"Bilateral" or "multilateral" APAs involve an agreement between the Service and the taxpayer, as well as a negotiated agreement with one or more foreign competent authorities under applicable income tax treaties. See CCDM 32.4.1.5, Negotiation and Approval of Unilateral APAs and CCDM 32.4.1.6, Negotiation and Approval of Bilateral and Multilateral APAs for special procedures for bilateral and multilateral APAs. A " unilateral" APA involves an agreement only between the Service and the taxpayer.

This subchapter sets forth procedures for negotiating and entering into APAs and otherwise conducting the APA Program. In addition to the CCDM, revenue procedures and other releases published in the Internal Revenue Bulletin may also provide procedures governing the APA Program. These additional procedures, if inconsistent with the CCDM, control.

Operating Division personnel, generally from the Operating Division (LMSB) and the Tax Treaty Division (bilateral and multilateral APAs), participate in APA negotiations. Operating Division (SB/SE) personnel participate in APA negotiations involving taxpayers assigned to the Operating Division (SB/SE). Supervisory personnel of the Operating Divisions supervise their personnel participating in APA negotiations.

International Examiners typically have significant APA negotiating responsibilities due to their expertise in transfer pricing issues.

Operating Division (LMSB) economists may play a significant role in APA negotiations. Under the guidance of the APA Team Leader, these economists coordinate their work with economists from the APA Office, as necessary.

Other Operating Division specialists (e.g., financial product specialists, computer audit specialists) may play an essential role if the APA negotiations require expertise in their specialized areas. In general, if an Operating Division specialist has involvement in transfer pricing compliance activities involving the taxpayer, the specialist will also participate in the APA negotiations.

Case Managers and Team Coordinators in Coordinated Industry cases often provide important guidance in conducting APA negotiations.

The APA Program Office may coordinate transfer pricing issues with the International Technical Advisors from the LMSB Office of Prefiling and Technical Guidance. International Technical Advisors also participate from time to time in evaluating APA Requests.

Division Counsel attorneys, generally from Division Counsel (LMSB) field offices, participate in APA negotiations as Chief Counsel representatives of the Operating Divisions. Personnel from Division Counsel (SB/SE) field offices participate in APA negotiating involving taxpayers assigned to the Operating Division (SB/SE). Supervisory personnel of the Division Counsel offices supervise their personnel participating in APA negotiations. See CCDM 32.4.1.4.3, Forming the APA Team, at paragraph 8 regarding the assignment of a Division Counsel (LMSB) field attorney to the APA Team.

Appeals Officers participate in APA negotiations whenever the APA request involves issues significantly related to issues involving the taxpayer before the Appeals Office. Appeals Officers will also participate when their participation otherwise assists the resolution of the case. Appeals supervisory personnel supervise their personnel participating in APA negotiations.

Taxpayers can file a user fee by the filing deadline for a taxable year and submit the full APA Request within 120 days thereafter. The taxpayer submits the user fee with a notice of intent to pursue an APA Request.

The APA Director receives the CASE-MIS assignments for all " Dollar File" cases pending the submission of the full APA Request. The APA Program Office does not include the time that a case resides in dollar file status toward its APA timeliness goals.

The APA Director may extend the 120-day period for filing the full APA Request.

Periodically, the APA Director reviews cases in the dollar file status and will return the user fee and close the case file if the taxpayer delays the submission of the full APA Request beyond the 120-day period. Closing the case file causes the APA program to lose its jurisdiction over any year for which the return filing deadline has passed.

The processing of an APA request begins when the taxpayer has filed its APA Request and paid the user fee.

The APA Director, in consultation with the APA Branch Chiefs, assigns an APA Team Leader to evaluate the request. The APA Team Leader promptly coordinates with the appropriate Operating Division, Division Counsel, and Appeals Office (if the APA request raises issues under consideration by Appeals for prior years), and the Tax Treaty Division (if the proposed APA is bilateral or multilateral).

Concurrent with the assignment of the APA Team Leader, the APA Director in consultation with the Chief of the APA Economist Branch, will either assign an APA economist, or determine that the APA Team Leader should work with the Chief of the APA Economist Branch to locate a field economist. To request the assignment of a field economist, APA Team Leaders submit Form 9276 (Request for Economist) to the appropriate field economist group manager.

The APA Team generally will include the field economist currently auditing the taxpayer’s transfer pricing.

Within 14 days of the assignment of the case, the APA Team Leader should have identified all of the members of the APA Team and arranged an initial team meeting.

For unilateral APA Requests, the APA Team Leader follows the procedures of CCDM 32.4.1.5 Negotiation and Approval of Unilateral APAs. For bilateral or multilateral APA Requests, the APA Team Leader follows the procedures of CCDM 32.4.1.6 Negotiation and Approval of Bilateral and Multilateral APAs.

The Service assigns personnel to APA negotiations with a view to efficiency. Therefore, APA Teams include the minimum number of people consistent with effectively evaluating the case.

The makeup of APA Teams varies from case to case. As appropriate, the APA Team may include the following categories of Service personnel:

The APA Team Leader should identify and form the APA Team within two weeks after the assignment of the case. The APA Desk Guide contains the coordination procedures for forming the APA Team.

In bilateral cases, the APA Team Leader forwards a copy of the APA Request to the US Competent Authority manager responsible for the particular treaty partner and requests the assignment of a US Competent Authority analyst to the case.

The international examiner may suggest the addition of other APA Team members.

If the taxpayer has prior years in Appeals with a related transfer pricing issue, the APA Team Leader should invite the appropriate appellate conferee to join the APA team.

To secure the assignment of a Division Counsel (LMSB) field attorney to the APA Team, the APA Team Leader contacts the Senior Legal Counsel (International) at the Washington, D.C. headquarters of the Division Counsel (LMSB). The Senior Legal Counsel (International) will determine the appropriate Division Counsel (LMSB) field attorney to assign to the APA Team, taking into consideration the location of the international examiner and the experience of field counsel with the taxpayer or involved issues.

The APA Team Leader, in consultation with the other members of the APA Team, arranges for the initial meeting with the taxpayer, generally within 45 days of the assignment of the case to the APA Team Leader. In advance of the initial taxpayer meeting, the APA Team must read and digest the APA Request, and should have had its first team meeting as described in CCDM 32.4.1.4.2, Processing an APA Request.

The APA Team and the taxpayer should make every effort to make the first meeting as useful as possible. The APA Team will prepare a list of questions based on the APA Request and submit them to the taxpayer in advance of the first meeting in sufficient time for the taxpayer to prepare a full response. Prior to sending the questions to the taxpayer, the APA Team Leader consults with the APA Branch Chief to determine the appropriate review of the outgoing questions.

Every APA negotiation must have a case plan that reflects the parties’ agreement on the scope and nature of the additional information required to resolve any questions and the dates of all necessary meetings.

Generally, the case plan sets one or more meetings with firm dates so as to allow the taxpayer and all team members to arrange their schedules. The typical case plan includes two to four meetings, including the initial taxpayer meeting, milestones such as the resolution of specific issues, the timing of supplemental questions and responses, and the completion and review of a draft APA or negotiating position.

Case plan milestones generally include:

To permit the expeditious completion of the APA negotiations, the APA Team generally holds the scheduled meetings on the case plan even if particular Service or taxpayer personnel cannot participate. The APA Team Leader will brief the APA Team members unable to participate. If appropriate, nonattending personnel should appoint a substitute to participate in the meeting.

The APA Team Leader promptly advises the APA Branch Chief of any failures by either the taxpayer or the APA Team to meet case plan milestones.

In some circumstances, the development of the case will suggest to both the APA Team and the taxpayer the adjusting of some case milestone dates. To preserve flexibility, the APA Team and the taxpayer may amend the case plan, but only if a substantial need exists.

APA Team Leaders should inform their APA Branch Chief of significant case developments. In particular, APA Team Leaders should discuss issues with their APA Branch Chief if a significant difference of opinion exists involving the taxpayer, the field, or the economists.

To promote savings in cost and time, APA Team Leaders may substitute case meetings with telephone conferences and video-conferences to the extent feasible and consistent with effective discussions.

The APA Team Leader has responsibility for ensuring compliance with rules governing powers of attorney and other rules governing the protection of return information.

At the conclusion of negotiations, the APA Team Leader determines, in consultation with the other members of the APA Team, whether to propose an APA to the APA Director or recommend ending negotiations because an agreement does not appear feasible.

If the APA Team Leader recommends a proposed APA, the APA Program Office follows the procedures in CCDM 32.4.1.5.11 Unilateral APA Review.

If the APA Team Leader recommends ending the negotiations, the APA Director evaluates the recommendation and takes any steps that appear warranted, including consultation with the APA Team and the taxpayer, and, if necessary, closure of the case.

The APA economist reviews the APA Request and prepares a preliminary analysis, which includes:

The APA economist generally provides the preliminary analyst to the APA Team Leader and his or her APA Branch Chief, and the Chief of the APA Economist Branch, in sufficient time for them to review it before the initial taxpayer meeting.

After the APA Team completes its requisite due diligence, the APA economist documents any significant additional economic analysis and provides the APA Team Leader with a proposed method for resolving the case.

If an APA request relates to pending litigation involving the taxpayer, including but not limited to U.S. Tax Court proceedings, refund actions, summons enforcement proceedings, and disclosure proceedings, the APA Team Leader coordinates with the Division Counsel attorneys responsible for the litigation and with the Deputy Associate Chief Counsel (International Field Service & Litigation). APA Team Leaders should consult promptly with the APA Director or their APA Branch Chief if they have any questions concerning the need for or nature of this coordination.

If an APA request raises complex or novel international tax issues requiring technical coordination, the APA Team Leader should contact his or her APA Branch Chief who will seek assistance from the appropriate branch in the Office of Associate Chief (International). A WLI will be created for the branch providing the assistance.

Under policies set forth in the revenue procedure governing the operations of the APA Program, application of an APA’s TPM to tax years prior to those covered by the APA ("rollback" ) can enhance voluntary compliance and effectively use resources to address unresolved transfer pricing issues. Applying the APA’s TPM to prior years may require adjustments to reflect differences in facts, conditions, and applicable legal rules. Subject to the policies and rules stated in the applicable revenue procedure, the determination whether, and to what extent, an APA’s TPM applies to prior years is within the discretion, depending on the circumstances, of the involved Operating Division, Division Counsel, or Appeals field office, which may implement the rollback using their regularly applicable procedures.

The APA Team Leader maintains and closes the official APA case file, ensuring that the file contains the following documents and materials:

The APA case file should not contain the original executed APA. The APA Team Leader should provide it to his or her secretary for safekeeping in the APA Docket Room.

The APA Program Office has a dedicated shared drive that the APA Team Leaders use for creating and storing case-related documents. Each case has a unique shared drive folder with at least two subfolders. One subfolder, entitled "Final Documents," contains the final APA documents, i.e., the APA, the recommended US negotiating position, the Director memo, and the Associate memo. A second subfolder, entitled "Economic Analysis," contains economic data.

During the APA process, the taxpayer may file an income tax return for one or more completed tax years of the APA term. As part of the APA Team’s due diligence, the APA Team Leader should get information from the taxpayer on the application of the TPM to the filed year(s). The APA Team Leader should include the information in the Director memo or recommended US negotiating position so as to facilitate review and US Competent Authority consideration.

Some taxpayers have followed the practice of filing pro forma annual reports consistent with their submission during the APA process. For these taxpayers, providing the requested information should involve little or no additional work.

In an exceptional case (e.g., a complex profit split that the taxpayer does not currently follow), the taxpayer may not have the information readily available for inclusion in the Director memo or recommended US negotiating position. APA Team Leaders should bring these exceptional cases to the attention of their APA Branch Chief.

The APA Team Leader provides the proposed APA for review to the:

The APA Team Leader sends the proposed APA to the Operating Division field office for a 21-day review period, with a copy to the APA Branch Chief. If the APA Team includes an APA economist, the APA economist will review the draft APA before it is sent the Operating Division field office. The Operating Division field office may concur with the proposed APA, with or without reservations, or disagree with the proposed APA and indicate remaining issues to the APA Team Leader. If the Operating Division field office concurs orally, the APA Team Leader prepares a file memorandum to memorialize the concurrence. If the Operating Division field office disagrees, the procedures in the next paragraph apply.

If the Operating Division field office disagrees with the proposed APA, the APA Team Leader consults with the APA Branch Chief and the APA Director, who will arrange to seek to resolve the Operating Division’s concerns. If a difference of views persists, the Associate Chief Counsel (International) will meet with the necessary Service and Chief Counsel personnel to resolve the matter. The Associate Chief Counsel (International) will make the final determination concerning disposition of the proposed APA.

The APA Team Leader also sends the proposed APA to the taxpayer with a cover letter explaining that the proposed APA draft is subject to APA management review and approval.

Once the Operating Division field office concurs and the taxpayer has provided its views, the APA Team Leader submits a review package to the APA Branch Chief. The APA Team Leader should anticipate a one week period for the APA Branch Chief’s review. The review package includes:

The Director memo includes a comprehensive discussion of the case and serves as the definitive case file memo. Similar to a recommended US negotiating position (see CCDM 32.4.1.6.1, Recommended US Negotiating Positions), the Director memo includes a description of:

The Director memo provides critical information for review of the Annual Reports filed in accordance with the APA, for any subsequent renewal, and for resolution of any issues arising under the APA.

The Associate memo briefly describes the taxpayer, the taxpayer’s business, the covered transactions, the proposed TPM, the taxpayer and field position, and any interesting, controversial, or otherwise significant issue raised by the case. The length of an Associate Memo depends on the complexity and other features of the particular case. It is generally one to two pages in length, but particularly complex cases may require longer memos.

After the APA Branch Chief approves the proposed APA and the Director and Associate memos, the APA Team Leader forwards them to the APA Director for review. The APA Director then forwards the Associate memo to the Associate Chief Counsel (International) and, after a discussion with the Associate Chief Counsel, signs two original copies of the proposed APA. If the Associate Chief Counsel (International) proposes significant changes to the APA, the APA Director will arrange for the Associate Chief Counsel (International) to meet with other Service personnel, as appropriate.

The APA Team Leader receives the APAs signed by the APA Director and transmits them to the taxpayer for signature. The taxpayer signs both copies and returns one executed original to the APA Team Leader.

The APA Team Leader forwards the fully executed APA to his or her APA secretary for filing in the docket room of the APA Program Office Program. The APA secretary distributes copies of the APA to the Operating Division field office and the Division Counsel (LMSB). The APA secretary also distributes a copy of the APA cover page to the APA professional staff.

After the APA Team determines the recommended US negotiating position for competent authority negotiations, the APA Team Leader prepares a memorandum that as concisely as possible, consistent with a full and clear explanation, sets forth the negotiating position with supporting rationale.

APA Program Office bases its recommended US negotiating position on "the most appropriate arm’s length method taking into account the US Treasury Regulation, the [appropriate treaty], and the US Competent Authority’s experience with the [appropriate] competent authority." The APA Team Leader must include the quoted language in the opening paragraph of the recommended US negotiating position.

The recommended US negotiating position takes the form of a memorandum from the APA Team Leader and APA Branch Chief to the APA Director, which contains a signature block for the APA Director to indicate his or her approval.

The recommended US negotiating position should describe:

The recommended US negotiating position provides a comprehensive background document for the US Competent Authority analyst, and should contain all of the factual information the analyst might need to negotiate the case, as well as the APA Team’s analysis of the facts. The analyst will need the taxpayer’s position as the taxpayer may have communicated it to the foreign competent authority. The APA Team Leader should also explain any material differences between the recommended US negotiating position and the taxpayer’s proposal. Tables comparing the taxpayer’s position with the APA Team’s position have proven useful.

As appropriate, the APA Team Leader also includes suggested negotiating strategies, issues that might be compromised, and alternative positions.

Under APA policy, the APA Team Leader generally offers the taxpayer the opportunity to comment on a redacted version of the recommended US negotiating position. The redacted negotiation position should include the facts of the case and the recommended TPM. Redactions include:

The Office of Associate Chief Counsel (International) considers information received from a foreign competent authority as confidential and protected by the applicable treaty provisions.

The redacted recommended US negotiating position should treat information provided by the taxpayer regarding the foreign competent authority’s views as factual information for verification by the taxpayer. The redacted negotiating position may include the information, but must identify it as having been received from the taxpayer.

The APA Team Leader should assume that the taxpayer will share any information provided by the APA Team with the foreign competent authority. The APA Team Leader should always provide the US Competent Authority analyst with a copy of any redacted negotiating position shared with the taxpayer.

The APA Team Leader provides the recommended US negotiating position for review to the:

The APA Team Leader sends the proposed recommended US negotiating position to the Operating Division field office for a 21-day review period, with a copy to the APA Branch Chief. If the APA Team includes an APA economist, the APA economist will review the recommended US negotiating position before it is sent to the Operating Division field office. The Operating Division field office may concur with the proposed recommended US negotiating position, with or without reservations, or disagree with the proposed recommended US negotiating position and indicate remaining issues to the APA Team Leader. If the Operating Division field office concurs orally, the APA Team Leader prepares a file memorandum to memorialize the concurrence. If the Operating Division field office disagrees, the procedures in the next paragraph apply.

If the Operating Division field office disagrees with the proposed recommended US negotiating position, the APA Team Leader consults with the APA Branch Chief and the APA Director, who will seek to resolve the Operating Division’s concerns. If a difference of views persists, the Associate Chief Counsel (International) will meet with the necessary Service and Chief Counsel personnel to resolve the matter. The Associate Chief Counsel (International) will make the final determination concerning disposition of the proposed recommended US negotiating position.

The APA Team Leader sends the redacted version of the draft recommended US negotiating position to the taxpayer after the APA Branch Chief has reviewed and approved the redactions. See CCDM 32.4.1.6.1 Recommended US Negotiating Positions regarding what material the APA Team Leader redacts. The redacted version should not contain blacked out text or blank pages, and the APA Team Leader should renumber its pages as necessary. The APA Team Leader gives the redacted version to the APA Branch Chief three days prior to sending it to the taxpayer.

The APA Team Leader forwards the final recommended US negotiating position, including the views of the Operating Division field office and the taxpayer, to the APA Branch Chief with an anticipated one week review period.

Along with the recommended US negotiating position, the APA Team Leader includes a brief memorandum summarizing the key elements of the negotiating position (the "Associate memo" ). The summary is in the form of a memorandum from the APA Director, the APA Branch Chief, and the APA Team Leader, to the Associate Chief Counsel (International).

The Associate memo briefly describes the taxpayer, the taxpayer’s business, the covered transactions, the proposed TPM, the taxpayer and field position, and any interesting, controversial, or otherwise significant issue raised by the case. The length of an Associate Memo depends on the complexity and other features of the particular case. It generally is one to two pages in length, but particularly complex cases may require longer memos.

After the APA Branch Chief reviews the recommended US negotiating position and the Associate memo, the APA Team Leader forwards them to the APA Director for review, along with an undated transmittal memorandum from the APA Director to the Manager, Tax Treaty Division in a yellow signature folder. The APA Director then forwards the Associate memo to the Associate Chief Counsel (International) for review. If the Associate Chief Counsel (International) approves, the APA Director signs the recommended US negotiating position and the transmittal memo.

After the APA Director signs the recommended US negotiating position, the APA secretaries distribute a copy of its first page to all of the APA professional staff. The APA secretary also changes the CASE-MIS case status code to 515, Pending in Competent Authority.

After the US and foreign competent authorities reach a mutual agreement on the proposed bilateral or multilateral APA, the APA Team Leader prepares an APA to conform with the agreement, along with a Director memo and Associate memo. The APA Branch Chief and APA Director review the proposed memos. After any necessary changes, the APA Director transmits the Associate memo to the Associate Chief Counsel (International) for review.

The review process for bilateral APAs follows the review process for unilateral APA review with the following key differences:

The signature process for bilateral and multilateral APAs follows the same process for unilateral APAs. See CCDM 32.4.1.5.11 Unilateral APA Review.