Tax Administration: IRS' Advance Pricing Agreement Program
GGD-00-168
Published: Aug 14, 2000. Publicly Released: Sep 27, 2000.
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Highlights
Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) Advance Pricing Agreement Program, focusing on the: (1) extent of advance pricing agreements (APA) use by U.S. taxpayers, including those that have had transfer pricing disputes with the IRS; (2) timeliness of IRS' APA processing; and (3) results of IRS' review of taxpayers' annual reports on compliance with APAs.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should take steps to cost-effectively collect data on APA processing suitable for analyzing the causes of delays and developing options for improvement. Such steps might include documenting deviations from plans or schedules and the reasons why in case files or modifying the Chief Counsel's Automated Systems Environment database to systematically capture such data. | According to IRS, the Advance Pricing Agreement Program (APA Program) director has modified the computerized information reporting system, CASE, to systematically capture data on the causes of delays in APA processing. CASE now contains a code to show that a particular APA is proceeding normally or, where the APA is delayed, a series of nine codes to identify a specific source of the delay and one code for other unspecified delays. In April 2001, APA program director confirmed that the coding system was implemented. He also provided GAO with information on the codes and a copy of the tracking sheet used to record the status of APA team leader's cases. Each week, the APA team leader... responsible for an APA is to assign one of these codes to each APA in his or her inventory. This information goes into the computerized case file associated with that APA in CASE. These codes will be available for future computer generated management reports for tracking and analyzing the causes of APA processing delays. In a September 2002 update on the status of this recommendation, the APA program director told GAO that IRS has done some analyses of the data collected. The analyses showed some inconsistencies relative to data entry which IRS expects should be corrected now that online data entry was implemented. According to IRS, preliminary data show that taxpayer caused delays are the principal type of processing delay. IRS has also instituted a new process that requires each closed case file to include a brief discussion on whether the case meet the agreed upon schedule for processing.
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| Internal Revenue Service | The Commissioner of Internal Revenue should test the use of written timeliness targets for processing bilateral APAs to determine the feasibility of using them for all bilateral APAs. | On November 13, 2000, IRS issued a press release stating that it has entered into an agreement with the United Kingdom on processing of competent authority cases, which includes APAs. The agreement sets a target period of 22 months to process competent authority cases. This period includes both preparing and exchanging position papers and negotiating the case. According to IRS, the agreement would reduce the time required to process bilateral APAs. One June 25, 2004, IRS announced that that the Pacific Association of Tax Administrators (PATA) has finalized internal operational guidance with respect to mutual agreement procedures and bilateral advance pricing arrangements. PATA is an...
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Prices and pricingTax administrationTax lawTaxpayersTransfer paymentsDatabase management systemsAppealsUntimely protestsSSA ticket paymentsSmall business