A Prior Pricing Agreement (APA) is a prior pricing agreement between a taxpayer and a tax authority on an appropriate transfer pricing methodology (TPM) for a set of transactions that take place over a period of time (referred to as “covered transactions”). Unilateral APAs However, it is possible for a taxpayer to negotiate a unilateral APA involving only the taxpayer and the IRS. In this case, both parties are negotiating an appropriate TPM for U.S. tax purposes only. If the taxpayer is involved in a dispute with a foreign tax authority over the transactions in question, the taxpayer may remedy the situation by requesting the competent U.S. authority to initiate a mutual agreement procedure. Of course, this presupposes that an applicable tax treaty is in force with foreign countries. Bilateral and multilateral ABS are generally bilateral or multilateral, i.e. they include agreements between the taxpayer and one or more foreign tax administrations that are under the supervision of the Mutual Understanding Procedure (MAGP) provided for in income tax treaties.  The taxpayer benefits from such agreements because he is assured that income associated with recorded transactions is not subject to double taxation by the IRS and the relevant foreign tax authorities. Irs policy is to “encourage” taxpayers to apply for bilateral or multilateral APAs where competent authority provisions exist. Most APAs affect U.S.
taxpayers and the U.S. Internal Revenue Service (IRS), but APAs are also manufactured outside the U.S.  The APA Program Each APA is overseen by an APA team. One of the designated team leaders of the APA program is responsible for building the team and typically consists of an economist, an international auditor, an LMSB field consultant, and, in bi- or multilateral cases, a U.S. consultant. Analyst of the competent authority responsible for conducting discussions with contractors. Other team members may be an international technical advisor to the LMSB, LMSB audit staff, or a nominating agent. .