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April 9, 2020

US IRS issues annual APA report for 2019

Executive summary

The United States (US) Internal Revenue Service (IRS) Advance Pricing and Mutual Agreement (APMA) Program issued the 21st annual Advance Pricing Agreement (APA) report (the Report) on 25 March 2020, in Announcement 2020-2. The Report provides a discussion of the APMA Program, including its activities and structure for calendar year 2019, and gives useful insights into its operation.

The number of APA filings decreased, with taxpayers filing 121 APA requests in 2019 compared to 203 in 2018. This decrease is not surprising given that APMA substantially increased the user fees charged to companies applying for an APA starting after 2018. The total number of APAs concluded increased from 107 to 120 and the median amount of time to finalize an APA slightly decreased from 40.2 months to 38.8 months.


  • During 2019, 121 APA applications were filed and 120 APAs were completed. The number of APAs completed during 2019 is generally consistent with the number of APAs completed during the last several years. Additionally, there has been a continued interest in bilateral APAs, with Japan (32%), India (12%), and Canada (14%) representing 58% of all US bilateral APAs filed.
  • At year end, 454 APA requests were pending (386 bilateral, 22 multilateral and 46 unilateral), down from 458 in 2018.
  • Details are provided on the treaty partners to bilateral APAs concluded during the year. APAs with Japan (49%) and Canada (11%) comprised approximately 60% of all US bilateral APAs executed in 2019. The percentage of US-Japan bilateral APAs increased by 10% in 2019 compared to 2018.
  • The median time required to complete an APA decreased, from 40.2 months in 2018 to 38.8 months in 2019.
  • Overall APMA headcount remained the same at 77 professionals as of 31 December 2019.
  • Unilateral APA requests significantly decreased from 35 in 2018 to 17 in 2019.
  • The number of applications withdrawn in 2019 significantly decreased from 21 in 2018 to 12 in 2019.
  • Approximately 62% of the APAs executed in 2019 were completed for transactions between foreign parented companies and their US subsidiaries, while 16% were completed for transactions between US parent companies and their foreign subsidiaries.
  • Among the transfers of tangible or intangible property that used the Comparable Profits Method/Transactional Net Margin Method (CPM/TNMM), the operating margin (OM) was once again the profit level indicator (PLI) most commonly applied, being used in 64% of cases.
  • The CPM/TNMM was applied in 82% of the APAs with intercompany service transactions. The most commonly selected PLI with the CPM/TNMM was the operating margin (65%).

For more details, please download the PDF version of the Alert.


For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, ITTS – Transfer Pricing

Ernst & Young LLP, Financial Services Organization



The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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