IRS Takes Facebook to Court, Showing Tougher Stance on IP-Driven Companies
Signaling a shift in enforcement tactics against big companies that make money from intellectual property, federal tax officials have sought a court order demanding internal corporate records related to one of Facebook’s offshore tax strategies.
Arguing that the social-media giant missed a deadline last month to turn over such information, the Internal Revenue Service filed a petition July 6 in San Francisco federal court seeking documents and records for the 2010 tax year. That year, Facebook shifted the global rights for many of its intangible assets — outside the U.S. and Canada — to a subsidiary in low-tax Ireland. The IRS claims that, for tax purposes, the company understated the value of those assets by billions of dollars.
The agency’s federal court petition represents the latest evidence that it’s applying new, tighter scrutiny to large IP-driven companies. Tax lawyers say the IRS is getting more aggressive as it tries to ferret out their tax-avoidance strategies, which often involve offshore subsidiaries. The agency announced in 2013 that it would begin seeking court orders if companies didn’t fork over documents requested during audits.