Transfer Pricing Archives - Page 2 of 3

MTC to Hold Transfer Pricing Group Meeting with Third-Party Contract Auditors

by Diann Smith and Stephen P. Kranz | Sep 23, 2014 | Alabama, District of Columbia, Florida, Georgia, Hawaii, Income Tax, Iowa, Kentucky, Nationwide Importance, New Jersey, North Carolina, Transfer Pricing

On October 6 and 7, 2014, the Multistate Tax Commission (MTC) will hold an Arm’s-Length Adjustment Service (ALAS) Advisory Group Conference at the Atlanta Airport Marriott. On the first day, third-party contract auditors will give presentations on transfer pricing issues. An ALAS Advisory Group meeting will be held on the second day.

This past year, the MTC has been designing a joint transfer pricing program. So far, nine members have committed money to the development of this program: Alabama, the District of Columbia, Florida, Georgia, Hawaii, Iowa, Kentucky, New Jersey and North Carolina.

Dan Bucks, former executive director of the MTC and former director of the Montana Department of Revenue, is the project facilitator. In the lead-up to the event, he discussed arm’s-length issues with numerous third-party contract auditors. On October 6, the contract auditors will explain how they believe a multistate transfer pricing program should work and how the MTC would best use their services to conduct transfer pricing audits on behalf of member states.

The list of contract auditors includes Chainbridge Software, Economics Analysis Group, Economists Incorporated, NERA, Peters Advisors, RoyaltyStat and WTP Advisors. While project facilitator, Dan Bucks, has indicated that this meeting is not an audition for a procurement process, the discussion seems to be headed in that direction and the MTC has not ruled out utilizing third-party audit assistance in the transfer pricing program.

Businesses concerned with the overall direction of the ALAS Advisory Group, including the possibility of subjecting taxpayers to Chainbridge-style audits on a nationwide scale, should contact the authors. For more information on the conference, please visit the MTC ALAS webpage.

Connecticut Hires Chainbridge Software LLC for Transfer Pricing Training

by Diann Smith and Stephen P. Kranz | Aug 21, 2014 | Connecticut, Income Tax, Nationwide Importance, Tax Base, Transfer Pricing

On July 15, 2014, the Connecticut Department of Revenue Services awarded Chainbridge Software LLC a contract worth $50,000 for on-site and remotely supported training for transfer pricing audits. Chainbridge is infamous for being the contract auditor hired by the District of Columbia Office of Tax and Revenue to manufacture transfer pricing-based assessments. In 2012, the District of Columbia Office of Administrative Hearings denounced Chainbridge’s methodology in Microsoft Corp. v. Office of Tax and Revenue. Numerous other cases are in litigation following D.C.’s refusal to abide by that decision.

We have reviewed the Connecticut request for proposal drafted by the Department of Revenue Services. While we do not yet have access to the final contract, it will likely be similar to the request for proposal. The solicitation requests two to three days of training per week over the course of three months. According to the RFP, Chainbridge will teach the Department’s employees about transfer pricing principles and methodologies, taxpayer planning, economic analysis of transactions between related parties, pre- and post-audit planning, and other related topics.

In light of the Connecticut Department of Revenue Services’ expected contract with Chainbridge, we anticipate that the Department will become more active in evaluating transfer pricing. What is not certain is whether the analysis will follow the debunked method still being used in D.C.

MTC State Transfer Pricing Program Looms on the Horizon

by McDermott Will & Emery, Diann Smith and Stephen P. Kranz | Apr 7, 2014 | Nationwide Importance, Transfer Pricing

More formal, rigorous, and perhaps more frequent, state transfer pricing audits appear to be looming on the horizon, as the Multistate Tax Commission (MTC) is set to launch a design and development project tasked with presenting a preliminary draft program by year’s end, with a final program recommendation due by the MTC’s annual meeting in July 2015. The intent would be to create a dedicated MTC program, including staff, that would assist, as well as train, member states (both combined and separate reporting states) in conducting state transfer pricing audits as an alternative to hiring contracted consultants.

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