Perspectives

MTC to solicit state commitments for transfer pricing initiative

Multistate tax alert | December 22, 2014

On December 12, the Executive Committee of the Multistate Tax Commission (“MTC”), after discussing project facilitator Dan Bucks’¹ latest preliminary design for a multistate transfer pricing initiative, passed a motion to formally solicit commitments from interested states for funding the initiative, termed the Arm’s-length Adjustment Service (“ALAS”). In this Alert we outline the background and recent developments in the ALAS initiative, discuss the components of the preliminary design, outline the potential path forward for the initiative, and suggest taxpayer considerations.

Background

Under the auspices of the MTC, states participating in the ALAS initiative have been working to combine resources toward strengthening their abilities to reattribute income under their respective versions of IRC § 482 as well as other applicable statutory and administrative powers.2 As noted in the preliminary design discussed at the December meeting, states “have found the challenges posed by improper income shifting to be too costly to address on their own.”3 The ALAS initiative is designed to “pool [state] resources to more effectively, efficiently and equitably address . . .” the challenges states face in addressing transfer pricing.4

1 Dan Bucks was formerly the MTC Executive Director and Montana Director of Revenue.

2 See our June 10 Alert for a detailed background on the origins of the project.

3 See Preliminary Design for an MTC Arm’s-Length Adjustment Service, Dan Bucks, Project Facilitator (Dec. 2, 2014).

4 Id.
 

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