Transfer Pricing Enforcement Expected to Increase Significantly
As part of the IRS’ hiring initiatives, increased staff will focus on transfer pricing noncompliance using sophisticated data analytics, according to an agency official. Among the topics broached by Jennifer Best, deputy commissioner of the IRS’ Large Business and International (LB&I) Division, was the U.S. government’s ongoing efforts to curtail abusive transfer pricing practices of multinational corporations aiming to lower their tax bill by illegally shifting profits to parts of the world with lesser tax rates in which they operate. With the IRS on a hiring spree as it has begun spending the first yearly allotment of additional funding granted by the Inflation Reduction Act (PL 117-169), LB&I will bolster its team and technologies in the transfer pricing space. “We are looking to hire new economists, tax law specialists, and revenue agents to work transfer pricing issues so we can increase our coverage,” said Best. This, she said, is to emphasize risk areas to streamline workloads and issue selection. It has been expected that the IRS would use the $80 billion to ramp up transfer pricing scrutiny. Penalties will also be evaluated by LB&I, more specifically when it is appropriate under statute and available guidance to assess a penalty.
This approach by the IRS isn’t a surprise. McGuire Sponsel’s Global Business Services team is available for phone discussions to determine how we can assist you in the transfer pricing area to prepare for this increased scrutiny. If you have any questions about this issue, do not hesitate to reach out.
Jason Rauhe, CPA is a Principal in the firm’s Global Business Services practice and is responsible for assisting clients and adding depth in all areas of the firm’s international tax consulting services including transfer pricing, and the firm’s compliance expertise.
Rauhe previously served as Director of International Tax at a Top 100 CPA Firm, where he was responsible for the firm’s international tax division and major industry alliance networks.