Yahoo Finance Facebook (FB) Could Owe $5 Billion to the IRS
The IRS is coming for Facebook (FB) -- to the tune of billions of dollars, reports Bloomberg.
The IRS gave the social network giant a deficiency notice for $3 billion to $5 billion, plus interest and penalties, after looking through Facebook's transfer pricing in an audit, per a Thursday regulatory finding from Facebook. The company anticipates challenging this, but warned it could hurt its balance sheet.
This stems from an IRS investigation, saying the company may have understated the value of intellectual property it transferred to Ireland and reduced its tax bill unfairly, Reuters reports.
The investigation started in 2013, when the IRS found documents related to the royalty value Facebook Ireland paid the primary Menlo Park, California-based Facebook business back in 2010.
"I don't think Facebook is necessarily hiding anything, but it's a fight over pricing," Stephen Hamilton, a tax lawyer in Philadelphia, tells Bloomberg.
The complaint says Facebook has been resisting IRS efforts, giving the agency "limited" documents in January followed by a lack of more information by April. IRS officials sent the first of seven records requests beginning in June via court summons. The company allegedly didn't go to IRS offices both June 17 and June 29, and the statute of limitations on requesting documents ends July 31.
"Facebook complies with all applicable rules and regulations in the countries where we operate," Facebook spokeswoman Bertie Thomson tells Bloomberg in an e-mail.
Facebook's stock has been up 19 percent so far this year. Unlike its struggling peer Twitter (TWTR) and the much-beleaguered Yahoo (YHOO), it beat earnings, revenue and active user expectations in its second quarter. Bloomberg notes its $3.2 billion overseas revenue made up half of all its revenue.
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