Transfer pricing enters a new era of volatility and scrutiny in 2025

The transfer pricing environment in 2025 has shifted faster than the IRS can hire, fire, or reinstate employees.

Years of expanded enforcement gave way to steep budget cuts, workforce churn, and operational instability. Despite that turbulence, the IRS continues to refine case selection, push penalties under §6662, and develop litigation positions.

Companies also face new pressure from ASC 740 reporting and the economic shock created by global tariff hikes. The combined effect keeps transfer pricing at the center of multinational tax strategy.

Enforcement and litigation

The IRS had begun building momentum in transfer pricing enforcement after decades of poor results. The Transfer Pricing Practice within LB&I expanded its role in case selection and development. The agency invested in personnel, technology, and analytics addressing intercompany debt and intangible property.

That trajectory reversed in January 2025.

The IRS budget dropped to $12.3 billion. Thousands of probationary employee…