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October 14, 2021

US IRS maintaining its policy on “telescoping” in APA and MAP cases while trying to alleviate administrative burden, official says

John Hughes, Director of the Internal Revenue Service’s (IRS) Advance Pricing and Mutual Agreement Program (APMA), said in a 7 October 2021, webinar that the IRS is maintaining its stance on telescoping but studying ways that it can alleviate the taxpayers' administrative burden, according to an article in Law 360.1

In October 2020, APMA updated the parameters that it follows in mutual agreement procedure (MAP) and advance pricing agreement (APA) cases, which significantly restricted the use of "telescoping" of results in MAPs and APAs (see EY Global Tax Alert, US IRS announces plans to limit the use of “telescoping” in APA and MAP cases, dated 30 October 2020).

Telescoping means reflecting an income tax adjustment in a year other than the year to which the adjustment relates. Taxpayers sometimes request this departure from annual accounting in a MAP or APA to relieve them from the administrative burden of filing multiple amended federal and state income tax returns.

The Tax Cuts and Jobs Act (TCJA) changed substantive provisions of the Internal Revenue Code beginning in 2018, so different tax rates and other rules may apply to similar related-party transactions, depending on which year they occur. Under the new APMA parameters, taxpayers must generally amend the applicable year's (or years') federal income tax return rather than reflect the changes to taxable income in a most current tax year. For cases with pre- and post-TCJA years, the IRS said in its 2020 update that changing the US taxpayer's taxable income under a competent authority resolution would likely impact the substantive calculation of tax, so APMA's updates to the telescoping parameters were intended to promote compliance with the TCJA's changes to US tax law.

According to the article, Hughes said, "If it's a relatively modest amount that's involved, then we're able to collapse some of the past years into that pre-2018 period … [b]ut if the amounts are substantial, then the ramifications for attributes and rate differentials are such that we need to be hewing closer to the kind of year-by-year accounting that is so important for TCJA."


Telescoping results from pre-TCJA years into post-TCJA years continues to be limited to situations where the change to the US taxpayer's taxable income resulting from a competent authority resolution is US$10 million or less. In our experience, however, APMA continues to accept, on a case-by-case basis, telescoping in cases that involve solely post-TCJA years. The issue of telescoping flexibility is important given the potential for further corporate tax reforms and a proposed increase in the federal corporate tax rate in the coming months. Taxpayers should consider in their MAP and APA cases whether telescoping makes sense for them and discuss the issue with the IRS.


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

Ernst & Young LLP (United States), International Tax and Transaction Services – Transfer Pricing, Washington DC

Ernst & Young LLP (United States), International Tax and Transaction Services – Transfer Pricing, San Jose

Ernst & Young LLP (United States), Tax Policy & Controversy, Seattle

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington DC



  1. Natalie Olivo, IRS Aims For Balance With “Telescoping” Limits, Official Says, Law 360 (7 Oct. 2021).

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