Skip to content
Home » Publications » Uncategorized

Uncategorized

Hooray for New Math: A simplified transfer pricing approach for 2025?

  You can’t take three from two Two is less than three So you look at the four in the tens place Now that’s really four tens So you make it three tens Regroup, and you change a ten to ten ones And you add them to the two and get twelve And you take away three, that’s nine Is that clear?   Lehrer, Tom. “New Math.” That Was the Year That Was, 1965   As promised before the end of 2024, Treasury and the I.R.S. outlined their approach to the codification of Amount B, a component of the O.E.C.D. Pillar One approach[1] (“O.E.C.D. guidance”) relevant to controlled distribution transactions of tangible property, in Notice 2025-04 on December 18, 2024.[2]  Taxpayers can elect to use the streamlined, simplified approach (“S.S.A.”) for corporate tax years beginning on or after January 1, 2025.  The I.R.S. will consider… Read More »Hooray for New Math: A simplified transfer pricing approach for 2025?

Is OECD transfer pricing guidance becoming something other than “soft law”?

  • by

Recent new Pillar I rules, an EU transfer pricing Directive, and Canadian and UK legislation revisions propose to reference and use the OECD Transfer Pricing Guidelines in often new and different ways. Rather than operating in their traditional role as the source for interpretation of the arm’s length principle, these new proposed uses appear more “law-like” to us. With Ruchelman PLLC‘s Michael Bennett, we take the first steps toward testing our theory from the U.S. perspective.     O.E.C.D. GUIDANCE AS AN ELEMENT OF FOREIGN TRANSFER PRICING TAX LAW – A VIEW FROM HERE Multilateral transfer pricing guidance from the OECD was first released in 1979. A version of OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations[1] (the “OECD TP Guidelines”) has been in print since 1995, long enough that U.S. international tax practitioners are by now accustomed to hearing foreign colleagues talk… Read More »Is OECD transfer pricing guidance becoming something other than “soft law”?

Finance Canada consulting on Section 247 amendment: Will the car go before the horse?

Finance released a consultation paper on proposed amendments to Canada’s transfer pricing rules under Section 247 of the Income Tax Act. It took all of five paragraphs (three if you exclude the Overview) to cite Cameco.  Will Finance take this opportunity to harmonize its approach with the OECD Guidelines being incorporated in tax law in treaty partner countries, or settle on another Made in Canada approach out of step with the country’s treaty partners? Stay tuned. Pictured above is a Bennett Buggy, a car without an engine drawn by a horse. A transport necessity during the Great Depression, it was named after the Depression-era Canadian Prime Minister R.B. Bennett. Not to be confused with W.A.C. Bennett, after whom a very useful and long-standing dam was named in Hudson’s Hope, BC.  

Old chestnuts roasting in the public domain

Eaton A.P.A. cancellations were an abuse of I.R.S. discretion This article appears in Insights vol. 4, Issue 9.  Insights is the Tax Journal of Ruchelman PLLC.  As the transfer pricing travails of Eaton Corporation (“Eaton”) continue, a recent Tax Court decision affirmed that I.R.S. administrative procedure set down in Revenue Procedures and relied upon by the I.R.S. and a taxpayer cannot be arbitrarily circumvented, and that the I.R.S. must reasonably exercise its discretion. At issue was the cancellation of two advance pricing agreements (A.P.A.’s) and the consequent I.R.S. income adjustments made as a result of applying a new transfer pricing method.  Eaton’s position was that the A.P.A.’s were binding contracts, and that these contracts were cancelled for reasons other than those named as cause for termination in the respective A.P.A. agreements.  Though the Tax Court did not agree with Eaton that an A.P.A. agreement should… Read More »Old chestnuts roasting in the public domain

Best method yet to come again?

  • by

We’re pleased to announce that our article about the recent Medtronic transfer pricing decision has been published in the November/December issue of The Licensing Journal.

Medtronic III: The best method is yet to come?

The recent decision from the U.S. Tax Court results in an outcome that is anything but tidy. What happened? Read our commentary in this edition of Insights: MEDTRONIC PART DEUX: THE BEST METHOD IS YET TO COME? The purpose of the most recent decision in the Medtronic saga[1] extends and refines the prior analysis of one of five connected controlled transactions within Medtronic’s controlled group of multinational medical device producers and suppliers.  The transactions may be described as follows: The first two transactions – license of manufacturing intangible property and license of trademarks – were the main subject of a period of examination controversy that concluded with the I.R.S. adjusting the royalty income of the U.S. Medtronic licensor for tax years 2005 and 2006. The adjustments included additional income necessary for the royalty to be arm’s length as determined under the comparable profits method (“C.P.M.”)… Read More »Medtronic III: The best method is yet to come?

Intangible assets, goodwill and Mister Donut

Could anything possibly be cruller than taking an old fashioned approach to selling intangible property with attached goodwill for tax purposes? Did we miss out on the lessons of International Multifoods in transfer pricing? Turns out I don’t think so, but Wooyoung Lee has more to say about the domestic implications in this month’s box of Insights. A sale of a business to a buyer often involves an element of goodwill, a term that can have different meanings in different contexts, depending on whether the term relates to (i) purchase price allocations for financial statement purposes or income tax purposes or (ii) attempting to compute the source of income for foreign tax credit purposes. Compounding the definitional inconsistency, the meaning of the term has  changed over time. The Merriam-Webster Dictionary defines goodwill in a non-business context as “a kind, helpful, or friendly feeling or attitude.” … Read More »Intangible assets, goodwill and Mister Donut

What’s “value creation” in transfer pricing these days?

Where does it happen? Why does it matter? A recent article on the continuing fog surrounding this key term, and why the sunshine from Pillar 1 won’t cause the fog to clear. Ho lwana badula-mmoho (Sesotho proverb, loosely meaning “Those who stay together often quarrel”.) When a Mosotho or a Sesotho speaker says “stay together,” they usually mean “live together.”  By this terminology, the Inclusive Framework of 137 countries that agreed in October to adopt the two-Pillar approach to taxing the digital economy has also agreed to cohabit the role of global tax administration.  The final details of the new arrangement have yet to be concluded, but one of the policy imperatives that led the world’s tax authorities to this point has yet to be addressed by the Pillar 1 approach.  Among other reforms, Pillar 1 replaces the arm’s length standard with a formula-driven profit… Read More »What’s “value creation” in transfer pricing these days?

After the gold rush

Comments and comparative statics after the final decisions in the Cameco and Glencore transfer pricing litigation matters, this month in Insights. Two significant transfer pricing cases about mined materials pricing between controlled companies have now been concluded with dismissals of tax authority applications for leave to appeal issued by the highest courts of Australia[1] and Canada.[2]  Both decisions upheld the original transfer pricing policy of the taxpayer after lengthy disputes informed by tax administration practice in two countries that are often looked to internationally for precedent, and by the 1995 edition of the O.E.C.D. Transfer Pricing Guidelines since replaced by 2009, 2010 and 2017 editions. This article first examines two transfer pricing questions that are similar in general outward appearance, approached in different ways by the tax authorities, and evaluated in broadly similar but not identical ways by the courts.  I then consider how each… Read More »After the gold rush

U.S. Tax Court decision in Coca-Cola

  • by

The court’s decision applies the regulations to the facts of the Coca-Cola controlled transactions and arrives at its conclusion in a principled manner.  A combination of critical factors led to the court to side with the I.R.S., and hold that the Supply Points used intangible assets in their businesses, but were not entitled to a return to valuable intangible property at arm’s length as a result of legal ownership or exercise of Supply Point control over the intangible property. See the January edition of Insights. The 2020 decision of the Tax Court in The Coca-Cola Company and Subsidiaries[1] (“Coca-Cola”) $3 billion transfer pricing case may cause Coca-Cola to petition the appropriate U.S. Court of Appeals for the same reason it petitioned the Tax Court.  A large amount of tax is at stake over a number of open tax years.  But in comparison to other transfer… Read More »U.S. Tax Court decision in Coca-Cola