KPMG report: U.S. administrative law basics for transfer pricing professionals
Examining the leading cases, APA requirements, and avenues for regulatory challenges
Transfer pricing professionals
Administrative law issues, and the resulting disputes, have proliferated throughout tax in the decade since the Supreme Court in Mayo held that general administrative law principles apply to tax. Challenges have recently been spurred by a flood of new guidance following the enactment of the 2017 U.S. tax law (Pub. L. No. 115-97)—the “Tax Cuts and Jobs Act” (TCJA). Transfer pricing, too, has been caught up in the current, with recent and ongoing litigation regarding the validity of IRS regulations on stock-based compensation and blocked foreign income putting administrative law in the spotlight.
Transfer pricing practitioners need not master the complex field of administrative law, but they can benefit from familiarity with some key concepts. Of particular importance are two administrative law avenues for challenging regulations that are often raised together, but which are fundamentally distinct. First, failure to comply with the rulemaking procedures prescribed by the Administrative Procedure Act (APA) can invalidate otherwise appropriate regulations. Second, even regulations that have had all their i’s dotted and their t’s crossed in a procedural sense may fail to warrant judicial deference under Chevron because they do not reasonably interpret the underlying statute.
Read a November 2022 report* [PDF 936 KB] prepared KPMG LLP that explores the aspects of administrative law that may be most useful to transfer pricing practitioners by examining the leading cases, APA requirements, and avenues for regulatory challenges.
*This article originally appeared in Tax Notes Federal (28 November 2022) and is provided with permission.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.