STEC’s Economic Solutions:

• Intangible property (“IP”) holding company structures are designed to transfer IP to an affiliated entity in a  favorable tax jurisdiction.  This entity then licenses the intangible assets to other affiliates in the group, in an exchange for royalty payments.  What this accomplishes is to move “excess” profit associated with the IP to the economical and legal owner of the IP, thereby providing the potential to moderate tax burdens, and increase operational efficiencies. 

• IP valuations are necessary to calculate buy-in payments when a company transfers IP from one affiliate (within a controlled group of companies) to another.  The payments for IP must comply with the arm’s-length standard outlined under IRC § 482, the OECD guidelines, or country-specific transfer pricing frameworks.

• Qualified Cost-Sharing Arrangements generally eliminate the need to charge intercompany royalties since these agreements result in a common ownership of intangible assets.  This is the case when an entity participates in the common development of (or purchases a share of pre-existing) IP as of the date of the buy-in, and contributes to future development costs. 

• Start-up, market penetration, and spin-out strategies contribute to a company’s successful entry into new markets or expansion of its existing market share.  A company may defensibly increase market development expenses or lower prices to affiliates when these strategies are properly documented contemporaneously with the implementation of the strategy, and business rationale is sound. This is, for instance, an effective, arm’s-length and economics-based framework to utilize NOLs.  Alternatively, it can be used to support a loss or to reduce profit levels for affiliated companies that enter (or expand) into new markets.

• Mergers and Acquisition (“M & A”) due-diligence services enhance the quality of price or bid negotiations, reduce post-acquisition risk, and harmonize transfer pricing policies.  During the due diligence process, understanding the potential transfer pricing tax liabilities of a target firm, or the transfer pricing objectives of an acquiring firm, can help to limit tax liability and allocate a purchase price to maximize tax benefits.

STEC - Our transfer pricing expertise, experience, and credentials provide our clients with peace of mind.

STEC’s Compliance Expertise:

• Documentation studies evaluate the extent to which transfer prices are consistent with the arm’s-length standard (as required under IRC §§ 482 and 6662, as well as the OECD Transfer Pricing Guidelines.  The scope of a transfer pricing documentation study is tailored to address the specific needs of a company relative to the complexity and magnitude of the transactions, number of affiliated members, and geographical regions involved. 

• Advance Pricing Agreements can be used as an effective tool to negotiate a company-specific arrangement with:  (i) domestic and international tax authorities in order to reduce uncertainty and risk, (ii) provide more assurance against income reallocations, and (iii) manage audits.  APAs can be entered into on a unilateral, bilateral, or multilateral basis.

• Intercompany policy and implementation guide­lines are created to assist a company in applying and monitoring its intercompany transfer pricing strategies.  The objective of utilizing these documents and resources is to standardize and harmonize company-wide global transfer pricing policies, align and synchronize these with management evaluation principles, and provide additional support in the event of an audit.  Creating this consistent framework provides credibility to performance measures and instills a sense of equity with respect to how intercompany transactions occur. 

• Intercompany agreements provide a consistent framework to formalize intercompany transfer pricing policies.  These documents also present a “form” over “substance” argument upon a potential audit.  This will become increasingly important under IRC § 1.482-9, and is already necessary for a number of tax authorities in countries that may give more credence to intercompany transactions that follow the “letter” of agreements, versus the discretion of taxpayers to set transfer prices.  Inter­company agreements include technology, trademark, cost-sharing, market expansion, services, and loan agreements, among others.

STEC - Our expertise, experience, and credentials are also our clients’ strength.

STEC’s Audit Defense Engagements Encompass:

• Tax authority response to Information Document Requests (“IDRs”) including (i) developing economic analyses to defend arm’s-length pricing strategies, (ii) evaluating and critiquing transfer pricing methodologies and adjustments proposed by tax authorities, (iii) recommending sound audit defense approaches, (iv) and providing responses to IDRs to the IRS; 

• Dispute resolutions and negotiations generally involve face-to-face interactions with a tax authority to assist in rebutting proposed reassess­ments of income by a tax authority, and preparing companies for litigation, APAs, audit settlements, or Competent Authority proceedings;

• Competent Authority submissions with respect to preparing and filing required documents to resolve double taxation disputes; and

• Litigation support and testimony providing litigation testimony, depositions, and strategy consulting, as well as the creation of submission reports, advocacy position papers, affidavits, and expert witness testimony.

STEC - The chosen path to defensively support the impact of transfer pricing in your organization. 

Assistance in creating and managing your in-house transfer pricing and valuation function, with respect to providing guidance for the credentials of personnel, database recommendations, as well as financial modeling and maintenance requirements to optimize your Company’s parameters, is imperative to develop a robust transfer pricing and valuation structure.

STEC -  Our transfer pricing experts have the experience and credentials to guide your company. 

Benchmarking statistics provide management with value-added information to determine and analyze financial advantages and disadvantages relative to competitors.  These assessments provide your company with critical tools to implement “best practices” methodologies and prioritize management initiatives.

STEC’s benchmarking resources comprise state-of-the art U.S. and global financial databases that contain over 20 years of fundamental, financial, economic, and market information for over 100,000 public companies.  Using our proprietary benchmarking models, adjustment methods, Monte-Carlo, real-options simulation software, and comparative analytical tools, STEC can evaluate tailored financial data to address company-specific needs, as well as market-based challenges. 

STEC’s Benchmarking Comprises:

• Financial ratio and profitability analyses cover all relevant areas of your company’s financial performance and provides indicators of profitability, efficiency, arm’s-length returns, and business solvency.  These types of analyses offer valuable insight for business executives and managers to improve business processes, deliver improved economic results (i.e., earnings per share), and support intercompany pricing and valuation issues. 

• Capital structure analyses provide statistics to support thin-capitalization positions.  These are applied in conjunction with other transfer pricing services to develop comprehensive profit repatriation strategies.

• Effective tax rate analyses derive critical parameters to benchmark international, federal, and state (or provincial) income tax liabilities in order to assist in managing the tax function, as well as identifying tax areas that may benefit from planning opportunities. 

STEC - Our expertise, experience, and credentials give our clients financial analytics and benchmarking strength.

Documentation Requirements
The IRS has developed extensive transfer pricing documentation requirements, which state that the documents necessary to support the arm’s-length nature of intercompany prices should be prepared contemporaneously with filing a tax return in order to avoid a potential imposition of penalties.  The required documentation is divided into two categories: principal documents and background documents. 

The 10 principal documents must include:

• Business and industry overview;
• Description of the company’s organizational structure covering all related parties engaged in intercompany transactions;
• Documentation explicitly required under IRC § 482, including any written agreements, contracts, or documents related to intercompany transactions;
• Description of the transfer pricing method selected for each transaction flow and an explanation why that method was chosen;
• Description of the alternative methods considered and an explanation why they were not selected;
• Description of the controlled transactions, including the terms of sale, and any internal data used to analyze those transactions;
• Description of the comparable transactions (or companies) that were used, how comparability was evaluated, and what (if any) adjustments were made;
• Explanation of the economic analysis performed and projections relied upon in developing the method;
• Description or summary of relevant data obtained after the end of the tax year and before filing a tax return; and
• General index of the principal and background documents and a description of the recordkeeping system used for cataloging and accessing those documents. 

The background documents should consist of any documents that present the assumptions, conclusions, and positions taken in the principal documents.  If the IRS requests principal (generally) or background documents, a taxpayer must provide these documents to the IRS within 30 days of the IDR.

Transfer Pricing Penalties (Non-Deductible)
The IRC § 6662 regulations outline the penalties levied on additional tax owed to the IRS due to a reassessment of income resulting from a transfer pricing adjustment (other countries – e.g., Canada) may levy a penalty on the actual income reassessment, whether additional tax is owed or not.

20 percent substantial valuation misstatement penalty applies if the:

• Adjustment is 200 percent or more, or 50 percent or less, than the amount reported; or
• Net positive adjustment is greater than the lesser of $5 million or 10 percent of gross receipts.

40 percent gross valuation misstatement penalty applies if the:

• Adjustment is 400 percent or more, or 25 percent or less, than the amount reported; or
• Net positive adjustment is greater than the lesser of $20 million or 20 percent of gross receipts.

A company may prevent an imposition of U.S. transfer pricing penalties if it can demonstrate that it has made reasonable efforts to comply with the IRC §§ 482 and 6662 regulations. 

OECD Transfer Pricing Guidelines
The Organization for Economic Cooperation and Development is an international policy organization that provides guidance for its member countries in their individual and joint efforts to expand trade and cross-border investment among themselves and the rest of the world.  It has issued a series of transfer pricing guidelines over many years, as well as other materials of significance to international taxpayers and tax administrators.  Its decisions and pronouncements are advisory and instructive, not mandatory; thus it cannot dictate policy to its members.

STEC – Our clients choose us for our Transfer Pricing, Economics, and Valuation Strengths.

Areas of Specialization
Victor H. Miesel is the Founder and Managing Director of Strategic Tax Economics Consulting, LLC (“STEC”).   Mr. Miesel is an independent consultant that specializes in providing customized transfer pricing services, business valuations for tax purposes, and economics based solutions to a wide range of industries and company sizes, which includes firms that are publicly traded or closely-held.  His skill set is unique in providing in-house coaching to corporate tax departments, as well as national and regional based CPA firms that seek to develop their own transfer pricing function or specialty area.  Mr. Miesel has extensive experience in partnering with independent outside legal counsel, major global law firms, domestic and international tax planning experts, as well as transfer pricing software firms.

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Professional highlights include:

• Performing transfer pricing documentation studies and IP valuations for numerous industries, including Financial Services (such as Banking, Insurance, Credit Cards, Hedge Funds, REITs, and Asset Management), and for industries such as High Technology, Industrial Products, Entertainment, Music, Travel, Specialty Chemicals, Biotechnology, Retail Food, e-business, Consumer and Luxury Products, and Deep Sea Oil Drilling; and


• Conducting transfer pricing analyses for strategic tax planning, contemporaneous documentation and tax compliance for the United States, Canada, the United Kingdom, Argentina, Brazil, Germany, France, Italy, Japan, Israel, Mexico, Hong Kong, and the Netherlands, and for Pan-European purposes (using Internal Revenue Code (“IRC”) §§ 482, 6662, and the Organization for Economic Cooperation and Development (“OECD”) applicable government transfer pricing regulations and methods, including the Europe focused “Master File” transfer pricing documentation).

Mr. Miesel’s other experience includes coaching and internal consulting to multinational enterprises focusing on building internal transfer pricing compliance teams, and working with in-house management to develop transfer pricing policies and procedures to minimize compliance and tax related risks.  He has spoken and published on a wide variety of transfer pricing topics and is a frequent speaker at international tax conferences focusing on transfer pricing economics and tax planning. 

Mr. Miesel is a member of the American Bar Association (“ABA”) Tax Group and one of the co-authors of the ABA “viewpoint” on the IRC § 482 Proposed Cost-Sharing Regulations, and the ABA “viewpoint” on the IRC § 482 Temporary and Proposed Services Regulations.

Education

• A.B. Economics, A.B. Political Science, The University of Michigan
• M.P.P. International Finance and Econometrics, The Gerald R. Ford School of Government, The University of Michigan
• M.A.E. (candidate), Applied Economics and Business Finance, The University of Michigan

Professional Associations and Awards

• American Bar Association, Associate Member; Tax Group, and Transfer Pricing Subcommittee, Member;
• European-American Tax Institute, Member;
• Bureau of National Affairs (“BNA”) Featured Author, Portfolio Series #890; Applied Transfer Pricing – A Case Study; and
• Awarded One of the World’s Leading Transfer Pricing Advisors by Legal Media Group, and included in The Guide to the World’s Leading Transfer Pricing Advisers.

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Mr. Jørgensen’s consulting experience also comprises litigation support for assessing damages from patent infringements, valuation appraisals of technology investments and trademarks divestitures, lobbying assistance concerning executive compensation, and economic and effective tax-rate analyses for the life insurance, bank, and thrift industries.  Additionally, Mr. Jørgensen provided advice to the IRS’s Commissioner Advisory Group on transfer pricing, in association with the issuance of the IRC § 482 regulations in 1994.

Education

Testimony and Depositions

• Testified as an expert witness in IRC § 482, transfer pricing, and economics with respect to aspects of control and the applicability of IRC § 482 to joint venture relationships, in the GE Petrochemicals, Inc. v. Cynthia Bridges, Secretary Louisiana Department of Revenue, State of Louisiana,B.T.A. Docket No. 6031
• Submitted deposition testimony on behalf of two multi-billion dollar  taxpayers v. the Illinois Department of Revenue and Wisconsin Department of Revenue, respectively, involving intercompany payments of royalties, management fees, and interest between affiliated members of commonly controlled group of companies
• Retained to submit deposition and expert witness testimony for domestic transfer pricing purposes for a multi-billion dollar taxpayer in the State of Maryland
• Testified as an expert witness in IRC § 482, transfer pricing, and economics in the Petition of The Sherwin-Williams Company, N.Y. Div. Tax App., Admin. Law Judge Unit, DTA No. 816712 (June 7, 2001)

Presentations and Seminars

• Alliance for Tax, Legal and Accounting (“ATLAS”) Seminars, May 2005:  Critical Tax Issues Facing the Pharmaceutical and Biotech Industries – Migrating Intangibles Cost-Sharing/Buy-Ins, Licensing, Real Options
• BDO Seidman, LLP WebEx, March 2005:  Jobs Creation Act – Application of Section 482 to Determine Allowable Manufacturing Deduction
• Tax Executives Institute (“TEI”) – Virginia Chapter, November 2004:  Update on State Transfer Pricing Issues
• TEI – Santa Clara Chapter, April 2004:  High Technology Tax Institute – India Transfer Pricing Documentation and Enforcement
• Arizona Society of CPAs, December 2003:  The Transfer Pricing Challenge – The Regulatory Environment and Practical Applications
• Council on State Taxation (“COST”), April 2003:  2003 Income Tax Conference/Audit Session – The Way to do 482
• Paul J. Hartman State and Local Tax Forum (9th Annual), October 2002:  Transfer Pricing – Are You Litigation Ready?
• The German American Chamber of Commerce, October 2002:  Transfer Pricing and the Use of Off-Shore Intangible Holding Companies to Lower Global Effective Tax Rates
• COST, August 2002:  Great Issues Conference – Anticipating State Audit Challenges to Transactions between Affiliates and Transfer Pricing Studies
• Georgetown University Law Center, Advanced State and Local Tax Institute, May 2002:  The Arm’s-Length Defense Against Forced Combination in “Distortion” States
• Mexcon 2002 Conference, March 2002:  Mexican Transfer Pricing Update
• Council for International Tax Education (“CITE”), 2000:  Transfer Pricing for State and Local Tax Purposes
• Numerous internal firm presentations and seminars to tax professionals in the United States and internationally

Invitations and Professional Affiliations

• Provided review and commentary on Robert Feinschriber’s book, 2004:  Transfer Pricing Methods – An Applications Guide
• National Association for Business Economics
• American Economics Association

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