The Mutual Agreement Procedure (MAP) articles of U.S. tax treaties and tax coordination agreements grant taxpayers the right to request the assistance of the appropriate competent authority specified in the tax treaty or tax coordination agreement when a taxpayer believes that the actions of the United States or the applicable U.S. treaty partner or U.S. territory result or will result in the taxpayer being subject to taxation not in accordance with the applicable tax treaty or tax coordination agreement. This situation typically arises from U.S. or foreign-initiated adjustments resulting from an examination but can also arise from other U.S. or foreign-initiated actions, including when taxes are withheld by a withholding agent.

Generally, the MAP articles of U.S. tax treaties and tax coordination agreements provide the authority for taxpayers to request, and competent authorities to provide, relief from taxation not in accordance with a tax treaty or tax coordination agreement. U.S. competent authority procedural authority is provided by Treasury Order 150-10 and IRS Delegation Order 4-12 (Rev. 4). See IRM 1.2.2.5.11, Delegation Order 4-12 (Rev. 4).

By law, the IRS has the authority to conduct examinations under Title 26 (Internal Revenue Code) Subtitle F (Procedure and Administration) Chapter 78 (Discovery of Liability and Enforcement of Title) Subchapter A (Examination and Inspection), which includes, but is not limited to:

The Director, TTPO is responsible for the policies and procedures discussed in this IRM.

Examination team managers are responsible for assigning cases to team members and for the review and closing of cases prepared by the team member.

Examination team members (i.e. revenue agents) are responsible for:

The U.S. Competent Authority’s roles and responsibilities are detailed in IRM 4.60.3, Tax Treaty Related Matters.

Program Reports: TTPO practice area directors prepare briefing reports for the LB&I commissioner on the MAP process, covering:

Program Effectiveness: Review of these reports are conducted periodically to ensure the guidance in this IRM is being followed as intended and to determine if and where efficiencies can be made to improve the procedures and guidance in this IRM.

The relevant TTPO directors (including the Director of Field Operations (DFO), Transfer Pricing Practice (TPP), and the Director, Advance Pricing and Mutual Agreement (APMA) Program) report to the TTPO practice area director on a continual basis.

TTPO directors identify goals and objectives to be achieved by their organizations based on annual commitments of LB&I priorities and monitors their success.

See Exhibit 4.60.2-1, Terms and Acronyms, for a description of commonly used terms and acronyms in this IRM.

Organization for Economic Cooperation and Development (OECD) Mutual Agreement Procedure Profile Website.

Overview of the MAP process at irs.gov.

The U.S. competent authority’s jurisdiction over competent authority issue(s) in a competent authority request begins when the U.S. competent authority accepts such competent authority request (in the case of competent authority requests made to U.S. competent authority) or the U.S. competent authority is notified by the competent authority of a U.S. treaty partner or U.S. territory of a competent authority request.

The U.S. competent authority will return jurisdiction over the issue(s) to the relevant office(s) within the IRS when the U.S. competent authority ceases to provide assistance regarding a competent authority issue(s).

In cases where a competent authority request arises from an examination, the U.S. competent authority will notify the examination team if it accepts the competent authority request or is notified by a U.S. treaty partner or U.S. territory of a competent authority request.

Such notification will include the name and contact information of the Advanced Pricing and Mutual Agreement Program (APMA) team leader or the Treaty Assistance and Interpretation Team (TAIT) competent authority analyst assigned to the competent authority request.

The examination team also has notice that the U.S. competent authority has jurisdiction over the related competent authority issue affecting a tax return by a ‘TC 971 AC 080’ activity code associated with the account or return in the Master File (i.e., this activity code indicates the return(s) has an accepted, unresolved or open competent authority request associated with it). The U.S. competent authority analyst may make a request to add this activity code by using Form 3177 , Notice of Action for Entry on Master File. See IRS Document 6209 (IRS Processing Codes and Information), Section 8C (Master File Codes) Subsection 9 (TC 971 Action Codes) for additional information.

When a competent authority request arises from an examination, the U.S. competent authority notifies the examination team if a competent authority resolution is reached.

When the examination team is directed to implement a competent authority resolution, the U.S. competent authority or the International Referral Recipient (IRR) will notify the examination team of the competent authority resolution.

In all other circumstances where a competent authority resolution did not arise from an examination, the examination team has notice that a competent authority resolution applies to a particular year or return by an indication of such on the applicable U.S. income tax return (i.e., a taxpayer filing a return on the basis of a competent authority resolution is directed to attach a copy of the competent authority closing letter to such return and to expressly state on page one of the return that it is filed pursuant to a competent authority settlement). The examination team is not required to take action in this circumstance unless the particular return or year is subsequently assigned to them and an examination is opened.

The examination team can ensure the results of an examination are consistent with an applicable competent authority resolution by referring to the competent authority closing letter attached to the applicable return(s) and/or the disposition memorandum (which the U.S. competent authority provides to the IRR with examination jurisdiction over the taxpayer). See IRM 4.60.3, Tax Treaty Related Matters, for information regarding the U.S. competent authority’s provision of the disposition memorandum to the IRR.

The examination team may direct questions relating to a competent authority request (or other tax treaty/tax coordination agreement issue) under the U.S. competent authority’s jurisdiction or to a competent authority resolution to the assigned APMA team leader or TAIT competent authority analyst (as applicable).

The contact information for the assigned APMA team leader or TAIT competent authority analyst is referenced in the U.S. competent authority’s notification to the examination team of the U.S. competent authority’s acceptance of a competent authority request, as well as any competent authority resolution disposition memorandum or closing letter.

The examination team may direct questions relating to a competent authority request or other tax treaty or tax coordination agreement issues not under the jurisdiction of the U.S. competent authority to the Treaties Practice Network. See IRM 4.60.2.2, U.S. Competent Authority Jurisdiction Over Competent Authority Issue(s) in a Competent Authority Request, and IRM 4.60.2.3, Competent Authority Resolutions and Examination, for additional information.

Notification to a taxpayer of potential double taxation or taxation otherwise inconsistent with a tax treaty advises the taxpayer of its right to request competent authority assistance. The notification also refers the taxpayer to the MAP article of the applicable tax treaty and Rev. Proc. 2015-40 (or its successor) for procedures for making a competent authority request, under a tax treaty, to the U.S. competent authority.

Where the MAP article of an applicable tax treaty contains a treaty notification period or does not allow for the waiver of time limits or other procedural limitations under the domestic law of the U.S. treaty partner, notification to a taxpayer contains information about such MAP article limitations. See IRM 4.60.2.5.3, When to Notify a Taxpayer, for additional information.

Notification to a taxpayer of potential double taxation or taxation otherwise inconsistent with a tax coordination agreement advises the taxpayer of its right to request competent authority assistance and refers the taxpayer to the MAP article of the applicable tax coordination agreement and Rev. Proc. 2006-23 (or its successor) for procedures for making a competent authority request, under a tax coordination agreement, to the U.S. competent authority.

The examination team does not notify a taxpayer of a potential competent authority issue until the issue is sufficiently developed and the adjustment can reasonably be estimated.

The examination team notifies the taxpayer at the earliest date possible and no later than when it issues a proposed adjustment that potentially leads to double taxation or taxation not in accordance with a tax treaty or tax coordination agreement.

If the development of an issue does not permit timely notification to the taxpayer, the examination team should contact the appropriate office of the U.S. competent authority. See IRM 4.60.2.3.3, Contacting the U.S. Competent Authority.

Certain tax treaties have treaty notification period provisions that require, for purposes of accessing MAP, the taxpayer to notify the United States or the applicable U.S. treaty partner when the examination team proposes an adjustment that implicates a competent authority issue.

A minority of tax treaties’ MAP articles do not allow for the waiver of time limits or other procedural limitations under the domestic law of the Contracting States.

Depending upon the facts and circumstances, if the taxpayer does not receive timely notice of a proposed adjustment, the IRS may be required to withdraw a proposed adjustment to the extent the adjustment would give rise to double taxation or taxation otherwise inconsistent with an applicable treaty.

“Timely notice” generally means that the taxpayer receives notification of a proposed adjustment or of the likelihood of a proposed adjustment prior to the expiration of a period of limitations specified in the MAP article of an applicable income tax treaty. Because treaty notification provisions vary and are potentially subject to case-by-case interpretation by the competent authorities of contracting states following the conclusion of an examination, timely notice to the taxpayer, regardless of the applicable notification period, is imperative in order to ensure that taxpayers have the ability to preserve their access to MAP.

The examination team maintains a copy of the notification provided to the taxpayer with the examination workpapers.

The examination team should ensure that the following notification language is included in the audit plan for Large Corporate Compliance (LCC) taxpayers: “During the examination, adjustments may be recommended to your income tax liability causing economic double taxation as a result of your various affiliates operating in foreign countries. Therefore, we suggest you advise your foreign affiliates in these countries to notify the appropriate taxing authorities about postponing the expiration of the statutory period of limitations on refunds or other tax adjustments. This procedure should not be limited to those foreign affiliates listed on page 4 of this portion of the examination plan. In the event these adjustments affect the tax liability of an affiliate operating in a country with which the United States has an income tax treaty in effect, you have the right to request competent authority consideration for relief from economic double taxation under Revenue Procedure 2015-40 or its successor.”

This notification language does not relieve the examination team of the responsibility to provide notification under IRM 4.60.2.5, Notification to Taxpayers of Potential Double Taxation or Taxation Otherwise Inconsistent with A Tax Treaty/Tax Coordination Agreement.

A taxpayer may file a competent authority request with respect to competent authority issues arising from adjustments proposed during the U.S. examination process.

When a taxpayer requests competent authority assistance, the U.S. competent authority notifies the relevant examination team of the request and may also request a copy of the MAP Report from the examination team at that time.

The examination team to which the return is charged is responsible for ensuring that the applicable domestic period of limitations for assessment of tax for taxable periods covered by a competent authority request does not expire in cases under competent authority consideration or jurisdiction.

The U.S. competent authority should be notified promptly if a taxpayer rejects a request to execute an extension of the period of limitations for assessment.

In any case where a taxpayer refuses to extend the period of limitations for the resolution of U.S.-initiated adjustments, the examination team should consider pursuing a quick assessment. See IRM 5.1.4, Jeopardy, Termination, Quick and Prompt Assessments, for additional information.

A taxpayer’s rejection of a request to extend such limitations period can result in denial of assistance by the U.S. competent authority with respect to the competent authority request.

The examination team suspends any further administrative action (e.g., assessment and collection procedures) with respect to the competent authority issue(s) covered in a competent authority request once the U.S. competent authority accepts a request or receives notice of a request made to a U.S. treaty partner or U.S. territory (with the exception of securing an extension of the applicable domestic period of limitations under this section). See IRM 4.60.2.2, U.S. Competent Authority Jurisdiction Over Competent Authority Issue(s) in a Competent Authority Request, for additional information. However, the examination team continues to apply its standard administrative procedures for issues not included in the competent authority request.

A taxpayer requesting competent authority assistance regarding foreign-initiated actions is not required to file a copy of the request with the examination team, even when the competent authority issue relates to a U.S. examination.

Where a competent authority request arising from a foreign-initiated action is made to the U.S. competent authority, the U.S. competent authority contacts the IRR to notify them of the issues, forwards a copy of the taxpayer’s request to the IRR and requests that an examiner be assigned.

The examination team suspends administrative action (e.g., assessment and collection procedures) with respect to the competent authority issue(s) covered in a competent authority request once the U.S. competent authority accepts such request (or receives notice of a request made to the U.S. treaty partner or U.S. territory), unless the U.S. competent authority requests otherwise. See IRM 4.60.2.2, U.S. Competent Authority Jurisdiction Over Competent Authority Issue(s) in a Competent Authority Request, for additional information. However, the examination team continues to apply its standard procedures for issues not included in the competent authority request.

When the competent authority request does not involve a return charged to the examination team, the examination team is not required to protect or monitor the applicable domestic statute of limitations.

Similarly, when the only unresolved issues on a return charged to an examination team relate to foreign initiated adjustments part of a a competent authority request, the examination team is not required to protect or monitor the applicable domestic statute of limitations.

Additional procedures related to foreign-initiated adjustments affecting a U.S. tax return or occurring during the examination of a U.S. taxpayer are provided in IRM 4.60.2.8, Foreign-Initiated Adjustments Affecting a U.S. Tax Return and Foreign Tax Credits Claimed During an Examination.

In cases of U.S.-initiated adjustments, the U.S. competent authority may request additional information from the examination team about the adjustments. Cases accepted for competent authority consideration in which the IRS position is not sufficiently developed will be returned to the examination team either for further development or with the direction to withdraw the adjustments.

In cases of foreign-initiated actions, the U.S. competent authority may request an evaluation of the foreign position or issue from the examination team.

Requests for evaluation of foreign positions and/or additional information are directed to the examination team conducting the examination proceeding that the related competent authority issue(s) arise from or relate to at the time that the request is made. The examination team handles these requests as priority action items, with a target date for submission of the completed response within 60 days from the time of receipt.

The examination team follows locally prescribed measures to record and control incoming correspondence and enter a response due date of 60 days from the date of receipt. A memorandum to the appropriate U.S. competent authority office (i.e., TAIT or APMA) indicates the office to which the request was forwarded, the name and contact information of the individual within that office who may be contacted, and the response due date given to the action office.

The acknowledgment memorandum will be routed through appropriate examination channels. If an evaluation cannot be completed within the requested 60-day period, personnel performing the evaluation will consult with the U.S. competent authority to describe the actions taken to complete the request, the reason the evaluation cannot be completed by the response due date, and the projected completion date.

When a taxpayer accepts the terms of a tentative competent authority resolution, the U.S. competent authority proceeds to formally close the case.

The U.S. competent authority provides the appropriate examination team (or IRR in some circumstances) a disposition memorandum explaining the terms of the resolution. The examination team and/or the taxpayer are responsible for implementing the terms of the resolution set out in the disposition memorandum. See IRM 4.60.2.3, Competent Authority Resolutions and Examination.

To the extent authorized under the applicable tax treaty, the competent authority resolution is implemented even if implementation would otherwise be barred by a domestic period of limitations or other procedural limitation. In certain circumstances, the IRS may request that the taxpayer execute a closing agreement reflecting the terms of the competent authority resolution.

Where no competent authority agreement is reached between the United States and the U.S. treaty partner or U.S. territory, or where the taxpayer does not accept the terms of a tentative competent authority resolution, the U.S. competent authority returns jurisdiction over the competent authority issue(s) in the competent authority request to the examination team via memorandum.

When a taxpayer either executes a closing agreement with respect to a potential competent authority issue(s) or otherwise reaches a settlement with the examination team, Appeals or the IRS Office of Chief Counsel on the issue(s), any related competent authority request may be limited in scope or entirely precluded, depending on the terms of the settlement. For example, the MAP may be limited to the U.S. competent authority requesting correlative relief from the U.S. treaty partner or U.S. territory. See Rev. Proc. 2015-40 (or its successor) or Rev. Proc. 2006-23 (or its successor), as applicable, for additional information. Any such agreement or settlement should specify that the taxpayer acknowledges that its rights for competent authority consideration on the issue will be restricted in this manner.

Many U.S. tax treaties contain a LOB article. Where applicable, a LOB article enumerates multiple, self-executing objective tests to determine whether a resident of the United States or the U.S. treaty partner is entitled to benefits under the applicable tax treaty. Most LOB articles provide that if a resident does not otherwise satisfy one of the applicable objective tests, the resident may be granted treaty benefits at the discretion of the competent authority from which benefits are sought. For additional information on the LOB requirement, see IRM 4.60.3, Tax Treaty Related Matters.

In the absence of a discretionary LOB determination by the U.S. competent authority (and otherwise subject to IRM 4.60.2.7(2)), a copy of which is required to be attached to any affected U.S. income tax returns, the examination team is responsible for determining whether a taxpayer claiming treaty benefits meets one of the applicable objective tests in the LOB article in order to qualify for treaty benefits.

If a taxpayer received a discretionary LOB determination, the examination team reviews the determination in relation to the applicable U.S. tax return(s) and notifies the U.S. competent authority of any contradictions with information gathered during the examination team’s proceeding, in accordance with IRM 4.60.2.4, Role of Examination. A material change in any law or fact forming the basis of a discretionary LOB determination may result in termination of the discretionary benefits. If the examination team concludes that a material change has occurred, it must contact the U.S. competent authority to determine next steps. See IRM 4.60.2.3.3, Contacting the U.S. Competent Authority, for more information.

Tax coordination agreements generally do not have the same taxpayer qualification requirements as tax treaties. Tax coordination agreement provisions generally apply to persons subject to the provisions of the IRC or domestic tax law of the U.S. territory.