Internal Revenue Bulletin 2018-19 (PDF rendition): IRS Announcements

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# INTERNAL REVENUE BULLETIN

IRS

Bulletin No. 2018-19
May 07, 2018

## HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

### Administrative

#### Announcement 2018-08, page 552.

This Announcement is issued pursuant to § 521(b) of Pub. L.
106-170, the Ticket to Work and Work Incentives Improve-
ment Act of 1999, which requires the Secretary of the Trea-
sury to report annually to the public concerning advance pric-
ing agreements (APAs) and the Advance Pricing and Mutual
Agreement Program (APMA Program), formerly known as the
Advance Pricing Agreement Program (APA Program). This nine-
teenth report describes the experience, structure, and activi-
ties of the APMA Program during calendar year 2017.

### Employee Plans

#### Notice 2018-34, page 549.

This notice sets forth updates on the corporate bond monthly
yield curve, the corresponding spot segment rates for April
2018 used under § 417(e)(3)(D), the 24-month average seg-
ment rates applicable for April 2018, and the 30-year Treasury
rates, as reflected by the application of § 430(h)(2)(C)(iv).

### The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

#### Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.

Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

##### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

##### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (Enforcement).

##### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

#### Part III. Administrative, Procedural, and Miscellaneous

##### Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

###### Notice 2018-34

This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used un-
der § 417(e)(3), and the 24-month average
segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the interest
rate on 30-year Treasury securities under
§ 417(e)(3)(A)(ii)(II) as in effect for plan
years beginning before 2008 and the 30-
year Treasury weighted average rate un-
der § 431(c)(6)(E)(ii)(I).

#### YIELD CURVE AND SEGMENT RATES

Section 430 specifies the minimum
funding requirements that apply to single-
employer plans (except for CSEC plans
under § 414(y)) pursuant to § 412. Section

430(h)(2) specifies the interest rates that
must be used to determine a plan's target
normal cost and funding target. Under this
provision, present value is generally de-
termined using three 24-month average
interest rates ("segment rates"), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.1 However, an elec-
tion may be made under § 430(h)(2)(D)
(ii) to use the monthly yield curve in place
of the segment rates.

Notice 2007-81, 2007-44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, and
the 24-month average corporate bond seg-
ment rates used to compute the target nor-
mal cost and the funding target. Consis-
tent with the methodology specified in
Notice 2007-81, the monthly corporate
bond yield curve derived from March
2018 data is in Table 2018-3 at the end of

this notice. The spot first, second, and
third segment rates for the month of
March 2018 are, respectively, 2.91, 3.99,
and 4.43.

The 24-month average segment rates de-
termined under § 430(h)(2)(C)(i) through
(iii) must be adjusted pursuant to § 430(h)
(2)(C)(iv) to be within the applicable mini-
mum and maximum percentages of the cor-
responding 25-year average segment rates.
For plan years beginning before 2021, the
applicable minimum percentage is 90% and
the applicable maximum percentage is
110%. The 25-year average segment rates
for plan years beginning in 2016, 2017, and
2018 were published in Notice 2015-61,
2015-39 I.R.B. 408, Notice 2016-54,
2016-40 I.R.B. 429, and Notice 2017-50,
2017-41 I.R.B. 280, respectively.

#### 24-MONTH AVERAGE CORPORATE BOND SEGMENT RATES

The three 24-month average corporate
bond segment rates applicable for April
2018 without adjustment for the 25-year
average segment rate limits are as follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

Applicable Month

First Segment

Second Segment

Third Segment

April 2018

1.94

3.66

4.44

Based on § 430(h)(2)(C)(iv), the 24-
adjusted to be within the applicable min-
imum and maximum percentages of the

month averages applicable for April 2018,

corresponding 25-year average segment
rates, are as follows:

For Plan Years Beginning In

Adjusted 24-Month Average Segment Rates

Applicable Month

First Segment

Second Segment

Third Segment

2017

April 2018

4.16

5.72

6.48

2018

April 2018

3.92

5.52

6.29

#### 30-YEAR TREASURY SECURITIES INTEREST RATES

Section 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation de-

scribed in § 431(c)(6)(A), based on the
plan's current liability. Section 431(c)(6)
(E)(ii)(I) provides that the interest rate
used to calculate current liability for this
purpose must be no more than 5 percent
above and no more than 10 percent below
the weighted average of the rates of inter-
est on 30-year Treasury securities during

the four-year period ending on the last day
before the beginning of the plan year.
Notice 88-73, 1988-2 C.B. 383, provides
guidelines for determining the weighted
average interest rate. The rate of interest
on 30-year Treasury securities for March
2018 is 3.09 percent. The Service deter-
mined this rate as the average of the daily

1Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).

determinations of yield on the 30-year
Treasury bond maturing in February 2048.
For plan years beginning in April 2018,

the weighted average of the rates of inter-
est on 30-year Treasury securities and the

permissible range of rates used to calcu-
late current liability are as follows:

For Plan Years Beginning In

Treasury Weighted Average Rates

30-Year Treasury Weighted Average

Permissible Range 90% to 105%

April 2018

2.84

2.56 to 2.98

##### MINIMUM PRESENT VALUE SEGMENT RATES

In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month
average. Notice 2007-81 provides guide-
lines for determining the minimum pres-
ent value segment rates. Pursuant to that
notice, the minimum present value seg-

ment rates determined for March 2018 are
as follows:

Month

Minimum Present Value Segment Rates

First Segment

Second Segment

Third Segment

March 2018

2.91

3.99

4.43

###### DRAFTING INFORMATION

The principal author of this notice is
Tom Morgan of the Office of the Associ-

ate Chief Counsel (Tax Exempt and Gov-
ernment Entities). However, other person-
nel from the IRS participated in the
development of this guidance. For further

information regarding this notice, contact
Mr. Morgan at 202-317-6700 or Tony
Montanaro at 202-317-8698 (not toll-free
numbers).

Maturity

Table 2018-3 Monthly Yield Curve for March 2018 Derived from March 2018 Data

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

0.5

2.37

20.5

4.29

40.5

4.44

60.5

4.49

80.5

4.52

1.0

2.53

21.0

4.30

41.0

4.44

61.0

4.50

81.0

4.52

1.5

2.68

21.5

4.31

41.5

4.45

61.5

4.50

81.5

4.52

2.0

2.81

22.0

4.31

42.0

4.45

62.0

4.50

82.0

4.52

2.5

2.92

22.5

4.32

42.5

4.45

62.5

4.50

82.5

4.52

3.0

3.01

23.0

4.32

43.0

4.45

63.0

4.50

83.0

4.52

3.5

3.10

23.5

4.33

43.5

4.45

63.5

4.50

83.5

4.52

4.0

3.17

24.0

4.33

44.0

4.45

64.0

4.50

84.0

4.52

4.5

3.24

24.5

4.34

44.5

4.46

64.5

4.50

84.5

4.52

5.0

3.31

25.0

4.34

45.0

4.46

65.0

4.50

85.0

4.52

5.5

3.38

25.5

4.35

45.5

4.46

65.5

4.50

85.5

4.53

6.0

3.45

26.0

4.35

46.0

4.46

66.0

4.50

86.0

4.53

6.5

3.51

26.5

4.36

46.5

4.46

66.5

4.50

86.5

4.53

7.0

3.57

27.0

4.36

47.0

4.46

67.0

4.50

87.0

4.53

7.5

3.63

27.5

4.37

47.5

4.47

67.5

4.51

87.5

4.53

8.0

3.69

28.0

4.37

48.0

4.47

68.0

4.51

88.0

4.53

8.5

3.75

28.5

4.38

48.5

4.47

68.5

4.51

88.5

4.53

9.0

3.80

29.0

4.38

49.0

4.47

69.0

4.51

89.0

4.53

9.5

3.84

29.5

4.38

49.5

4.47

69.5

4.51

89.5

4.53

10.0

3.89

30.0

4.39

50.0

4.47

70.0

4.51

90.0

4.53

10.5

3.93

30.5

4.39

50.5

4.47

70.5

4.51

90.5

4.53

11.0

3.97

31.0

4.39

51.0

4.47

71.0

4.51

91.0

4.53

# Table 2018-3 Monthly Yield Curve for March 2018 Derived from March 2018 Data

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

Maturity

Yield

11.5

4.00

31.5

4.40

51.5

4.48

71.5

4.51

91.5

4.53

12.0

4.03

32.0

4.40

52.0

4.48

72.0

4.51

92.0

4.53

12.5

4.06

32.5

4.40

52.5

4.48

72.5

4.51

92.5

4.53

13.0

4.09

33.0

4.41

53.0

4.48

73.0

4.51

93.0

4.53

13.5

4.11

33.5

4.41

53.5

4.48

73.5

4.51

93.5

4.53

14.0

4.14

34.0

4.41

54.0

4.48

74.0

4.51

94.0

4.53

14.5

4.15

34.5

4.41

54.5

4.48

74.5

4.51

94.5

4.53

15.0

4.17

35.0

4.42

55.0

4.48

75.0

4.51

95.0

4.53

15.5

4.19

35.5

4.42

55.5

4.48

75.5

4.52

95.5

4.53

16.0

4.20

36.0

4.42

56.0

4.49

76.0

4.52

96.0

4.53

16.5

4.22

36.5

4.42

56.5

4.49

76.5

4.52

96.5

4.53

17.0

4.23

37.0

4.43

57.0

4.49

77.0

4.52

97.0

4.53

17.5

4.24

37.5

4.43

57.5

4.49

77.5

4.52

97.5

4.53

18.0

4.25

38.0

4.43

58.0

4.49

78.0

4.52

98.0

4.53

18.5

4.26

38.5

4.43

58.5

4.49

78.5

4.52

98.5

4.54

19.0

4.27

39.0

4.44

59.0

4.49

79.0

4.52

99.0

4.54

19.5

4.28

39.5

4.44

59.5

4.49

79.5

4.52

99.5

4.54

20.0

4.29

40.0

4.44

60.0

4.49

80.0

4.52

100.0

4.54

# Part IV. Items of General Interest ANNOUNCEMENT AND REPORT CONCERNING ADVANCE PRICING AGREEMENTS

Announcement 2018-08

March 30, 2018

This Announcement is issued pursuant to § 521(b) of Pub. L. 106-170, the Ticket to Work and Work Incentives Improvement Act
of 1999, which requires the Secretary of the Treasury to report annually to the public concerning advance pricing agreements (APAs)
and the Advance Pricing and Mutual Agreement Program (APMA Program), formerly known as the Advance Pricing Agreement
Program (APA Program). The first report covered calendar years 1991 through 1999. Subsequent reports covered each calendar year
2000 through 2016 separately. This nineteenth report describes the experience, structure, and activities of the APMA Program during
calendar year 2017. It does not provide guidance regarding the application of the arm's length standard.

Part I of this report includes information on the structure, composition, and operation of the APMA Program; Part II presents
statistical data; and Part III includes general descriptions of various elements of the APAs executed in 2017, including types of
transactions covered, transfer pricing methods used, and completion time.

John C.C. Hughes
Director, Advance Pricing and Mutual Agreement Program

# Part I. The APMA Program - Structure, Composition, and Operation [Pub. L. 106-170 § 521(b)(2)(A)]

In February 2012, the former APA Program was moved from the Office of Chief Counsel to the Office of Transfer Pricing
Operations2 within the Large Business and International Division of the IRS and combined with the U.S. Competent Authority staff
responsible for transfer pricing cases, thereby forming the APMA Program.

As of December 29, 2017, the APMA Program included 55 team leaders, 17 economists, and 10 senior managers organized into 10
groups (7 team leader groups and 3 economist groups). The APMA Program's main office is in Washington, DC, and it also has a
significant presence in San Francisco and the Los Angeles area.

On August 31, 2015, new revenue procedures governing MAP and APA applications were published in 2015-35 I.R.B. on pages
236 and 263, respectively. Revenue Procedure (Rev. Proc.) 2015-41 provides guidance and instructions on filing APA requests as
well as guidance and information on the administration of APAs. Rev. Proc. 2015-41 updates and supersedes Rev. Proc. 2006-9,
2006-1 C.B. 278, as modified by Rev. Proc. 2008-31, 2008-1 C.B. 1133, which is also superseded. Rev. Proc. 2015-40 provides
procedures and guidance on requesting assistance from the U.S. Competent Authority where the taxpayer believes that the actions
of the United States or a treaty country result or will result in the taxpayer being subject to taxation not in accordance with the
applicable U.S. tax treaty. Rev. Proc. 2015-40 updates and supersedes Rev. Proc. 2006-54, 2006-2 C.B. 1035.

The 2009 model APA agreement appears in this report as Appendix 1. In the fall of 2017, APMA solicited comments on a proposed
major revision. A list of primary APMA contacts is available at https://www.irs.gov/businesses/corporations/apma-contacts.

2In 2017, Transfer Pricing Operations became Treaty & Transfer Pricing Operations (TTPO).

# Part II. APMA Program Statistical Data [Pub. L. 106-170 § 521(b)(2)(C)(i-viii)]

Table 1: APA Applications Filed § 521(b)(2)(C)(i)

Unilateral

Bilateral

Multilateral

Total

Filed 1991-19993

401

Filed 2000-2016

556

1278

1844

Filed in 2017

101

Total Filed 1991-2017

2346

Applications Filed 2008-2017

200

150

100

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

The table above illustrates the number of complete applications filed per year. As of December 31, 2017, APMA had also received
37 user fee filings that were not yet accompanied by substantially complete APA applications, in addition to the 101 complete APA
applications.

Bilateral APAs Filed by Country 2017

All Other Countries
22%

Germany
5%

Japan
38%

Switzerland
6%

Canada
8%

India
21%

3The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number of applications for those years by submission type, so the cumulative
totals cannot be reported in that manner.

Table 2: Executed and Pending APAs § 521(b)(2)(C)(ii-vi)

Unilateral

Bilateral

Multilateral

Total

Total Executed 1991-2016

560

1,023

1,597

Total Executed in 2017

116

Total Executed 1991-2017

590

1,108

1,713

Total Pending as of 12/31/2017

321

386

Renewals Executed in 2017

Renewals Pending

133

164

APAs Executed 2008-2017

150

100

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Of the 116 agreements executed in 2017, 40 percent were new APAs (i.e., not a renewal of a prior APA). This is consistent with
prior years.

All Other Countries
8%

Bilateral APAs
Executed by Country 2017

Germany
4%

Switzerland
6%

Korea
9%

Japan
57%

Canada
16%

As the chart above illustrates, nearly three quarters of the total number of bilateral APAs executed in 2017 involved the United States
entering into mutual agreements with either Japan or Canada.

# Pending APAs 2008-2017

500

400

300

200

100

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

The number of pending APAs has continued to decline since 2015 with Japan, India, and Canada accounting for more than half of
all pending bilateral APAs.

All Other Countries
17%

Bilateral APAs
Pending by Country 2017

Mexico
4%

Japan
30%

China
4%

Korea
6%

Germany
8%

Canada
12%

India
14%

Table 3: APAs Revoked or Cancelled and Applications Withdrawn § 521(b)(2)(C)(vii)

Unilateral

Bilateral

Multilateral

Total

Revoked or Cancelled in 2017

Total Revoked or Cancelled 1991-20174

Applications Withdrawn in 2017

Total Applications Withdrawn 1991-20175

232

5The first APA Statutory Report, which compiled APA data from 1991-1999, did not report the cumulative number of applications for those years by submission type, so the cumulative
totals cannot be reported in that manner.

Table 4: APAs Finalized or Renewed6 by Industry § 521(b)(2)(C)(viii)

Industry

Manufacturing

Wholesale/Retail Trade

Services

Management

Finance, Insurance, and Real Estate

All Other Industries

APAs by Industry
Finalized or Renewed 2017

All Other Industries
3%

Finance, Insurance
and Real Estate
3%

Manufacturing
41%

Management
5%

Services
10%

Wholesale/Retail
Trade
37%

Table 4a: Manufacturing APAs Finalized or Renewed 2017

Manufacturing

Computer and Electronic Products

Chemical

Transportation Equipment

Miscellaneous Manufacturing7

All Other Types of Manufacturing

6APAs finalized or renewed are the same as APAs executed.

7Miscellaneous Manufacturing is NAICS code 339.

Manufacturing APAs Finalized or Renewed 2017

Computer and
Electronic Products
19%

Chemical
19%

Transportation
Equipment
17%

All Other
Manufacturing
25%

Miscellaneous
Manufacturing
21%

Table 4b: Wholesale/Retail Trade APAs Finalized or Renewed 2017

Wholesale/Retail Trade

Merchant Wholesalers, Durable Goods

Merchant Wholesalers, Nondurable Goods

All Other Types of Other Wholesale/Retail Trade

Wholesale/Retail Trade APAs
Finalized or Renewed 2017

All Other
Wholesalers
7%

Merchant
Wholesalers,
Nondurable Goods
16%

Merchant
Wholesalers, Durable
Goods
77%

# Part III. General Descriptions of APAs Executed in 2017 [Pub. L. 106-170 § 521(b)(2)(D) and (E)]

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

Relationships between Controlled Parties in 2017
U.S. Parent & Non-
U.S. Subsidiary
21%

Sister Companies
18%

Non-U.S. Parent &
U.S. Subsidiary
59%

All Other
Relationships
2%

As in prior years, more than half of the APAs executed in 2017 involved transactions between non-U.S. parents and U.S. subsidiaries.

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

Types of Covered Transactions in 2017

Sale of Tangible
Property into the U.S.
28%

Sale of Tangible
Property from the
U.S.
16%

Provision of Services
by a Non-U.S. Entity
16%

Use of Intangible
Property by a U.S.
Entity
14%

Provision of Services
by a U.S. Entity
19%

Use of Intangible
Property by a Non-
U.S. Entity
7%

Although most of the transactions8 covered in APAs executed in 2017 involve the sale of tangible goods and the provision of
services, over 20% covered the use of intangible property, which can be among the most challenging in APMA's inventory. The IRS
continues to seek opportunities to work with taxpayers and treaty partners to provide prospective certainty, wherever appropriate, for
transactions involving the use of intangible property.

In the majority of APAs, the covered transactions involve numerous business functions and risks. For instance, with respect to
functions, APAs involving manufactured products typically involve a controlled group that conducts research and development
(R&D), engages in product design and engineering, manufactures the product, markets and distributes the product, and performs
support functions such as legal, finance, and human resources services. Regarding risks, the controlled group may assume a variety
of risks, including market risks, R&D risks, financial risks, credit and collection risks, product liability risks, and general business
risks. In the APA evaluation process, a significant amount of time and effort is devoted to understanding how the functions and risks
are allocated amongst the controlled group of companies that are party to the covered transactions. Generally, for methods
requiring selection of a tested party, the tested party that is chosen will be the least complex of the controlled taxpayers.

8APAs often cover more than one type of transaction.

Types of Tested Parties in 2017

U.S. Distributor
52%

Non-U.S. Service
Provider
3%

Non-U.S. Distributor
10%

U.S. Service Provider
19%

Non-U.S.
Manufacturer
5%

U.S. Manufacturer
11%

Over three quarters of the tested parties in 20179 were U.S. distributors, U.S. manufacturers, or U.S. service providers.

### Transfer Pricing Methods Used

#### § 521(b)(2)(D)(iv)

Consistent with prior years, in 2017, the primary transfer pricing method (TPM) used for both the sale of tangible property and the
use of intangible property was the comparable profits method/transactional net margin method (CPM/TNMM). The CPM/TNMM
was used for 87 percent of transfers of tangible and intangible property while all other methods combined accounted for the other
13 percent of such transactions.

For covered transfers of tangible and intangible property that used the CPM/TNMM, the operating margin (OM) continues to be the
most common profit level indicator (PLI) used to benchmark results. It was used 85 percent of the time. Other PLIs, such as the Berry
Ratio and return on assets or capital employed, made up the other 15 percent. As used here, OM means the ratio of operating profits
to sales,10 and "Berry Ratio" means the ratio of gross profit to operating expenses.11 Most services transactions (86 percent) also used
the CPM/TNMM, and the OM was also the most common PLI (used 62 percent of the time).12

##### Sources of Comparables, Comparables Selection Criteria, and Nature of Adjustments to Comparables or Tested Party Data

#### § 521(b)(2)(D)(v-vii)

For the APAs executed in 2017 that used external comparable data in the analysis, the most widely used data source for comparables
was Standard and Poor's Compustat/Capital IQ database. Other sources were also used in appropriate cases (e.g., where the tested
party was not the U.S. entity or where transaction-based methods were applied). The other more commonly used databases are listed
in the table below.

Table 5: Sources of Comparable Data

Avention (formerly known as OneSource)

Mergent

Bloomberg

Orbis

Disclosure

Recap

Global Vantage

RoyaltySource

ktMINE

RoyaltyStat

LoanConnector

Worldscope

In making comparability adjustments, the standard balance sheet adjustments identified in Treas. Reg. § 1.482-1(d) and § 1.482-5(c),
including adjustments for differing amounts of payables, receivables, and inventory, were made in the majority of cases. Where
appropriate, adjustments for different accounting practices were made to convert from LIFO to FIFO inventory accounting, and a
small number of cases also involved the accounting reclassification of expenses, e.g., from COGS to operating expenses.

9Not all APAs executed in 2017 involved a tested party.

10See Treas. Reg. § 1.482-5(b)(4)(ii)(A).

11See Treas. Reg. § 1.482-5(b)(4)(ii)(B).

12In 2017, the majority of the APAs that covered services transactions also included tangible/intangible transactions, which were not tested under a separate PLI.

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

Most transactions covered in APAs target an interquartile range as described in Treas. Reg. § 1.482-1(e)(2)(iii)(C). Where the
transaction involves a royalty payment for the use of intangible property, both specific royalty rates and ranges have been used.
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 post-royalty operating margin or cost-plus mark-up, has been used. The testing periods of the APAs executed in 2017
were either: (1) a single year, (2) the term of the APA only, or (3) the term of the APA plus rollback years.

APAs executed in 2017 included several mechanisms for making adjustments to tested party results when the results fall outside the
range or do not match the point required by the APA. The following are examples of the mechanisms used: an adjustment bringing
the tested party's results to the closest edge of the range applied to the results of a single year; an adjustment to the closer edge of
the range applied to the results over the APA term; an adjustment to the specified point or royalty rate; or an adjustment to the median
of the range for a single year.

#### Critical Assumptions

##### § 521(b)(2)(D)(v)

The model APA used by the IRS (included as Appendix 1 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. A few bilateral
cases have also included critical assumptions tied either to 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. Pursuant to § 7.06(3) of Rev. Proc. 2015-41,
2015 I.R.B. 263, APMA will cancel an APA in the event of a failure of a critical assumption unless the parties agree to revise the
APA.

## Term Lengths of APAs Executed in 2017 § 521(b)(2)(D)(x)

Table 6: Term Lengths of APAs Executed in 2017

Term Length (years)

Number of APAS

Average

Term Length of APAs in 2017

Number of APAS

Number of Years (Including Rollback)

As described in § 3.03(1) of Rev. Proc. 2015-41, taxpayers should request an APA term that would cover at least five prospective
years and may also request that the APA be "rolled back" to cover one or more earlier taxable years, although the appropriate APA
term is decided on a case-by-case basis. Of the APAs executed in 2017, 22 percent included rollback years. A substantial number
of those APAs with terms of greater than five years 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
the taxpayer's request) to ensure a reasonable amount of prospectivity in the APA term.

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

Table 7: Months to Complete New and Renewal APAs Executed in 2017

Unilateral

Bilateral

Unilateral &amp; Bilateral

Average

Median

Average

Median

Average

Median

New

40.4

34.8

46.9

50.0

45.5

43.0

Renewal

28.7

27.2

37.3

32.2

34.7

30.5

New &amp; Renewal

32.6

31.0

41.5

35.9

39.1

33.8

Months to Complete New and Renewal APAs Executed in 2017

50.0

Months to Complete

40.0

@New
☒

30.0

☒
Renewal

20.0

☐
New &
Renewal

10.0

0.0

Median

Average
Unilateral

Average

Median

Median
Unilateral &
Bilateral

Average

Bilateral

Type of APA

The median time required to complete an APA in 2017 increased slightly (32.8 months in 2016 versus 33.8 in 2017).

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

As described in § 7.02(1) of Rev. Proc. 2015-41, taxpayers are required to file annual reports to demonstrate compliance with the
terms and conditions of their APA. The filing and review of these annual reports are critical parts of the APA process. Through annual
report review, the APMA Program monitors taxpayer compliance with APAs on a contemporaneous basis. Annual report review also
provides current information on the success or problems associated with the various TPMs adopted in the APA process.

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

APAs require taxpayers to file timely and complete annual reports describing their operations and demonstrating compliance with
the APA's terms and conditions. Not every annual report will include each of the items listed in the following table13; they are
required where the facts demonstrate a need for such documentation.

13The source of this list is the 2009 APA Model Agreement.

Statement regarding all material differences between Taxpayer's business operations during APA year and description of Taxpayer's business operations contained in Taxpayer's APA request. If there are no material differences, a statement to that effect.

Statement concerning all material changes in Taxpayer's accounting methods and classifications, and methods of estimation, from those described or used in Taxpayer's request for the APA. If there has been no material change in accounting methods and classifications or methods of estimation, a statement to that effect.

Any change to the taxpayer notice information.

Description of any failure to meet critical assumptions. If there has been none, a statement to that effect.

Statement identifying whether or not any material information submitted while the APA request was pending is discovered to be false, incorrect, or incomplete.

The amount, reason for, and financial analysis of any compensating adjustment, for the APA year, including but not limited to: the amounts paid or received by each affected entity; the character (such as capital or ordi- nary expense) and country source of the funds transferred, and the specific line item(s) of any affected U.S. tax return; and any change to any entity classification for federal income tax purposes of any member of Tax- payer's group that is relevant to the APA.

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.

Statement regarding whether Taxpayer contemplates requesting, or has requested, to renew, modify, or cancel the APA.

Financial statements and any necessary account detail to show compliance with the TPM, with a copy of the opinion from an independent certified public accountant or other documentation required by paragraph 5(f) of the APA.

10.

Financial analysis demonstrating Taxpayer's compliance with TPM.

11.

Organizational chart.

12.

A copy of the APA and any amendment.

13.

A penalty of perjury statement.

# Approaches for Sharing of Currency or Other Risks

## § 521(b)(2)(D)(xii)

In appropriate cases, APAs may provide specific approaches for dealing with risks, including currency risk, such as adjustment
mechanisms and/or critical assumptions.

# APPENDIX 1- 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.

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 Trans-
actions 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:

Taxpayer Corporation
Attn: Jane Doe, Sr. Vice President (Taxes)
1000 Any Road
Any City, USA 10000
(phone:
)

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:
Jane Doe
Sr. Vice President (Taxes)

IRS
By:

John C. C. Hughes
Director, Advance Pricing and Mutual
Agreement Program

Date:

201

Date:

201

## 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 Regulation 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 Regulation 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 _%.

##### . Residual Profit Split Method

The TPM is the residual profit split method. [Insert 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.]

## 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.]

## 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 Treatment was elected pursuant to paragraph 5 of Appendix A and Revenue
Procedure 2006-9, 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.

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 2006-9, section 11.01(6) and (7).

## APPENDIX D DEFINITIONS

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

Term

Definition

Annual Report

A report within the meaning of Revenue Procedure 2006-9, section 11.01.

APA

This Advance Pricing Agreement, which is an "advance pricing agreement" within the meaning of Revenue Procedure 2006-9, section 2.04.

APA Records

The records specified in Appendix C.

APA Request

Taxpayer's request for this APA dated including any amendments or supplemental or additional information thereto.

APA Year

This term is defined in paragraph 5(a) of this APA.

Covered Transaction(s)

This term is defined in Appendix A.

Financial Statements

Financial statements prepared in accordance with U.S. GAAP and stated in U.S. dollars.

Foreign Group

Worldwide Group members that are not U.S. persons.

Foreign Participants

[name the foreign entities involved in Covered Transactions].

I.R.C.

The Internal Revenue Code of 1986, 26 U.S.C., as amended.

Pub. L. 106-170

The Ticket to Work and Work Incentives Improvement Act of 1999.

Revenue Procedure 2006-9

Rev. Proc. 2006-9, 2006-1 C.B. 278.

Transfer Pricing Method (TPM)

A transfer pricing method within the meaning of Treasury Regulation section 1.482-1(b) and Revenue Procedure 2006-9, section 2.04.

U.S. GAAP

U.S. generally-accepted accounting principles.

U.S. Group

Worldwide Group members that are U.S. persons.

U.S. Return

For each taxable year, the "returns with respect to income taxes under subtitle A" that Taxpayer must "make" in accordance with I.R.C. section 6012. {Or substitute for partnership: For each taxable year, the "return" that Taxpayer must "make" in accordance with I.R.C. section 6031.}

Worldwide Group

Taxpayer and all organizations, trades, businesses, entities, or branches (whether or not incorpo- rated, organized in the United States, or affiliated) owned or controlled directly or indirectly by the same interests.

## APPENDIX E APA ANNUAL REPORT SUMMARY FORM

The APA Annual Report Summary on the next page is a required APA Record. The APA 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

Department of the Treasury- Internal Revenue Service Large Business and International Division Transfer Pricing Operations Advance Pricing and Mutual Agreement Program

APA No. Team Leader Economist Intl Examiner

APA Information

Taxpayer Name:

Taxpayer EIN: NAICS:

APA Term: Taxable years ending to Original APA [ ] Renewal APA [ ] Annual Report due dates: 201_ for all APA Years through APA Year ending in 200 _; for each APA Year , thereafter, on [month and day] immediately following the close of the APA Year Principal foreign country(ies) involved in covered transaction(s): ☒ ☒ Type of APA: [ ] unilateral [ ] bilateral with Tested party is [ ] US [ ] foreign [ ] both

Approximate dollar volume of covered transactions (on an annual basis) involving tangible goods and services:

[] N/A [ ] &lt;$50 million [] $50-100 million [] $100-250 ☒ APA tests on (check all that apply): ☒ [ ] annual basis [ ] multi-year basis [ ] term basis ☒ APA provides (check all that apply) a: ☒ [ ] range [ ] point [ ] floor only [ ] ceiling only [ ] other ☒ APA provides for adjustment (check all that apply) to: ☒ [ ] nearest edge [ ] median [ ] other point

million [] $250-500 million [] &gt;$500 million ☒

APA Annual Report
Information

APA date executed:

201

This APA Annual Report Summary is for APA Year(s) ending in 200_ and
was filed on
201

(to be completed
by the Taxpayer)

Check here [ ] if Annual Report was filed after original due date but in accordance with extension.
☐
Has this APA been amended or changed?
☐ ☐
no
Effective Date:
yes

Has Taxpayer complied with all APA terms and conditions?
☐
yes
☐
no

Were all the critical assumptions met? [ ] yes [ ] no
☐ ☐

Has a Primary Compensating Adjustment been made in any APA Year covered by this Annual Report?
[ ] yes [ ] no If yes, which year(s): 200
☐

Have any necessary Secondary Compensating Adjustments been made?
☐
yes
☐
no

Did Taxpayer elect APA Revenue Procedure treatment?
☐
yes

no
Any change to the entity classification of a party to the APA?
☐
yes
☐
no
Taxpayer notice information contained in the APA remains unchanged?
☐
yes
☐
no
Taxpayer's current US principal place of business: (City, State)

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:

Contact Information

Authorized Representative

Phone Number

Affiliation and Address

## Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

## Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

GR-Grantor.

COOP-Cooperative.

IC-Insurance Company.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

CY-County.

LE-Lessee.

D-Decedent.

LP-Limited Partner.

LR-Lessor.

M-Minor.

Nonacq .- Nonacquiescence.

O Organization.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

TFR-Transferor.

CI-City.

T.I.R .- Technical Information Release.

TP-Taxpayer.
TR-Trust.

TT-Trustee.

U.S.C .- United States Code.

DE-Donee.

Del. Order-Delegation Order.

DISC-Domestic International Sales Corporation.
DR-Donor.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

DC-Dummy Corporation.

X-Corporation.

Y-Corporation.

Z-Corporation.

Numerical Finding List1

Revenue Procedures:

Bulletin 2018-1 through 2018-19

2018-1, 2018-1 I.R.B. 1 2018-2, 2018-1 I.R.B. 106

Announcements:

2018-3, 2018-1 I.R.B. 130

2018-4, 2018-1 I.R.B. 146

2018-01, 2018-9 I.R.B. 387

2018-5, 2018-1 I.R.B. 244

2018-02, 2018-9 I.R.B. 387

2018-7, 2018-1 I.R.B. 282

2018-03, 2018-9 I.R.B. 387

2018-8, 2018-2 I.R.B. 286

2018-04, 2018-10 I.R.B. 401

2018-9, 2018-2 I.R.B. 290

2018-05, 2018-13 I.R.B. 461

2018-10, 2018-7 I.R.B. 355

2018-11, 2018-5 I.R.B. 334

2018-07, 2018-16 I.R.B. 503

2018-12, 2018-6 I.R.B. 349

2018-08, 2018-19 I.R.B. 552

2018-13, 2018-7 I.R.B. 356

2018-14, 2018-9 I.R.B. 378

Notices:

2018-15, 2018-9 I.R.B. 379

2018-01, 2018-3 I.R.B. 285

2018-16, 2018-9 I.R.B. 383

2018-02, 2018-2 I.R.B. 281

2018-17, 2018-9 I.R.B. 384

2018-18, 2018-10 I.R.B. 392

2018-03, 2018-2 I.R.B. 285

2018-19, 2018-14 I.R.B. 466

2018-05, 2018-6 I.R.B. 341

2018-20, 2018-11 I.R.B. 427

2018-06, 2018-3 I.R.B. 300

2018-21, 2018-14 I.R.B. 467

2018-07, 2018-4 I.R.B. 317

2018-22, 2018-18 I.R.B. 524

2018-08, 2018-7 I.R.B. 352

2018-23, 2018-17 I.R.B. 516

2018-10, 2018-8 I.R.B. 359

2018-24, 2018-18 I.R.B. 525

2018-11, 2018-11 I.R.B. 425

2018-25, 2018-18 I.R.B. 543

2018-12, 2018-12 I.R.B. 441

2018-26, 2018-18 I.R.B. 546

2018-13, 2018-6 I.R.B. 341

2018-14, 2018-7 I.R.B. 353

Revenue Rulings:

2018-15, 2018-9 I.R.B. 376

2018-16, 2018-10 I.R.B. 390

2018-01, 2018-2 I.R.B. 275

2018-17, 2018-9 I.R.B. 376

2018-02, 2018-2 I.R.B. 277

2018-18, 2018-12 I.R.B. 443

2018-03, 2018-2 I.R.B. 278

2018-19, 2018-12 I.R.B. 443

2018-04, 2018-4 I.R.B. 304

I.R.B. 444

2018-05, 2018-6 I.R.B. 339

2018-20, 2018-12

2018-06, 2018-10 I.R.B. 388

2018-21, 2018-15 I.R.B. 472

2018-07, 2018-13 I.R.B. 445

2018-22, 2018-14 I.R.B. 464

2018-09, 2018-14 I.R.B. 462

2018-23, 2018-15 I.R.B. 474

2018-10, 2018-16 I.R.B. 477

2018-24, 2018-17 I.R.B. 507

2018-11, 2018-18 I.R.B. 518

2018-25, 2018-15 I.R.B. 476

2018-26, 2018-16 I.R.B. 480

Treasury Decisions:

2018-28, 2018-16 I.R.B. 492

2018-29, 2018-16 I.R.B. 495

9829, 2018-04 I.R.B. 308

2018-31, 2018-16 I.R.B. 501

9830, 2018-11 I.R.B. 423

2018-32, 2018-17 I.R.B. 507

9831, 2018-13 I.R.B. 459

2018-33, 2018-17 I.R.B. 508

9832, 2018-16 I.R.B. 477

2018-34, 2018-19 I.R.B. 549

2018-35, 2018-18 I.R.B. 520

2018-37, 2018-18 I.R.B. 521

2018-38, 2018-18 I.R.B. 522

### Proposed Regulations:

REG-119514-15, 2018-04 I.R.B. 325
REG-129260-16, 2018-14 I.R.B. 470
REG-118067-17, 2018-08 I.R.B. 360
REG-132197-17, 2018-10 I.R.B. 404
REG-132197-17, 2018-10 I.R.B. 404
REG-132434-17, 2018-16 I.R.B. 503

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017-27 through 2017-52 is in Internal Revenue Bulletin
2017-52, dated December 27, 2017.

# Finding List of Current Actions on Previously Published Items1

Bulletin 2018-1 through 2018-19

# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

## We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave.
NW, IR-6230 Washington, DC 20224.

Internal Revenue Bulletin 2018-19 (PDF rendition): IRS Announcements

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