Rev.Proc.96-53.SUP

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SUPPORTING STATEMENT

1. CIRCUMSTANCES NECESSITATING COLLECTION OF INFORMATION

Section 482 of the Internal Revenue Code (26 U.S.C. § 482) allows the Secretary of the Treasury to reallocate income between related organizations if necessary to prevent tax evasion or to clearly reflect income. Section 482 also requires that the income associated with the transfer of intangible property be commensurate with the income attributable to the intangible property. Treasury Regulation 1.482-1 provides an “arm’s length” standard, under which the transfer of goods and services between related parties should be valued at a price that would have been negotiated between unrelated parties for the same transaction. Under this revenue procedure, taxpayers can apply for advance agreements with the Internal Revenue Service about how to compute such “arm’s length” transfer prices. The Service requires information from Taxpayers in order to negotiate these agreements and to verify compliance with any agreements reached.

2. USE OF DATA

The data will be used by the Service to determine the best method of computing “arm’s length” prices, and to verify compliance with advance pricing agreements.

3. USE OF IMPROVED INFORMATION TECHNOLOGY TO REDUCE BURDEN

IRS Publications, Regulations, Notices and Letters are to be electronically enabled on an as practicable basis in accordance with the IRS Reform and Restructuring Act of 1998.

4. EFFORTS TO IDENTIFY DUPLICATION

We have attempted to eliminate duplication within the agency wherever possible.

5. METHODS TO MINIMIZE BURDEN ON SMALL BUSINESSES OR OTHER

SMALL ENTITIES

Not applicable.

6. CONSEQUENCES OF LESS FREQUENT COLLECTION ON FEDERAL

PROGRAMS OR POLICY ACTIVITIES

Not applicable.

7. SPECIAL CIRCUMSTANCES REQUIRING DATA COLLECTION TO BE

INCONSISTENT WITH GUIDELINES IN 5 CFR 1320.5(d)(2)

In some cases, more than an original and two copies of information are required because many different officials in the Service must carefully review the material.

8. CONSULTATION WITH INDIVIDUALS OUTSIDE THE AGENCY ON

AVAILABILITY OF DATA, FREQUENCY OF COLLECTION, CLARITY OF

INSTRUCTIONS AND FORMS, AND DATA ELEMENTS

Revenue Procedure 96-53 was published in the Internal Revenue Bulletin on December 2, 1996 (Revenue Procedural 96-53, 1996-49 I.R.B. 9).

In response to the Federal Register Notice dated March 10, 2009 (74 FR 10346), we received no comments during the comment period regarding Revenue Procedure 96-53.

9. EXPLANATION OF DECISION TO PROVIDE ANY PAYMENT OR GIFT TO

RESPONDENTS

Not applicable.

10. ASSURANCE OF CONFIDENTIALITY OF RESPONSES

Submissions under this revenue procedure are considered tax returns and tax return information, which are confidential as required by 26 USC 6103.

11. JUSTIFICATION OF SENSITIVE QUESTIONS

Not applicable.

12. ESTIMATED BURDEN OF INFORMATION COLLECTION

This Revenue Procedure involves three types of information.

Section 3.06 concerns information submitted before optional prefiling conferences. We estimate that 70 taxpayers will make such submissions. The estimated burden per respondent for recordkeeping/reporting is from 5 to 20 hours, with an average burden of 10 hours, for a total estimated burden of 700 hours.

Sections 4, 7.03 and 11.01 concern information submitted in filing an application for an initial or renewal Advance Pricing Agreement. We estimate that 90 taxpayers will make such submissions. The estimated burden per respondent for recordkeeping/reporting is from 20 to 150 hours, with an average burden of 50 hours, for a total estimated burden of 4,500 hours.

Sections 11.01, 11.02(1), 11.04, and 10.05 concern information submitted for, and recordkeeping requirements in connection with, annual reports to verify compliance with an Advance Pricing Agreement, and information submitted to verify an Advance Pricing Agreement's continuing validity or need for revision. We estimate that 200 taxpayers will make such submissions. The estimated recordkeeping/reporting burden per respondent is from 5 to 30 hours, with an average burden of 15 hours, for a total estimated burden of 3,000 hours.

The total burden on all taxpayers described in the three preceding paragraphs is 8,200 hours. It is estimated that the burden will fall on 230 separate respondents (that is, 230 separate taxpayers will make the submissions described in one or more of the preceding three paragraphs). The above changes will result in a program change increase of 2,950 hours.

These various burdens do not necessarily represent a net additional burden to the taxpayer, since entering into an Advance Pricing Agreement can potentially save the taxpayer time spent on IRS audits and associated appeals and litigation.

Estimates of the annualized cost to respondents for the hour burdens shown above are not available at this time.

13. ESTIMATED TOTAL ANNUAL COST BURDEN TO RESPONDENTS

As Suggested by OMB, our Federal Register notice dated March 10 2009, requested pubic comments on estimates of cost burden that are not captured in the estimates of burden hours, i.e., estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. However, we did not receive any response from taxpayers on this subject. As a result, estimates of the cost burdens are not available at this time.

14. ESTIMATED ANNUALIZED COST TO THE FEDERAL GOVERNMENT

Not applicable.

15. REASONS FOR CHANGE IN BURDEN

There is no change to the paperwork burden previously approved by OMB. We are making this submission to renew the OMB approval.

16. PLANS FOR TABULATION, STATISTICAL ANALYSIS AND PUBLICATION

Not applicable.

17. REASONS WHY DISPLAYING THE OMB EXPIRATION DATE IS

INAPPROPRIATE

We believe that displaying the OMB expiration date is inappropriate because it could cause confusion by leading taxpayers to believe that the revenue procedure sunsets as of the expiration date. Taxpayers are not likely to be aware that the Service intends to request renewal of the OMB approval and obtain a new expiration date before the old one expires.

18. EXCEPTIONS TO THE CERTIFICATION STATEMENT ON OMB FORM 83-I

Not applicable.

Note: The following paragraph applies to all of the collections of information in this submission:

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. § 6103.