The US Treasury Department and the Internal Revenue Service (IRS) released Notice 2025-04, “Application of the Simplified and Streamlined Approach under Section 482”, on 18 December 2024, clarifying the US government’s stance on using the OECD’s simplified method to provide a new method for pricing certain controlled transactions involving baseline marketing and distribution activities.

The approach for pricing these activities, referred to herein as the simplified and streamlined approach (SSA), is described in a report of the Organization for Economic Cooperation and Development (OECD) titled, “Pillar One – Amount B: Inclusive Framework on BEPS” which was published on 19 February 2024.

As a key deliverable of Pillar One, Amount B is expected to not only provide relief of compliance burdens for taxpayers but also to enable tax administrations to allocate resources towards riskier and more complex transactions, thereby ensuring a more efficient and impactful approach to their work.

The OECD stated countries have the option to adopt the rules, however, the US has always supported Amount B and delegated to make the transfer pricing provision mandatory.

The proposed regulations offer two options for applying the new transfer pricing framework. Under the first, companies can choose to opt in. The second still allows companies to decide but lets countries apply Amount B to transactions even if a company doesn’t opt in.

This notice also provides guidance concerning application of the SSA to in-scope transactions undertaken by parties subject to US tax with respect to those transactions before issuance of those proposed regulations.

The Treasury and IRS plan to align the proposed regulations fully with the OECD report, implementing its substance entirely, though not all elements are restated in the notice. The notice states that parts of the SSA may need updates over time and could be addressed through sub-regulatory guidance, like a revenue procedure, incorporated into the regulations.

Beginning 1 January 2025, companies will be permitted to implement Amount B for taxable years.