ExxonMobil Oil Corporation, Hess Corporation, and Shell Oil Company (collectively, the âOil Companiesâ) were recently dealt another blow in their ongoing transfer pricing dispute with the District of Columbia Office of Tax and Revenue (âOTRâ). The Oil Companies are among several taxpayers that have been fighting the validity of the transfer pricing methodology employed by Chainbridge Software LLC (âChainbridgeâ), the OTRâs third-party transfer pricing consultant. Just last year, the Oil Companies unsuccessfully sought to estop the OTR from relitigating the validity of the controversial Chainbridge methodology in light of the OAHâs holding in Microsoft Corp. v. Office of Tax and Revenue (2012) that the Chainbridge methodology was arbitrary, capricious and unreasonable (for prior coverage, see DC Office of Tax and Revenue Set to Relitigate Chainbridge Methodology in Oil Company Cases).  In a January 26, 2018 Order, Office of Administrative Hearings (âOAHâ) Administrative Law Judge Bernard H. Weberman denied the Oil Companiesâ motion for summary judgment, holding that they failed to establish that the transfer pricing method employed by Chainbridge was arbitrary, capricious and unreasonable as a matter of law. Hess Corp., et. al. v. D.C. Office of Tax & Revenue, Case Nos. 2012-OTR-00027, 2011-OTR-00047, 2011-OTR-00049 (Jan. 26, 2018).Â
Transfer pricing has occupied the state tax spotlight in recent years, as taxing authorities continue to challenge intercompany transactions (see âKeeping the State at Armâs Length: State Transfer Pricing Recent Developmentsâ for prior coverage of state transfer pricing developments). Because state revenue departments often lack the resources and expertise necessary to perform a thorough transfer pricing audit, some states have engaged third-party service providersâoften on a contingent-fee basisâto conduct transfer pricing examinations or to prepare transfer pricing reports and analyses on their behalf. The District of Columbia Office of Tax and Revenue (âOTRâ) is one example of a local taxing agency that has for years relied on a third-party âexpert,â Chainbridge Software LLC (âChainbridgeâ), to perform transfer pricing analyses.