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Transfer Pricing

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Beginning November 1, 2021, the Louisiana Department of Revenue (“Department”) will be offering taxpayers the opportunity to participate in a voluntary transfer pricing “managed audit” program (the “Program”). Pursuant to a recently released Department information bulletin, the purpose of the Program is to: Create an efficient and expedited resolution for corporate tax audits when transfer pricing issues exist; andProvide certainty and uniformity to taxpayers on the resolution of transfer pricing issues for open audit periods…

The Multistate Tax Commission (“MTC”) is set to revamp its transfer pricing collaboration and enforcement initiatives following the first public meeting of its State Intercompany Transactions Advisory Service (“SITAS”) Committee in over four years.  At the end of last year, the SITAS Committee appointed its new Chair- Krystal Bolton, who is also an assistant director at the Louisiana Department of Revenue’s field audit income tax division.  On March 23rd, Ms. Bolton hosted representatives from state revenue agencies, practitioners, taxpayers, and other members of the public in a virtual conference to overview the history of the SITAS Committee and to present the results of a multistate survey regarding intercompany transactions and transfer pricing.    

The Utah Supreme Court recently heard arguments in Utah State Tax Comm’n v. See’s Candies Inc., Utah, No. 20160910-SC, which is an important case for whether Utah will respect arm’s-length transfer pricing.  During the hearing, the Utah State Tax Commission (“Commission”) argued that Internal Revenue Code (“IRC”) § 482 should not limit its discretionary authority to reallocate income between related companies.  The taxpayer, on the other hand, claimed the intercompany transactions at issue were at arm’s length and therefore deductible. 

ExxonMobil Oil Corporation, Hess Corporation, and Shell Oil Company (collectively, the “Oil Companies”) were recently dealt another blow in their ongoing transfer pricing dispute with the District of Columbia Office of Tax and Revenue (“OTR”).  The Oil Companies are among several taxpayers that have been fighting the validity of the transfer pricing methodology employed by Chainbridge Software LLC (“Chainbridge”), the OTR’s 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 OAH’s 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 (“OAH”) Administrative Law Judge Bernard H. Weberman denied the Oil Companies’ 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).