Evolution of the commensurate with income (CWI) standard, its current and prospective application, and its practical implications for taxpayers
The Tax Reform Act of 1986 introduced the commensurate with income (CWI) standard into both section 367(d) and section 482 to police the pricing of intangible property transfers between related taxpayers. While the issue motivating Congress to enact the CWI standard was clear, the intended meaning and application of the standard were not. As a result, interpretations of the CWI standard have shifted over time to reflect changes in the global economy and international transfer pricing developments related to the arm’s length standard. Still, almost four decades after the enactment of the CWI standard, ambiguity on its scope and appropriate application persists.
Read a December 2024 article* prepared by KPMG LLP tax professionals that examines the evolution of the CWI standard, its current and prospective application, and its practical implications for taxpayers.
* This article originally appeared in Tax Notes International (December 16, 2024) and is provided with permission.