We provide here a written summary of answers provided by the Department of Revenue to the committee at periodic question and answer sessions. These documents are classified as Revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on a specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.
Q&A with the Pennsylvania Department of Revenue
Under what circumstances would the DOR review intercompany royalty and/or interest expense deductions?
Under what circumstances would the Department review intercompany royalty and/or interest expense deductions? What criteria would the Department utilize to determine the appropriateness of such deductions? In what circumstances, if any, would the Department assert that the related corporation receiving of such intercompany payments is subject to tax? How would apportionment be determined with respect to such intercompany income?
On audit, the Department reviews all royalty and interest expense deductions. A decision is based upon the facts presented. If the person who has this question has a specific case, he/she should consider making full disclosure of the facts, including the taxpayer’s identity, and submitting these issues as a letter ruling request to the Department.