USA Trends and Developments Contributed by: Kim Marie Boylan, Kevin Spencer, Nicholas Wilkins and Sean Lyons, White & Case LLP
ever, such challenges are far from guaranteed to prevail, as shown in Lissack. Loper Bright’s acknowledgement that Congress may grant agencies discretion in issuing rules and regula - tions will likely be an important feature of any decision. The ultimate outcomes of 3M and Coca-Cola are unlikely to dramatically change this new para - digm. However, those two cases do present an interesting litmus test for the Section 482 regula - tions. If both cases are decided in favour of the government, then challenges to Treasury Regu - lation Section 1.482-1(h)(2) may become less attractive to taxpayers. On the other hand, if one or both cases are decided in favour of the tax - payers, then the regulation may be significantly revised (or effectively withdrawn). Depending upon the bases for the courts’ deci - sions, this effect also could apply to the transfer
pricing regulations more generally. By way of example, a conclusion that the Treasury and the IRS have no or limited discretion under Section 482 of the Code could call the entire US transfer pricing regime into question. It is worth remem - bering that both cases give the appellate courts effective safety valves – ie, means of resolving the disputes without expressly passing on the substantive validity of Treasury Regulation Sec - tion 1.482-1(h)(2). By way of example, a conclu - sion that the regulation is procedurally invalid under the APA – while still highly significant – might not reverberate as far. Regardless, companies with transfer pricing issues should remain aware of the potential for challenging the Treasury Regulations. Loper Bright provides another tool in the toolbox for taxpayers who see their transfer pricing chal - lenged by the IRS. How effective that tool will prove to be remains to be seen.
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