Federal Tax Planning

IRS Form 5471 – Important Tips for IRS Reporting of Foreign Corporations (2018)

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Tinka Resources Ltd. is a junior exploration company based in Vancouver, Canada, that is developing its %-owned Ayawilca project. The square ki. Temporary and proposed regulations under section of the Code provide guidance for making certain elections for taxpayers that continue to be subject to the passive foreign investment company (PFIC) excess distribution regime of section even though the foreign corporation in which they own stock is no longer treated as a PFIC.

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It has also been determined that section b of the Administrative Procedure Act 5 U. Pursuant to section f of the Code, the notice of proposed rulemaking preceding this regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Section d 2 allows a shareholder to purge the continuing PFIC taint by making either a deemed sale election or a deemed dividend election. A shareholder of a foreign corporation that is a former PFIC with respect to such shareholder may make a deemed sale election under section b 1 by applying the rules of this paragraph b.

A shareholder making the deemed sale election with respect to a former PFIC shall be treated as having sold all its stock in the former PFIC for its fair market value on the termination date, as defined in paragraph d of this section. A deemed sale is treated as a disposition subject to taxation under section Thus, gain from the deemed sale is taxed under section as an excess distribution received on the termination date.

A shareholder shall not adjust the basis of any stock with respect to which the shareholder realized a loss on the deemed sale, but which loss is not recognized under paragraph b 2 of this section. A shareholder of a foreign corporation that is a former PFIC with respect to such shareholder may make the deemed dividend election under the rules of this paragraph c provided the foreign corporation was a controlled foreign corporation as defined in section a CFC during its last taxable year as a PFIC.

A shareholder may make the deemed dividend election without regard to whether the shareholder is a United States shareholder within the meaning of section b. A deemed dividend election may be made by a shareholder whose pro rata share of the post earnings and profits of the PFIC attributable to the PFIC stock held on the termination date is zero.

A shareholder making the deemed dividend election with respect to a former PFIC shall include in income as a dividend its pro rata share of the post earnings and profits of the PFIC attributable to all of the stock it held, directly or indirectly on the termination date, as defined in paragraph d of this section. The deemed dividend is taxed under section as an excess distribution received on the termination date. For purposes of this section, the term post earnings and profits means the post undistributed earnings, within the meaning of section c 1 determined without regard to section c 3 , as of the close of the taxable year that includes the termination date.

For purposes of this computation, only earnings and profits accumulated in taxable years during which the foreign corporation was a PFIC shall be taken into account, without regard to whether the earnings relate to a period during which the PFIC was a CFC.

A The name, address, and taxpayer identification number of each U. For purposes of this section, the termination date is the last day of the last taxable year of the foreign corporation during which it qualified as a PFIC under section a.

This section applies for taxable years of shareholders beginning on or after December 8, However, taxpayers may apply the rules of this section to a taxable year beginning prior to December 8, , provided the statute of limitations on the assessment of tax has not expired.

On July 26, , the Japanese Diet reorganized Japanese corporate law through the promulgation of the Company Law and the Coordination Law, which were passed on June 29, The effective date of these laws will be determined by a Cabinet enforcement order; however, the provisions will be effective no later than January 26, A business entity with two or more members is classified for federal tax purposes as either a corporation or a partnership.

A business entity with only one owner is classified as a corporation or is disregarded. The principal author of this revenue ruling is Ronald M. For further information regarding this revenue ruling, contact Ronald M. Gootzeit at not a toll-free call. This notice extends by one year the transition relief provided in Notice , I.

Section h 6 E provides that rules similar to those applicable to partnerships in determining whether property is tax-exempt use property apply to other pass-thru entities. Section generally applies to leases entered into after March 12, Abusive transactions involving partnerships and other pass-thru entities remain subject to challenge by the Service under other provisions of the tax law.

This revenue procedure updates and supersedes Revenue Procedure , C. The APA process increases the efficiency of tax administration by encouraging taxpayers to come forward and present to the Service all the facts relevant to a proper transfer pricing analysis and to work towards a mutual agreement in a spirit of openness and cooperation.

The prospective nature of APAs lessens the burden of compliance by giving taxpayers greater certainty regarding their transfer pricing methods, and promotes the principled resolution of these issues by allowing for their discussion and resolution in advance before the consequences of such resolution are fully known to taxpayers and the Service. APAs are intended to supplement traditional administrative, judicial, and treaty mechanisms for resolving transfer pricing issues. Taxpayers formally initiate the process for APAs.

Thereafter, APAs require discussions among the taxpayer, one or more associated enterprises, and one or more tax administrations, including the Service. Ordinarily, an APA is reached only on the proposed covered transactions.

In some cases, however, the APA Program may require that the scope of the proposed covered transactions be expanded or contracted, or may determine that the TPM proposed by the taxpayer is not appropriate for some subset of the proposed covered transactions.

In some cases, the Service may approach a taxpayer to discuss the advantages of an APA. The APA Director, directly or by delegation, may take any action - not contrary to statute, regulation, or treaty - necessary to carry out the provisions of this revenue procedure.

The APA Director may modify the provisions contained in this revenue procedure for example, time limits or content of an APA request if that modification would be consistent with sound tax administration. The Service, through an APA Team, evaluates the APA request by analyzing all relevant data and information submitted with the initial request and at any time thereafter.

A bilateral or multilateral APA involves a request for an APA between the taxpayer and the Service, accompanied by a request for a mutual agreement between relevant competent authorities. A unilateral APA involves only an agreement between the taxpayer and the Service. Where possible, in the interest of sound tax administration and to ensure that no potential for double taxation results from an APA, an APA should be concluded on a bilateral or multilateral basis between the competent authorities through the mutual agreement procedure of the relevant income tax treaty or treaties.

The negotiating position serves as a basis for discussions with the relevant foreign competent authority or authorities under the mutual agreement article of the applicable income tax treaty or treaties.

Competent Authority and the relevant foreign competent authority or authorities reach a mutual agreement, the taxpayer and the Service may execute one or more APAs consistent with that mutual agreement.

The APA Program will coordinate its activities with those of other Service proceedings to avoid duplicative information requests to the taxpayer, enhance the efficiency of Service operations, and reduce overall taxpayer compliance burdens.

The taxpayer may use a PFC to clarify what information, documentation, and analyses are likely to be necessary for the Service to consider an APA request.

To provide for the efficient use of taxpayer resources, PFCs are recommended in order to ensure that the APA request is appropriate and focuses on relevant issues. The taxpayer or its representative should propose three alternative dates, and should generally allow two weeks before the first proposed date. The telephone and facsimile numbers are:. Representatives from Appeals and the Division Counsel field offices may also attend. If a taxpayer initially requests a PFC on an anonymous basis but prior to the meeting chooses to identify itself, the meeting may be rescheduled to permit necessary Service personnel to attend.

This brief submission should be provided at least one week in advance of the PFC. If the document is twenty pages or less, it may be sent by facsimile; but if it exceeds twenty pages, eight copies or if anonymous, only three copies and one original should be delivered. The goal of completing a unilateral APA or a recommended negotiating position within 12 months see section 6.

The level of detail required will depend on the particular facts and circumstances of each case and should be governed by relevancy and materiality considerations keeping in mind that the request should provide enough information to allow the reader to concur that a matter is not relevant or material.

The detailed information supporting the APA request should be tailored to the specific facts relating to the taxpayer, the proposed covered transactions, and relevant legal authority. Therefore, taxpayers should not submit original documents. The taxpayer must submit copies of any documents relating to the proposed TPM.

All materials submitted must be properly labeled, indexed, and referenced in the request. Any previously submitted documents that the taxpayer wishes to associate with the request must be referenced. If the records or documents to be submitted are too voluminous for transmittal with the request, the taxpayer must describe the contents of such items in the request and confirm that the items will promptly be made available upon request.

All documents submitted in a foreign language must be accompanied by an accurate English translation. All documents in the APA request that are available in electronic format should be submitted, on either a CD-ROM or diskette, along with the paper submission.

Other formats may be arranged on a case-by-case basis. Unless otherwise agreed, each APA request must include an appropriate discussion of the items set forth below.

The names, addresses, telephone and facsimile numbers, taxpayer identification numbers if applicable , and both the Standard Industrial Classification SIC and the North American Industry Classification System NAICS codes reported on the most recently filed federal tax returns if applicable of a the organizations, trades, and businesses engaging in the proposed covered transactions, and b the controlling taxpayer of the parties, if the controlling taxpayer is not itself engaging in the proposed covered transactions.

A properly completed Form Power of Attorney and Declaration of Representative for any person authorized to represent the taxpayer in connection with the request, disregarding if appropriate the line 3 instruction limiting the authorization to three future tax periods.

Part 10 July 26, Such written authorization may be made by completing Form Tax Information Authorization , disregarding, if appropriate, the line 3 instruction limiting the authorization to three future tax periods. A description of the general history of business operations, worldwide organizational structure, ownership, capitalization, financial arrangements, principal businesses, the place or places where such businesses are conducted, and major transaction flows of the parties to the proposed covered transactions.

A description and analysis of the transactions covered by the APA request, as well as the estimated dollar value of each proposed covered transaction for each year of the proposed term of the APA. The discussion must also describe how the proposed covered transactions relate to other controlled transactions that the taxpayer does not propose to cover.

A statement addressing the extent to which the tested party has transactions involving commission sales and ordinary distribution sales i. If the APA request involves both kinds of transactions, the taxpayer must propose a TPM and analyze the extent to which it is appropriate under the facts and circumstances to a test both kinds of transactions on an aggregated basis; b test the two kinds of transactions separately; or c exclude one of the two kinds of transactions from the APA.

Representative financial and tax data of the parties to the proposed covered transactions for the last three taxable years or more years if relevant to the proposed TPM , together with other pertinent data and documents in support of the TPM. This item may include but need not be limited to data from the following:. Form Information Return of U. Corporation or a Foreign Corporation Engaged in a U. Trade or Business ;. The functional currency of the parties to the proposed covered transactions and their respective foreign currency exchange risks.

A description of significant financial accounting methods employed by the parties that have a bearing on any proposed TPM. An explanation of any relevant financial and tax accounting differences between the U.

A discussion of any relevant statutory provisions, tax treaties, court decisions, regulations, revenue rulings, or revenue procedures that relate to the appropriateness of the proposed TPM for the requested APA. For cases in which the taxpayer requests a rollback, the discussion should state whether the period of limitations for the rollback years has expired in the U.

The following language satisfies this requirement:. Waiver of Ex Parte Communication: A statement describing any APAs with, or rulings by, foreign tax authorities relating to the proposed covered transactions or any pending requests for such APAs or rulings and, if requested, copies of such APAs or rulings. An economic analysis or study of the general industry pricing practices and economic functions performed within the markets and geographical areas covered by the APA request. An explanation of the proposed TPMs, including any method used to convert results from one payment form to another e.

A detailed presentation of the research efforts and criteria used to identify and select possible independent comparables. This presentation should include a list of potential comparables and an explanation of why each was either accepted or rejected.

The taxpayer may request an APA even though no comparable uncontrolled prices, transactions, or companies can be identified. Detailed financial data and licenses or other agreements, if applicable on the selected independent comparables in print and electronic formats.

For example, if the proposed TPM uses the comparable uncontrolled price CUP method, the comparable pricing information should be included; if the TPM uses the comparable uncontrolled transaction CUT method, the comparable license agreements should be included; and if the TPM uses the comparable profits method CPM , the annual and multiple year period results using the selected profit level indicator should be included.

If pertinent, the taxpayer should demonstrate consideration of alternative measurements of profitability and return on investment for example, gross profit margin or markup, ratio of gross income to total operating expenses, net operating profit margin, or return on assets.

A detailed explanation of any adjustments to the selected comparables, such as: If historical data cannot be used to illustrate a TPM for example, when the TPM applies to a new product or business , the request should include an illustration based on projected or hypothetical data, as well as a description of the source of the data. If coverage of three taxable years is inappropriate for any reason, the taxpayer should provide data for an appropriate period and explain why the period was chosen.

In addition to the items in section 4. A specific description of intangible development costs for all participants under the CSA. Such description should include a description of the costs included and excluded for example, costs of technology acquired from third parties; the treatment of stock-based compensation under the CSA; non-product specific development costs; costs associated with abandoned projects; costs associated with specific stages of product development; relevant labor, material, and overhead costs; and support and administrative costs ; a description of any services performed for participants that will be included in intangible development costs for example, contract research and how those services would be taken into account; and, for a representative period, a breakdown of total costs incurred, and the costs borne by each participant, according to the CSA.

The accounting method used to determine the costs and benefits of the intangible development including the method used to translate foreign currencies. A description of any amounts to be received from non-participants for the use of covered intangibles for example, as a royalty pursuant to a license agreement and how the participants would take into account such amounts. Representative internal manuals, directives, guidelines, and similar documents prepared for purposes of implementing or operating the CSA for example, research and development committee meeting minutes, market studies, economic impact analyses, capital expenditure budgets, engineering studies, reports and studies of trends and profitability in the industry, and financial analyses for financing and cash flow purposes.

The treatment of cost sharing and buy-in or buy-out payments for U. For taxpayers requesting an APA that covers a CSA but does not cover the related buy-in transaction, or an APA that covers a buy-in transaction but does not cover the related CSA, the reasons why an APA limited in this manner is consistent with the principles of the APA process, as set forth in this revenue procedure.

The APA Program will evaluate the requests to ensure their consistency with the principles of this revenue procedure and sound tax administration. The taxpayer should propose and describe any relevant critical assumptions. Critical assumptions might include, for example, a particular mode of conducting business operations, a particular corporate or business structure, a range of expected business volume, or the relative value of foreign currencies.

The taxpayer should propose in the request a list of items to be included in each report. The taxpayer must propose a term for the APA appropriate to the industry, products, and transactions involved. Although the appropriate APA term is determined on a case-by-case basis, a request for an APA should propose an APA term of at least five years unless the taxpayer states a compelling reason for a shorter term. Accordingly, taxpayers should anticipate that the APA Program may require their agreement to extend the proposed term of an APA if necessary to ensure such prospectivity.

The taxpayer must file its APA request within the time prescribed by statute including extensions for filing its Federal income tax return for the first proposed APA year. If the taxpayer receives an extension to file its Federal income tax return, it must file its APA request no later than the actual filing date of the return.

Because of the need to begin the processing of the APA request in a manner that ensures appropriate prospectivity, the APA Director will consider extending the day period pursuant to section 2. The taxpayer must state whether any of the parties to the proposed covered transactions are residents of or conduct activities in a treaty partner country or U. Competent Authority with respect to a possession tax agency described in Rev.

If the APA request is unilateral and involves transactions with an entity in a treaty jurisdiction, the taxpayer must provide an explanation of why the request is not bilateral. The following wording satisfies section 4. The taxpayer must include in any APA request and supplemental submission a declaration in the following form:. Under penalties of perjury, I declare that I have examined this [APA request] [supplemental submission relating to this APA request] including accompanying documents, and, to the best of my knowledge and belief, the [APA request] [supplemental submission] contains all the relevant facts relating to the [APA request] [supplemental submission], and such facts are true, correct, and complete.

If an authorized representative is to sign, the taxpayer and representative must satisfy the relevant instructions on signatures in Rev. User fees accompanied by an identifying cover letter that includes a justification of the fee amount must be sent to:. The fee payment may also be hand delivered to the drop box at the 12th Street entrance of Constitution Avenue, N. All other communications must be mailed or delivered as follows to unless arranged otherwise, for example, mailing to the California office:.

The taxpayer must provide the original and eight copies of its APA request and any supplemental materials submitted while the request is pending.

A separate user fee is required for each APA request. For this purpose, an APA request means a substantially complete and timely-filed APA submission, as required by section 4, and includes all such APA submissions filed by the taxpayer within any single sixty-day period. For this purpose, an APA request will be considered an APA renewal request if its subject matter is substantially the same as in a previous APA request by the taxpayer.

For purposes of paragraph 5, the gross income of a taxpayer includes the gross income of all organizations, trades, or businesses owned or controlled directly or indirectly by the same interests controlling the taxpayer. Gross income must be computed for the last full month taxable year ending before the date the taxpayer filed the APA request.

For this purpose, a request to amend will be deemed to occur if a taxpayer requests changes to an APA request or to a completed APA that requires substantial additional work by the APA Team.

Generally, no user fee will be imposed if substantial changes are requested by the Service or by a foreign competent authority. The APA Director may require a corrected user fee after submission of an APA request if the request does not meet the criteria for the user fee amount initially paid by the taxpayer. The taxpayer may either pay the corrected fee and continue the APA process or withdraw the request.

In addition, while an APA request is pending and after an APA is executed, a taxpayer is under a continuing duty to timely supplement its disclosures if the taxpayer discovers that information that it provided in connection with an APA request was false, incorrect, or incomplete in some material respect.

If a taxpayer discovers such an error or omission after the APA is executed, the taxpayer must disclose the error or omission in its next-filed annual report see section The scheduling of due diligence, analysis, discussion, agreement, and drafting is designed to complete the recommended U.

The filing of a full APA request includes not only the payment of a user fee, but also the receipt by the APA Program of the materials specified in sections 4. Significant analysis of the APA request will not begin until a substantially complete request has been filed.

After receiving an APA request, a representative of the APA Program will contact the taxpayer or its representative to discuss any preliminary questions the APA Program may have, or to ask for any additional information or documents necessary in order to initiate processing of the request. The taxpayer must supply the additional information and documents, accompanied by the perjury statement described in section 4.

If a prefiling conference was held with the taxpayer, the Team Leader generally will be designated from among the APA Program staff attending the prefiling conference. The function of the APA Team is the following: In connection with the initial meeting, the APA Team and the taxpayer will agree on a Case Plan to which both Service and taxpayer personnel will be expected to adhere. The Case Plan will be signed by both an APA manager and an authorized official of the taxpayer see section 4.

Firm dates should be agreed upon for resolving all outstanding issues, and case milestones should be cited. The time scheduled for completion of the case milestones will depend to some extent on the scope and complexity of the particular case.

In the case of bilateral or multilateral requests, the Service will seek to work with the competent authority of the treaty partner or partners, or the U. Failures by either the taxpayer or the APA Team to meet case milestones will be addressed promptly. The APA Director will assist in remedying any difficulties to ensure a course of action to meet case milestones.

In this event, if the taxpayer wishes to continue to pursue the APA, the taxpayer must re-file the request and pay a new user fee. In some circumstances, development of the case will suggest to both the APA Team and the taxpayer that they adjust some milestone dates.

To preserve flexibility, the APA Team and the taxpayer may amend the Case Plan by written mutual agreement, consistent with the need to complete the case expeditiously. If a case is not completed by the date specified in the operative Case Plan, the APA Team Leader and the taxpayer must submit to the APA Director a joint status report or separate status reports in the event of disagreement explaining the substantive or procedural matters causing the delay and specifying how the parties propose to resolve the outstanding issues and complete the case within a reasonable time.

If the case is not completed by the new target date, APA Program management will hold a status conference. The purpose of the status conference is to reach agreement on how the case will be resolved.

The Associate Chief Counsel International may participate in this or subsequent conferences if the case is not resolved satisfactorily in a timely manner. The person signing the APA request on behalf of the taxpayer must satisfy the requirements of section 4. The taxpayer may withdraw the request at any time before the execution of the APA. The user fee generally will not be refunded if the taxpayer withdraws its APA request after the due diligence process has been initiated.

If the APA Program declines to execute an APA after the due diligence process has been initiated, the Service normally will retain the user fee, although the fee may be returned if the APA Program determines that such action would be appropriate under the circumstances.

Requests similar to APA requests that are initiated through treaty partners or possession tax agencies and submitted to the U. In order to provide timely clarification of factual issues, minimize the potential for miscommunication, and assist in development of a multiple party agreement on a timely basis, the Service will generally initiate coordination among the taxpayer, the Service, and the competent authorities of treaty partners at the earliest possible stage of consideration of an APA request, including, where possible, the prefiling stage.

In this manner, the U. The taxpayer should remain available throughout consideration of the request to assist the Service in reaching agreement with the foreign competent authority. Final agreement to the negotiated APA will be sought among the taxpayer, the Service, and the foreign competent authority. As a general matter, the taxpayer should submit APA requests and related correspondence simultaneously to the Service and to foreign competent authorities involved in the requests.

If such an agreement is not acceptable to the taxpayer, the taxpayer may withdraw the APA request see section 6. If the competent authorities are unable to reach an agreement, the taxpayer may withdraw its request or, at its discretion, the Service may negotiate and enter into a unilateral APA with the taxpayer see section 7.

If the taxpayer identifies such sensitive information, the Service will work with the taxpayer in developing a mechanism to permit consideration or verification by the treaty partner or partners of the information while still preserving its confidentiality. Bilateral APAs may provide for simultaneous filing of the annual report with the Service and with the foreign tax administration.

In appropriate circumstances, however, the Service may execute an APA with a taxpayer without reaching a competent authority agreement. The taxpayer must show sufficient justification for a unilateral APA. In some circumstances, procedures agreed upon with particular foreign competent authorities, or the requirements of proper relations with treaty partners, may preclude unilateral APAs. The restrictions imposed under section 7. However, a unilateral APA may hinder the ability of the U.

Under regularly applicable procedures, the Service may determine that the same or a similar TPM as that agreed to in an APA should be applied to prior years even in the absence of a rollback request. When applying the TPM to prior years, adjustments may be made to reflect differences in facts, economic conditions, and applicable legal rules.

Those adjustments may be made regardless of whether the taxpayer or the Service initiated the rollback request. The principles set forth in section 2.

Competent Authority will coordinate consideration of the request. As necessary to reach a competent authority agreement, the Service may require that the rollback be applied to one or more specified years if accelerated competent authority is to be granted. In exercising its discretion over the conduct of accelerated competent authority consideration, the U.

Competent Authority will seek to implement the policy concerning APA rollbacks stated in section 2. That application is described in section 8 of Rev. In exercising its discretion in a simultaneous Competent Authority-Appeals proceeding, the U.

Taxpayers are encouraged to request accelerated competent authority consideration under section 8. Competent Authority for matters subject to competent authority negotiations , or the Division Counsel for matters pending litigation. Except to the extent inconsistent with this revenue procedure, APA rollbacks will be implemented using regularly applicable procedures for resolving tax issues.

Such procedures include but are not limited to closing agreements and other settlement documents and Forms and AD. A SBT is any U. Although transactions involving valuable intangible property or CSAs would not ordinarily be appropriate for these SBT procedures because of the complexity of valuing such intangibles , the APA Program will consider employing special procedures for such transactions on a case-by-case basis.

An APA Team will evaluate the APA prefiling information to determine items of concern and the additional documentation needed to evaluate the request. The APA Program expects that performing this analysis earlier in the process should result in a reduced number of post-filing meetings and supplemental information requests. To minimize the number of meetings, teleconferences will be employed whenever feasible. The taxpayer remains otherwise subject to U.

The report must include all items required by the APA, describe any pending or contemplated requests to renew, modify or cancel the APA, and report any adjustments made pursuant to section In addition, the annual report must identify any material information submitted while the APA request was pending that the taxpayer discovers during the taxable year was false, incorrect, or incomplete. The taxpayer must file an original and four copies of the annual report by the later of a 90 days after the time prescribed by statute including extensions for filing its federal income tax return for the year covered by the report, or b 90 days after the effective date of the APA.

The Service and the taxpayer may agree to alternative filing dates. For bilateral or multilateral APAs, the Service may require the taxpayer to file simultaneously a copy of the annual report with the treaty partner or partners. The Service Operating Division or the APA Program Office will contact the taxpayer regarding an annual report if it is necessary to clarify or complete the information submitted in the annual report.

The taxpayer must supply the additional information by the date specified. If a filed annual report contains incomplete or incorrect information, or reports an incorrect application of the TPM, the taxpayer must amend it within 45 days after becoming aware of the need to amend the report.

The time may be extended for good cause. Under penalties of perjury, I declare that I have examined this annual report including accompanying documents, and, to the best of my knowledge and belief, this annual report contains all the relevant facts relating to the annual reporting requirements pursuant to the APA, and such facts are true, correct, and complete.

An adjustment to conform taxable income and other relevant items to reflect the results reported herein has been reported to the appropriate responsible Service Operating Division personnel. An amended income tax return to conform taxable income and other relevant items to reflect the results reported herein [has been] [will be] filed with the appropriate Internal Revenue Service Center.

The taxpayer must sign the declaration in compliance with sections 4. Failure to file a timely, complete, or accurate annual report may be grounds for canceling or revoking the APA under sections Under some TPMs, however, the taxpayer may have to wait until the close of the taxable year to determine whether the intercompany prices it actually paid or received complied with the TPM for example, a comparable profits method providing for a particular operating margin range.

The generally applicable Code rules, including additions to tax, penalties and interest, apply with respect to an APA primary adjustment. When the taxpayer makes an APA primary adjustment, an appropriate correlative adjustment will also be made with respect to the related foreign entity affected by the APA primary adjustment. To the extent the APA covers years for which federal income tax returns were filed prior to, or no later than 60 days after, the effective date of the APA, the taxpayer must file, unless otherwise agreed to in the APA, an amended return or returns that reflect any required primary adjustment and pay any tax due because of such adjustments, within days of entering into the APA.

The generally applicable Code rules will apply with respect to the primary adjustment with respect to the APA years for which federal income tax returns were filed before the APA was executed, except: Absent an election of the APA revenue procedure treatment described in section The secondary adjustment may result in additional tax consequences. If a taxpayer makes an APA primary adjustment, the taxpayer and its related foreign entity may elect APA revenue procedure treatment and avoid the possible adverse tax consequences of a secondary adjustment that would otherwise follow the APA primary adjustment.

Under APA revenue procedure treatment, consistent with the principles of Rev. The account must be paid within the 90 day period to receive revenue procedure treatment. The taxpayer must document the payment or offset of the account, and disclose it in the APA annual report for the year of the payment. The Service will give effect to an APA primary adjustment, secondary adjustment, and payment under APA revenue procedure treatment, if applicable, for all U.

The tax treatment of any such adjustment or payment depends on the facts and circumstances of the adjustment or payment. This deemed payment may be subject to U. Any foreign tax withheld from the payment may be treated as a noncompulsory payment ineligible for the foreign tax credit, unless the taxpayer exhausts all effective and practical remedies, including invocation of competent authority procedures, to obtain consistent treatment that would eliminate the foreign tax liability.

If the Service proposes a tax adjustment or the taxpayer files an amended return that does not require an APA primary adjustment, generally applicable Code rules will apply. If the taxpayer requests a bilateral or multilateral APA, the U. For the year under examination, the Service may require the taxpayer to establish: After consulting with the appropriate Service Operating Division personnel, the Associate Chief Counsel International may decide to apply the terms of the APA, or revise see section The taxpayer may agree with the proposed adjustments in the same manner as any other adjustment, and the Service Operating Division will assess any resulting additional tax or refund any resulting overpayment of tax.

If the taxpayer does not agree with the proposed adjustment, the taxpayer may contest it through the normal administrative and judicial procedures. The taxpayer must include the audit adjustments as finally determined for the purpose of applying the TPM and, as necessary, make any APA primary, secondary and correlative adjustments under section APA revenue procedure treatment under section The taxpayer must maintain books and records sufficient to enable the Service Operating Division to examine whether the taxpayer has complied with the APA.

Upon examination, the Service Operating Division may submit a written request to the taxpayer requiring the submission of requested information or the translation of specific documents within 30 days, as extended for good cause. An APA may be revised by agreement of the parties, consistent with the principles set forth herein and the interests of sound tax administration. Competent Authority to obtain the consent of the foreign competent authority. If the foreign competent authority refuses to accept the revised APA, or if the competent authorities cannot agree on a revised APA acceptable to all parties, the APA Director and the taxpayer may agree to: Unless the parties agree to revise the APA, the Associate Chief Counsel International will cancel an APA in the event of a failure of a critical assumption, or a material change in governing case law, statute, regulation, or a treaty as described in section For purposes of this section In regard to annual reports, the Associate Chief Counsel International will consider facts as material if, for example, knowledge of the facts would have resulted in a a materially different allocation of income, deductions, or credits than reported in the annual report, or b the failure to meet a critical assumption.

The Associate Chief Counsel International may waive cancellation if the taxpayer can satisfactorily show good faith and reasonable cause and agrees to make any adjustment proposed to correct for the misrepresentation, mistake as to a material fact, failure to state a material fact, or noncompliance. The Service will seek to coordinate any action concerning revocation of a bilateral or multilateral APA with the foreign competent authority.

If the Associate Chief Counsel International cancels an APA, the cancellation normally relates back to the beginning of the year in which the critical assumption failed, or the beginning of the year to which the misrepresentation, mistake as to a material fact, failure to state a material fact, or noncompliance relates.

If, however, the cancellation results from a change in case law, statute, regulation, or treaty, the cancellation normally relates back to the beginning of the year that contains the effective date of the change in case law, statute, regulation, or treaty.

As of the effective date of the cancellation, the APA has no further force and effect with respect to the Service and the taxpayer for U. The Service will seek to coordinate any action concerning the cancellation of a bilateral or multilateral APA with the foreign competent authority.

To expedite the preparation and evaluation of an APA renewal request, however, taxpayers are encouraged to request a prefiling conference to discuss with the APA Program the suitability of streamlined submission requirements.

Taxpayers are encouraged to file the renewal request nine months before the expiration of the APA term. Expedited processing will be most likely where the taxpayer demonstrates that the following conditions exist: The APA Team will focus on any changed facts and circumstances. While the APA Team will endeavor to streamline the renewal process, certain cases may require additional analysis. That is, experience and insight gained from applying the TPM to actual data for example, APA annual reports may provide insight that indicates the need to modify the TPM.

The APA Program will use its best efforts to advise the taxpayer at a prefiling conference whether a streamlined APA renewal process will be achievable. That report includes specifically designated information concerning all APAs, but in a form that does not identify taxpayers or their trade secrets or proprietary or confidential business or financial information.

In cases where the exchange of information would be discretionary, information may be exchanged to the extent consistent with sound tax administration and the practices of the relevant foreign competent authority, including where relevant the existence and application by the foreign competent authority of rules similar to those described in sections This revenue procedure will apply to all APA requests, including requests for renewal, received on or after February 1, The collections of information contained in this revenue procedure have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act 44 U.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. The collections of information are in sections 3. This information is required to provide the Service sufficient information to evaluate and process the APA request or request for renewal of an existing APA, or to determine whether the taxpayer is in compliance with the terms and conditions of an APA.

The collections of information are required to obtain an APA. The likely respondents are business or other for-profit institutions. The estimated average burden for an APA prefiling conference is 10 hours; the estimated average burden for an APA request is 50 hours; and the estimated average burden for preparation of an annual report by a party to an APA is 15 hours.

The estimated annual frequency of responses is one request or report per year per applicant or party to an APA, except that a taxpayer requesting an APA may also request a prefiling conference. For further information regarding this revenue procedure, please contact Mr. Gilbert at not a toll-free number. This revenue procedure describes the application procedures for becoming an acceptance agent and the requisite agreement that an acceptance agent must execute with the IRS.

Persons may wish to become an acceptance agent for purposes of facilitating the issuance of 1 IRS individual taxpayer identification numbers ITINs to alien individuals who are ineligible to obtain social security numbers SSNs , or 2 employer identification numbers EINs to other foreign persons who need an EIN for Federal tax purposes.

This revenue procedure supersedes Rev. Accordingly, acceptance agents will have to periodically reapply to retain their acceptance agent status. Acceptance agents subject to those expiring agreements must reapply to retain their acceptance agent status.

The regulations require that an applicant for an ITIN or an EIN furnish the information required by the form, the accompanying instructions, and any applicable regulations.

Acceptance agents facilitate and expedite the issuance of ITINs and EINs by verifying the foreign status and identity of the applicants.

The IRS is pleased with the success of the acceptance agent program and values the contributions made by acceptance agents. This revenue procedure modifies screening requirements to ensure that acceptance agents are adequately qualified to serve ITIN and EIN applicants.

Acceptance agent applicants now may be required to undergo a suitability check, which includes a review of their tax filing histories to ensure compliance with their tax obligations and, in some cases, a credit history and FBI background check. The new procedures also call for the acceptance agent agreement to expire at the end of the fourth full calendar year. These new requirements are intended to ensure that ITIN and EIN applicants continue to receive assistance from credible and responsible acceptance agents.

A person acting in its capacity as an acceptance agent does not act as an agent of the IRS and is not authorized to hold itself out as an agent of the IRS. The certifying acceptance agent process does not apply to obtaining EINs.

A person acting in its capacity as a certifying acceptance agent does not act as an agent of the IRS and is not authorized to hold itself out as an agent of the IRS. The role of an acceptance agent is to facilitate the application process for the issuance of TINs to alien individuals and other foreign persons who need TINs for Federal tax purposes. An acceptance agent facilitates the ITIN application process by forwarding the completed Form W-7 together with the required documentary evidence to the IRS at the address listed in the Form W-7 instructions.

An acceptance agent facilitates the EIN application process by submitting to the IRS a Form SS-4 together with any supplementary statement if required by following one of the procedures described in the Form SS-4 instructions. An eligible person may be a U. Prior to submitting a formal application, a person interested in becoming an acceptance agent may, but is not required to, request a telephone or in-person conference with the IRS to explore informally the benefits and burdens associated with the role of an acceptance agent.

Requests for pre-application conferences should be directed to the Commissioner of the Wage and Investment Division at not a toll-free number. A person may apply to become an acceptance agent by submitting a written request to:. The application shall include the following information:. All acceptance agents must have EINs.

Upon review of the application, the IRS may request additional information. The IRS will determine whether the applicant qualifies to become an acceptance agent and will notify the applicant in writing of this determination upon completion of a suitability check as described in section 6 of this revenue procedure. If the applicant is approved as an acceptance agent, the IRS will provide written instructions to the applicant regarding the procedures for entering into the acceptance agent agreement with the IRS.

In addition, the certifying acceptance agent must certify that, to the best of its knowledge and belief, the documentation is authentic, complete, and accurate. As part of the certification, the certifying acceptance agent must describe the documentation upon which it is relying.

As a result, in addition to the information required to be submitted with an application to become an acceptance agent as outlined in section 4. Prior to submitting a formal application, a person interested in becoming a certifying acceptance agent may, but is not required to, request a telephone or in-person conference with the IRS. Such a conference provides an opportunity to address such matters as the scope of the agreement, corresponding obligations for the applicant that arise under the agreement, and the nature of documentation, record maintenance, and verification procedures that arise under the agreement.

The terms of a certifying acceptance agent agreement may vary from case to case depending upon such factors as local laws and practices, know-your-customer procedures, supervisory controls, and the types of internal controls and recordkeeping procedures in effect in the normal course of the business of the certifying acceptance agent.

Generally, the certifying acceptance agent agreement will contain the terms and conditions necessary to insure proper administration of the process, described in section 7.

The following terms for certifying acceptance agents are in addition to those outlined in section 7 of this revenue procedure for all acceptance agents. A certifying acceptance agent agreement will describe the procedures by which the certifying acceptance agent will verify the identity and alien status of ITIN applicants and submit a certification to the IRS.

To the extent applicable, a certifying acceptance agent may use documentation evidencing citizenship, nationality, residency, or immigration status to support its determination of the alien status of ITIN applicants.

The reliability of any documentation should be evaluated by the certifying acceptance agent on the basis of the type of information stated on the document, the source of the document, and the ease with which the document could be counterfeited. If the IRS determines that these requirements or practices are not sufficient, it may require that additional procedures and documentation be established.

The certifying acceptance agent will agree to maintain a record of the documentation obtained and reviewed pursuant to the obligations set forth in the agreement. All documentation submitted with respect to an ITIN applicant shall be maintained for a reasonable period, as prescribed in the agreement. A certifying acceptance agent must also agree to furnish supporting documentary evidence to the IRS upon request in such manner as the IRS and the certifying acceptance agent will establish.

The certifying acceptance agent agreement will specify the manner in which IRS compliance checks will take place i. Where the certifying acceptance agent resides outside of the United States, in appropriate cases, assistance may be obtained from the tax authorities of the country where the acceptance agent resides.

In general, applicants for approval as an acceptance agent or certifying acceptance agent must pass a suitability background check before being admitted into the acceptance agent program. If the acceptance agent is a person other than an individual, the agreement must be signed by an authorized representative of the acceptance agent. The terms of an acceptance agent agreement may vary depending upon such factors as the professional status of the applicant e. The acceptance agent agreement will generally contain the following terms and conditions to ensure proper administration of the process by which the IRS issues TINs to alien individuals and other foreign persons.

The acceptance agent may use a substitute form that is approved by the IRS. For example, if the acceptance agent is a financial institution, the Form W-7 or Form SS-4 may be incorporated as part of an account opening package. An acceptance agent shall agree to assist in the preparation of the TIN application form. For example, the acceptance agent should confirm that every item included on the application form has been completed and should assist the TIN applicant in understanding the information required by the application form.

The acceptance agent should contact the IRS for assistance regarding any questions about the forms, application process, the requirement to have TINs, etc. Questions regarding such matters should be directed to the Commissioner of the Wage and Investment Division at not a toll-free number. The acceptance agent may act as an agent for the ITIN applicant with regard to any additional communication with the IRS that is necessary for completion of the application form.

We also help with worker classification determinations. We assist clients in utilizing their IRAs for real estate investments and closely held businesses. Tax Return Preparation and Review: Our tax department prepares federal and state tax returns for individuals and business trusts and estates, and is often asked to review returns to aid in minimizing taxes.

Retirement Plans and Employee Benefits McLane Middleton provides a range of employee benefit advice to help clients select, implement, and administer employee benefit plans.

Our attorneys are experts in: Our attorneys assists clients in selecting the plan that best fits their needs. We assist them to administer and maintain their plans in compliance with all tax qualification and ERISA required demands.

Voluntary Correction Programs Submission: Our attorneys have substantial experience assisting clients to bring their plans back into agreement with the tax code and ERISA requirements, and when necessary, utilize the appropriate IRS or U.

Department of Labor programs. Benefit Plans and Corporate Transactions: Our attorneys advise clients buying and selling businesses on how the rules governing benefit plans will impact the transaction.

Health Insurance and Welfare Plans: McLane Middleton attorneys have substantial experience with the ACA and other laws and regulations impacting health insurance, disability insurance, and other employer-provided benefits. Common types of nonqualified plans include: Stock option and restructure stock Deferred compensation Stock appreciation rights and phantom stock Bonus plans Supplemental executive retirement plans SERPs Change of control plans b and f plans Our attorneys regularly review executive employment agreements in transactions to avoid unnecessary tax liability for golden parachutes, deferred compensation, and other executive arrangements.

State and Local Tax Audits: We represent clients before various tax agencies, and have been effective in minimizing taxes, penalties, and interest assessed. Our attorneys have a history of success in representing clients before the U. Through lobbying activities, involvement in working groups, and working with clients, we assist in improving state tax laws and in the review and streamlining of state agency practices and procedures. Real Estate Tax Appeals: Tax Controversy McLane Middleton's tax law expertise includes representing clients involved in various federal and state tax controversies: Our skilled attorneys represent businesses and individuals during audit, appeal, or in court to obtain the best possible resolution of matters with the Internal Revenue Service IRS , New Hampshire Department of Revenue Administration, Massachusetts Department of Revenue, and other taxing authorities.

McLane Middleton maintains a successful track record in pursuing tax issues before the U. We routinely assist our clients with: Organizing and filing the documentation necessary to establish tax-exempt entities. Preparing and filing necessary documentation to obtain tax-exempt status from the Internal Revenue Service. Avoiding or minimizing the effects of private foundation status, minimizing unrelated business income tax, and helping with internal audits.

Advocating at both the state and federal level when authorities raise questions regarding tax-exempt status, assert unrelated business income, or seek to impose private foundation penalties Charitable Giving: We help boards comply with state and federal requirements for proper oversight of tax-exempt organizations and help them manage risks inherent with service as trustees and directors.

Our attorneys regularly advise companies on the following complex international tax issues: Choosing the correct business entity and restructuring foreign operations to minimize U. Trust Strength Collaboration History Intellect. There are no people who match the criteria that you specified. Please revise your search. Peter Anderson Director, Litigation Department.

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Common types of nonqualified plans include:.

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