umentation, examination procedures, and methodologies. These modifications will
be taking place through revised audit procedures as well as possibly through changes
to the regulations themselves.
29.7 USING DATA SOURCES. There are many occasions in which the IRS fails to
seek, obtain, or utilize potential data sources. In short, we are suggesting that there
may be occasions in which Information Document Requests (IDRs) are too narrowly
focused. Here are two situations in which the IRS may benefit from expanding the
IDR process.
(a) International Merger Example. Consider, as an example, the situation of an IRS
international examiner and the transfer pricing economist seeking information about
an international merger. The two entities had been independent, but the U.S. entity
and a foreign subsidiary face intercompany transfer concerns for the first time be-
cause of this merger. The merger that is under review by the IRS had previously been
subject to the Hart Scott Rodino (HSR) premerger notification requirements with the
Department of Justice (DOJ) and the Federal Trade Commission (FTC).^1
It would be in the interests of the IRS to seek, obtain, and utilize these HSR pre-
merger filings. The filings should provide the international examiner and the transfer
pricing economist with information that should be quite useful in the transfer pricing
context, especially as to industry segments and competitors. In this regard, the inter-
national examiner and the transfer pricing economist should be able to interpret the
importance of second request filings, the investigation process, and third-party in-
volvement in the HSR process.
(b) Engineering Economy Example. The international examiner is dependent on re-
ceiving and utilizing engineering data under a number of scenarios (see Section 29.8,
Cost Issues, Excess Capacity, and Cost Structures Overseas, for one such example).
We suggest that the transfer pricing economist be involved in the interpretation of en-
gineering data in coordination with the needs of the international examiner until the
transfer pricing coordinator(s) serve this role.
In our view, having a transfer pricing coordinator would be beneficial to the IRS,
as the transfer pricing coordinator could better identify or confirm data sources that
should exist before the IRS makes the effort to seek, obtain, and utilize these data
sources. The transfer pricing coordinator and other high-level transfer pricing per-
sonnel should benefit from education and cross-training that would bring these un-
tapped data sources to light.
(c) Divisional Tax Accounting and Intracompany Transfer Pricing. Tax considera-
tions are the central focus of the transfer pricing regulations, to the exclusion of the
business considerations other than taxation that impact transfer pricing. As such, it is
our suggestion that the transfer pricing regulations take into account such business
facets as division and profit center accounting, autonomous transactions, vertical in-
tegration, and the like.^2
29.7 USING DATA SOURCES 29 • 13(^1) Thomas E. Johnson, “Antitrust Customs, Gray Market, and Other Nontax Transfer Pricing Consid-
erations,”Transfer Pricing Handbook#2, 3rd ed., edited by R. Feinschreiber (New York: John Wiley &
Sons, 2001): Section 85.2.
(^2) Robert Feinschreiber, “Business Facets of Transfer Pricing,” Transfer Pricing Handbook#1, 3rd ed.,
edited by R. Feinschreiber (New York: John Wiley & Sons, 2001): Section 1.5.