The text of Public Law 117-169, otherwise known as the “Inflation Reduction Act” passed on January 3, 2022, includes the Section 10301 harmlessly entitled “Enhancement of Internal Revenue Service Resources.” However, as is now becoming well known, within this Section we have the paragraph 10301(1)(A)(ii), “Enforcement.” It is here we see the enormous resources allocated to “enforcement activities.”
Here $46,637,400,000 is dedicated “…For necessary expenses for tax enforcement activities of the Internal Revenue Service to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes, to purchase and hire passenger motor vehicles (31 U.S.C. 1343(b)), and to provide other services as authorized by 5 U.S.C. 3109, at such rates as may be determined by the Commissioner…”. That’s $46 billion dedicated to enforcement and collection.
Further, the Congressional Budget Office’s Cost Estimate of PL 117-169 released on September 7, 2022, estimates that just over $2 billion additional tax collections will be realized just next year alone, in 2023, and nearly $35 billion of additional taxes by 2026. That’s a lot of assessments and collections in a short time.
These new resources provided to the IRS become available just after the IRS had updated its transfer pricing examination process guide on September 8, 2020. As the Treasury and Congress have stated that the focus of this enhanced enforcement effort will be large corporations with international operations, it becomes obvious that transfer pricing is squarely in their sights. Inadequate transfer pricing policies and documentation have never been more exposed to audit adjustment than now.
McGuire Sponsel’s Global Services Team has the depth of experience and tools required to ensure your clients’ compliance with the multi-layered IRS and Treasury cross-border transfer pricing principles. Let our team help you and your clients efficiently handle the oncoming transfer pricing enhanced enforcement.
Mark O’Dell, CPA, has a wealth of skill and knowledge in the areas of international corporate taxation and M&A. He brings more than thirty years of experience to the table as a corporate tax director for several publicly-traded multi-nationals, both U.S. and foreign-owned.