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Peter Barnes and David Rosenbloom Comment on IRS Transfer Pricing Tool

November 2, 2018, Law360 Tax Authority

While companies may have less incentive to move intangibles offshore after the U.S. tax overhaul, a change to the transfer pricing statute that has received little attention gives the IRS a powerful weapon against those that still choose to adopt that tax planning technique.

. . .

"Old habits die hard," said David Rosenbloom of Caplin & Drysdale. "My sense is that without a change to 482, we would still see 482 planning."

. . .

GILTI is something of a crude tool compared with Section 482, according to Peter Barnes, a professor of tax law at Duke University School of Law and of counsel at Caplin & Drysdale. The GILTI calculation, he noted, aggregates income across all foreign subsidiaries, allowing earnings in high-tax countries to be offset against those in low-tax jurisdictions.

"If you have businesses in higher-tax jurisdictions, you may have the ability to absorb more low-taxed income in other jurisdictions without triggering GILTI," he said. In those cases, he added, GILTI doesn't apply, "so transfer pricing is the tool the IRS wants to use."

For the full article, please visit Law360’s website (subscription required).

Excerpt taken from the article “IRS Wields Powerful Transfer Pricing Tool After Tax Overhaul” by Molly Moses for Law360 Tax Authority.



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