US IRS will consider applying the economic substance doctrine and related penalties more frequently in transfer pricing audits

The Acting Commissioner of the United States (US) Internal Revenue Service’s (IRS) Large Business and International Division stated that the IRS is "thinking about" asserting penalties under the economic substance doctrine.

Following a policy change, the IRS requires only approval from a supervisor, rather than executive approval, to assert economic substance and penalties related to economic substance.

Taxpayers might be able to avoid certain penalties by notifying the IRS of additional tax due u…