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ARTICLE · 13 SEPTEMBER 2023

Blowing The Whistle On Transfer Pricing

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In a recent case, Villa-Arce v. Commissioner, a whistleblower sent information to the IRS that he believed showed that the company was using improper transfer pricing practices and taking unjustified deductions.

United StatesTax
Tyler M. Johnson
Tyler M. Johnson
Anthony D. Pastore
Anthony D. Pastore
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In a recent case, Villa-Arce v. Commissioner,1 a whistleblower sent information to the IRS that he believed showed that the company was using improper transfer pricing practices and taking unjustified deductions. The IRS opened an examination that resulted in other adjustments, but none based on the information from the whistleblower. For that key reason, the D.C. Circuit affirmed the Tax Court decision that the whistleblower was not entitled to an award for the collection of proceeds from the unrelated adjustments. Yet while the whistleblower walked away emptyhanded, the case illustrates a unique type of transfer pricing and audit risk that comes from whistleblowers that companies should recognize. And given the indefinite nature of transfer pricing and the potential amount of dollars at stake, we will likely see more whistleblower actions involving transfer pricing.

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