State tax agencies continue to conduct transfer pricing examinations, even though they often lack the necessary resources or expertise to review the intercompany transactions. As a result, many states have come to rely exclusively on a simplified Comparable Profits Method (CPM) to establish intercompany pricing. This simplified approach, to the exclusion of all globally accepted pricing methodologies, can produce bizarre pricing results that defy market logic. This presentation will explore U.S. and global intent in developing the CPM and explain why simplified CPM approaches rarely predict arm’s-length pricing.