May 11, 2023

APMA’s New Interim APA Guidance


As previewed in a post on our Best Methods transfer pricing blog, the IRS’s Advance Pricing and Mutual Agreement (“APMA”) program recently issued new interim guidance regarding Advance Pricing Agreement (“APA”) requests effective as of April 25, 2023. The new guidance is styled as an internal “memorandum” for APMA employees, but it also states that its guidance will be incorporated into the Internal Revenue Manual within two years from its release. The IRS began signaling nearly two years ago that it intended to issue updates to the existing APA procedures contained in Rev. Proc. 2015-41. And, as we previously highlighted in another Best Methods transfer pricing blog post, the OECD published the Bilateral Advance Pricing Arrangement (“BAPA”) Manual last fall, which proposed best practices for jurisdictions to streamline, expedite, and improve BAPA processes across member jurisdictions in order to reduce the average completion time for APAs to 24-30 months. But the announcement of new US APA procedures—effective immediately via an internal employee memorandum, rather than a revenue procedure update—was an unexpected development for many taxpayers and practitioners who regularly deal with APAs and APMA.

To that end, the new guidance provides much more than just perfunctory process revisions. On the one hand, the guidance introduces an “optional pre-submission review” for taxpayers who wish to submit a prefiling memoranda before submitting a formal APA request that seems aimed at reducing APA completion time and conserving APMA resources by filtering out cases that it believes are unlikely to reach an agreement at an earlier stage. But the interim guidance also instructs APMA personnel on how to review pre-submissions and formal taxpayer APA requests for acceptance to the program, or, alternatively, suggest an “alternative workstream” such as the International Compliance Assurance Program (“ICAP”),1 or—most notably—a joint audit.

The guidance claims that its new review process “is not intended to limit or decrease the number of APA requests accepted by APMA.” But to some, the prospect that submitting an APA request may result in a referral to open a joint audit contradicts the spirit of the APA program, and introduces new concerns that taxpayers should be aware of before submitting an application.

Pre-Submission Review

The interim guidance states that its newly introduced “optional pre-submission review” process, along with its other measures, will help “support the best and highest use of transfer pricing resources for taxpayers and tax administrations.” The pre-submission review will be conducted by an APMA Team Leader or economist and a member of the Transfer Pricing Risk Assessment (“TPRA”) team. The TPRA team focuses on transfer pricing risk assessments in the Large Business and International Division (“LB&I”) and conducts assessments for ICAP and other programs. The TPRA team’s involvement in APA pre-submission review is a new feature in the interim guidance. This review team will make recommendations to the APMA frontline manager who then makes and communicates recommended action to the taxpayer. The interim guidance anticipates that the pre-submission review will take about four weeks to complete, and will conclude with one of three non-binding recommendations: to proceed with submitting an APA request; that an “alternative workstream” would be a more effective route; or to provide more information about the proposed APA.

The new optional pre-submission review procedures are more stringent and formal than the existing procedures under Rev. Proc. 2015-41. But they are not entirely new, because the existing revenue procedure already provided that in some cases APMA may invite—and in some cases require—that a prefiling conference be conducted between it and prospective taxpayers, or that the taxpayer submit a prefiling memorandum. While the pre-submission review is “optional,” its application to instances where a prefiling memorandum is required seems to support the IRS’s stated goals with the interim guidance.

APA Submission Review

Under the interim guidance, all new APA submissions will be subject to a more robust and rigorous process for determining whether APMA will accept the submission into its program or recommend an alternative workstream. The process is envisioned to take eight weeks and begins once APMA receives a complete APA submission. After receipt, an APMA frontline manager will form a Submission Review Team consisting of personnel from APMA, the Treaty Assistance and Interpretation Team (if the submission raises non-transfer pricing treaty issues), TPRA, and the Transfer Pricing Practice (“TPP”). This team will review the APA submission for suitability for the assignment of APMA resources relative to alternative workstreams.

Criteria the team will apply in making this determination include:

  • transaction materiality and complexity
  • whether there is an actual or potential transfer pricing dispute
  • whether the APA process would likely lead to prospective APA years
  • availability of arbitration and other country-specific strategic considerations
  • whether APMA is best situated in TTPO to analyze the proposed covered transactions
  • whether the proposed transactions are suitable for ICAP
  • whether TPP has an interest in examining the covered transactions
  • the extent to which the transfer pricing issues posed by the covered transactions are secondary to other domestic tax law provisions, and
  • the views of treaty partners.

Additional special considerations apply in the case of unilateral requests, renewal requests, and rollback requests.

Based on the Submission Review Team’s review, the APMA frontline manager will make a recommendation about whether to accept the APA request to the APMA Assistant Director. Generally, the APMA Assistant Director will be the final decision maker on whether to accept an APA request, but in certain cases a recommendation to decline to initiate the APA process and the appropriate alternative treatment (e.g., a joint audit) will be escalated to the APMA Director and subject to further internal consultations within LB&I.

Notably, while the new guidance expands both the pre-submission review and APA submission review processes, the recommendation following the pre-submission review is non-binding. Thus, it is conceivable that APMA could recommend proceeding with an APA request after a pre-submission review but then reach a different conclusion after the APA submission review.

Alternative Workstreams

Whether a taxpayer submits an optional pre-submission review request or a formal APA request, the interim guidance states that an “alternative workstream” may be recommended in lieu of acceptance into the APA program, which includes ICAP or a joint audit.

Factors that APMA will consider for weighing whether an ICAP alternative workstream is more appropriate include 1) the scope, materiality, and complexity of the covered transactions in the United States and jurisdictions participating in ICAP; 2) the taxpayer’s history of transparent and cooperative engagement with the IRS; 3) the taxpayer’s examination history regarding transfer pricing and permanent establishment issues; and 4) the availability of resources to perform an ICAP risk assessment.

Factors that APMA will consider for weighing whether a potential future TPP examination or joint audit is more appropriate include whether 1) the taxpayer and its foreign affiliates are under examination in relevant jurisdictions; 2) common or complimentary tax issues exist; and 3) transactions that pose significant compliance risk to one or more tax administrations exist. Where APMA determines that a joint audit may be a better treatment stream than an APA, APMA will consult with the relevant LB&I geographic practice area. If LB&I elects to propose a joint audit, APMA will not accept the APA request. If LB&I does not elect to propose a joint audit, then an APMA director will determine whether to accept the APA request.

Anonymous Requests

The new guidance does not provide any changes regarding APMA’s review of anonymous informal consultations or the submission of an anonymous memorandum. Under Rev. Proc. 2015-41—which has not been revoked—taxpayers have the option to request an informal consultation on a no-name basis, and to submit an anonymous memorandum that describes the potential covered transactions. Thus, this is one option seemingly still available to taxpayers who wish to receive some guidance as to the likelihood that they would be accepted into the APA program, without necessarily opening themselves up to a potential audit. But, in practice, whether APMA will still earnestly review and provide such direction on an informal basis remains an open question.


Overall, the recent interim guidance is significant for taxpayers who intend to seek both new and renewal APAs. It signals that APMA—and, more broadly, the IRS—will have greater involvement and broader scope in the recommendations and decisions at the early stages of the APA process. While the interim guidance is not intended to limit the number of APA requests that the APMA Program accepts, the clear message is that taxpayers should no longer take acceptance into the APA process as a given. The impact of the interim guidance will likely be a new emphasis on early engagement with the APMA Program and treaty partners and effective advocacy beginning at the prefiling stage. In addition, taxpayers should be mindful that APMA has now clearly stated that its review of APA submissions may result in a referral for a TPP exam or a joint audit, and thus plan accordingly.



1 See our prior blog post about the ICAP program for more information: ICAP, a New Tool in the Multiverse of Multinational Tax Dispute Management (May 25, 2021). 

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