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October 20, 2022

IRS official said agency might be more selective on APAs given availability of ICAP in transfer pricing disputes

  • An IRS official stated in a webinar that the IRS may be interested in pursuing transfer pricing disputes through the International Compliance Assurance Program (ICAP) in some cases instead of the advance pricing agreement (APA) program.
  • ICAP may allow for faster resolution than the APA program.

Jennifer Best, the IRS's Large Business and International (LB&I) Division Acting Deputy Commissioner, said that the IRS is "reevaluating the APA program, which will probably become a bit more selective about what it takes in, going forward" and that "ICAP might be a greater interest going forward if the IRS becomes more selective." This statement was made during the webinar "International Compliance Assurance Program (ICAP): The Best Kept Secret in Transfer Pricing," held on October 6, 2022, and sponsored by the National Association for Business Economics.

APAs are written agreements between multinational corporations (multinationals) and tax authorities on the transfer pricing to apply in future transactions between related parties. ICAP is a voluntary risk assessment and assurance program aimed at facilitating co-operative engagements between multinationals and tax authorities in their local jurisdictions. ICAP allows multinationals to present their tax position to several tax administrations simultaneously in a more cooperative environment than a typical audit. As with the APA program, ICAP is intended to be part of the "toolkit for dispute prevention and resolution," the official said, which ultimately should reduce the number of disputes that require resolution through Mutual Agreement Procedure (MAP) cases.

The ICAP process has three stages:

  • Selection — the multinational communicates to the tax authorities of the jurisdiction of its ultimate parent entity its interest in participating in ICAP
  • Risk assessment — the tax authorities determine that the multinational's tax positions are "low" risk or that such a finding is not possible
  • Outcomes — the multinational is informed, through outcome letters, whether each tax authority agrees with the outcome of the process

As opposed to APAs, ICAP outcome letters do not have "legal certainty but, rather, [are] a practical [solution]," the official said. Specifically, a "low-risk" outcome letter means "the tax administrations issuing the letter do not intend to dedicate any further compliance resources to the specified transactions or issues that they have designated to be low risk," the official clarified. However, "risk profiles are inversely correlated — the country with the greater amount of profits might conclude that the covered risks are low, whereas those with the least amount of profits might conclude that they are not," the official said. The official added that the IRS is considering releasing risk assessment metrics.


If the IRS becomes more selective about which cases are accepted in the APA program, ICAP would become an increasingly important option in preventing transfer pricing disputes. ICAP does not have the same level of certainty that an APA does; it may, however, allow for a (1) faster path to multilateral, practical tax certainty for taxpayers; and (2) resolution through the risk assessment phase, thus potentially reducing the number of requests for MAP assistance. Additionally, for a transaction that requires further review (i.e., where it is not determined to be low risk), tax authorities may recommend that the multinational enter the APA program, which may lead to a more efficient APA process because the tax authorities have already reviewed the transaction and should have a more truncated due diligence review. Alternatively, the tax authorities may agree that a tax adjustment is needed and attempt to settle the issue informally outside of the MAP process where possible. Taxpayers who have participated in the ICAP process have reported positive experiences.


Contact Information
For additional information concerning this Alert, please contact:
National Tax Department, International Tax and Transactions Services, Transfer Pricing
   • Ryan J. Kelly, Americas ITTS Tax Controversy Leader (
   • Hiro Furuya (
   • Ameet Kapoor (
   • Carlos M Mallo (
   • Marla McClure (
   • Donna McComber (
   • Mike McDonald (
   • Tom Ralph (
   • Craig Sharon (
   • Kent Stackhouse (
   • Thomas A. Vidano (
   • Heather Gorman (
   • Giulia Di Stefano (
   • Carolina Figueroa (
   • Mitch Gibson (