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September 20, 2023

US Treasury economist states US preference on transfer pricing rules

  • The US Treasury Department reiterated its preference for the adoption of “Alternative A” in the scoping rules for Amount B of Pillar One of the BEPS 2.0 project.
  • The United States opposes new concepts in Amount B, as it believes that the primary goal of simplification cannot be achieved by incorporating new complexities.

Bill Morgan, a financial economist at the US Treasury Department, told a panel at an International Fiscal Association’s international tax conference on September 12, 2023, that Treasury would prefer the adoption of Alternative A for the transfer pricing scoping criteria in Amount B.1

“The whole idea here is that Amount B is a simplification and we don’t think that can be achieved by introducing new concepts,” Morgan said, according to a Daily Tax Report article.

Amount B provides for fixed returns for in-scope in-country baseline marketing and distribution activities. While de minimis retail sales are allowed, the primary focus of Amount B is on the wholesale distribution of goods, including commissionaires and sales agents. Further, the scoping framework explicitly excludes the performance of services and distribution of commodities from scope.


Alternative A was proposed in a recent Consultation Document that was released among a series of technical documents by the Organisation for Economic Co-operation and Development (OECD) in July 2023 (see Tax Alert 2023-1316).  The Consultation Document includes two alternatives in the scoping criteria, Alternative A and Alternative B, which reflect the different positions of jurisdictions participating in the work on Pillars One and Two through the Inclusive Framework.

The key differentiator between the two alternatives is whether an additional qualitative scoping criterion is required. Alternative A includes no additional qualitative scoping exclusions. Under Alternative B, the scope of Amount B would only include distributors that fit within a definition of "baseline" distributor and that do not make "non-baseline contributions" that cannot be reliably priced under the proposed pricing method.

The jurisdictions supporting Alternative A believe that the additional criteria are not needed to achieve arm's-length pricing, would make Amount B far less administrable and certain, and would have the practical effect of making Amount B a "floor" on all controlled distributor returns.

The jurisdictions supporting Alternative B believe that Amount B would not reliably produce outcomes aligned with the arm’s-length principle and would result in opportunities for base erosion and profit shifting, absent the additional criterion.

According to the Daily Tax Report article, Morgan expressed his thoughts on the comment submissions received on the Consultation Document, noting that they generally favored Alternative A. These submissions expressed enthusiasm for the potential of Amount B to streamline transfer pricing and offer greater certainty. This enthusiasm and support, he added, comes with the caveat of Amount B potentially being a safe harbor provision.


The approach that is ultimately chosen will significantly affect the impact of Amount B. Moreover, the incorporation of Amount B into the OECD Transfer Pricing Guidelines could result in different interpretations by different jurisdictions.

Given that Amount B is not subject to a global  revenue threshold, it has broad applicability. Businesses should assess the potential implications of Amount B for transactions falling within the scope and evaluate its impact on those transactions. It is also crucial to remain vigilant and monitor the progress of both Pillar One and Pillar Two in the upcoming months.


Contact Information
For additional information concerning this Alert, please contact:
National Tax Department, International Tax and Transactions Services, Transfer Pricing
   • Ryan J. Kelly, Americas ITTS Tax Controversy Leader (
   • Hiro Furuya (
   • Ameet Kapoor (
   • Carlos M. Mallo (
   • Marla McClure (
   • Donna McComber (
   • Mike McDonald (
   • Tom Ralph (
   • Craig Sharon (
   • Kent Stackhouse (
   • Heather Gorman (
   • Giulia Di Stefano (
   • Carolina Figueroa (
   • Mitch Gibson (

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor


1 James Munson, US Backs Simpler Transfer Pricing Reform in Global Tax Deal, Daily Tax Report (Sept. 12, 2023).


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