Part III. General Descriptions of APAs Executed in 2012

[Pub. L. 106–170 § 521(b)(2)(D)]

Nature of the Relationships § 521(b)(2)(D)(i)

As in prior years, more than half of the APAs executed in 2012 involved transactions between foreign parents and U.S. subsidiaries. In 2012 the percentages were approximately 75 percent foreign parents and 25 percent U.S. parents; in 2011 those percentages were 61 and 39, respectively.

As shown in the graph below, of the total number of bilateral APAs executed in 2012, more than half were agreed between the United States and Japan, with the other two treaty countries with significant activity being Canada and the United Kingdom. As the IRS gains additional experience with other treaty partners it would be expected that the relative representation of other treaty partners will increase over time.

Tested Parties, Covered Transactions, Functions and Risks § 521(b)(2)(D)(ii-iii)

Tested Parties and Covered Transactions: As shown in the following graph, and consistent with prior years, the tested parties included in APAs executed in 2012 fell primarily into two categories, i.e ., U.S. distributors and U.S. service providers, each of which represents approximately 30 percent of the total. No other single type of entity represents even ten percent of the total. Consistent with this result, more than 40 percent of the transactions covered in APAs executed in 2012 involved transfers of tangible goods, and close to 40 percent involved the provision of services. Most of the rest of the transactions involved the use of intangible property.

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Although a high percentage of agreements involved tangible goods and services transactions, the IRS has successfully completed numerous APAs involving intangibles. While complex transactions involving intangibles may be more challenging in some cases than other types of transactions, and represent a smaller percentage of the APA inventory than the other types of transactions, the IRS will continue to seek opportunities to work with taxpayers and treaty partners to provide prospective certainty for such transactions wherever appropriate.

Functions and Risks: As shown in the graphs below, most of the functions and risks of the tested parties in the APAs executed in 2012 were routine functions and risks, with more than 70 percent of the cases involving distribution or related functions, e.g . marketing and product support. Similarly, the risks borne by the tested parties were primarily standard business risks, e.g., market risk and credit risk. A small percentage of the tested parties performed more complex or high value functions such as manufacturing and research and development, and a similarly small percentage of the tested parties bore non-routine and potentially significant risks such as product liability or research and development risk.

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Transfer Pricing Methods Used § 521(b)(2)(D)(iv)

As shown on the following graphs, and consistent with prior years, the primary transfer pricing method used for transfers of both tangible and intangible property in APAs executed in 2012 was the Comparable Profits Method/Transactional Net Margin Method (CPM/TNMM).

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Regarding the various profit level indicators typically used to benchmark results for transfers of property under the CPM/TNMM, the Operating Margin, defined ³ as the ratio of operating profits to sales, accounts for more than 60 percent of the cases, while the Berry Ratio, defined ⁴ as the ratio of gross profit to operating expenses, accounts for approximately 15 percent of the cases. Other profit level indicators, in the aggregate, account for less than ten percent of the cases.

For services transactions, while the CPM/TNMM still predominates, a significant percentage of cases involving services used the Services Cost Method or the Cost of Services Plus Method. The Services Cost Method evaluates whether the amount charged for certain services is arm’s length with reference to the total services costs; the Cost of Services Plus Method determines whether prices are arm’s length by reference to the gross services profit markup in comparable uncontrolled transactions. When the CPM/TNMM is used to benchmark services transactions, the Berry Ratio is the most frequently used PLI.

3 Treas. Reg. § 1.482–5(b)(4)(ii)(A).

4 Treas. Reg. § 1.482–5(b)(4)(ii)(B).

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Sources of Comparables, Comparables Selection Criteria, and Nature of Adjustments to Comparable or Tested Party Data § 521(b)(2)(D)(v-vii)

For the majority of the APAs executed in 2012 where external comparables data was used in the analysis, the data source for comparables was Standard and Poors’ Compustat database; the following other sources were also used in appropriate cases, e.g ., where the tested party was not the U.S. entity:

Additional Sources of Comparable Data

Regarding selection criteria, in the majority of cases the selection process included consideration of whether the comparable company was comparable regarding its functions, risks and industry. Also considered in some cases was the existence of comparable intangibles or comparable products.

Regarding adjustments, the standard balance sheet adjustments covered by Treas. Reg. § 1.482–1(d) and –5(c), including adjustments to payables, receivables and inventory, were made in the majority of cases, and approximately 30 percent of the cases also involved an adjustment to plant, property and equipment. In addition, where appropriate, accounting adjustments were made to convert from LIFO to FIFO inventory accounting, and a small number of the cases also involved the accounting reclassification of expenses, e.g., from COGS to operating expenses, or from operating expenses to extraordinary items.

Ranges, Targets and Adjustment Mechanisms § 521(b)(2)(D)(viii-ix)

The majority of the transactions covered in APAs executed in 2012 target an interquartile range as described in Treas. Reg. § 1.482–1(e)(2)(iii)(C). A substantial minority of those transactions also include a specific point within the CPM/TNMM range that is not a floor or ceiling, but that represents either an interim or a final target, and in a few cases the CPM/TNMM does not set a range, but sets either a floor or a ceiling, i.e., an upper or lower bound for the results of the particular transaction. Where the transaction involves a royalty payment for the use of intangible property both points and ranges have been used, and in some cases where the covered transaction is the payment of a royalty based solely on external royalty agreements, a secondary method, e.g., a test of the payor’s post-royalty operating margin, has been imposed. The testing periods set in the APAs executed in 2012 included: a) a single year; b) the term of the APA not including any rollback years; or c) the term of the APA including rollback years.

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APAs executed in 2012 included a number of mechanisms for making adjustments to tested party results when they are outside the range or point required by the APA. Among the mechanisms included in 2012, which apply to the APA term and/or rollback years, were: a) an adjustment to the closest edge of the range applied to the results of a single year; b) adjustment to the closest edge of the range applied to the results over the APA term; c) adjustment to the specified point or royalty rate; and d) adjustment to the median of the range for a single year. For bilateral APAs, compensating adjustments that are required under the terms of the APA can sometimes be subject to further discussions between the APMA team and its counterpart in the foreign jurisdiction, and the amount and/or timing of the compensating adjustment can be the subject of an additional agreement between the countries.

Critical Assumptions § 521(b)(2)(D)(v)

The model APA used by the IRS (included as Appendix A of this report) includes a standard critical assumption that there will be no material changes to the taxpayer’s business or to its tax or financial accounting practices during the APA term, and all the APAs executed in 2012 included that standard critical assumption. A few bilateral cases have included critical assumptions tied to either the taxpayer’s profitability in a certain year or over the term of the APA, or to the amount of non-covered transactions as a percentage of the taxpayer’s revenue. Under § 11.03(2) of Rev. Proc. 2006–9, the IRS may require the taxpayer to show compliance with all the critical assumptions included in the APA. Taxpayers must report to the IRS the failure of a critical assumption, including the event or events causing such failure, and under § 11.06(3) of Rev. Proc. 2006–9, unless the APMA Director agrees to modify the APA, the APA is cancelled. The IRS did not cancel any APAs in 2012 due to the failure of a critical assumption.

Term Lengths for APAs § 521(b)(2)(D)(x)

As described in § 4.07 of Rev. Proc. 2006–9, taxpayers should request at least a five-year term in their APA submissions, although the appropriate APA term is decided on a case-by-case basis. Of the APAs executed in 2012, almost half had five-year terms, and 80 percent had terms of between five and eight years. For APAs with terms of between six and eight years, a substantial number of those were submitted as a request for a five-year term, and the additional years were agreed to between the taxpayer and the IRS (or, in the case of a bilateral APA, between the IRS and the foreign government upon taxpayer’s request) in order to ensure a reasonable amount of prospectivity in the APA term. In 2012, ten percent of the APAs included terms exceeding nine years. These longer-than-normal terms were agreed based on the particular circumstances of those cases, and it is expected that the instances of APA terms exceeding 9 years will continue to be rare in future years.

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Table 5: Term Lengths (Including Rollback Years)

Amount of Time Taken to Complete New and Renewal APAs § 521(b)(2)(E)

As noted in the introduction to this report, the average time taken to complete the 140 APAs executed in 2012 was slightly less than the average time taken in 2011, and the IRS expects this average processing time to continue to go down as a result of the increased resources dedicated to the program in 2011 and 2012 and continued process improvements.

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Table 6: Months to Complete New and Renewal APAs § 521(b)(2)(E)

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Efforts to Ensure Compliance with APAs § 521(b)(2)(F)

As described in § 11.01 of Rev. Proc. 2006–09, APA taxpayers are required to file annual reports to demonstrate compliance with the terms and conditions of the APA. The filing and review of annual reports is a critical part of the APA process. Through annual report review, the APMA Program monitors taxpayer compliance with the APA on a contemporaneous basis. Annual report review provides current information on the success or problems associated with the various Transfer Pricing Methods (TPMs) adopted in the APA process.

All reports received by the APMA Program are assigned to a designated APMA team leader or economist. Whenever possible, annual report reviews are assigned to the team leader who worked the case, or another staff member who is already familiar with the relevant facts and terms of the agreement. Other team leaders and economists may assist the assigned team leader as well. Once received by the APMA Program, the annual report is also sent to the field personnel with exam jurisdiction over the taxpayer. The field personnel conduct a parallel compliance review, and work with APMA personnel to resolve any questions or problems that might arise.

Nature of Documentation Required in Annual Report § 521(b)(2)(D)(xi)

APAs executed in 2012 required that taxpayers provide various documents with their annual reports, depending on the facts of the case. While not every annual report will include every one of the documents listed below ( e.g ., where no compensating adjustment occurs no documentation is required) the documents listed are required where the facts demonstrate a need for the document.

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Approaches for Sharing of Currency or Other Risks § 521(b)(2)(D)(xii)

In appropriate cases, APAs may provide specific approaches for dealing with currency risk, such as adjustment mechanisms and/or critical assumptions. In 2012 very few executed APAs included either adjustment mechanisms or critical assumptions regarding currency or other similar risks, and most of the cases that did so involved bilateral agreements with Japan, which has experienced significant, extreme currency fluctuations over the last several years.

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APPENDIX A — Model APA (based on Rev. Proc. 2006–9)

[§ 521(b)(2)(B)]

ADVANCE PRICING AGREEMENT

between

[ Insert Taxpayer’s Name ]

and

THE INTERNAL REVENUE SERVICE

PARTIES

The Parties to this Advance Pricing Agreement (APA) are the Internal Revenue Service (IRS) and [ Insert Taxpayer’s Name ], EIN .

RECITALS

[ Insert Taxpayer Name ] is the common parent of an affiliated group filing consolidated U.S. tax returns (collectively referred to as “Taxpayer”), and is entering into this APA on behalf of itself and other members of its consolidated group.

Taxpayer’s principal place of business is [ City, State ]. [ Insert general description of taxpayer and other relevant parties ].

This APA contains the Parties’ agreement on the best method for determining arm’s-length prices of the Covered Transactions under I.R.C. section 482, the Treasury Regulations thereunder, and any applicable tax treaties.

{If renewal, add} [Taxpayer and IRS previously entered into an APA covering taxable years ending to , executed on . ]

AGREEMENT

The Parties agree as follows:

1. Covered Transactions. This APA applies to the Covered Transactions, as defined in Appendix A.

2. Transfer Pricing Method. Appendix A sets forth the Transfer Pricing Method (TPM) for the Covered Transactions.

3. Term . This APA applies to the APA Term, as defined in Appendix A.

4. Operation.

a. Revenue Procedure 2006–9 governs the interpretation, legal effect, and administration of this APA.

b. Nonfactual oral and written representations, within the meaning of sections 10.04 and 10.05 of Revenue Procedure 2006–9 (including any proposals to use particular TPMs), made in conjunction with the APA Request constitute statements made in compromise negotiations within the meaning of Rule 408 of the Federal Rules of Evidence.

5. Compliance.

a. Taxpayer must report its taxable income in an amount that is consistent with Appendix A and all other requirements of this APA on its timely filed U.S. Return. However, if Taxpayer’s timely filed U.S. Return for any taxable year covered by this APA (APA Year) is filed prior to, or no later than 60 days after, the effective date of this APA, then Taxpayer must report its taxable income for that APA Year in an amount that is consistent with Appendix A and all other requirements of this APA either on the original U.S. Return or on an amended U.S. Return filed no later than 120 days after the effective date of this APA, or through such other means as may be specified herein.

b. { Use or edit the following when U.S. Group or Foreign Group contains more than one member.} [This APA addresses the arm’s-length nature of prices charged or received in the aggregate between Taxpayer and Foreign Participants with respect to the Covered Transactions. Except as explicitly provided, this APA does not address and does not bind the IRS with respect to prices charged or received, or the relative amounts of income or loss realized, by particular legal entities that are members of U.S. Group or that are members of Foreign Group.]

c. For each APA Year, if Taxpayer complies with the terms and conditions of this APA, then the IRS will not make or propose any allocation or adjustment under I.R.C. section 482 to the amounts charged in the aggregate between Taxpayer and Foreign Participant[s] with respect to the Covered Transactions.

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d. If Taxpayer does not comply with the terms and conditions of this APA, then the IRS may:

i. enforce the terms and conditions of this APA and make or propose allocations or adjustments under I.R.C. section 482 consistent with this APA;

ii. cancel or revoke this APA under section 11.06 of Revenue Procedure 2006–9; or

iii. revise this APA, if the Parties agree.

e. Taxpayer must timely file an Annual Report (an original and four copies) for each APA Year in accordance with Appendix C and section 11.01 of Revenue Procedure 2006–9. Taxpayer must file the Annual Report for all APA Years through the APA Year ending [insert year] by [insert date]. Taxpayer must file the Annual Report for each subsequent APA Year by [insert month and day] immediately following the close of that APA Year. (If any date falls on a weekend or holiday, the Annual Report shall be due on the next date that is not a weekend or holiday.) The IRS may request additional information reasonably necessary to clarify or complete the Annual Report. Taxpayer will provide such requested information within 30 days. Additional time may be allowed for good cause.

f. The IRS will determine whether Taxpayer has complied with this APA based on Taxpayer’s U.S. Returns, the Financial Statements, and other APA Records, for the APA Term and any other year necessary to verify compliance. For Taxpayer to comply with this APA, {use the following or an alternative} an independent certified public accountant must render an opinion that Taxpayer’s Financial Statements present fairly, in all material respects, Taxpayer’s financial position under U.S. GAAP.

g. In accordance with section 11.04 of Revenue Procedure 2006–9, Taxpayer will (1) maintain the APA Records, and (2) make them available to the IRS in connection with an examination under section 11.03. Compliance with this subparagraph constitutes compliance with the record-maintenance provisions of I.R.C. sections 6038A and 6038C for the Covered Transactions for any taxable year during the APA Term.

h. The True Taxable Income within the meaning of Treasury Regulations sections 1.482–1(a)(1) and (i)(9) of a member of an affiliated group filing a U.S. consolidated return will be determined under the I.R.C. section 1502 Treasury Regulations.

i. {Optional for US Parent Signatories} To the extent that Taxpayer’s compliance with this APA depends on certain acts of Foreign Group members, Taxpayer will ensure that each Foreign Group member will perform such acts.

6. Critical Assumptions. This APA’s critical assumptions, within the meaning of Revenue Procedure 2006–9, section 4.05, appear in Appendix B. If any critical assumption has not been met, then Revenue Procedure 2006–9, section 11.06, governs.

7. Disclosure. This APA, and any background information related to this APA or the APA Request, are: (1) considered “return information” under I.R.C. section 6103(b)(2)(C); and (2) not subject to public inspection as a “written determination” under I.R.C. section 6110(b)(1). Section 521(b) of Pub. L. 106–170 provides that the Secretary of the Treasury must prepare a report for public disclosure that includes certain specifically designated information concerning all APAs, including this APA, in a form that does not reveal taxpayers’ identities, trade secrets, and proprietary or confidential business or financial information.

8. Disputes. If a dispute arises concerning the interpretation of this APA, the Parties will seek a resolution by the Director of the Advance Pricing and Mutual Agreement Program, to the extent reasonably practicable, before seeking alternative remedies.

9. Materiality. In this APA the terms “material” and “materially” will be interpreted consistently with the definition of “material facts” in Revenue Procedure 2006–9, section 11.06(4).

10. Section Captions. This APA’s section captions, which appear in italics, are for convenience and reference only. The captions do not affect in any way the interpretation or application of this APA.

11. Terms and Definitions . Unless otherwise specified, terms in the plural include the singular and vice versa. Appendix D contains definitions for capitalized terms not elsewhere defined in this APA.

12. Entire Agreement and Severability. This APA is the complete statement of the Parties’ agreement. The Parties will sever, delete, or reform any invalid or unenforceable provision in this APA to approximate the Parties’ intent as nearly as possible.

13. Successor in Interest. This APA binds, and inures to the benefit of, any successor in interest to Taxpayer.

14. Notice. Any notices required by this APA or Revenue Procedure 2006–9 must be in writing. Taxpayer will send notices to the IRS at the address and in the manner set forth in Revenue Procedure 2006–9, section 4.11. The IRS will send notices to:

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15. Effective Date and Counterparts. This APA is effective starting on the date, or later date of the dates, upon which all Parties execute this APA. The Parties may execute this APA in counterparts, with each counterpart constituting an original.

WITNESS,

The Parties have executed this APA on the dates below.

[Taxpayer Name in all caps]

By: Date: , 20

Jane Doe Sr. Vice President (Taxes)

IRS

By: Date: , 20

Richard J. McAlonan, Jr. Director, Advance Pricing and Mutual Agreement Program

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APPENDIX A

COVERED TRANSACTIONS AND TRANSFER PRICING METHOD (TPM)

1. Covered Transactions.

[ Define the Covered Transactions. ]

2. APA Term.

This APA applies to Taxpayer’s taxable years ending through (APA Term).

3. TPM.

{ Note: If appropriate, adapt language from the following examples. }

[The Tested Party is . ]

• CUP Method

The TPM is the comparable uncontrolled price (CUP) method. The Arm’s Length Range of the price charged for is between and per unit.

• CUT Method

The TPM is the CUT Method. The Arm’s Length Range of the royalty charged for the license of is between % and % of [Taxpayer’s, Foreign Participants’, or other specified party’s] Net Sales Revenue. [Insert definition of net sales revenue or other royalty base.]

• Resale Price Method (RPM)

The TPM is the resale price method (RPM). The Tested Party’s Gross Margin for any APA Year is defined as follows: the Tested Party’s gross profit divided by its sales revenue (as those terms are defined in Treasury Regulations sections 1.482–5(d)(1) and (2)) for that APA Year. The Arm’s Length Range is between % and %, and the Median of the Arm’s Length Range is % .

• Cost Plus Method

The TPM is the cost plus method. The Tested Party’s Cost Plus Markup is defined as follows for any APA Year: the Tested Party’s ratio of gross profit to production costs (as those terms are defined in Treasury Regulations sections 1.482–3(d)(1) and (2)) for that APA Year. The Arm’s Length Range is between % and %, and the Median of the Arm’s Length Range is % .

• CPM with Berry Ratio PLI

The TPM is the comparable profits method (CPM). The profit level indicator is a Berry Ratio. The Tested Party’s Berry Ratio is defined as follows for any APA Year: the Tested Party’s gross profit divided by its operating expenses (as those terms are defined in Treasury Regulations sections 1.482–5(d)(2) and (3)) for that APA Year. The Arm’s Length Range is between and , and the Median of the Arm’s Length Range is .

• CPM using an Operating Margin PLI

The TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested Party’s Operating Margin is defined as follows for any APA Year: the Tested Party’s operating profit divided by its sales revenue (as those terms are defined in Treasury Regulations section 1.482–5(d)(1) and (4)) for that APA Year. The Arm’s Length Range is between % and %, and the Median of the Arm’s Length Range is % .

• CPM using a Three-year Rolling Average Operating Margin PLI

The TPM is the comparable profits method (CPM). The profit level indicator is an operating margin. The Tested Party’s Three-Year Rolling Average operating margin is defined as follows for any APA Year: the sum of the Tested Party’s operating profit (within the meaning of Treasury Regulations section 1.482–5(d)(4) for that APA Year and the two preceding years, divided by the sum of its sales revenue (within the meaning of Treasury Regulations section 1.482–5(d)(1)) for that APA Year and the two preceding years. The Arm’s Length Range is between % and %, and the Median of the Arm’s Length Range is % .

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• Residual Profit Split Method

The TPM is the residual profit split method. [I nsert description of routine profit level determinations and residual profit-split mechanism ].

[ Insert additional provisions as needed. ]

4. Application of TPM.

For any APA Year, if the results of Taxpayer’s actual transactions produce a [price per unit, royalty rate for the Covered Transactions] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party] within the Arm’s Length Range, then the amounts reported on Taxpayer’s U.S. Return must clearly reflect such results.

For any APA year, if the results of Taxpayer’s actual transactions produce a [price per unit, royalty rate] [or] [Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin for the Tested Party] outside the Arm’s Length Range, then amounts reported on Taxpayer’s U.S. Return must clearly reflect an adjustment that brings the

[price per unit, royalty rate] [or] [Tested Party’s Gross Margin, Cost Plus Markup, Berry Ratio, Operating Margin, Three-Year Rolling Average Operating Margin] to the Median.

For purposes of this Appendix A, the “results of Taxpayer’s actual transactions” means the results reflected in Taxpayer’s and Tested Party’s books and records as computed under U.S. GAAP [ insert another relevant accounting standard if applicable ], with the following adjustments:

(a) [The fair value of stock-based compensation as disclosed in the Tested Party’s audited financial statements shall be treated as an operating expense]; and

(b) To the extent that the results in any prior APA Year are relevant (for example, to compute a multi-year average), such results shall be adjusted to reflect the amount of any adjustment made for that prior APA Year under this Appendix A.

5. APA Revenue Procedure Treatment

If Taxpayer makes an adjustment under paragraph 4 of this Appendix A (a “primary adjustment”), Taxpayer and its related foreign entity may elect APA Revenue Procedure Treatment in accordance with section 11.02(3) of Revenue Procedure 2006–9 and avoid the possible adverse tax consequences of a secondary adjustment that would otherwise follow the primary adjustment.

[ Insert additional provisions as needed. ]

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APPENDIX B

CRITICAL ASSUMPTIONS

This APA’s critical assumptions are:

1. The business activities, functions performed, risks assumed, assets employed, and financial and tax accounting methods and classifications [and methods of estimation] of Taxpayer in relation to the Covered Transactions will remain materially the same as described or used in Taxpayer’s APA Request. A mere change in business results will not be a material change.

[ Insert additional provisions as needed. ]

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APPENDIX C

APA RECORDS AND ANNUAL REPORT

APA RECORDS

The APA Records will consist of all documents listed below for inclusion in the Annual Report, as well as all documents, notes, work papers, records, or other writings that support the information provided in such documents.

ANNUAL REPORT

The Annual Report (and each of the four copies required by paragraph 5(e) of this APA) will include:

1. Two copies of a properly completed APA Annual Report Summary in the form of Appendix E to this APA, one copy of the form bound with, and one copy provided separately from, the rest of the Annual Report.

2. A table of contents, organized as follows:

3. Statements that fully identify, describe, analyze, and explain:

a. All material differences between the U.S. Group’s business operations (including functions, risks assumed, markets, contractual terms, economic conditions, property, services, and assets employed) during the APA Year from the business operations described in the APA Request. If there have been no material differences, the Annual Report will include a statement to that effect.

b. All material differences between the U.S. Group’s accounting methods and classifications, and methods of estimation used during the APA Year, from those described or used in the APA Request. If any change was made to conform to changes in U.S. GAAP (or other relevant accounting standards) Taxpayer will specifically identify the change. If there has been no material change in accounting methods and classifications or methods of estimation, the Annual Report will include a statement to that effect.

c. Any change to the Taxpayer notice information in paragraph 14 of this APA.

d. Any failure to meet any critical assumption. If there has been no failure, the Annual Report will include a statement to that effect.

e. Whether or not material information submitted while the APA Request was pending is discovered to be false, incorrect, or incomplete.

f. Any change to any entity classification for federal income tax purposes (including any change that causes an entity to be disregarded for federal income tax purposes) of any Worldwide Group member that is a party to the Covered Transactions or is otherwise relevant to the TPM.

g. The amount, reason for, and financial analysis of (1) any primary adjustments made under Appendix A for the APA Year; and (2) any ( a ) secondary adjustments that follow such primary adjustments or ( b ) accounts receivable that Taxpayer establishes, in lieu of secondary adjustments, by electing APA Revenue Procedure Treatment pursuant to paragraph 5 of Appendix A and Revenue Procedure 2006–9, section 11.02(3), for the APA Year, including but not limited to:

i. the amounts due or owed, and paid or received by each affected entity;

ii. the character (such as capital, ordinary, income, expense) and country source of the funds transferred, and the specific affected line item(s) of any affected U.S. Return;

iii. the date(s) and means by which the payments are or will be made; and

iv. whether or not APA Revenue Procedure was elected pursuant to paragraph 5 of Appendix A and Revenue Procedure 2006–09, section 11.02(3).

h. The amounts, description, reason for, and financial analysis of any book-tax difference relevant to the TPM for the APA Year, as reflected on Schedule M–1 or Schedule M–3 of the U.S. Return for the APA Year.

i. Whether Taxpayer contemplates requesting, or has requested, to renew, modify, or cancel the APA.

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4. The Financial Statements, and any necessary account detail to show compliance with the TPM, including consolidating financial statements, segmented financial data, records from the general ledger, or similar information if the assets, liabilities, income, or expenses relevant to showing compliance with the TPM are a subset of the assets, liabilities, income, or expenses presented in the Financial Statements.

5. {Use the following or the alternative prescribed by paragraph 5(f) of this APA:} A copy of the independent certified public accountant’s opinion required by paragraph 5(f) of this APA.

6. A financial analysis that reflects Taxpayer’s TPM calculations for the APA Year. The calculations must reconcile with and reference the information required under item 4 above in sufficient account detail to allow the IRS to determine whether Taxpayer has complied with the TPM.

7. An organizational chart for the Worldwide Group, revised annually to reflect all ownership or structural changes of entities that are parties to the Covered Transactions or are otherwise relevant to the TPM.

8. A copy of the APA and any amendment.

9. A penalty of perjury statement, executed in accordance with Revenue Procedure 2006–09, section 11.01(6) and (7).

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APPENDIX D

DEFINITIONS

The following definitions control for all purposes of this APA. The definitions appear alphabetically below:

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APPENDIX E

APA ANNUAL REPORT SUMMARY FORM

The APA Annual Report Summary below and on the next page is a required APA Record. The APMA Team Leader supplies some of the information requested on the form. Taxpayer is to supply the remaining information requested by the form and submit the form as part of its Annual Report.

APA Annual

Report SUMMARY

APA Information

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APA Annual

Report Information (to be completed by the Taxpayer)

APA Annual

Report Checklist of Key Contents (to be completed by the Taxpayer)

Financial analysis reflecting TPM calculations [ ] yes [ ] no

Financial statements showing compliance with TPM(s) [ ] yes [ ] no

Schedule M–1 or M–3 book-tax differences [ ] yes [ ] no

Current organizational chart of relevant portion of world-wide group [ ] yes [ ] no

Attach copy of APA [ ] yes [ ] no

Other APA records and documents included:

Information

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Appendix B — APMA Contacts

As of March 25, 2013

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Taxable Medical Devices; Correction

Announcement 2013–23

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correction to final regulations.

SUMMARY: This document contains corrections to final regulations (T.D. 9604, 2012–52 I.R.B. 730) that were published in the Federal Register on Friday, December 7, 2012 (77 FR 72924). The final regulations provide guidance on the excise tax imposed on the sale of certain medical devices, enacted by the Health Care and Education Reconciliation Act of 2010 in conjunction with the Patient Protection and Affordable Care Act.

DATES: This correction is effective on March 13, 2013, and is applicable after December 31, 2012.

FOR FURTHER INFORMATION CONTACT: Natalie Payne, Michael Beker, or Stephanie Bland, at (202) 622–3130 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations (T.D. 9604) that are the subject of this correction is under section 4191 of the Internal Revenue Code.

Need for Correction

As published, the final regulations (T.D. 9604) contain errors that may prove to be misleading and are in need of clarification.

Correction of Publication

Accordingly, the final regulations (T.D. 9604), that are the subject of FR Doc. 2012–29628, are corrected as follows:

1. On page 72925, column 1, in the preamble, under the paragraph heading “Background”, second full paragraph of the column, lines 2 through 9, the language “regulations identified two issues that the IRS and the Treasury Department will study further and on which the IRS and the Treasury Department have requested additional comments. Those issues are discussed later in this preamble.

Comments with regard to those issues should be submitted in” is corrected to read “regulations identified one issue that the IRS and the Treasury Department will study further and on which the IRS and the Treasury Department have requested additional comments. That issue is discussed later in this preamble. Comments with regard to that issue should be submitted in”.

2. On page 72926, column 2, in the preamble, under the paragraph heading “Humanitarian Use Devices”, line 6 from the bottom of the column, the language “excluding HUDs from the definition of ” is corrected to read “excluding HUDs from the definition of a”.

3. On page 72927, column 3, under the paragraph heading “Nonexclusivity of Factors”, line 4 from the bottom of the column, the language “the final regulations include seven” is corrected to read “the final regulations include eight”

4. On page 72928, column 2, under the paragraph heading “Cost”, line 6 from the bottom of the column, the language “used in hospitals, doctors offices and” is corrected to read “used in hospitals, doctors’ offices and”.

5. On page 72929, column 2, under the paragraph heading “Documents Submitted for FDA Notification or Approval”, line 3 from the top of the column, the language “by the general public for individual use.” is corrected to read “by the general public at retail for individual use.”

6. On page 72929, column 3, under the paragraph heading “Capped Rental Devices”, first full paragraph of the column, line 2, the language “in consultation with the Center for” is corrected to read “in consultation with the Centers for”.

7. On page 72930, column 2, under the paragraph heading “A. Proposed Regulations”, line 6, the language “of taxable medical device to the FDA’s” is corrected to read “of a taxable medical device to the FDA’s”.

8. On page 72931, column 1, under the paragraph heading “Installment Sales, Leases, and Long-Term Contracts”, line 3 from the bottom of the column, the language “Payments made pursuant to a contract” is corrected to read “Payments made on or after January 1, 2013, pursuant to a contract”.

9. On page 72932, column 2, under the paragraph heading “Consolidated Form

637 Registration”, line 3, the language “effectuate tax-free sales. Several” is corrected to read “effectuate tax-free sales for further manufacture or export. Several”.

LaNita VanDyke, Chief, Publications and

Regulations Branch, Legal Processing Division,

Associate Chief Counsel (Procedure and Administration).

(Filed by the Office of the Federal Register on March 12, 2013, 8:45 a.m., and published in the issue of the Federal Register for March 13, 2013, 78 F.R. 15877)

Announcement of Disciplinary Sanctions From the Office of Professional Responsibility

The Office of Professional Responsibility (OPR) announces recent disciplinary sanctions involving attorneys, certified public accountants, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code of Federal Regulations, Part 10, and which are published in pamphlet form as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations.

The disciplinary sanctions to be imposed for violation of the regulations are:

Disbarred from practice before the IRS —An individual who is disbarred is not eligible to represent taxpayers before the IRS.

Suspended from practice before the IRS —An individual who is suspended is not eligible to represent taxpayers before the IRS during the term of the suspension.

Censured in practice before the IRS —Censure is a public reprimand. Unlike disbarment or suspension, censure does not affect an individual’s eligibility to represent taxpayers before the IRS, but OPR may subject the individual’s future representations to conditions designed to promote high standards of conduct.

Monetary penalty —A monetary penalty may be imposed on an individual

2013–16 I.R.B. 940 April 15, 2013

Suspended indefinitely by decision in expedited proceeding, Suspended indef- initely by default decision in expedited proceeding, Suspended by consent in expedited proceeding —OPR instituted an expedited proceeding for suspension (based on certain limited grounds, including loss of a professional license for cause, and criminal convictions).

OPR has authority to disclose the grounds for disciplinary sanctions in these situations: (1) an ALJ or the Secretary’s delegate on appeal has issued a decision on or after September 26, 2007, which was the effective date of amendments to the regulations that permit making such decisions publicly available; (2) the individual has settled a disciplinary case by signing OPR’s “consent to sanction” form, which requires consenting individuals to admit to one or more violations of the regulations and to consent to the disclosure of the individual’s own return information related to the admitted violations (for example, failure to file Federal income tax returns); or (3) OPR has issued a decision in an expedited proceeding for indefinite suspension.

Announcements of disciplinary sanctions appear in the Internal Revenue Bulletin at the earliest practicable date. The sanctions announced below are alphabetized first by the names of states and second by the last names of individuals. Unless otherwise indicated, section numbers ( e.g ., § 10.51) refer to the regulations.

who engages in conduct subject to sanction or on an employer, firm, or entity if the individual was acting on its behalf and if it knew, or reasonably should have known, of the individual’s conduct.

Disqualification of appraiser —An appraiser who is disqualified is barred from presenting evidence or testimony in any administrative proceeding before the Department of the Treasury or the IRS.

Under the regulations, attorneys, certified public accountants, enrolled agents, enrolled actuaries, and enrolled retirement plan agents may not assist, or accept assistance from, individuals who are suspended or disbarred with respect to matters constituting practice ( i.e ., representation) before the IRS, and they may not aid or abet suspended or disbarred individuals to practice before the IRS.

Disciplinary sanctions are described in these terms:

Disbarred by decision after hearing, Suspended by decision after hearing, Censured by decision after hearing, Monetary penalty imposed after hear- ing, and Disqualified after hearing —An administrative law judge (ALJ) conducted an evidentiary hearing upon OPR’s complaint alleging violation of the regulations and issued a decision imposing one of these sanctions. After 30 days from the issuance of the decision, in the absence of an appeal, the ALJ’s decision became the final agency decision.

Disbarred by default decision, Sus- pended by default decision, Censured by

default decision, Monetary penalty im- posed by default decision, and Disqual- ified by default decision —An ALJ, after finding that no answer to OPR’s complaint had been filed, granted OPR’s motion for a default judgment and issued a decision imposing one of these sanctions.

Disbarment by decision on appeal, Suspended by decision on appeal, Cen- sured by decision on appeal, Monetary penalty imposed by decision on ap- peal, and Disqualified by decision on appeal —The decision of the ALJ was appealed to the agency appeal authority, acting as the delegate of the Secretary of the Treasury, and the appeal authority issued a decision imposing one of these sanctions.

Disbarred by consent, Suspended by consent, Censured by consent, Mone- tary penalty imposed by consent, and Disqualified by consent —In lieu of a disciplinary proceeding being instituted or continued, an individual offered a consent to one of these sanctions and OPR accepted the offer. Typically, an offer of consent will provide for: suspension for an indefinite term; conditions that the individual must observe during the suspension; and the individual’s opportunity, after a stated number of months, to file with OPR a petition for reinstatement affirming compliance with the terms of the consent and affirming current eligibility to practice ( i.e ., an active professional license or active enrollment status).

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Arizona

Buckeye Carlson, Steven M. CPA Suspended by default decision in expedited proceeding under § 10.82 (suspension of CPA license in Washington State)

Indefinite from November 13, 2012

April 15, 2013 941 2013–16 I.R.B.

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Camp Verde Andre, Damian C. Enrolled Agent Suspended by default decision in expedited proceeding under § 10.82 (conviction under Arizona law for fraud and misrepresentation concerning worker’s compensation insurance)

Arkansas

Ash Flat Morris, James B. Public Accountant Suspended by default decision in expedited proceeding under § 10.82 (conviction under 26 U.S.C. § 7206(2), aiding and abetting the preparation of false income tax returns; 18 U.S.C. § 641, aiding and abetting theft of social security funds, 42 U.S.C § 408, concealment of a material fact as to social security funds, 18 U.S.C. § 641, theft of veteran’s administration funds, 18 U.S.C. § 371 conspiracy to defraud the government, 10 U.S.C. § 1097, aiding and abetting obtaining title IV funds by fraud and false statements; revocation of Arkansas Public Accountant license)

Van Buren Jenkins, Jr., Newton D. Attorney Suspended by default decision in expedited proceeding under § 10.82 (suspension of attorney license)

California

Lompoc Tannous, George Enrolled Agent Suspended by default decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 371, conspiracy, and 26 U.S.C. § 7206, subscribing to a false tax return)

Indefinite from January 10, 2013

Indefinite from November 13, 2012

Indefinite from January 7, 2013

Indefinite from November 13, 2012

2013–16 I.R.B. 942 April 15, 2013

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Santa Monica Kerekes, Michael S. Attorney Suspended by default decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 371, conspiracy, and 26 U.S.C. § 7201, tax evasion in the USDC, SDNY)

District of Columbia

Assaraf, Steven M., See Maryland

Florida

Hialeah Sanders, Berta CPA Suspended by default decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 1349, conspiracy to commit bank fraud)

Illinois

Indefinite from January 10, 2013

Indefinite from November 13, 2012

Monee Galvin, Laura M. CPA Reinstated to practice before the IRS, effective December 3, 2012

South Holland Ihejirika, Christopher CPA Suspended by default decision in expedited proceeding under § 10.82 (conviction under 26 U.S.C. § 7201, tax evasion)

Indiana

Indianapolis Freeman, Timothy D. Attorney Suspended by default decision in expedited proceeding under § 10.82 (suspension of attorney license)

Indianapolis Sheedy, Stacy L. CPA Suspended by default decision in expedited proceeding under § 10.82 (conviction under state law, theft; receiving stolen property)

Indefinite from November 13, 2012

Indefinite from January 16, 2013

Indefinite from January 9, 2013

April 15, 2013 943 2013–16 I.R.B.

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Maryland

Coppola, John M., See Virginia

Baltimore Goldstein, David B. Attorney Suspended by default decision in expedited proceeding under § 10.82 (attorney disbarment by the Court of Appeals of Maryland, and conviction under 18 U.S.C. §§ 2252 and 2256, distribution of visual depictions of minors engaged in sexually explicit conduct)

Baltimore Stern, Gary F. Attorney Suspended by default decision in expedited proceeding under § 10.82 (attorney disbarment by the Court of Appeals of Maryland)

Rockville Assaraf, Steven M. Attorney Suspended by default decision in expedited proceeding under § 10.82 (attorney disbarment by the Court of Appeals of Maryland, and suspension of attorney license in the District of Columbia)

Silver Spring Romanus, Joyce A. Enrolled Agent Disbarment by consent for admitted violation of § 10.51 (failure to pay Federal tax liability for tax years 2007–2010, failure to pay Employer’s Quarterly Federal tax for tax years 2009 (3rd qtr.); 2010, 2011 (1st & 2nd qtrs.)

Massachusetts

Chatham Edgar, Charles M. CPA Suspended by default decision in expedited proceeding under § 10.82 (revocation of CPA license)

Kingston Lamond, III, John F. Attorney Suspended by default decision in expedited proceeding under § 10.82 (resignation in lieu of loss of license for cause)

Indefinite from November 9, 2012

Indefinite from October 18, 2012

Indefinite from November 9, 2012

Indefinite from January 15, 2013

Indefinite from January 9, 2013

Indefinite from November 13, 2012

2013–16 I.R.B. 944 April 15, 2013

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Mississippi

West Point Hamilton, Gary C. CPA Suspended by default decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 371 and 26 U.S.C. § 7201, conspiracy to evade taxes, and evade income taxes; and revocation of CPA license)

Missouri

Maryland Hts Black, Todd R. Attorney Suspended by default decision in expedited proceeding under § 10.82 (attorney disbarment)

Nebraska

Omaha Kiroff, Mark A. CPA Suspended by default decision in expedited proceeding under § 10.82 (revocation of CPA license)

Nevada

Las Vegas Tewolde, Benaym Unenrolled Preparer Disbarred by consent for admitted violation of § 10.51(a) (disreputable and incompetent conduct which conduct renders the practitioner unfit to practice before the IRS)

NewYork

Kerekes, Michael S., See California

New York Park, Sun H. Enrolled Agent Suspended by decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 1341, mail fraud, 18 U.S.C. § 1349 & 1344, conspiracy to commit bank fraud, 26 U.S.C. § 7206, aiding another in the preparation and presentation of a false income tax return)

Indefinite from January 10, 2013

Indefinite from January 22, 2013

Indefinite from August 7, 2012

Indefinite from December 18, 2012

Indefinite from October 31, 2012

April 15, 2013 945 2013–16 I.R.B.

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

NorthCarolina

Butner Harris, Ephrain D. Enrolled Agent Suspended by decision in expedited proceeding under § 10.82 (conviction under 18 U.S.C. § 1346, conspiracy to commit mail and wire fraud in USDC, EDVA)

NorthDakota

Fargo McDonagh, Alan M. Attorney Suspended by default decision in expedited proceeding under § 10.82 (conviction under North Dakota law, forgery or counterfeiting; and suspension of attorney license)

Ohio

Cleveland Heights Drake, Charles C. CPA Suspended by decision in expedited proceeding under § 10.82 (revocation of CPA license)

Tennessee

Franklin Heath, Stewart O. CPA Suspended by default decision in expedited proceeding under § 10.82 (voluntarily revocation of CPA license)

Virginia

McLean Coppola, John M. Attorney Suspended by default decision in expedited proceeding under § 10.82 (attorney disbarment by the Court of Appeals of Maryland, and suspension of attorney license)

Harris, Ephrain D., See North Carolina

Washington

Carlson, Steven M., See Arizona

Indefinite from October 31, 2012

Indefinite from December 10, 2012

Indefinite from November 28, 2012

Indefinite from November 13, 2012

Indefinite from January 16, 2013

2013–16 I.R.B. 946 April 15, 2013