Fixing Section 482 After The Tax Cuts And Jobs Act: Suggestions For The Next Revision

It will probably be a long time before Congress redrafts section 482, but it’s never too early to propose improvements to the flawed statute that authorizes Treasury’s transfer pricing regulations.

The predecessor of what now appears in section 482 of the Internal Revenue Code was first introduced as section 45 of the Revenue Act of 1928, and the oddly drafted statute has remained remarkably stable over the last 95 years. The statute contained only a single sentence between 1928 and 1986, but that sentence seemingly granted almost unlimited power to Treasury and the IRS (via the Treasury secretary) to shuffle income and deductions across entities that are commonly owned or controlled. Courts, however, have rarely read that sentence or the corresponding Treasury regulations as broadly as the literal statutory text would suggest.