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ARTICLE · 04 MAY 2022

Less Than Meets The Eye: The IRS Practice Unit On CbC Reports

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In April, the IRS released a practice unit on country-by-country (or "CbC") reporting. The purpose of the document is twofold: (i) describe the background of CbC reporting...

United StatesTax
John T. Hildy
John T. Hildy
Anthony D. Pastore
Anthony D. Pastore
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In April, the IRS released a practice unit on country-by-country (or "CbC") reporting. The purpose of the document is twofold: (i) describe the background of CbC reporting and (ii) provide guidance to IRS personnel on the use of CbC reports "in the IRS high-level transfer pricing risk assessment process." Although the practice unit repeatedly stresses that the IRS will not audit CbC reports, there is potentially less to this claim than meets the eye.

Background on CbC Reports. Country-by-country reporting is a concept that arose from the OECD's BEPS project and was incorporated into US law. BEPS Action 13 introduced three tiers of transfer-pricing documentation: a master file, a local file, and a CbC report. The US declined to require the first two types of documentation on the theory that similar information is already required under IRC section 6662. (That said, the practice unit does say that the IRS may obtain master files and local files from foreign taxing

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