The IRS Advance Pricing and Mutual Agreement program, which is responsible for negotiating advance pricing agreements on behalf of the IRS, experienced a challenging 2025. At the same time, broader transfer pricing developments have made APAs increasingly attractive to taxpayers seeking greater certainty. Internally within APMA, recent IRS budget cuts, furloughs, and return-to-office policies have resulted in an estimated 15% reduction in staffing at APMA. Against this backdrop, the 2025 APA Annual Report provides an early indication of how effectively APMA is managing its increased workload with a reduced workforce and highlights areas where changes may be necessary.
The extent to which recent transfer pricing trends increase the desirability of an APA varies based on a taxpayer’s specific facts and circumstances. A company’s need for certainty depends on the nature and volatility of the transfer pricing risks that an APA could reduce or eliminate. Accordingly, the cost-benefit analysis of pursuing an APA is shaped by relative changes in both the cost and expected outcomes of the regular audit process as compared to the APA process.
Trends Spur APAs
Enforcement. US and global transfer pricing enforcement has significantly changed in recent years. Increased IRS funding and staffing have improved the agency’s success rate in transfer pricing enforcement, heightening companies’ need for greater certainty regarding penalties, double taxation, adjustments, financial reporting, and customs valuation. Although IRS budget and staffing cuts in 2025 may limit the agency’s ability to expand transfer pricing enforcement, ongoing cases continue to pose meaningful exposure for taxpayers. Recent IRS victories in Tax Court have further increased the demand for certainty. However, appeals in these cases, along with the elimination of Chevron deference in Loper Bright, have weakened the IRS’s position with respect to regulatory guidance. Other countries have also become more active in transfer pricing enforcement. Overall, the US and global transfer pricing enforcement continue to increase taxpayers’ need for certainty.
Penalties. The IRS shift toward a more assertive application of §6662 penalties has introduced additional uncertainty and significantly altered the cost-benefit calculation of pursuing an APA. Transfer pricing adjustments under §482 may give rise to accuracy‑related penalties under §6662, including a 20% penalty for substantial valuation misstatements and a 40% penalty for gross valuation misstatements. While taxpayers may evaluate a range of approaches to managing this exposure, an APA allows taxpayers to resolve transfer pricing issues prospectively and avoid the risk of such penalties. Avoidance of exposure to §6662 penalties is one important consideration when evaluating whether an APA is an appropriate approach.
Financial Reporting of Uncertain Tax Positions. The exposure around transfer pricing as an uncertain tax position has risen in recent years due to IRS Tax Court wins, large amounts in issue, and the changed IRS approach to penalties. Further, a recent investor lawsuit against Amgen for failure to disclose the amount of a proposed IRS adjustment for transfer pricing raises the potential for non-tax exposure.
Tariffs. Although tariffs certainly increase a company’s need for certainty, there has been little experience with MAP and APA resolution of the issue. To date, the issue has mostly been resolved on a case-by-case basis between treaty partners, providing scant information to guide company decisions. Achieving certainty regarding tariffs may not be a primary reason to pursue an APA, but should be added to any new APA request that has tariff exposure.
APMA Program Challenges
Over the past decade, the IRS has steadily expanded APMA staffing and deepened its institutional expertise. More recently, however, broader administrative developments have introduced near‑term uncertainty. Together, these developments have affected staffing availability, contributed to additional voluntary departures, and disrupted operational continuity.
Annual Report
Staffing. Staffing levels within the APMA Program increased in both 2023 and 2024, reflecting a period of expanded resourcing intended to address sustained growth in APA demand and elevated inventory levels. These staffing numbers were primarily attributable to funding increases from the Inflation Reduction Act. These increases were aimed at supporting the program’s growing workload and were accompanied by measurable improvements in APA processing, including reductions in average completion times despite sustained filing volumes.
By contrast, 2025 may represent a turning point, with APMA facing renewed resource constraints following a period of organizational transition and budgetary uncertainty. In January 2025, the IRS budget was reduced to $12.3 billion, triggering the termination of thousands of probationary employees, many of whom were later reinstated. This was followed by the implementation of a return‑to‑office policy, and the IRS introduced a deferred resignation program that prompted additional voluntary departures across the agency. In October 2025, the government shut down and furloughed its IRS workforce for more than a month. Taken together, these destabilizing events contributed to an estimated loss of approximately 25% of the IRS workforce and approximately 15% of APMA staff.
Over the last 35 years, APAs have become an important component of the agency’s transfer pricing enforcement effort, allowing compliant taxpayers to achieve certainty. Recent increases in the inventory of pending APAs and months-to-complete statistics suggest that the IRS should consider additional staffing. However, this appears unlikely given the 2027 proposed budget includes an additional $1.4 billion in funding cuts.
The table below presents the year-over-year staffing changes from 2023 to 2025.
Filed. Taxpayer interest in the APA program remained strong and consistent between 2023 through 2025. In 2024, the IRS received 169 APA applications, compared to 167 applications in 2023, which reflects stable demand. In 2025, APA applications increased to 178. Bilateral APAs continued to dominate filings, accounting for the vast majority of new applications in both years, while unilateral and multilateral filings remained comparatively limited.
The consistency in filings underscores taxpayers’ continued preference for APAs as a mechanism for achieving transfer pricing certainty, particularly in an environment of heightened global transfer pricing enforcement.
The following table presents the year-over-year filing statistics from 2023 to 2025.
Closed. Following a high number of APAs executed in 2023, the total number of executed agreements declined modestly in 2024, though execution levels remained elevated by historical standards. Bilateral APAs continued to dominate executed cases consistent with APMA’s overall inventory, while multilateral APAs increased year over year.
In 2025, the number of executed APAs declined more noticeably relative to prior years. Total executed agreements decreased from 142 in 2024 to 110 in 2025, driven primarily by a reduction in bilateral APA executions, which nevertheless continued to represent the majority of executed cases. Unilateral APA executions increased slightly year over year, while multilateral executions declined from 2024 levels but remained above 2023 volumes. Overall, execution activity in 2025 remained elevated by longer‑term historical standards, though below the levels observed in 2023 and 2024. The following table presents the year-over-year executed APA statistics from 2023 to 2025.
Inventory. Despite sustained filing volumes and a modest decline in executed APAs, APMA’s pending inventory remained relatively stable between 2023 and 2024. Year‑end inventory levels increased only marginally, indicating that staffing increases and process efficiencies helped offset the imbalance between filings and closures. The pending inventory continues to be heavily weighted toward bilateral APAs, consistent with overall filing and execution trends.
In 2025, APMA’s pending inventory increased more noticeably relative to prior years. Total APA applications in inventory rose from 560 at year‑end 2024 to 622 at year‑end 2025. This increase was driven primarily by growth in bilateral APAs, which continued to comprise the substantial majority of pending cases and increased meaningfully year over year. Pending unilateral APAs also increased, while multilateral APAs declined in 2025. Overall, the 2025 inventory data reflect a renewed buildup in pending cases, consistent with sustained filing activity and longer average completion times observed during the year. The following table presents the year-over-year applications in inventory from 2023 to 2025.
Withdrawn. The number of withdrawn APA applications increased modestly from 2023 to 2024. Withdrawals remain a relatively small component of overall APA activity but continue to play a role in moderating net inventory growth.
In 2025, the number of withdrawn APA applications declined relative to 2024. Total withdrawals decreased from 17 in 2024 to 10 in 2025, driven primarily by a reduction in bilateral withdrawals. Unilateral withdrawals remained minimal, and no multilateral APA applications were withdrawn during the period. Overall, withdrawals continued to represent a small share of APA activity and did not materially affect overall inventory levels. The following table presents the year-over-year withdrawal statistics from 2023 to 2025.
Time to Conclude. The APA Annual Reports for 2023 and 2024 reflect meaningful improvements in the time required to conclude both new and renewal APAs. Across unilateral and bilateral cases, average completion times declined year over year, indicating increased efficiency within the APMA Program.
For new APAs, average completion time decreased between 2023 and 2024 across all categories. Unilateral new APAs experienced a particularly notable reduction, while bilateral new APAs also showed a meaningful improvement. When viewed on a combined basis, the average time to complete new APAs materially declined from 2023 to 2024.
When considering all APAs combined, including both new and renewal cases, average completion time declined from 2023 to 2024 for unilateral APAs, bilateral APAs, and in aggregate. These reductions suggest that the Inflation Reduction Act-driven program resourcing contributed to faster resolution of APA cases, even as filing volumes remained elevated.
In 2025, average completion times increased relative to 2024 across both new and renewal APAs. For new APAs, average completion times rose for unilateral and bilateral cases, offsetting some of the improvements observed in the prior year. Bilateral new APAs, in particular, experienced longer average completion times, while unilateral new APAs also trended upward relative to 2024. When viewed on a combined basis, the average time to complete new APAs increased in 2025.
When considering all APAs combined, including both new and renewal cases, average completion times likewise increased in 2025 for unilateral APAs, bilateral APAs, and in aggregate. While completion times remained generally consistent with longer‑term historical averages, the 2025 results suggest that the efficiency gains reflected in the 2023 and 2024 Annual Reports were not fully sustained.
Country Trends. APA activity in 2023 through 2025 remained highly concentrated, with Japan and India together accounting for roughly half of all filings and executions. India experienced a noticeable increase in activity over the period, driven by both rising filings and a large volume of case closures, reflecting sustained taxpayer demand amid active transfer pricing enforcement. By contrast, Japan continues to represent a mature and stable APA environment, with consistently high volumes but relatively even year‑over‑year movement.
It remains to be seen whether the elevated level of APA activity in India will persist following the introduction of India’s expanded transfer pricing safe harbor regime. Under the new framework, a uniform safe harbor margin applies to a broad category of IT and IT‑enabled services, and eligibility has been extended to taxpayers with up to approximately $218 million in annual intercompany transaction volume. For qualifying taxpayers, the safe harbor offers a streamlined, rule‑based alternative to bilateral APAs, potentially reducing the need for more resource‑intensive APA processes, particularly where fact patterns are relatively standardized.
While several other treaty partners—including Canada, South Korea, and the United Kingdom—and select European jurisdictions continue to appear in filed, executed, and pending inventories, their activity levels remained comparatively modest and did not materially shift overall trends.
Recommendations
The APA program remains a critical component of the IRS’s transfer pricing enforcement framework and continues to be highly valued by taxpayers seeking prospective certainty in an increasingly uncertain enforcement environment. As the data in the 2025 APA Annual Report demonstrate, taxpayer demand for APAs has remained strong despite recent administrative and operational disruptions within APMA. At the same time, sustained filing volumes, rising inventories, and increasing completion times suggest that additional resources may be necessary for APMA to meet its obligations to treaty partners and taxpayers.
Accordingly, renewed investment in APMA staffing and operational capacity should be a priority. Reducing the time required to conclude APAs would help preserve the program’s effectiveness as both an enforcement tool and a cooperative dispute‑prevention mechanism. In an environment characterized by heightened global transfer pricing enforcement, penalty exposure, and increased scrutiny of uncertain tax positions, APAs continue to offer a uniquely valuable path to certainty for taxpayers.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Steven C. Wrappe is the National Technical Leader of Transfer Pricing in Grant Thornton’s National Tax Office and an adjunct professor in the New York University and University of California-Irvine tax programs. Jessica Dahlberg is a Transfer Pricing Senior Manager at Grant Thronton in Minneapolis with a JD from Hamline University School of Law. Hayley M. Yarem is a Transfer Pricing Manager at Grant Thornton in Raleigh with an MBA from Duke University.
Grant Thornton LLP and GT Advisors (and their respective subsidiary entities) practice as an alternative practice structure in accordance with the American Institute of Certified Public Accountants Code of Professional Conduct and applicable law, regulations, and professional standards. Grant Thornton LLP is a licensed independent CPA firm that provides attest services to its clients, and GT Advisors and its subsidiary entities provide tax and business consulting services to their clients. GT Advisors and its subsidiary entities are not licensed CPA firms.
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To contact the editors responsible for this story: Soni Manickam at smanickam@bloombergindustry.com;