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March 20, 2024

US IRS official discusses benefits of mandatory arbitration on MAP

Nicole Welch, IRS's Large Business and International (LB&I) Division Director of Treaty and Transfer Pricing Operations, said the United States encourages jurisdictions to pursue mandatory binding arbitration to strengthen their mutual agreement procedure (MAP) programs.1

Speaking on March 7, 2024, at a Global International Fiscal Association program in Washington DC, Welch said mandatory binding arbitration is the US tax treaty policy.2 Mandatory binding arbitration is included in the 2016 US model tax treaty and the bilateral US income tax treaties with Belgium, Canada, Croatia,3 France, Germany, Japan, Spain and Switzerland.4 MAP disputes can be brought to an arbitration panel if the parties agree to arbitration and fulfill certain requirements.


Mandatory arbitration in MAP is baseball style, or final-offer arbitration, meaning that each party puts forth its final position and one position is chosen by the arbitration panel. The successful party in arbitration is the one that submits a more reasonable offer. Arbitration can help to more efficiently reach a MAP settlement because competent authorities might be more willing to negotiate before arbitration to avoid an all-or-nothing settlement.

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1 Michael Smith, Mandatory Arbitration is Crucial for U.S. MAP, IRS Official Says, Tax Notes Today (Mar. 11, 2024).

2 Id.

3 The tax treaty with Croatia will not be in effect until both parties have completed their requisite domestic procedures. For the United States, the US Senate will need to ratify the treaty. See US Dept. of Treasury, United States, Croatia Sign Income Tax Treaty  (Dec. 7, 2022).

4 See Mandatory Tax Treat Arbitration for more information.

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Contact Information

For additional information concerning this Alert, please contact:

National Tax Department, International Tax and Transactions Services, Transfer Pricing

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor