Report on recent US international tax developments – 31 March 2023

An Organisation for Economic Co-operation and Development (OECD) official this week said the organization is confident there will be an agreement on Amount B of Base Erosion and Profit Shifting (BEPS) Pillar One by the middle of this year. The official was quoted as saying that while there is overwhelming support among businesses to broaden the scope of Amount B, there are “natural limits to how broad the scope can be as well” and delegates are working on the right balance.

In December 2022, the OECD Secretariat released a consultation document on Amount B of Pillar One of the BEPS 2.0 project. Amount B is aimed at simplifying and streamlining the transfer pricing of in-country baseline marketing and distribution activities, while ensuring outputs are consistent with the arm’s-length principle. There is no threshold proposed for multinational enterprises (MNEs) to be within scope of Amount B; this is in contrast to both Amount A of Pillar One and the global minimum tax rules under Pillar Two, where specified thresholds would apply for determining whether an MNE is within scope.

The Internal Revenue Service (IRS) Advance Pricing and Mutual Agreement (APMA) Program this week issued its 24th annual Advance Pricing Agreement (APA) report in Announcement 2023-10 (pdf). The report discusses APMA, including its activities and structure for calendar year 2022 and provides useful insights into the operation of the APA Program. Although the number of APA filings increased significantly in 2022, the total number of APAs concluded decreased significantly; the median amount of time to finalize an APA increased from 35.1 months in 2021 to 43.4 months in 2022. See EY Global Tax Alert, US IRS issues annual APA report for 2022 showing significant increase in number of APAs filed, dated 31 March 2023 for details.

House Republican tax writers sent a 24 March letter to the House Appropriations State, Foreign Operations and Related Programs Subcommittee requesting that funding to the OECD by the United States Government be eliminated. The 10 Ways and Means Committee members wrote that the organization has “evolved into a venue that advocates against the economic interests of United States’ workers and business … .” Senate Finance Committee Chairman Ron Wyden was quoted as saying he opposed the action.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

• Arlene Fitzpatrick 
  
  
• Joshua Ruland 

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.