The IRS’s Advance Pricing and Mutual Agreement (APMA) program executed 110 Advance Pricing Agreements (APAs) in 2025 and saw its pending caseload rise to 622, according to the program’s twenty-seventh annual report. The median time to complete an APA was 41.6 months, a slight increase from the prior year, with new APAs taking a median of 45.9 months. (Ann. 2026-8, 2026-16 IRB, 3/30/2026)
APA Program
The IRS Advance Pricing and Mutual Agreement (APMA) program is a voluntary process under which a taxpayer and the IRS agree in advance on a transfer pricing method and its application to specified controlled transactions so that the results are consistent with the arm’s‑length standard under IRC § 482.
An Advance Pricing Agreement (APA) sets a defined scope (covered entities, transactions, and tax years), is binding once executed, and limits IRS examinations for covered years to verifying that the taxpayer followed the APA terms, that critical assumptions are still valid, and that the agreed method was properly applied. Taxpayers must file annual compliance reports, and in certain cases, the agreed method can be “rolled back” to resolve earlier years. The principal procedural guidance is in Rev Proc 2015‑41.
APA Filings Continue to Rise
In 2025, the APMA program received 178 APA applications. Bilateral APAs, which involve negotiations with a foreign tax authority, continue to be the most requested type, making up 153 of the total filings. The report notes that as of the end of 2025, the program also had 31 user fee filings that were not yet accompanied by a complete application.
While the program executed 110 APAs during the year, the total number of pending requests grew to 622 at the end of 2025. Japan and India engaged in just under half of all pending bilateral APA requests. The number of APA renewals executed in 2025 decreased to 50% of the total, down from 58% in 2024.
Shift in APA Relationships and Tested Parties
The report highlights a notable shift in the nature of cross-border transactions covered by APAs. In a change from previous years, APAs involving transactions between U.S. parent companies and their foreign subsidiaries were just as common as those between foreign parent companies and their U.S. subsidiaries. In 2024, the latter arrangement accounted for 56% of executed APAs.
A similar trend was seen in the selection of the “tested party” in transfer pricing analyses. The proportion of U.S. distributors, manufacturers, and service providers used as the tested party fell to 48% in 2025, down from 59% in 2024. Conversely, the use of non-U.S. service providers as the tested party rose significantly, from 31% in 2024 to 41% in 2025.
CPM Remains Dominant Method as Terms Lengthen
The comparable profits method/transactional net margin method (CPM/TNMM) continues to be the most widely used transfer pricing method. In 2025, it was applied in 86% of APAs covering the sale of tangible property and the use of intangible property. The operating margin was the most common profit level indicator (PLI) for these transactions.
The average term for an APA executed in 2025 was six years, with the majority (41 APAs) set for a five-year term. However, a substantial number of agreements extended to seven, eight, or even 15 years. Approximately 23% of the APAs included “rollback” provisions to cover prior tax years.
APA Completion Times Remain Lengthy
The median time needed to finish an APA in 2025 was 41.6 months. The time varied based on the type of agreement. New unilateral APAs took a median of 39.6 months, while new bilateral APAs took 46.4 months. Renewal APAs were generally completed faster, with a median completion time of 38.4 months across all types.
For more information about the IRS’ APA program, see Checkpoint’s Federal Tax Coordinator 2d ¶ G-4740.
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