In such cases, income is subject to tax in both the country  where it was earned and in the United States. Despite these efforts to limit disputes, a U.S. MNC may disagree with an  adjustment made to its taxable income. According to tax experts we spoke with, if, however, a U.S. MNC views  this process as unlikely to be successful or if it was unsuccessful and  believes the adjustment would result in double taxation, the corporation  can ask USCA for assistance in resolving the dispute. As noted earlier, when a U.S. MNC disputes a foreign tax authority’s  adjustment to a tax return, the U.S. MNC can try to resolve the issue  through the appeals process within the taxing jurisdiction. USCA can provide correlative relief to the MNC. Figure 1 provides an overview of the basic process of a MAP request for  assistance. Other IRS websites  provide more detailed information for other issues relevant to U.S.  MNCs. For example, Canada publishes an annual  MAP Program Report on its website that includes background information  on its process, as well as general information on the steps in the process  and high-level information on timeframes. Providing taxpayers with a clear overview and accessible guidance on the  MAP process would help ensure that taxpayers who might benefit from  entering the MAP process are aware of the process, know how to  navigate it, and understand the general time frames for relief. One of the criteria we have previously identified for a good tax system is  transparency. This information would be useful to know because it  could provide insight about the resources needed for different cases  based on differences in complexity and other factors. APMA Does Not Have Controls to Ensure the Quality of its Case Data

In our review of a generalizable sample of MAP case files we found a  number of inconsistencies between the amount of adjustment recorded in  APMA’s inventory database, the amount recorded in the original MAP  request, and the amount recorded in the resolution letter provided to  taxpayers and the foreign competent authority. APMA Does Not Analyze Currently Available Data to Inform Its Operations and Management Decisions

APMA’s inventory data-base includes data on both pending and resolved  MAP cases that can help management monitor program operations and  potentially identify areas to improve the management of MAP cases. For example, analysis of trends and comparisons of certain  case characteristics—such as the country initiating the adjustment, the  elapsed time on the case, whether an economist was assigned to the  case, and the negotiated outcome—can help to identify how these  characteristics may be related. The data show that U.S.-initiated cases  were more often resolved entirely by the United States than with the  foreign country providing some of the relief. Analyzing trends in outcomes would help to  ensure that APMA is not missing opportunities to protect the U.S.  corporate tax base and that IRS examiners are cognizant of tax treaty  treatment of foreign source income of U.S. MNCs. Collecting key characteristics and  conducting relevant analyses would help ensure effective internal control  and could help improve USCA’s management of MAP cases. Conclusions

In a world with a growing number of international transactions, the United  States needs an efficient and effective dispute resolution process to  ensure that it is protecting the U.S. taxpayer and the U.S. corporate tax  base. First,  USCA has not provided clear guidance to taxpayers on how the MAP  process works. Recommendations for Executive Action

We are making the following eight recommendations to the IRS. In its written comments, reprinted in  appendix II, IRS agreed with our eight recommendations and will provide  detailed corrective action plans in its 60-day letter response to Congress. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Objectives Scope and Methodology

As noted earlier, to assess the extent to which the Internal Revenue  Service (IRS) evaluates management of dispute resolution cases, we  interview IRS officials. Competent Authority (USCA).
Why GAO Did This Study

With increasing globalization, multinational corporations can take advantage of differences in countries' corporate tax systems to reduce their overall tax liabilities. However, globalization can also lead to disputes about the correct tax liability for U.S. MNCs in different countries. GAO was asked to review how the United States administers the process for resolving international tax disputes when a U.S. MNC disagrees with a tax determination of another country.
This report (1) describes IRS's dispute resolution process, (2) assesses the information IRS provides to taxpayers about the process, and (3) assesses the extent to which IRS evaluates its management of dispute resolutions cases. GAO reviewed IRS guidance on the MAP process, interviewed IRS officials and compared IRS actions to federal standards for internal control and GAO's criteria for a good tax system. GAO analyzed MAP data for cases closed from 2013 to 2017 as well as a stratified random sample of MAP case files.

What GAO Found

A U.S. multinational corporation (MNC) operating in a foreign country is subject to taxes in that country as well as in the United States. The U.S. MNC's tax return may be audited by the United States or the other country. Such audits can result in an adjustment to the U.S. MNC's taxable income that may result in income being subject to tax in both countries. If the U.S. MNC disagrees with the adjustment, it can ask the United States Competent Authority (USCA) within the Internal Revenue Service (IRS) to help resolve the dispute through the mutual agreement procedure (MAP). Generally, disputes are resolved by one country withdrawing some or all of the adjustment and the other country providing other relief to the MNC to address double taxation of income. The following figure provides an overview of the dispute resolution process.
Dispute resolution assistance is available to U.S.MNCs that need it and USCA provides comprehensive technical information on its website on how to request assistance. However, because USCA's website does not provide an overview or plain language guidance on the MAP process U.S. MNCs may not have clear information on how to navigate the process.
USCA has taken a number of steps to ensure efficient management of MAP cases including assigning staff with requisite background and skills to cases according to their complexity and organizing staff into teams that specialize by countries. However, GAO identified a number of weaknesses that impact USCA's management of MAP cases. These include the following
key data are not tracked and existing data are not used to assess the effective allocation of resources for the program,
few controls have been established to monitor and ensure the reliability of the data in the case management database, and
lack of trend analyses on dispute case characteristics that could help inform management decision making and the more efficient operation of the program.

What GAO Recommends

GAO is making a total of eight recommendations, including that IRS improve the clarity of information on the dispute resolution process, track and use dispute resolution case data, ensure the quality of case data, and analyze trends in dispute case characteristics. IRS agreed with GAO's recommendations and said it will provide detailed corrective action plans.