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July 10, 2024

IRS representative says corporations that did not respond to transfer pricing compliance letters have been referred for possible examination

Speaking on June 27, 2024, at the NYU School of Professional Studies Tax Controversy Forum, Holly Paz, IRS Large Business & International Division Commissioner, said the IRS has received responses from most of the US-based subsidiaries of foreign-owned corporations that received letters from the IRS asking about their intercompany transaction pricing.1 Those that have not responded have been referred for possible examination, Paz said.

The letters (Letters 6607 and 6608) have gone mostly to corporations that distribute goods in the United States, and in limited instances, to corporations that manufacture goods in the United States. These letters stem from the corporations' alleged use of certain transfer pricing strategies that the IRS may deem improper.

The IRS had announced (IR-2023-194) on October 20, 2023, that it planned to send letters to approximately 150 US-based subsidiaries (see Tax Alert 2023-1907). The IRS updated this number to 180 in January 2024 (see Tax Alert 2024-0383).


The letters are the first transfer pricing enforcement initiative following enactment of the Inflation Reduction Act. In addition to taxpayers that did not respond to the compliance letters, taxpayers that responded by defending their transfer pricing also may be referred for examination if the IRS does not consider their explanation satisfactory. Taxpayers should continue to monitor the progress of this transfer pricing compliance initiative as it may provide insight into similar future compliance initiatives.

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1 Erin Slowey, IRS Audit Campaign on Transfer Pricing Draws Big Response, Daily Tax Report (June 27, 2024).

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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