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Transfer Pricing

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Transfer pricing has occupied the state tax spotlight in recent years, as taxing authorities continue to challenge intercompany transactions (see “Keeping the State at Arm’s Length: State Transfer Pricing Recent Developments” 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 providers—often on a contingent-fee basis—to conduct transfer pricing examinations or to prepare transfer pricing reports and analyses on their behalf.  The District of Columbia Office of Tax and Revenue (“OTR”) is one example of a local taxing agency that has for years relied on a third-party “expert,” Chainbridge Software LLC (“Chainbridge”), to perform transfer pricing analyses.