Revenue Procedure 2015-41 is the IRS’s current framework for Advance Pricing Agreements, the contracts that let a multinational business lock in the transfer pricing treatment of transactions between its related entities before it files the returns those transactions affect. It replaced Rev. Proc. 2006-9, operates under the Section 482 authority to reallocate income among commonly controlled taxpayers, and is administered by the Advance Pricing and Mutual Agreement (APMA) program inside the Large Business & International Division.1Internal Revenue Service. Rev. Proc. 2015-412Office of the Law Revision Counsel. 26 USC 482 – Allocation of Income and Deductions Among Taxpayers If you are considering an APA, the procedure controls how you get in the door, what you must submit, what you owe once the agreement is signed, and what will cause you to lose it.
What an APA Covers and Which Type to Request
An APA governs the tax treatment of specified transactions between related entities. Common candidates include inventory sales between affiliates, licensing of patents and trademarks, cost-sharing arrangements for research and development, and intercompany management or technical services. The taxpayer proposes a transfer pricing methodology, the IRS evaluates it, and if the parties agree, the result is a binding contract for a set number of years.
Rev. Proc. 2015-41 recognizes three structures:
- Unilateral APA. Between the taxpayer and the IRS only. It protects against a U.S. adjustment but does nothing to stop a foreign tax authority from taking a different position, which can leave the taxpayer double-taxed.
- Bilateral APA. Negotiated by the U.S. Competent Authority with one foreign tax authority under the relevant treaty. This is the usual structure for material cross-border issues.
- Multilateral APA. Coordinated with two or more foreign tax authorities. Less common and considerably slower, but the right choice when a single supply chain touches multiple jurisdictions.
The Pre-Filing Stage
Before the formal request, the procedure sets up a pre-filing stage that ranges from optional to mandatory. A pre-filing memorandum identifying the taxpayer is required when any of the following is true: the taxpayer wants a unilateral APA for an issue that could be handled bilaterally under a treaty; the taxpayer is asking to file an abbreviated request; or the transactions involve intangible development arrangements, global trading operations, business restructurings, or hybrid entities.1Internal Revenue Service. Rev. Proc. 2015-41 Outside those categories the memorandum is voluntary, though the IRS may still require a pre-filing conference to follow it.
Taxpayers who want to sound out the IRS without identifying themselves can request an anonymous pre-filing conference, but only for the optional variety. Mandatory pre-filing conferences cannot be conducted anonymously. When proceeding anonymously the taxpayer omits its name and EIN from the memorandum and skips the power of attorney and tax information authorization forms.3Internal Revenue Service. APMA Requests for APA Pre-Filing Conferences or Consultations Requests that qualify for the small case user fee are exempt from the pre-filing requirements entirely.1Internal Revenue Service. Rev. Proc. 2015-41
What the Formal Request Must Contain
The APA request is a substantial package. It has to describe the business, the specific transactions at issue, and the reasoning behind the proposed methodology in enough depth that the IRS can test it. The core components include a functional analysis of each entity’s activities, risks, and assets; income statements and balance sheets for the entities involved; and an economic analysis defending the chosen transfer pricing method as the most reliable option on the facts.
The submission also includes a proposed case plan with milestones, English translations of any foreign-language documents, and both paper and electronic copies delivered to APMA. Every submission carries a declaration signed under penalties of perjury by an authorized officer confirming that the information is true and complete.1Internal Revenue Service. Rev. Proc. 2015-41
One item taxpayers sometimes overlook: the request must include the Section 6662(e) transfer pricing documentation for the covered intercompany transactions for the most recent three prior years. Filing a complete APA request is itself a factor the IRS weighs when deciding whether the taxpayer has met transfer pricing documentation requirements for the proposed APA years.1Internal Revenue Service. Rev. Proc. 2015-41
Current User Fees
The fees originally set by Rev. Proc. 2015-41 have been increased. For APA requests filed on or after January 1, 2024, the schedule is:4Internal Revenue Service. Update to APA User Fees
- Original APA: $121,600
- Renewal APA: $65,900
- Amendment to an existing APA: $24,600
- Small case APA: $57,500
The fee must accompany the initial filing, and the wrong amount can get the application sent back. Fees are non-refundable once review begins. Rev. Proc. 2015-41 does allow reduced total fees when the same controlled group files multiple APA requests inside a sixty-day window.1Internal Revenue Service. Rev. Proc. 2015-41
Term Length and Rollbacks
Taxpayers should ask for a term of at least five prospective tax years, though the actual term is negotiated case by case.5Internal Revenue Service. Announcement and Report Concerning Advance Pricing Agreements – 2023 The five-year floor exists because bilateral cases in particular can take years to finalize; a shorter prospective term risks an agreement that expires almost as soon as it takes effect.
A rollback applies the agreed methodology to earlier open tax years. The taxpayer can request one to resolve a pending audit, and the IRS can require one as a condition of moving the APA forward. Because the examination function retains jurisdiction over prior years, rollbacks require coordination between APMA and the examination team.1Internal Revenue Service. Rev. Proc. 2015-41
Annual Reports
Signing the APA does not end your obligations. For every year the agreement is in effect, the taxpayer must file an annual report showing compliance with the methodology and all APA terms. The report documents any adjustments made to conform taxable income to the APA results, flags any pending renewal or modification request, and corrects any materially inaccurate information discovered during the year.1Internal Revenue Service. Rev. Proc. 2015-41
The filing deadline is the later of two dates: the fifteenth day of the twelfth month after the close of the APA year, or 90 days after the APA becomes effective. APMA can agree to an alternative date on request. Each annual report carries its own perjury declaration.1Internal Revenue Service. Rev. Proc. 2015-41 Missing the deadline is grounds for cancellation, not a housekeeping slip.
Critical Assumptions, Cancellation, and Revocation
Every APA identifies “critical assumptions,” facts whose continued existence is essential to the reliability of the pricing methodology. They can relate to the business model, industry conditions, a supply chain structure, or the economic environment in a particular market. If a critical assumption fails and the parties cannot agree on a revised APA, the IRS will cancel the agreement.1Internal Revenue Service. Rev. Proc. 2015-41
Rev. Proc. 2015-41 separates cancellation from revocation. Revocation is the more serious action and is reserved for fraud, malfeasance, or disregard by the taxpayer in connection with the APA. Cancellation reaches a broader set of problems: misrepresentation of material facts, failure to disclose material information, missed annual report deadlines, or a lack of good faith compliance with the agreement’s terms.1Internal Revenue Service. Rev. Proc. 2015-41 A cancellation generally takes effect from the start of the tax year in which the problem occurred, leaving the taxpayer without APA protection for that year and every year after.
The IRS can waive cancellation if the taxpayer shows good faith and reasonable cause and agrees to corrective adjustments, but that relief is discretionary. A material change in governing law, regulations, or the applicable tax treaty will also trigger cancellation if the parties cannot agree on revised terms.1Internal Revenue Service. Rev. Proc. 2015-41 An executed APA is a binding closing agreement under Section 7121 of the Internal Revenue Code, which is why the cancellation and revocation rules matter as much as the eligibility rules.
Renewing Before the Term Ends
The IRS asks taxpayers to file a renewal request at least nine months before the final year of the existing APA expires.1Internal Revenue Service. Rev. Proc. 2015-41 Waiting past that window risks a gap between agreements, which reintroduces the audit uncertainty the APA was meant to eliminate. Renewals use the lower $65,900 fee rather than the $121,600 original-request fee, and they generally move faster because both sides already share a working methodology.4Internal Revenue Service. Update to APA User Fees