The IRS today posted a document that formally withdraws a transfer pricing-related directive from the IRS Large Business and International (LB&I) division concerning cost-sharing arrangements and stock-based compensation.
Read LB&I-04-0719-008 (dated July 31, 2019, and posted August 5, 2019).
The LB&I directive posted today formally withdraws Directive LB&I-04-0118-005 (dated January 12, 2018) that provided instructions for examiners on transfer pricing issue selection related to stock-based compensation (SBC) in cost-sharing arrangements (CSAs).
Today’s LB&I directive explains:
Today’s LB&I directive states:
Based on the Ninth Circuit’s decision in Altera, I am formally withdrawing Directive LB&I-04-0118-005. With the issuance of this Withdrawal, examiners should continue applying Treas. Reg. §§ 1.482-7A(d)(2) and 1.482-7(d)(3), including opening new examinations of CSA SBC issues when appropriate. These issues may be factually intensive, and transfer pricing teams should develop the facts to support their analyses and conclusions. Where appropriate, Issue Teams should consider consulting the Practice Network and Counsel for support in developing the most reliable analyses of this issue. We will continue to monitor any further developments related to the Ninth Circuit’s decision.
The Ninth Circuit’s decision in Altera was decided by a two-judge majority and included a dissenting opinion. The taxpayer in Altera has requested en banc review of the majority decision by the Ninth Circuit, and there have been others—including KPMG LLP—that filed amicus curiae briefs in support of the taxpayer’s request for review by the full panel of the Ninth Circuit. Read TaxNewsFlash
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