The February 12, 2018 release discussed the recent orders from the Administrative Law Judge (ALJ) in three cases dealing with the Chainbridge transfer pricing methodology. The orders dismissed the taxpayers’ motion to dismiss the case on the grounds that the transfer pricing methodology used by Chainbridge was arbitrary. If the ALJ had granted the motion, the order would have been consistent with a previous ruling by the office of administrative hearings in Microsoft v. Office of Tax and Revenue [No. 2010-OTR-00012 (5/1/12)], which held that the Chainbridge methodology was arbitrary, capricious, and unreasonable.
The ALJ in the recent order refused to dismiss the case, but instead determined that a hearing on the facts in each of the cases was required to determine if the Chainbridge methodology was indeed “arbitrary, capricious, and unreasonable.”
It is also our understanding that other states, including Alabama, Connecticut, Kentucky, Louisiana, New Jersey, and Rhode Island, have recently used Chainbridge to conduct transfer pricing studies for taxpayer transactions.
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