The IRS has reissued the Memorandum for Treaty and Transfer Pricing Operations Employees (memo), which listed previously internal procedures for APA prefiling meeting requests and the review and acceptance of APA submissions.

The IRS reissued the memo because the original one expired on April 25, 2025. The reissued memo has an expiration date of October 22, 2025, at which point it is anticipated that the guidance will be incorporated into Internal Revenue Manual 4.60.3.

The memo implemented a rigorous screening process whereby the Advance Pricing and Mutual Agreement team (APMA) (along with other Treaty and Transfer Pricing Operations (TTPO) personnel) may shift taxpayers from the APA process to alternative workstreams (see Tax Alert 2023-0800).

Memo procedures

According to the memo, an APMA Team Leader (or Economist) and a member of the IRS's Transfer Pricing Risk Assessment (TPRA) team (collectively, the Prefiling Memorandum Review Team) will review a taxpayer's APA prefiling memorandum (which is "recommended" under the memo in instances where it was optional under earlier guidance) and recommend to the APMA country manager whether the taxpayer should proceed with submitting the APA request, provide additional information or consider an alternative workstream. The memo lists the factors for the team to consider in making its recommendation.

Within four weeks of filing the APA prefiling memorandum, the APMA country manager is supposed to make and orally communicate to the taxpayer a decision about the recommended taxpayer action.

Once the APA is submitted, it will be reviewed by an IRS team consisting of an APMA country manager, an APMA Team Leader, a member of the TPRA team and a member of the IRS's Transfer Pricing Practice (TPP) (a Treaty Assistance and Interpretation Team analyst will be assigned for any non-transfer pricing treaty issues, such as permanent establishment). The review is supposed to take no longer than eight weeks and result in an oral communication from APMA as to whether it accepts or declines the APA request. If APMA declines the APA request, it recommends an alternative workstream for the taxpayer to consider, including the International Compliance Assurance Programme (ICAP) or a joint audit. Like the APA prefile review procedures, the APA submission review procedures include a detailed list of factors that the IRS will consider in reaching its determination.

The memo also provides guidance specific to unilateral, renewal and rollback requests.

Implications

Although APMA may recommend that the taxpayer apply to ICAP or indicate that the issues are better suited to be handled in an audit, this strategy does not seem to have been used with any frequency. However, the new procedures have not reduced the number of APAs accepted into the APA program. The number of APA applications filed in 2023¹ and 2024² remained relatively stable with the number of APA applications filed in 2022,³ although the number of withdrawn applications increased in 2023 and 2024.

The true impact of the memo has been adding an additional step to the APA submission process for taxpayers that may not have filed a pre-filing memorandum under the rules in Revenue Procedure 2015-41. The prefiling memorandum, now at least recommended by APMA, requires taxpayers to determine their proposed transfer pricing position early in the drafting process and allows them to receive valuable feedback on their position. The reissuance of the memo indicates that the more rigorous APA submission process in here to stay for the foreseeable future.