New APA Template under Rev. Proc. 2015-41


On May 11, 2018, the IRS's Advance Pricing and Mutual Agreement Program (APMA) issued a new template that taxpayers must use when requesting an advance pricing agreement (APA) under Rev. Proc. 2015-41, 2015-35 I.R.B. 263 (Rev. Proc. 2015-41). Taxpayers with pending APA requests should contact their assigned APMA team leader(s) about whether to use this template in their cases.

APMA revised this template on September 4, 2018, primarily to fix a problem with the document's "track changes" settings.

A proposed version of this template was released for comment in September 2017. In conjunction with the proposed template, APMA also released in September 2017 a filled-in and annotated example (Example) of how the template might be edited by taxpayers to produce an initial draft APA. APMA received constructive comments on both documents that are summarized below. APMA envisions periodically reviewing the template and making further revisions as it gains experience in the template's use. As noted below, comments are presently invited on one issue; but taxpayers may provide feedback at any time by sending an e-mail to (APMA mailbox) with the subject line "APA Template Comments".

Taxpayers may request Microsoft Word files of the template, the Example, and a "redline" comparison of the current version of the template with the September 2017 version by sending an e-mail to the APMA Mailbox with the subject line "APA Template Request".

The current version of the template continues to use an options-based format. APMA believes this format will facilitate the submission and review of APA requests and the drafting of APAs. APMA's principal revisions to the proposed template and Example and APMA's reply to comments received are as follows:

General Instructions

  • In response to comments regarding flexibility in certain cases, APMA clarified and further emphasized how the template might be edited by taxpayers. Thus, custom drafting might be required even where not specifically indicated in the template; in particular, custom critical assumptions might be appropriate and helpful, and in appropriate cases APMA might agree to modify the "limitation on assistance" provision in the Recitals.
  • Some comments suggested that any non-selected options should be deleted from the final executed APA to make it shorter, more readable, and less confusing to parties not involved in the APA's drafting. APMA acknowledges the merit of these comments and may revisit this point as it gains experience in the template's use. However, for now, APMA believes that retaining the non-selected options will limit errors and facilitate the review process.
  • The proposed template flagged with an asterisk certain specified options whose selection will require justification in the APA request. A comment suggested that only custom-drafted options should require justification. APMA believes that certain specified options, even if commonly used in APAs, should be justified in the APA request to facilitate review. After further considering which options should require justification, APMA has retained the justification requirement for options so flagged in the proposed template and has extended that requirement to additional options, primarily those involving a testing period other than annual testing.


  • As explained in the Instructions on Appendix A, the template uses the term "Tested Party" in a more expansive sense than is used in the OECD Transfer Pricing Guidelines and Treasury regulations. One comment suggested that this usage is confusing. APMA believes that this usage is appropriate and preferable to alternatives considered. However, to avoid confusion, the revised template repeats in section 4 of Appendix A the explanation of the sense in which "Tested Party" is used.
  • APMA agrees with a comment that, when an APA covers the pricing of transactions between related entities, the covered issue should be described as the pricing for the transaction, rather than simply as the transaction. APMA has thus modified the description of the two Covered Issues in the Example (see section 3 of Appendix A of the revised Example).

Specific Provisions in Appendix A

  • APMA added in section 4.e of Appendix A two optional provisions regarding periodic adjustments, as contemplated in section 6.03 of Rev. Proc. 2015-41. One provision, suggested by a comment, provides that a covered platform contribution transaction ("PCT") will not be treated as a Trigger PCT for purposes of making periodic adjustments under section 1.482-7(i)(6) of the Treasury regulations. The other provision, not specifically suggested in the comments, similarly provides that a covered intangible transaction (other than a PCT) will not be subject to periodic adjustments under section 1.482-4(f)(2) or (6) of the Treasury regulations.
  • A provision in section 6.i of Appendix A of the proposed template reflects the IRS position that an intercompany payable established under the principles of Rev. Proc. 99-32 should be treated as indebtedness for all U.S. federal tax purposes, including for purposes of Code section 956. Some comments criticized this provision, as regards Code section 956, on various grounds: (i) the IRS position is legally incorrect, (ii) the application of the IRS position to APAs will discourage many taxpayers from seeking APAs and is not needed to fulfill the purpose of Code section 956, and (iii) the application of the IRS position to bilateral APAs will frustrate the relief of double tax. The IRS continues to believe that its position is correct on legal and policy grounds. Within the context of a bilateral, multilateral, or unilateral APA, however, a de minimis exception is provided whereby the intercompany payable will not be treated as indebtedness for purposes of Code section 956 if the payable is satisfied within 90 days of the close of the APA Tax Year with respect to which it is established.

Comments are invited on one issue:

  • APMA removed proposed section 7 of Appendix A, Effect of Certain Adjustments by Tax Authorities and Resulting Competent Authority Proceedings. This section addressed whether a covered method should be re-applied to take into account certain adjustments between an APA-covered entity and a non-APA-covered entity, and any resulting competent authority resolution, that would affect the testing of financial results under the covered method. APMA believes that this question needs further study. Comments are invited on the frequency with which this question might arise, the need for provisions to address this question, and what provisions or choice of provisions (including those in the removed section of the proposed template) might be appropriate.

Comments should be directed to the APMA Mailbox with the subject line "APA Template Comments".

September 4, 2018 Revision

On September 4, 2018 APMA released a revised version of the APA template that includes the following changes:

  1. Allows comments / edits to be saved under the specific name of the editor. Previously, the document's settings made all edits show under one generic name anytime the document was saved. This made it difficult to determine which edits were proposed by the taxpayer versus APMA. For APA drafting already in progress that started with the May 2018 template version, taxpayers can fix this problem for future edits by these steps:
    • Open document and go to File tab, Options (on left, under Account), Trust Center (on left at bottom), Trust Center settings (right), Privacy Options (on left at bottom).
    • Under Privacy Options, uncheck the box labeled "Remove personal information from file properties on save".
    • Click OK (twice).
  2. Fixes incorrect phrasing under Appendix A, section 4(b) Financial Results Tested (Type of Method), regarding the royalty for the license of intangible property (p. 21). The phrase "royalty rate" is replaced by "royalty". The text now reads as follows:
    • The Covered Method is an implementation of the comparable uncontrolled price method under the OECD Guidelines and of the comparable uncontrolled transaction method under the U.S. Treasury Regulations. The Tested Party's financial results to be tested are the royalty rate paid for the license of #DESCRIPTION OF LICENSED INTANGIBLE PROPERTY divided by the Tested Party's:
    • sales revenue from sales of #DESCRIPTION OF GOODS/SERVICES.

The revisions to the proposed version of the template were prepared primarily by APMA employees Robert Weissler and Emily Mangrum. For further information regarding this announcement, please contact Robert Weissler at 202-317- 8933 or Emily Mangrum at 202-317-8771 (not toll-free numbers).