[Congressional Record (Bound Edition), Volume 145 (1999), Part 10]
[Extensions of Remarks]
[Page 14695]
[From the U.S. Government Publishing Office, www.gpo.gov]



A BILL TO CLARIFY THAT ADVANCE PRICING AGREEMENTS BETWEEN TAXPAYERS AND 
    THE INTERNAL REVENUE SERVICE ARE CONFIDENTIAL RETURN INFORMATION

                                 ______
                                 

                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                         Tuesday, June 29, 1999

  Mr. HOUGHTON. Mr. Speaker, today I am joined by my colleagues, 
Messrs. Sam Johnson from Texas and Sander Levin from Michigan, and Ms. 
Jennifer Dunn from Washington, in introducing our bill which would 
protect, as confidential tax information, advance pricing agreements 
(APAs) and the information in the background file. This information 
would be protected under Section 6103 of the Internal Revenue Code and 
treated as an exception to the public inspection provisions provided in 
Section 6110 of the Code.
  The APA program began in 1991. From all reports it has been 
successful. The program has provided a mechanism to resolve transfer 
pricing issues (i.e. the appropriate arm's length price for sales, 
services, licenses and other transactions between related parties) of 
multinational companies for not only prior years, but also for 
specified years in the future. It saves time and money for the 
government as well as for taxpayers. It also reduces protracted and 
costly litigation. The program involves not only taxpayers and the IRS, 
but also where certain double taxation treaties are applicable, foreign 
taxing authorities as well.
  From the beginning of the program, taxpayers, as well foreign 
governments, have relied on assurances that the information received or 
generated by the IRS would be protected under the confidentiality 
requirements of Section 6103. Such assurances were based on published 
IRS information. As a result, multinational companies were willing to 
disclose sensitive pricing information, trade secrets, and other data 
in the interests of efficiently determining the proper and agreed-upon 
transfer pricing methodology and agreement.
  Earlier this year, the IRS notified taxpayers that, contrary to its 
long-standing policy, the APAs are subject to disclosure under Section 
6110--which requires disclosure of any IRS ``written determination''. 
This change by the IRS came in response to a lawsuit brought by a 
commercial publisher of tax information. Although the lawsuit is not 
settled, the IRS is proceeding with redaction and release of the APAs 
issued since 1991. The release is scheduled for October, 1999.
  We do not find it difficult to believe that tax return information, 
as well as pricing, trade secrets and other sensitive data which were 
provided and used in completing an APA, remain confidential under 
Section 6103, and excluded from the provisions of Section 6110. 
Otherwise, we do not believe taxpayers will continue to support the 
program. Clearly it is essential under our tax system to provide as 
much useful tax guidance to the public as possible, while maintaining 
the confidentiality and identity of the taxpayers involved. Thus, the 
bill would provide for an annual report by the Secretary of the 
Treasury. This report would include statistical information on the 
issuance of APAs and renewed APAs. In addition, the report would set 
forth general summaries of the methodologies used in the APAs, together 
with hypothetical examples. Such a report should serve the interests of 
providing additional guidance to taxpayers regarding the approach used 
by taxpayers and the IRS in reaching agreements on transfer pricing.
  We invite our colleagues to join us in supporting this important 
legislation affecting the confidentiality of taxpayer information.

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