United States: Voluntary transfer pricing initiative in Louisiana

The Louisiana Department of Revenue announced that eligible corporate taxpayers are invited to participate in a voluntary initiative designed to resolve intercompany transfer pricing issues. 

The purpose of the “Louisiana Transfer Pricing Managed Audit Program” is twofold.

• First, the Department of Revenue is seeking to create an efficient and expedited resolution for corporate tax audits when transfer pricing issues exist.
• Second, the aim is to provide certainty and uniformity to taxpayers on the resolution of transfer pricing issues for open audit periods and a defined period of future tax years. 

Revenue Information Bulletin 21-029 [PDF 155 KB] sets forth the eligibility requirements for participation, the program’s procedures, and other key information for interested taxpayers. Generally, eligible taxpayers are those with an established history of compliance with Louisiana’s tax laws that have the time and resources to participate in the program and would reasonably be able to pay any resulting liability. A taxpayer must also have suitable records regarding intercompany transactions. 

Taxpayers interested in participating in the program will need to contact the Department via email. If approved to be part of the program, the taxpayer must provide certain information to the Department’s representative within 30 days, including but not limited to, federal income tax returns, a list of all intercompany transactions, financial statements on a GAAP basis for each party to an intercompany transaction (if these are not available, the Department will determine operating income using the federal return and M-3 schedules), and any transfer pricing studies.

The Department’s representative will review the documentation provided and will issue a written determination as to whether the Department agrees or disagrees with the taxpayer’s transfer pricing studies and methods used. The Department may use external consultants to assist it with this endeavor.  After receiving the Department’s determination, a taxpayer will have 30 days to accept the determination or offer modifications or adjustments. The Department will review comments from the taxpayer regarding modifications or adjustments to its determination, but it is not clear to what extent the Department will make additional adjustments based on the taxpayer’s comments.

Participating taxpayers will receive an abatement of penalties associated with additional taxes owed as a result of the managed audit, as well as an abatement of interest during the course of the managed audit. Periods available for resolution under the program include the current tax year for calendar and fiscal year filers, any open tax periods that have not yet prescribed, and up to four future tax periods.

Taxpayers that are under audit may participate in the program, but the only issues that can be resolved via the managed audit process are transfer pricing issues. While a taxpayer can engage a representative to assist with the managed audit, a taxpayer cannot participate anonymously through a representative.

Requests for approval to participate in the program must be received by the Department on or before April 30, 2022. All managed audits must be closed by June 30, 2022.

For more information, contact a KPMG tax professional in the United States:

Shirley Sicilian | +1 202 533 3466 | ssicilian@kpmg.com