Richard Rubin wrote a Wall Street Journal article titled Facebook and IRS Prepare for $9 Billion U.S. Tax Court Fight.

« Facebook Inc. and the Internal Revenue Service will square off in a U.S. Tax Court case that could cost the social-media giant more than $9 billion and shape the government’s ability to crack down on companies’ efforts to shift profits to low-tax countries. »

« In its pretrial memo, the government quoted Chief Operating Officer Sheryl Sandberg as saying that Facebook had to call Ireland its international headquarters for “tax purposes.” »

« The IRS argues that more of the company’s profits should have been taxed at higher rates in the U.S., rather than in the company’s Irish subsidiary. Facebook contends that it deserves a refund. »

« The result will likely hinge on the valuation of intellectual property used by Facebook’s overseas subsidiaries, which pay royalties to the parent company…. Facebook had incentives to set a low value for those assets, such as the user base and the company’s technology. By doing so, Facebook could reduce the stream of royalties paid to the U.S. parent that would be taxed at the 35% rate that applied before the 2017 tax law. »

«  Facebook’s practice of routing overseas profits to low-tax countries is common among U.S. multinationals, which have faced criticism in the U.S. and in Europe for not paying enough in taxes. The case could set the rules of the road for others with similar disputes in the pipeline. »

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