Hooray for New Math: Is It Really a Simplified Transfer Pricing Approach for 2025?
/Volume 12 No 1 / Read Article
As promised before the end of 2024, the I.R.S. has outlined its approach to the codification of Amount B, a component of the O.E.C.D. Pillar One approach to controlled distribution transactions of tangible property. Notice 2025-04 allows taxpayers to elect to use the streamlined, simplified approach (“S.S.A.”) for corporate tax years beginning on or after January 1, 2025. If a valid election is made, the I.R.S. will consider the S.S.A. to be the best method under the Treas. Reg. §1.482-1(c). While touted as a method that brings simplicity to transfer pricing, in practice it appears to abandon all transfer pricing concepts developed since the concept of arm’s length pricing was first introduced to tax law. Michael Peggs does yeoman work in taking the reader through the steps to be followed, the relationships to be applied, and the variable that pop out. To a simple reader who has given transfer pricing advice over the years, Amount B seems to reflect concepts of the command economy of bygone days rather than transactions that occur in the market place. See more →
