The Limits of Tax Planning John T. Woodruff -McDermott Will & Emery LLP

Transcription

1 The Limits of Tax Planning John T. Woodruff -McDermott Will & Emery LLP I. Introduction: The following paper provides an overview of limitations on U.S. federal income tax planning. This paper addresses these issues in a general manner by discussing the difference between tax avoidance and tax evasion and providing an overview of restrictions on tax avoidance transactions, reporting requirements, civil penalties, the regulation of tax advisers and the ability to obtain a tax ruling. II. Tax Avoidance vs. Tax Evasion: U.S. federal income tax law draws a distinction between tax avoidance, which is subject only to potential civil penalties, and tax evasion, for which criminal penalties may apply. The IRS considers permissible tax avoidance to include attempts to reduce, avoid, minimize, or alleviate taxes by legitimate means, while it considers evasion to involve an element of deceit or concealment. 1 Evasion of taxes is addressed in 7201, 2 which imposes criminal penalties for willful attempts to evade or defeat a tax imposed by the Code. 3 The Supreme Court has articulated three necessary elements for a finding of tax evasion: (a) willfulness, (b) existence of a tax deficiency; and (c) an affirmative act constituting an evasion or attempted evasion of the tax. 4 Willfulness, in turn, requires an intentional violation of a known legal duty. 5 While 7201 makes it a crime to willfully evade taxes, 7206 imposes criminal liability for fraudulent statements made on any return, statement, or other document submitted under penalty of perjury. 6 This statute 1 IRM (Avoidance Distinguished from Evasion) ( ). 2 or Section references shall be to sections of the Internal Revenue Code of 1986, as amended (the Code ), unless otherwise indicated (evasion of taxes). See also 7206 (tax fraud, generally), 7207 (fraudulent returns). 4 Sansone v. United States, 380 U.S. 343, 351 (1965). 5 United States v. Pomponio, et al., 429 U.S. 10 (1976)

2 applies to all statements filed under penalty of perjury. Further, criminal liability extends to secondary actors who willfully aid or assist in the preparation of fraudulent statements. 7 Where there is the potential for tax avoidance but not tax evasion, a taxpayer is entitled to choose the most taxefficient alternative to structure a transaction. The Supreme Court has stated that [t]he legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.... But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. 8 In other words, while the taxpayer is entitled to avoid taxes, in order for the form of a tax avoidance transaction to be respected and not recharacterized or disregarded, it must satisfy certain statutory and common-law requirements, including that it have economic substance, that is not a sham, and that it is not a step transaction. III. Statutory and Judicial Restraints on Tax Avoidance: While the United States does not have a general anti-abuse rule, it does impose a number of judicial and statutory constraints on tax reduction strategies where the otherwise applicable statutory requirements would be met. Those of general application include the step transaction doctrine, economic substance, sham transaction doctrine and Section Step Transaction Doctrine: The step transaction doctrine may permit a series of formally separate steps to be amalgamated and treated as a single transaction if they are in substance integrated, interdependent, and focused toward a particular end result. 9 There are several competing articulations of this doctrine, a discussion of which is beyond the scope of this paper. 10 However, the IRS has stated its views on the application of the step transaction doctrine as follows: Threshold steps will not be disregarded under a step transaction analysis if such preliminary activity results in a permanent alteration of a previous bona fide business relationship. Thus, the substance of each of a series of steps will be recognized and the step transaction doctrine will not apply, if each such step demonstrates independent economic significance, is not subject to attack as a sham, and was undertaken for valid business purposes and not mere avoidance of taxes. 11 In addition, case law authorities have held that the IRS may not invent steps that did not take place in a step transaction analysis in order to create a more favorable result for the fisc Economic Substance, Sham Transaction and Substance Over Form: (2). 8 Id., citations omitted. 9 Rev. Rul , C.B See e.g., Mergers, Acquisitions, and Buyouts, Ginsburg Levine & Rocap, , Alternative Formulations of Step-Transaction Doctrine. 11 Id. citing Rev. Rul , C.B. 147; Rev. Rul , C.B. 120; Rev. Rul , C.B. 103; Rev. Rul , C.B. 128; Rev. Rul , C.B See e.g., Esmark, Inc. v. Commissioner, 90 T.C. 171 (1988), aff d 886 F.2d 1318 (7th Cir. 1989); Turner Broadcasting System, Inc. v. Commissioner/Tracinda Corp. v. Commissioner, 111 T.C. 315 (1998). See also Mergers, Acquisitions, and Buyouts, Ginsburg Levine & Rocap, Alternative Formulations of Step-Transaction Doctrine.

3 These related doctrines (and the step transaction doctrine) each spring from the seminal case of Gregory v. Helvering. 13 Gregory involved a taxpayer who formed a corporation for the sole purpose of utilizing the reorganization provisions of the Code to avoid the recognition of gain on a subsequent sale of stock transferred to such corporation. In rendering its decision for the IRS, the Supreme Court penned some of the most familiar phrases in U.S. tax jurisprudence: It is earnestly contended on behalf of the taxpayer that since every element required by [the statute] is to be found in what was done, a statutory reorganization was effected; and that the motive of the taxpayer thereby to escape payment of a tax will not alter the result or make unlawful what the statute allows....the legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.... But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. 14 * * * The whole undertaking, though conducted according to the terms of [the statute], was in fact an elaborate and devious form of conveyance masquerading as a corporation reorganization, and nothing else.... To hold otherwise would be to exalt artifice over reality and to deprive the statutory provision in question of all serious purpose. The sham transaction doctrine is a creature of case law, which denies beneficial tax treatment of transactions entered into primarily for tax avoidance, which lack a bona fide business purpose. The courts have identified two forms of sham transactions: sham in fact and sham in substance. The sham-in-fact analysis assesses whether anything other than the drafting of legal documents and the reduction of tax occurred. 15 A relatively meager showing of business activity will generally overcome this argument. In contrast, the sham-in-substance or economic substance doctrine requires a more robust showing of business purpose and/or non-tax profit motive. The sham in substance or economic substance doctrine, historically a creature of case law, was recently codified in 7701(o), which provides in part that in the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if: (A) the transaction changes in a meaningful way (apart from Federal income tax effects) the taxpayer s economic position, and U.S. 467 (1935). 14 Id., citations omitted. 15 Moline Properties, Inc. v. Commissioner, 63 S.Ct (1943), is emblematic of this line of authority. In Moline, a shareholder conveyed property to a corporation which was used as a security device. When the property was sold by the corporation, the IRS sought to tax the gains to the shareholder by disregarding the separate existence of the corporation. In holding for the taxpayer, the Supreme Court stated that [t]he doctrine of corporate entity fills a useful purpose in business life. Whether the purpose be to gain an advantage under the law of the state of incorporation or to avoid or to comply with the demands of creditors or to serve the creator s personal or undisclosed convenience, so long as that purpose is the equivalent of business activity or is followed by the carrying on of business by the corporation, the corporation remains a separate taxable entity.

4 4 (B) the taxpayer has a substantial purpose (apart from Federal income tax effects) for entering into such transaction. 16 For purposes of this provision, the term economic substance doctrine means the common law doctrine under which tax benefits with respect to a transaction are not allowable if the transaction does not have economic substance or lacks a business purpose. 17 In this regard, the Joint Committee on Taxation has stated that if the realization of the tax benefits of a transaction is consistent with the Congressional purpose or plan that the tax benefits were designed by Congress to effectuate, it is not intended that such tax benefits be disallowed. 18 The first prong of the economic substance inquiry questions whether a reasonable possibility of a profit exists. 19 The focus of this inquiry should be on the particular transaction that produced the tax benefit, not on collateral transactions. 20 Economic risk is also an important element of the objective economic substance inquiry. 21 The second prong of the inquiry questions whether the taxpayer has a business purpose for entering into the transaction. The Tax Court has phrased this inquiry as whether a taxpayer approached the transaction in a prudent business-like manner with good-faith business reasons for entering into the transaction. 22 Similarly, the 11 th Circuit stated in United Parcel Service of America Inc. v. Commissioner 23 that [e]ven if the transaction has economic effects, it must be disregarded if it has no business purposes and its motive is tax avoidance.... A business purpose does not mean a reason for a transaction that is free of tax considerations. Rather, a transaction has a business purpose when we are talking about a going concern like UPS, as long as it figures in a bona-fide, profit-seeking business.... The transaction [considered in that case] simply altered the form of an (o)(1) (o)(5)(A). Further, the determination of whether the economic substance doctrine is relevant to a transaction is to be made in the same manner as if 7701(o) had never been enacted. Therefore, 7701(o)(5) explicitly provides that the prior case law with respect to economic substance is still applicable to determine whether this section is relevant and to apply the doctrine, with the exception that any case law which requires only one prong of the economic substance test (e.g., either a meaningful change in economic position or a substantial, non-tax business purpose) is overruled. That is, the codification of economic substance doctrine requires that both prongs be satisfied, and therefore any case which only requires one prong has limited applicability for tax years 2010 and forward. 18 Joint Committee Staff, Technical Explanation of the Revenue Provisions of the Reconciliation Act of 2010, as Amended in Combination With the Patient Protection and Affordable Care Act (JCX-18 10) (March 21, 2010), See e.g., Klamath Strategic Investment Fund v. United States, 103 AFTR 2d (5th Cir. 2009); Compaq Computer Corporation and Subsidiaries v. Commissioner, 277 F.3d 778 (5 th Cir. 2001); Rice s Toyota World, 752 F.2d 89 (4th Cir. 1985). 20 Klamath Strategic Investment Fund v. United States, 103 AFTR 2d (5 th Cir. 2009). 21 See e.g., Klamath Strategic Investment Fund v. United States, 103 AFTR 2d (5th Cir. 2009); United Parcel Service of America Inc. v. Commissioner, 254 F.3d 1014 (11th Cir. 2001). 22 See e.g., Levy v. Commissioner, 91 T.C. 838, 854 (1988) F.3d 1014 (11th Cir. 2001).

5 5 existing, bona fide business, and... therefore falls in with those that find an adequate business purpose to neutralize any tax-avoidance motive. 24 Much like the sham transaction analysis, the substance over form doctrine states that tax liability is based on the economic substance of the transaction, and not the particular form used. 25 The primary goal of this doctrine is to target situations where the taxpayer mischaracterizes a transaction in order to receive beneficial tax treatment. Under this doctrine, the courts are empowered to look past the form used to determine the proper tax liabilities. 3. Section 269: In general, 269(a) provides that if a person acquires control of a corporation, or a corporation acquires property of another corporation, which is not controlled by the acquiring corporation or its stockholders, and the tax basis of which is determined on a carryover basis, then if the principal purpose for which such acquisition was made is evasion or avoidance of Federal income tax by securing the benefit of a deduction, credit, or other allowance which such person or corporation would not otherwise enjoy, the Secretary may disallow such deduction, credit, or other allowance. This provision has not been proven to be a particularly useful tool for the IRS to deter tax avoidance transactions, as it has strict threshold requirements which must be met and is riddled with judicial exceptions. As a result, it has become more of a trap for the unwary as tax avoidance transactions can often be planned to avoid its restrictions. For example, a recent Tax Court case upheld the taxpayer s reporting of a transaction, stating that section 269 applies only if tax evasion or avoidance is the principal purpose for the acquisition. 26 In the context of section 269, principal purpose means that the evasion or avoidance purpose must exceed in importance any other purpose To prevail, petitioners need prove only that the avoidance or evasion of tax was not the principal purpose for the acquisition Petitioners were entitled to arrange their affairs so as to minimize their tax liability by means which the law permits 27 IV. Cross-Border and Abusive Transaction Reporting Requirements: There are numerous filing requirements that apply to cross-border transactions, designed to alert the IRS to the existence and financial consequences of such transactions. These filing requirements include the reporting of transactions between controlled foreign subsidiaries or foreign partnerships and their U.S. shareholders/members 28, the reporting of transactions between foreign parents and their controlled domestic subsidiaries 29, the reporting of transactions subject to withholding 30 and the reporting and identification of tax 24 Id.; see, e.g., Ferguson, et al. v. Commissioner, 29 F.3d 98 (2d Cir. 1994); ACM Partnership v. Commissioner, T.C. Memo ; Coltec Industries, Inc. v. United States, 454 F.3d (Fed. Cir. 2006). 25 Frank Lyon Co. v. United States, 435 U.S. 561, 573 (1978). 26 Citing Capri, Inc. v. Commissioner, 65 T.C. 162, 178 (1975); Plains Petroleum Co. v. Commissioner, T.C. Memo ; Treas. Reg (a). 27 K.H. Love, T.C. Memo Forms 5471 and Form 5472.

6 treaty benefits and beneficiaries. 31 As discussed below, these filing requirements are generally subject to failure to file penalties and the possibility that the statute of limitations will be extended in the event of a failure to file. In addition, the IRS has promulgated reportable transactions rules. These rules are designed to identify transactions that result in a tax benefit and are perceived to be abusive or which are considered to have the potential for abuse. However, the fact that a transaction is a reportable transaction does not affect the legal determination of whether the taxpayer s treatment of the transaction is proper. 32 Treas. Reg provides that every taxpayer that has participated in a reportable transaction must file a disclosure statement with its tax return for each taxable year for which the taxpayer participates in a reportable transaction. A copy of the disclosure statement must be sent to Office of Tax Shelter Analysis at the same time that the disclosure statement is required to be filed by the taxpayer. A reportable transaction is a transaction which is: 1. The same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified as a listed transaction ; 2. A transaction that is offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid an advisor a minimum fee 33 ; 3. A transaction with contractual protection (i.e., one in which the taxpayer has the right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained or for which fees are contingent on the taxpayer s realization of tax benefits from the transaction); 4. Certain loss transactions, including any transaction resulting in the taxpayer claiming a loss under 165 of at least $10 million in any single taxable year or $20 million in any combination of taxable years for corporations 34 ; or 5. Transactions that are the same as or substantially similar to one of the types of transactions that the IRS has identified. 35 Significant penalties can apply for failure to disclose such participation, and publicly-traded companies can be required to disclose any such penalty on their financial statements. Section 6111 also requires each material advisor with respect to any reportable transaction to make a return identifying and describing the transaction, describing any potential tax benefits expected to result from the 6 30 Forms 1042 and 1042-S. 31 Forms W-8BEN (and variants) and See Treas. Reg (a). 33 Generally, $250,000 for a transaction if the taxpayer is a corporation and $50,000 for all other transactions unless the taxpayer is a partnership or trust, all of the owners or beneficiaries of which are corporations. 34 Note, however, that losses derived from the sale or exchange of assets with a qualifying basis are not reportable transactions. See Rev. Proc , C.B See Treas. Reg (b).

7 transaction, and providing such other information as the IRS may prescribe. A material advisor means any person who provides any material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and who directly or indirectly derives gross income in excess of a threshold amount. 36 Further, each material advisor must prepare and maintain a separate list for each reportable transaction describing the transaction and providing certain identifying information with regard to the participants and the status of filing requirements as well as the opinions and other supporting documentation provided by such advisor. 37 V. Civil Penalty Regimes: There are a number of civil penalty regimes designed to ensure the accurate reporting of transactions. Section 6662(a) imposes a 20 percent penalty 38 on the portion of an underpayment attributable to, inter alia, negligence or disregard of rules or regulations; a substantial understatement of income tax; or a substantial valuation overstatement. This penalty is increased for gross valuation misstatements to 40% of the understatement. In addition, the 40% penalty applies in the case of undisclosed noneconomic substance transactions and for undisclosed foreign financial asset understatements. 39 Further, there is a separate penalty regime for reportable transaction understatements with increases for non-disclosure 40 and for underpayments due to fraud. 41 Notwithstanding, no accuracy-related penalty may be imposed on any portion of an underpayment if there was reasonable cause for, and the taxpayer acted in good faith with respect to, such portion. 42 In addition, in many cases, the penalties for disregard of rules or regulations and for a substantial understatement of income tax may be avoided by adequately disclosing certain information. 43 However, the penalties for negligence and for a substantial (or gross) valuation misstatement may not be avoided by disclosure. 44 In addition to this generalized penalty regime, most reporting provisions are accompanied by failure to file penalties and the possibility that the statute of limitations will not close in the event of a failure to file. For 7 36 $50,000 in the case of advice provided to natural persons, and $250,000 in any other case. 37 See 6112; Treas. Reg This percentage can be increased to 40% in the case of gross valuation misstatements and certain other undisclosed transactions. See 6662(h), (g) and (i); Treas. Reg (b)(2) (h) and (i). 40 See 6662A. 41 See See Treas. Reg ; 6664(c). In the case of transfer pricing adjustments, this rule does not apply. In lieu thereof, 6662(e)(3) provides that taxpayers may avoid penalties on a redetermination of a transfer price if the taxpayer determined such price in accordance with a specific pricing method (as provided under the 482 regulations) and that the taxpayer s use of such method was reasonable, the taxpayer has documentation in existence as of the time of filing the return which sets forth the determination of such price in accordance with such a method, and the taxpayer provides such documentation to the IRS within 30 days of a request. 43 See Treas. Reg ; see also Treas. Reg (c) and (e) and (f). 44 Id.

8 example, 6651 provides a generalized failure to file penalty, providing for additions to tax of 5 percent of the amount of tax due for each month or fraction thereof during which such failure continues, not to exceed 25 percent in the aggregate. In the case of information returns, the penalties are generally stated as a dollar amount per return which is not filed. For example, 6038, imposing information return requirements on U.S. shareholders of controlled foreign corporations, provides that if any person fails to furnish, within the time prescribed, any information with respect to any foreign business entity required under this section, such person shall pay a penalty of $10,000 for each annual accounting period with respect to which such failure exists. 45 In addition to penalties for a failure to file, 6501(c)(3) provides that tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. In other words, the general statute of limitations does not apply. Further, in the case of a failure to file certain foreign information returns, the time for assessment of any tax imposed by this title with respect to any tax return, event, or period to which such information relates does not expire before the date which is 3 years after the date on which the IRS is furnished the information required to be reported. 46 Similar extensions of the statute of limitations apply in the case of a failure to report a listed transaction. 47 VI. Regulation of Tax Advisors: The Treasury Department has promulgated a set of rules governing practice before the IRS, known as Circular 230. These rules were substantially strengthened after a number of high-profile corporate and individual tax shelters were identified and the IRS began litigating such cases approximately a decade ago. These rules address standards by which tax advisors must conduct their practice, including specific requirements as to the competence of tax advisors to render the opinion at issue. In addition, Circular 230 addresses the standards and level of diligence that tax advisors must exercise in rendering covered opinions 48 and allows for sanctions when a tax practitioner is out of compliance with its standards. A practitioner providing a covered opinion must use reasonable efforts to identify and ascertain the facts, must not base the opinion on any unreasonable factual assumptions or representations, must relate the applicable law to the relevant facts, must not assume the favorable resolution of any significant Federal tax issue and must not draft the 8 45 See 6038(a). Foreign tax credits can also be reduced for failure to file and additional penalties can be applied for continued failure to file after notification by the IRS. 46 See 6501(c)(8). 47 See 6501(c)(10). 48 A covered opinion is written advice by a practitioner concerning one or more Federal tax issues arising from: A transaction that is the same as or substantially similar to a listed transaction (discussed above); any arrangement, the principal purpose of which is the avoidance or evasion of any tax imposed; or any arrangement, a significant purpose of which is the avoidance or evasion of Federal tax if the written advice is a reliance opinion; a marketed opinion; is subject to conditions of confidentiality; or is subject to contractual protection. See Treas. Reg Written advice is a reliance opinion if the advice concludes at a confidence level of at least more likely than not (a greater than 50 percent likelihood) that one or more significant Federal tax issues would be resolved in the taxpayer s favor. However, written advice, other than advice concerning listed transactions or principal purpose transactions, is not treated as a reliance opinion if the practitioner prominently discloses in the written advice that it was not intended or written by the practitioner to be used, and that it cannot be used by the taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Id.

9 opinion with internally inconsistent legal analyses or conclusions. 49 Further, the opinion generally must consider all significant Federal tax issues and provide the practitioner s conclusion as to the likelihood that the taxpayer will prevail on the merits with respect to each significant federal tax issue considered in the opinion (without taking into account the possibility that a tax return will not be audited, that an issue will not be raised on audit, or that an issue will be resolved through settlement if raised). 50 The Treasury Department may censure, suspend, or disbar any practitioner from practice before the Internal Revenue Service if the practitioner is shown to be incompetent or disreputable, fails to comply with any portion of the prohibited conduct standards, or with intent to defraud, willfully and knowingly misleads or threatens a client or prospective client. In addition, Treasury may impose a monetary penalty on any practitioner who engages in conduct subject to sanction under Circular 230 and his employer or firm if it knew, or reasonably should have known of such conduct VII. Advance Rulings: There are a number of advance rulings available in the U.S., including pre-filing agreements, private letter rulings and advance pricing agreements. However, there are also a number of areas in which the IRS refuses to rule. In the case of private letter rulings, the Treasury Department issues an annual Revenue Procedure in which it outlines no-ruling areas. Advance Pricing Agreements require inter-governmental agreement if concluded on a bi-lateral basis. Tax authorities may challenge a transaction despite the existence of a ruling, but generally only when there has been a misrepresentation of material fact. For example, I.R.M states that a Private Letter Ruling ( PLR ) may be revoked or modified if it is found to be in error or not in accord with the current views of the IRS. However, a PLR will generally not be revoked or modified retroactively provided that: a. There has been no change in the applicable law; b. The letter ruling was originally issued for a proposed transaction; and c. The taxpayer directly involved in the letter ruling acted in good faith in relying on the letter ruling, and revoking or modifying the letter ruling retroactively would be to the taxpayer s detriment. 52 In contradistinction, the revocation or modification of a letter ruling may be applied retroactively to the taxpayer if there has been a misstatement or omission of controlling facts, the facts at the time of the transaction are 49 See Treas. Reg (c). 50 Id. In certain circumstances, however, a practitioner may provide an opinion that considers less than all of the significant Federal tax issues (a limited scope opinion) if the practitioner and the taxpayer agree that the scope of the opinion and the taxpayer s potential reliance on the opinion for purposes of avoiding penalties that may be imposed on the taxpayer are limited to the Federal tax issue(s) addressed in the opinion, the opinion is not advice concerning listed transactions, the transaction does not have a principal purpose of avoidance or evasion, is not a marketed opinion, and the opinion includes appropriate disclosure. 51 See Treas. Reg I.R.M

10 materially different from the controlling facts on which the letter ruling was based, or the transaction involves a continuing action or series of actions and the controlling facts change during the course of the transaction. 53 In the case of an APA 54, if the taxpayer complies with the terms and conditions of the APA, the IRS will generally not contest the application of the transfer pricing method ( TPM ) to the subject matter of the APA. 55 However, the IRS may cancel or revoke an APA due to the taxpayer s misrepresentation, mistake as to a material fact, failure to state a material fact, failure to file a timely annual report, or lack of good faith compliance with the terms and conditions of the APA. 56 The APA Program recently cancelled two APAs with Eaton Corporation. According to news reports, Eaton has requested that the U.S. Tax Court order partial summary judgment in favor of Eaton, on the basis that the two APAs it entered into with the IRS are binding contracts and that the IRS must prove it was entitled to cancel them. The company is seeking to enforce the terms of the and APAs, the cancellation of which allowed the IRS to make transfer pricing adjustments of $368.6 million for ******************************************************************************************************************* IRS Circular 230 Disclosure: To comply with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained herein (including any attachments), unless specifically stated otherwise, is not intended or written to be used, and cannot be used, for the purposes of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter herein. ******************************************************************************************************************* 53 I.R.M An APA is an agreement between a taxpayer and the IRS in which the parties set forth, in advance of controlled transactions, the best transfer pricing method ( TPM ) for specified controlled transactions ( covered transactions ) within the APA term. See Rev. Proc , I.R.B. 1, 2.04; Rev. Proc , I.R.B. 1, Id. at Bloomberg BNA Transfer Pricing Report: News Archive 2012.