State Transfer Pricing Audits: Forced Combinations, Add-Backs, IRC Section 482, and Recent Cases

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, June 2, 2021

Recorded event now available

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Program Materials

This webinar will discuss the rise in state challenges of transfer pricing arrangements. Our panel of SALT veterans will cover choosing, documenting, and defending intercompany pricing agreements for multistate businesses.

Description

Pricing arrangements between related parties should reflect the fair market value of goods and services exchanged. With adequate methodologies, prices charged and paid would mirror the prices between unrelated parties so that related parties don't avoid taxation or benefit unduly. There has been a recent surge in state examinations of perceived transfer pricing abuses.

Using IRC Section 482 as a base, some states scrutinize intercompany transactions to see if prices used are arms-length and the "best method" is being used. Other states rely on their own add-back statutes, forced combinations, and nexus determinations to challenge these arrangements. Since intercompany transactions are eliminated in a combined filing, many states use forced combinations as a resolution stating that separate filings lack economic substance. Taxpayers with proper transfer pricing studies have been able to defend separate filings successfully.

SALT practitioners working with multi-state companies need to understand transfer pricing methods and challenges to assist multistate clients in structuring and defending these arrangements.

Listen as our panel of SALT experts explains transfer pricing methods, the best method analysis rule, current cases, and defending pricing arrangements between related entities.

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Outline

  1. State transfer pricing overview
  2. IRC Section 482
  3. Pricing studies
  4. State-specific methods
  5. Transfer pricing enforcement
  6. Defending transfer pricing arrangements
  7. Best practices

Benefits

The panel will review these and other critical issues:

  • Selecting appropriate transfer pricing methods
  • Documenting pricing arrangements
  • How specific states are challenging transfer pricing arrangements
  • Implementing the best method for pricing arrangements
  • How states incorporate the rules under IRC Section 482

Faculty

Lyon, Davinia
Davinia Lyon, CPA

Partner
TaxOps

Ms. Lyon specializes in corporate and international tax and planning, including income tax provisions (ASC 740),...  |  Read More

Roberts, Stacey
Stacey L. Roberts, CPA

State and Local Tax Director
TaxOps

Ms. Roberts has been making SALT less taxing for over a 1,000 businesses over the last 25 years. As a director of the...  |  Read More

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