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Internal Revenue Code, § 482. Allocation Of Income And Deductions Among Taxpayers

In any case of two or more organizations, trades, or businesses (whether or not incorporated, whether or not organized in the United States, and whether or not affiliated) owned or controlled directly or indirectly by the same interests, the Secretary may distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among such organizations, trades, or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such organizations, trades, or businesses. In the case of any transfer (or license) of intangible property (within the meaning of section 367(d)(4)), the income with respect to such transfer or license shall be commensurate with the income attributable to the intangible. For purposes of this section, the Secretary shall require the valuation of transfers of intangible property (including intangible property transferred with other property or services) on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation of such transfers.
(Aug. 16, 1954, ch. 736, 68A Stat. 162; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), 90 Stat. 1834; Oct. 22, 1986, Pub. L. 99-514, title XII, Sec. 1231(e)(1), 100 Stat. 2562; Pub. L. 115-97, title I, Sec. 14221(b)(2), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. U, title IV, Sec. 401(d)(1)(D)(viii)(III), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018 - Pub. L. 115-141, Div. U, Sec. 401(d)(1)(D)(viii)(III), amended Sec. 482 by substituting “section 367(d)(4)” for “section 936(h)(3)(B)”.
2017 - Pub. L. 115-97, Sec. 14221(b)(2) added the sentence at the end: “For purposes of this section, the Secretary shall require the valuation of transfers of intangible property (including intangible property transferred with other property or services) on an aggregate basis or the valuation of such a transfer on the basis of the realistic alternatives to such a transfer, if the Secretary determines that such basis is the most reliable means of valuation of such transfers.”
1986 - Pub. L. 99-514 inserted at end ‘In the case of any transfer (or license) of intangible property (within the meaning of section 936(h)(3)(B)), the income with respect to such transfer or license shall be commensurate with the income attributable to the intangible.’
1976 - Pub. L. 94-455 struck out ‘or his delegate’ after ‘Secretary’.
EFFECTIVE DATE OF 2018 AMENDMENT
Amendment by Pub. L. 115-141, Div. U, Sec. 401(d)(1)(D)(viii)(III), effective March 23, 2018.
Sec. 401(e) of Pub. L. 115-141, Div. U, provided the following Savings Provision:
“(e) General Savings Provision With Respect To Deadwood Provisions.—If—
“(1) any provision amended or repealed by the amendments made by subsection (b) or (d) applied to—
“(A) any transaction occurring before the date of the enactment of this Act,
“(B) any property acquired before such date of enactment, or
“(C) any item of income, loss, deduction, or credit taken into account before such date of enactment, and
“(2) the treatment of such transaction, property, or item under such provision would (without regard to the amendments or repeals made by such subsection) affect the liability for tax for periods ending after such date of enactment,
“nothing in the amendments or repeals made by this section shall be construed to affect the treatment of such transaction, property, or item for purposes of determining liability for tax for periods ending after such date of enactment.”
EFFECTIVE DATE OF 2017 AMENDMENT
Amendment by Pub. L. 115-97, Sec. 14221(b)(2), effective for transfers in taxable years beginning after December 31, 2017.
Section 14221(c)(2) of Pub. L. 115-97 provided the following:
“(2) NO INFERENCE.—Nothing in the amendment made by subsection (a) shall be construed to create any inference with respect to the application of section 936(h)(3) of the Internal Revenue Code of 1986, or the authority of the Secretary of the Treasury to provide regulations for such application, with respect to taxable years beginning before January 1, 2018.”
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning after Dec. 31, 1986, but only with respect to transfers after Nov. 16, 1985, or licenses granted after such date, or before such date with respect to property not in existence or owned by the taxpayer on such date, except that for purposes of section 936(h)(5)(C) of this title, such amendment applicable to taxable years beginning after Dec. 31, 1986, without regard to when the transfer or license was made, see section 1231(g)(2) of Pub. L. 99-514, set out as a note under section 936 of this title.
COORDINATION WITH SECTION 481
Sec. 13221(d) of Pub. L. 115-97 provided the following:
“(d) COORDINATION WITH SECTION 481.—
“(1) IN GENERAL.—In the case of any qualified change in method of accounting for the taxpayer's first taxable year beginning after December 31, 2017—
“(A) such change shall be treated as initiated by the taxpayer, and
“(B) such change shall be treated as made with the consent of the Secretary of the Treasury.
“(2) QUALIFIED CHANGE IN METHOD OF ACCOUNTING.—For purposes of this subsection, the term ‘‘qualified change in method of accounting’’ means any change in method of accounting which—
“(A) is required by the amendments made by this section, or
“(B) was prohibited under the Internal Revenue Code of 1986 prior to such amendments and is permitted under such Code after such amendments.”
STUDIES
Section 806 of Pub. L. 108-357 provided the following:
“(a) TRANSFER PRICING RULES- The Secretary of the Treasury or the Secretary's delegate shall conduct a study regarding the effectiveness of current transfer pricing rules and compliance efforts in ensuring that cross-border transfers and other related-party transactions, particularly transactions involving intangible assets, service contracts, or leases cannot be used improperly to shift income out of the United States. The study shall include a review of the contemporaneous documentation and penalty rules under section 6662 of the Internal Revenue Code of 1986, a review of the regulatory and administrative guidance implementing the principles of section 482 of such Code to transactions involving intangible property and services and to cost-sharing arrangements, and an examination of whether increased disclosure of cross-border transactions should be required. The study shall set forth specific recommendations to address all abuses identified in the study. Not later than June 30, 2005, such Secretary or delegate shall submit to the Congress a report of such study.
“(b) INCOME TAX TREATIES- The Secretary of the Treasury or the Secretary's delegate shall conduct a study of United States income tax treaties to identify any inappropriate reductions in United States withholding tax that provide opportunities for shifting income out of the United States, and to evaluate whether existing anti-abuse mechanisms are operating properly. The study shall include specific recommendations to address all inappropriate uses of tax treaties. Not later than June 30, 2005, such Secretary or delegate shall submit to the Congress a report of such study.
“(c) EFFECTIVENESS OF CORPORATE EXPATRIATION PROVISIONS- The Secretary of the Treasury or the Secretary's delegate shall conduct a study of the effectiveness of the provisions of this title on corporate expatriation. The study shall include such recommendations as such Secretary or delegate may have to improve the effectiveness of such provisions in carrying out the purposes of this title. Not later than December 31, 2006, such Secretary or delegate shall submit to the Congress a report of such study.”
STUDY OF APPLICATION AND ADMINISTRATION OF THIS SECTION
Pub. L. 101-508, title XI, Sec. 11316, Nov. 5, 1990, 104 Stat. 1388-458, provided that:
‘(a) General Rule. - The Secretary of the Treasury or his delegate shall conduct a study of the application and administration of section 482 of the Internal Revenue Code of 1986.
Such study shall include examination of -
‘(1) the effectiveness of the amendments made by this part (part II (Sec. 11311-11319) of subtitle C of title XI of Pub. L. 101-508, enacting section 6038C of this title, amending sections 6038A, 6050I, 6103, 6323, 6502, 6503, 6662, and 6721 of this title, and amending provisions set out as a note under section 7801 of this title) in increasing levels of compliance with such section 482,
‘(2) use of advanced determination agreements with respect to issues under such section 482,
‘(3) possible legislative or administrative changes to assist the Internal Revenue Service in increasing compliance with such section 482, and
‘(4) coordination of the administration of such section 482 with similar provisions of foreign tax laws and with domestic nontax laws.
‘(b) Report. - Not later than March 1, 1992, the Secretary of the Treasury or his delegate shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on the study conducted under subsection (a), together with such recommendations as he may deem advisable.’
REVISION OF REGULATIONS
For requirement that, not later than 180 days after July 18, 1984, the Secretary of the Treasury modify the safe harbor interest rates applicable under the regulations prescribed under this section so that such rates are consistent with the rates applicable under section 483 of this title by reason of the amendments made by Pub. L. 98-369, see section 44(b)(2) of Pub. L. 98-369, set out as an Effective Date note under section 1271 of this title.