The IRS today posted a Large Business and International (LB&I) directive that announces the withdrawal of a prior LB&I directive concerning transfer pricing issue selection by IRS examiners when related to issues of “reasonably anticipated benefits” in cost sharing arrangements.
The LB&I directive posted today is LB&I-04-0519-005 (dated May 21, 2019, with a posting date of June 5, 2019).
With this LB&I directive, the IRS is formally withdrawing LB&I-04-0118-004 (January 12, 2018) which provided instructions for examiners on transfer pricing issue selection related to reasonably anticipated benefits in cost sharing arrangements.
The 2018 LB&I directive provided instructions to IRS examiners to stop developing adjustments to cost sharing arrangements based solely on changing a taxpayer’s multiple reasonably anticipated benefits (RAB) shares to a single RAB share when subsequent platform contribution transactions were added to an existing cost sharing arrangement until the IRS finalized its position. The 2018 directive was issued to support the efficient use of transfer pricing examination resources. Restricting the use of examination resources allowed the IRS to direct resources to other transfer pricing examination issues until the IRS Chief Counsel completed the technical analysis of interpretation of the regulations related to the specific RAB share question.
In July 2018, the IRS Office of the Associate Chief Counsel (International) issued an advice memorandum (AM 2018-003) that finalized the IRS position and concluded:
The LB&I directive posted today notes the withdrawal of the 2018 directive, effective May 21, 2019.
The new directive states:
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