On Wednesday, May 10, 2017, the Internal Revenue Service (IRS) Large Business and International Division (LB&I) hosted a webinar with the Association of International Certified Professional Accountants (AICPA) regarding LB&I’s recently-announced campaigns targeting inbound distributors and taxpayers who either were declined by, or withdrew from, the IRS’s Offshore Voluntary Disclosure Program (OVDP). Our previous coverage of LB&I’s campaign initiatives can be found here. The slides from the presentation are available here.
As described by the IRS, this campaign is intended to address transfer pricing in the context of United States distributors of goods sourced from foreign-related parties that may have reported gains or losses that are not commensurate with the functions performed and the risk assumed.
As discussed in Wednesday’s webinar, this campaign is somewhat unique in that the IRS is still evaluating whether this issue presents an actual—rather than a mere potential—threat of noncompliance. The IRS has identified a series of returns to be sent into the field for examination, but is currently holding them to evaluate whether a genuine threat of noncompliance exists. The IRS also stated that the campaign is being designed to allow for flexibility to release returns quickly, if compliance can be readily ascertained. (more…)