Procedures for Requesting Competent Authority Assistance under US Tax Treaties

U.S. competent authority assistance is not necessarily contingent upon whether you sign an agreement with the IRS Examination function contrary to the assertions of some IRS Revenue Agents. Turns out this is important information for some US Taxpayers of international origin in battle with the IRS.

Yes there are good and bad people EVERYWHERE, including some IRS Revenue Agents!

As a result of sharing that knowledge I subsequently found myself on a team of people getting dirty with both the US China Tax Treaty and the US Israel Tax Treaty. For the first time in my life (fully disclosed of course) I’ve been tasked with understanding, engaging and explaining competent authority assistance.

Life begins outside of your comfort zone and THIS is going to be fun!

What I understand so far is that generally speaking most tax treaties have opportunity for competent authority assistance upon written request when it is substantiated that the actions of either taxing authority will result in either double taxation or taxation contrary to treaty provisions.

For example tax treaties generally contain provisions permitting competent authorities to resolve:

  1. allocation issues under IRC Section482 in the USA or an equivalent provision under the laws of the treaty country in question.
  2. resident issues as well as allowing for discretion in determining the limits to which a taxpayer is entitled to the benefits of a treaty.

The following revenue procedures have also been extraordinarily useful.

Revenue Procedure 2015-40“provides guidance on the process of requesting and obtaining assistance under U.S. tax treaties from the U.S. Competent Authority, acting through the Advance Pricing and Mutual Agreement Program and the Treaty Assistance and Interpretation Team of the Deputy Commissioner (International) Large Business and International Division of the Internal Revenue Service.”

Revenue Procedure 2015-41“provides guidance on the process of requesting and obtaining an Advance Pricing Agreement (“APA”).”

The request letter must be presented according to the instructions and structure and is incredibly intense.

More to follow!