KPMG report: U.S. administrative law basics for transfer pricing professionals

Examining the leading cases, APA requirements, and avenues for regulatory challenges

Transfer pricing professionals

Administrative law issues, and the resulting disputes, have proliferated throughout tax in the decade since the Supreme Court in Mayo held that general administrative law principles apply to tax. Challenges have recently been spurred by a flood of new guidance following the enactment of the 2017 U.S. tax law (Pub. L. No. 115-97)—the “Tax Cuts and Jobs Act” (TCJA). Transfer pricing, too, has been caught up in the current, with recent and ongoing litigation regarding the validity of IRS regulations on stock-based compensation and blocked foreign income putting administrative law in the spotlight.

Transfer pricing practitioners need not master the complex field of administrative law, but they can benefit from familiarity with some key concepts. Of particular importance are two administrative law avenues for challenging regulations that are often raised together, but which are fundamentally distinct. First, failure to comply with the rulemaking procedures prescribed by the Administrative Procedure Act (APA) can invalidate otherwise appropriate regulations. Second, even regulations that have had all their i’s dotted and their t’s crossed in a procedural sense may fail to warrant judicial deference under Chevron because they do not reasonably interpret the underlying statute.

Read a November 2022 report* [PDF 936 KB] prepared KPMG LLP that explores the aspects of administrative law that may be most useful to transfer pricing practitioners by examining the leading cases, APA requirements, and avenues for regulatory challenges.

*This article originally appeared in Tax Notes Federal (28 November 2022) and is provided with permission.



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