Overview
After the IRS issued a generic legal advice memorandum (GLAM) on a recurring issue regarding transfer pricing for intercompany loans, Steptoe partners Steve Dixon and Amanda Pedvin Varma co-authored a client alert that detailed some of the important questions that the GLAM left unanswered. Tax Notes engaged with the substance of that alert and Dixon spoke with Bloomberg Law and Law360 about the GLAM and its legal problems.
Steptoe’s client alert was one subject of a Tax Notes piece about law firm critiques of the GLAM, “Backlash Against IRS’s ‘Implicit Support’ Memo Is Unfounded.” That piece acknowledged that the Steptoe alert had “a point regarding the memorandum’s characterizations of taxpayer arguments.”
Law360 published an article on the GLAM, “IRS Memo Highlights Tensions in Arm's-Length Loan Pricing.” That article quotes Dixon’s explanation that “the GLAM doesn't give a clear explanation for why the lender's costs for providing implicit support aren't accounted for when calculating the rate at which a lender would make a loan.” Dixon also remarked that “the IRS may propose rules on implicit support, it's in a bit of a bind” because of the tension that new rules might undermine the IRS’s current position. “On the one hand, the agency would likely want to definitively say the arm's-length standard requires the pricing of intercompany loans to consider implicit support. On the other hand, the GLAM is based on reasoning from the arm's-length standard, as well as OECD guidelines and the passive association regulations”
In the Bloomberg Law article on the GLAM, “IRS Legal Memo Suggests Closer Scrutiny of Intercompany Loans,” Dixon warned that companies must make sure they have “a clear and cogent business purpose” for making intercompany loans.
Read Steptoe’s client alert “Transfer Pricing GLAM on Implicit Support Raises Many Questions, Offers Few Answers.”
Read the full articles about the transfer pricing GLAM at Bloomberg Law and Law360. View the Tax Notes article on their website. (subscription may be required)