The Arm’s Length Adjustment Service Advisory Group (ALAS) of the Multistate Tax Commission (MTC) continued its transfer pricing effort with a teleconference today to discuss its training and implementation program. This initiative has extended over a year, and the MTC is aiming for approval from the Executive Committee by May 2015. States participating on this call included: New Jersey, Connecticut, Georgia, Kentucky, North Carolina, Florida, Iowa, Alabama, Pennsylvania and the District of Columbia.
ALAS recently presented its project design to the MTC Executive Committee, which will review a final project design on May 7, 2015.
Joe Huddleston, Executive Director of the MTC, sent letters to 46 states (including the District of Columbia) requesting their participation in the transfer pricing program. The letter requested a response from the states by the end of March. To date, one state has declined to join the program. The MTC will conduct a training session at the end of March to educate state auditors on how best to address state transfer pricing issues. The training will take place in Raleigh, North Carolina, between March 31 and April 1 and will be provided by Royalty Stat. Based on demand, ALAS may conduct additional trainings in the near future.
Proposed Draft Agreement
Dan Bucks, Project Facilitator, drafted a Proposed Agreement for the states to sign to join the program. ALAS emphasized that this is a “model” agreement and is subject to change to satisfy individual state requirements. A critical feature of the agreement is the exchange of information between states.
ALAS aims to run from July 1, 2015 through June 30, 2019. In order to launch, the MTC requires at least seven states to participate in the agreement. Ideally, the program seeks to have states sign on for four years, although some states may be prohibited by state law to sign on for that entire length. In addition to the term of contract, some states raised the concern that a contract between a state government and a contractor is regulated by each individual state, and may require competitive bidding process.
The states will have to pay to participate in ALAS. There is a fee for general services and a separate fee for transfer pricing analysis. The General Services fee includes administration, training, information exchange, litigation support, and other services. The Transfer Pricing Analysis fee is composed of the costs of economic and noneconomic analysis of taxpayer transfer pricing reports. There is an additional fee for states participating that are not part of the MTC.
ALAS will continue to discuss and revise the Proposed Draft Agreement. This work will continue via teleconference. ALAS’s priority is to revise the program design before the Executive Committee meeting on May 7 in Washington D.C. Two teleconferences are likely to occur between April and May to continue working on the program. The teleconferences will be open to the public.