would apply as of an earlier APA Covered Year.
Similarly, while in the absence of an Early Termination a subterm test would apply as of the last APA Covered Year in
the subterm, in the event of an Early Termination the subterm test might apply as of an earlier APA Covered Year. In
these situations, the Early Termination might not be established in time for U.S. Taxpayer to know to apply the term test

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or subterm test as of the earlier APA Covered Year in reporting taxable income as required under paragraphs 6(a)(i) and
6(a)(ii) for the APA Tax Year corresponding to that earlier APA Covered Year. In such cases, U.S. Taxpayer may need to
correct its reporting for that APA Tax Year. Specifically, U.S. Taxpayer will need to correct its income reporting for that
APA Tax Year if the application of the term test or subterm test in that earlier APA Covered Year changes the existence
or amount of an APA Primary Adjustment for the Covered Method for that APA Tax Year. In such cases:
A) The resulting incorrectness in the prior reporting for that APA Tax Year is excused; and
B) U.S. Taxpayer must correct such prior reporting through a means listed in paragraph 6(a)(i) within 120 days of the
Early Termination being established.
b.

For each Covered Issue, if any, that involves determination of pricing and/or income allocation16 under Code section
482 (or Code section 367(d)) as modified by any applicable income tax convention, this APA addresses the pricing and/
or income allocation between U.S. Taxpayer and Non-U.S. Taxpayer in the aggregate. Except as explicitly provided,
this APA does not address and does not bind the IRS with respect to pricing or income allocation (1) among particular
legal entities that are members of U.S. Taxpayer, or (2) among particular legal entities that are members of Non-U.S.
Taxpayer. In addition, this APA does not address pricing or income allocation between an entity that is not a Covered
Entity, and any entity.

c.

For each APA Tax Year, if U.S. Taxpayer complies with the terms and conditions of this APA, then, provided that this
APA remains effective for that APA Tax Year for a particular Covered Issue, the IRS will not make or propose any allocation or adjustment that is inconsistent with the application under this APA of the applicable Covered Method to that
Covered Issue.

d.

If U.S. Taxpayer does not comply with the terms and conditions of this APA, then the IRS may:
i.

enforce the terms and conditions of this APA and make or propose allocations or adjustments based on the application of the Covered Method(s) to the Covered Issue(s) as provided in this APA;

ii. cancel or revoke this APA under section 7.06 of Rev. Proc. 2015-41; or
iii. revise this APA, if the Parties agree.

16

e.

U.S. Taxpayer must timely file an Annual Report for each APA Tax Year in accordance with this paragraph 6(e),
Appendix C to this APA, and section 7.02 of Rev. Proc. 2015-41. Annual Reports for multiple APA Tax Years may be
combined, provided that all required information for each APA Tax Year is clearly presented. For each Annual Report,
U.S. Taxpayer must submit an original printed version containing a signed original “penalties of perjury” declaration,
one printed copy of the contents of the original printed version, and an electronic copy of the contents of the original
printed version. Any exhibits in the printed version must be tabbed, and the electronic copy is subject to the same
requirements, as to medium and format, that are specified for APA requests in section 2 of the Appendix to Rev. Proc.
2015-41. Upon request, U.S. Taxpayer must provide additional copies of the printed version, at addresses specified by
the IRS. U.S. Taxpayer must file the Annual Report for each APA Tax Year by the later of (i) #DATE CERTAIN, NORMALLY APPROXIMATELY 90 DAYS AFTER THE U.S. EFFECTIVE DATE, and (ii) the fifteenth day of the twelfth
month following the close of the APA Tax Year. The IRS may by notice request additional information reasonably necessary to clarify or complete the Annual Report. (See paragraph 16, and section 3(c) of Appendix C, regarding notices.)
U.S. Taxpayer will provide such requested information within 30 days from the date of the notice unless a later date is
specified in the notice. Additional time may be allowed for good cause in the discretion of the Director of the Advance
Pricing and Mutual Agreement Program.

f.

The IRS will determine whether U.S. Taxpayer has complied with this APA based on U.S. Taxpayer’s U.S. returns, the
Financial Statements and additional statements required under this paragraph 6(f), and other APA Records, for all APA
Tax Years and any other tax year necessary to verify compliance. The Financial Statements and additional statements
required for a particular tax year are:

As used in this APA, "income allocation" includes allocation of loss.

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[]

For every U.S. Covered Entity, the Financial Statements together with the additional statements specified in
paragraph 6(f)(i); and for every Non-U.S. Covered Entity, the Financial Statements together with the additional
statements specified in paragraph 6(f)(ii).

[]* For every U.S. Covered Entity, the Financial Statements together with the additional statements specified in paragraph 6(f)(i).
[]* For every Non-U.S. Covered Entity, the Financial Statements together with the additional statements specified in
paragraph 6(f)(ii).
i.

For each U.S. Covered Entity, the additional statements consist of the following statement(s):
[]

An audit opinion for that U.S. Covered Entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]* One or more of the following, as indicated:
[]

An accountant’s report for that U.S. Covered Entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that U.S. Covered Entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that U.S. Covered Entity’s Financial Statements, together with a tying certification for
that entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]

#OTHER MEANS OF VERIFYING THE RELIABILITY OF THE U.S. COVERED ENTITY’S FINANCIAL STATEMENTS.

ii. For each Non-U.S. Covered Entity, the additional statements consist of the following statement(s):
[]

An audit opinion for that Non-U.S. Covered Entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]* One or more of the following, as indicated:
[]

An accountant’s report for that Non-U.S. Covered Entity’s Financial Statements, as defined in paragraph 6(f)
(iii).

[]

A self-certification for that Non-U.S. Covered Entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]

A self-certification for that Non-U.S. Covered Entity’s Financial Statements, together with a tying certification
for that Covered Entity’s Financial Statements, as defined in paragraph 6(f)(iii).

[]

#OTHER MEANS OF VERIFYING THE RELIABILITY OF THE NON-U.S. COVERED ENTITY’S
FINANCIAL STATEMENTS.

iii. With reference to the Financial Statements for a particular Covered Entity for a particular tax year, certain terms used
in paragraphs 6(f)(i) and 6(f)(ii) are defined as follows:
A. An audit opinion is an opinion of an independent certified public or chartered accountant who audited the Financial
Statements.
B. An accountant’s report is a report of an independent certified public or chartered accountant who is associated with
the Financial Statements.
C. A self-certification is an attestation, as defined in paragraph 6(f)(iii)(E), that the Financial Statements have been
prepared according to the Applicable Accounting Standard.

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D. A tying certification consists of the following:
(1) An attestation, as defined in paragraph 6(f)(iii)(E), that the Financial Statements can be reconciled to the consolidated Financial Statements for that entity’s direct or indirect parent according to workpapers provided with
the attestation;
(2) The workpapers referred to in paragraph 6(f)(iii)(D)(1), which must demonstrate the consolidation of the Covered Entity’s Financial Statements into the Financial Statements of the parent referred to in paragraph 6(f)(iii)
(D)(1);
(3) The Financial Statements of the parent referred to in paragraph 6(f)(iii)(D)(1); and
(4) An audit opinion (as defined in paragraph 6(f)(iii)(A)) for the Financial Statements of the parent referred to in
paragraph 6(f)(iii)(D)(1).
E. An attestation is an affirmation by an officer of the Covered Entity in the following form:
I, [Officer’s Name and Title], of [Name of Covered Entity] affirm under penalties of perjury that the facts
stated below are true. I either have adequate first-hand knowledge to make this affirmation or have gained
adequate knowledge to make this affirmation through diligent consultation(s) with one or more individuals
who have first-hand knowledge.
[Facts attested to.]
[Signature]
g.

In accordance with section 7.04 of Rev. Proc. 2015-41, U.S. Taxpayer will (1) maintain the APA Records, and (2) make
them available to the IRS in connection with an examination under section 7.03 of Rev. Proc. 2015-41. Compliance with
this subparagraph constitutes compliance with the record-maintenance provisions of Code sections 6038A and 6038C for
the Covered Issue(s) for any APA Covered Year.

h.

The “true taxable income” within the meaning of U.S. Treasury Regulations sections 1.482-1(a)(1) and (i)(9) of a member
of an affiliated group filing a U.S. consolidated return will be determined under the U.S. Treasury Regulations under Code
section 1502.

i.

To the extent that U.S. Taxpayer’s compliance with this APA depends on certain acts of other members of Worldwide Group,
U.S. Taxpayer will ensure that such other members will perform such acts.

7.

Critical Assumptions. The Critical Assumptions, which are this APA’s critical assumptions as defined in Rev. Proc. 2015-41,
appear in Appendix B. If any Critical Assumption has not been met, then Rev. Proc. 2015-41, section 7.06, governs, as modified
by Appendix B to this APA.

8.

Disclosure. This APA, and any background information related to this APA or the APA Request, are: (1) considered “return
information” under Code section 6103(b)(2)(C); and (2) not subject to public inspection as a “written determination” under Code
section 6110(b)(1). Section 521(b) of Pub. L. 106-170 provides that the Secretary of the Treasury must prepare a report for public
disclosure that includes certain specifically designated information concerning all APAs, including this APA, in a form that does
not reveal taxpayers’ identities, trade secrets, and proprietary or confidential business or financial information.

9.

Disputes. If a dispute arises concerning the interpretation or application of this APA, the Parties will seek a resolution by the
Director, Treaty and Transfer Pricing Operations, to the extent reasonably practicable, before seeking alternative remedies.

10. Materiality. In this APA the terms “material” and “materially” will be interpreted in a manner consistent with the description of
“material facts” in Rev. Proc. 2015-41, section 7.06(4).
11. Paragraph Captions. This APA’s paragraph captions, which appear in italic type, are for convenience and reference only. The
captions do not affect in any way the interpretation or application of this APA.

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12. Terms and Definitions.
a.

Unless otherwise specified, terms in the plural include the singular and vice versa.

b.

Appendix A contains definitions for certain terms used in this APA’s body and appendices.

c.

Certain terms used in this APA’s body and appendices are defined as follows:

Term
Annual Report
Advance Pricing
Agreement, or “APA”
APA Records
APA Request

Critical Assumptions
Financial Statements
Non-U.S. Group
Parties
Pub. L. 106-170
U.S. Effective Date
U.S. Group
Worldwide Group

Definition
A report within the meaning of Rev. Proc. 2015-41, section 7.02.
An “advance pricing agreement” within the meaning of Rev. Proc. 2015-41, section 2.02. Unless context
indicates otherwise, “this APA” or “the APA” denotes the particular APA that is executed below.
(Defined in Appendix C.)
U.S. Taxpayer’s request for this APA, which was dated #DATE, including any amendments or
supplemental or additional information thereto (including but not limited to any responses to due
diligence questions).
(Defined in paragraph 7.)
Balance sheet, income statement, statement of cash flow, and explanatory notes, prepared in accordance
with the Applicable Accounting Standard as defined in section 7 of Appendix A.
In any APA Tax Year, Worldwide Group members that are not U.S. persons.
(Defined in the Recitals near the start of this APA.)
The Ticket to Work and Work Incentives Improvement Act of 1999.
(Defined in paragraph 17 and in section 7 of Appendix A. Those definitions are intended to have the
same meaning. In case of conflict, the definition in paragraph 17 controls.)
In any APA Tax Year, Worldwide Group members that are U.S. persons.
In any APA Tax Year, U.S. Taxpayer and all organizations, trades, businesses, entities, or branches
(whether or not incorporated, organized in the United States, or affiliated) owned or controlled directly
or indirectly by the same interests.

13. Deadline References. If a deadline under this APA falls on a Saturday, Sunday, or a legal holiday in the District of Columbia, the
deadline is extended to the next succeeding day that is not a Saturday, Sunday, or legal holiday in the District of Columbia.
14. Entire Agreement and Severability. This APA is the complete statement of the Parties’ agreement. The Parties will sever, delete,
or reform any invalid or unenforceable provision in this APA to approximate the Parties’ intent as nearly as possible.
15. Successor in Interest. This APA binds, and inures to the benefit of, any successor in interest to U.S. Taxpayer.
16. Notice. Any notices required by this APA or Rev. Proc. 2015-41 must be in writing. U.S. Taxpayer will send notices to the IRS
at:
Commissioner, Large Business and International Division
Internal Revenue Service
1111 Constitution Avenue, NW
SE:LB:TTPO:APMA:NCA534-01
Washington, DC 20224
(Attention: APMA)
The IRS will send notices to:
# NAME AND ADDRESS
(phone: #PHONE)

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The IRS also will send notices to, if applicable:
[] #REPRESENTATIVE’S NAME AND ADDRESS
(phone: #PHONE)
provided that a valid IRS Form 2848 “Power of Attorney and Declaration of Representative” for that person was included in the
most recent Annual Report (or, if no Annual Report has been filed, was included in the APA Request).
17. U.S. Effective Date and Counterparts. This APA is effective starting on the date, or later date of the dates, upon which all Parties
execute this APA (“U.S. Effective Date”). The Parties may execute this APA in counterparts, with each counterpart constituting
an original.
WITNESS,
The Parties have executed this APA on the dates below.
#SIGNATORY NAME IN BOLD FACE BLOCK CAPITAL LETTERS
By:

__________________________Date: _________________, 20____
#NAME
#TITLE

INTERNAL REVENUE SERVICE
By:

__________________________Date: _________________, 20____
John M. Wall
Acting Director, Advance Pricing and Mutual Agreement Program

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APPENDIX A
COVERED ENTITIES, TERM, COVERED ISSUE(S), COVERED METHOD(S), INCOME REPORTING,
CONFORMING ADJUSTMENTS AND REPATRITION OF FUNDS,
CERTAIN SUBSEQUENT ADJUSTMENTS,
AND DEFINITIONS
Section 1 of this Appendix lists the Covered Entities. Section 2 defines the APA Term, APA Tax Years, and APA Covered Years.
Section 3 describes the Covered Issue(s). Section 4 describes the Covered Method applicable to each Covered Issue.
Section 5 describes the application of the Covered Method(s) to income reporting and the possible need for an APA Primary
Adjustment under one or more Covered Methods. Section 6 addresses conforming adjustments and repatriation of funds following
APA Primary Adjustments.
Section 7 provides definitions that apply both to this Appendix and to the APA as a whole. The definitions table is based on a standard, inclusive model, and thus may include terms not used in this APA.
1.

Covered Entities
The U.S. Covered Entity(ies) are:
#LIST OF EACH U.S. ENTITY INVOLVED IN ONE OR MORE COVERED ISSUE(S), AND ALSO (LISTED FIRST)
ANY CONSOLIDATED RETURN PARENT FOR ANY SUCH ENTITY. FOR EACH ENTITY, NAME, ADDRESS,
PHONE, AND EIN.

The term “U.S. Taxpayer” includes collectively all U.S. Covered Entities and any other entities that are in a consolidated return
group with a U.S. Covered Entity.
The Non-U.S. Covered Entity(ies) are:
# LIST OF EACH NON-U.S. ENTITY INVOLVED IN ONE OR MORE COVERED ISSUE(S), AND ALSO (LISTED
FIRST) ANY COMMON TAX REPORTING PARENT FOR ANY SUCH ENTITY. FOR EACH ENTITY, NAME,
ADDRESS, AND PHONE.
The term “Non-U.S. Taxpayer” includes collectively all Non-U.S. Covered Entities and any other entities that are in a common tax
reporting group with a Non-U.S. Covered Entity.
The term “Covered Entities” includes both the U.S. Covered Entities and the Non-U.S. Covered Entities.
2.

APA Term, APA Tax Years, and APA Covered Years
The APA applies to the period from #DATE to #DATE, inclusive (the “APA Term”).
[]

The APA Term does not include a Rollback.

[]

The APA Term includes a Rollback, which covers from #DATE to #DATE, inclusive (the “Rollback Period”).

A tax year of U.S. Taxpayer that is wholly or partly contained in the APA Term is called an “APA Tax Year.” For a particular APA
Tax Year, the portion of such APA Tax Year that is contained in the APA Term is called an “APA Covered Year.” Such APA Tax Year
and APA Covered Year are said to “correspond” to each other or to be “corresponding.”
3.

Covered Issue(s)
The Covered Issue(s) are as described below.
Covered Issue 1:
#DESCRIPTION OF COVERED ISSUE.

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4.

Covered Method(s)

Each Covered Method applies to one or more Covered Issues. A Covered Method and the Covered Issue(s) to which the Covered
Method applies are said to “correspond,” or to be “corresponding”.
The Covered Methods are summarized in the following table and are described in detail below. In case of conflict with this table,
the detailed descriptions of the Covered Methods below, and the descriptions in section 3 above of the Covered Issues, control.
Covered Method
Number

Applies to Covered
Issues Number(s)

Summary Description of
Corresponding Covered
Issues

Type of Method;
Results Tested

Point or
Range

Testing Frequency
and Periods

1
This Appendix A uses the term “Tested Party.” When applied in the context of methods that consider, or test, data from only one
party to a transaction, this term is similar in concept to the term “tested party” as discussed in the OECD Guidelines paragraphs 3.18
and 3.19, and as defined in the U.S. Treasury Regulations section 1.482-5(b)(2). However, some methods consider, or test, data from
both parties to a transaction, where there is no singular “tested” party. Even in applying such methods, however, it is typically the
case that one particular party’s results are formally tested for compliance with the method. For purposes of this template, in such
circumstances, the party whose results are formally tested in applying any particular method is the “Tested Party”, even if that party
is not strictly a “tested party” as discussed in the OECD Guidelines paragraphs 3.18 and 3.19, or as defined in the U.S. Treasury
Regulations section 1.482-5(b)(2).
Covered Method for Covered Issue 1:
a.

Tested Party

The Tested Party is #TESTED PARTY.
b. Financial Results Tested (Type of Method)
[]

[]

[]

The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and
of the comparable uncontrolled price method under the U.S. Treasury Regulations. The Tested Party’s financial results to be
tested are:
[]

per unit price paid, defined as the total amount paid for #DESCRIPTION OF GOODS divided by the number of
#DESCRIPTION OF A UNIT OF GOODS purchased.

[]

per unit price received, defined as the total amount received for #DESCRIPTION OF GOODS divided by the number
of #DESCRIPTION OF A UNIT OF GOODS sold.

The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of
the comparable uncontrolled services price method under the U.S. Treasury Regulations. The Tested Party’s financial results
to be tested are:
[]

per unit price paid, defined as the total amount paid for #DESCRIPTION OF SERVICES divided by the number of
#DESCRIPTION OF A UNIT OF SERVICES received.

[]

per unit price received, defined as the total amount received for #DESCRIPTION OF SERVICES divided by the number
of #DESCRIPTION OF A UNIT OF SERVICES provided.

The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and
of the comparable uncontrolled transaction method under the U.S. Treasury Regulations. The Tested Party’s financial results
to be tested are the royalty paid for the license of #DESCRIPTION OF LICENSED INTANGIBLE PROPERTY divided by
the Tested Party’s:
[]

sales revenue from sales of #DESCRIPTION OF GOODS/SERVICES.

[]

#OTHER ROYALTY BASE.

Bulletin No. 2023–16

697

April 17, 2023

[]

The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and
of the acquisition price method under the U.S. Treasury Regulations. The Tested Party’s financial results to be tested are
described in subsection (c) below.

[]

The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and
of the market capitalization method under the U.S. Treasury Regulations. The Tested Party’s financial results to be tested are
described in subsection (c) below.

[]

The Covered Method is an implementation of the resale price method under the OECD Guidelines and of the resale price
method under the U.S. Treasury Regulations. The Tested Party’s financial results to be tested are the gross profit margin from
the sale of #DESCRIPTION OF GOODS.

[]

The Covered Method is an implementation of the resale price method under the OECD Guidelines and of the gross services
margin method under the U.S. Treasury Regulations. The Tested Party’s financial results to be tested are the gross services
margin from the provision of #DESCRIPTION OF SERVICES.

[]

The Covered Method is an implementation of the cost plus method under the OECD Guidelines and of the cost plus method
under the U.S. Treasury Regulations. The Tested Party’s financial results to be tested are the gross profit markup.

[]

The Covered Method is an implementation of the cost plus method under the OECD Guidelines and of the cost of services
plus method under the U.S. Treasury Regulations. The Tested Party’s financial results to be tested are the gross services
profit markup from the provision of #DESCRIPTION OF SERVICES.

[]

The Covered Method is based on the principles of the low value-adding intra-group services approach under the OECD
Guidelines and of the services cost method under t

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A3343469e5fa9f987. Public record. Not legal advice.