Clark Armitage Discusses IRS Approach to APAs and MAPs in Bloomberg Law

The diminished number of advance pricing agreements the IRS completed last year has tax practitioners wondering what the agency will do to get more APAs done with fewer resources.

The agency’s Advance Pricing and Mutual Agreement Program reported this week that it signed just 110 APAs last year, down from 142 the year before, while new applications ticked up to 178.

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The staff situation could also affect APMA’s approach to APAs as the agency tries to find ways to get more done with less, Caplin & Drysdale attorney Clark Armitage said.

One approach has been for the IRS to get pickier about which APA applications to accept, he said.

“For taxpayers, that is challenging because the standards for acceptance are not crystal clear, and it of course would be inappropriate for APMA to use the screening process as a way to right-size its inventory for its staffing levels,” Armitage said.

The agency also has been narrowing the scope of topics to cover under the APAs it does accept.

That has the potential to backfire, Armitage cautioned, “if those less central issues end up getting audited and adjusted, and taxpayers end up filing under MAP to cover the same issue,” he said, referring to mutual agreement procedures used by taxpayers to hash out double-tax issues between treaty partner nations.

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