KW Economics prepares the economic analysis in tax and transfer pricing disputes involving businesses in Montana: the controlled transactions at issue, the functional analysis and comparables that test their prices, and a report written for the forum that decides the dispute, whether a federal tax forum, a state tax appeal, or a court in Montana, for either side.
A tax or transfer pricing dispute asks whether the prices one company in a group charged another for goods, services, intangibles, or loans match what unrelated parties would have agreed to, and how much income moves if they do not, answered from the intercompany agreements, the companies' conduct, and comparable transactions. Read the full tax and transfer pricing dispute analysis guide.
Federal tax forums test expert testimony under the federal rules of evidence, which the Tax Court applies by statute: whether the expert is qualified, whether the testimony rests on sufficient facts or data and on reliable methods, and whether those methods were reliably applied to the facts of the case. The commercial, shareholder, and matrimonial claims heard in Montana's courts are tested under its own standard, and a state tax appeal follows the rules of the forum that hears it. Montana courts apply a reliability inquiry to novel scientific evidence and otherwise ask whether the economist is qualified by training and experience and whether the opinion will help the fact finder, leaving the weight of the testimony to cross-examination. A transfer pricing report meets each of these inquiries by stating every method choice and naming the data behind every comparable.
Highest court: Montana Supreme Court. Federal venues: D. Mont. Court system: courts.mt.gov.
A federal transfer pricing dispute applies the same statute and regulations wherever the business is based, but where it is based decides which appellate decisions govern: an appeal from the Tax Court ordinarily goes to the federal court of appeals for the circuit where a corporation has its principal place of business (for a business based in Montana, the Ninth Circuit), whose precedent the Tax Court follows, and a refund suit is filed in the federal district where the business is based or in the Court of Federal Claims. Whether Montana reallocates income between related companies under its own tax, requires royalties or interest paid to an affiliate to be added back, or combines affiliates in one return, and whether a commercial, shareholder, or matrimonial claim in Montana adopts an arm's length benchmark, are questions counsel confirms; the report presents the analysis so it can be applied under either party's position.
The same four steps apply to a tax or transfer pricing dispute involving Montana; the forum that hears the dispute and the rule of decision it applies decide how the result is used.
Federal income tax disputes over related-party prices are heard in the United States Tax Court or, on a refund claim, in a federal district court or the Court of Federal Claims; appeals from the Tax Court and the district courts ordinarily go to the federal court of appeals for the circuit where the business is based, and appeals from the Court of Federal Claims to the Federal Circuit. A dispute over Montana's own tax follows its administrative and appeal process. Commercial and shareholder claims in Montana that turn on an intercompany price are heard in the District Court (General jurisdiction; one district in each of 56 counties), with final appeals to the Montana Supreme Court, and a divorce in which one bears on income or the value of a business is heard in the court that hears divorce in Montana. Matters within federal jurisdiction proceed in the United States District Court for the District of Montana.
A federal transfer pricing dispute applies the same statute and regulations wherever the business is based, but where it is based decides which appellate decisions govern: an appeal from the Tax Court ordinarily goes to the federal court of appeals for the circuit where a corporation has its principal place of business (for a business based in Montana, the Ninth Circuit), whose precedent the Tax Court follows, and a refund suit is filed in the federal district where the business is based or in the Court of Federal Claims. Whether Montana reallocates income between related companies under its own tax, requires royalties or interest paid to an affiliate to be added back, or combines affiliates in one return, and whether a commercial, shareholder, or matrimonial claim in Montana adopts an arm's length benchmark, are questions counsel confirms; the report presents the analysis so it can be applied under either party's position. Federal tax forums test expert testimony under the federal rules of evidence, which the Tax Court applies by statute: whether the expert is qualified, whether the testimony rests on sufficient facts or data and on reliable methods, and whether those methods were reliably applied to the facts of the case. The commercial, shareholder, and matrimonial claims heard in Montana's courts are tested under its own standard, and a state tax appeal follows the rules of the forum that hears it. Montana courts apply a reliability inquiry to novel scientific evidence and otherwise ask whether the economist is qualified by training and experience and whether the opinion will help the fact finder, leaving the weight of the testimony to cross-examination. A transfer pricing report meets each of these inquiries by stating every method choice and naming the data behind every comparable.
Request a consultation on tax and transfer pricing dispute cases in Montana or call (201) 343-0700. Plaintiff and defense counsel.