IRS sues Facebook for $9B, says company offshored profits to Ireland

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The IRS argues that Facebook understated the value of the intellectual property it sold to an Irish subsidiary in 2010 while building out global operations, a move common among U.S. multinationals. Ireland has lower corporate tax rates than the United States, so the move reduced the company’s tax bill.


Under the arrangement, Facebook’s subsidiaries pay royalties to the U.S.-based parent for access to its trademark, users and platform technologies. From 2010 to 2016, Facebook Ireland paid Facebook U.S. more than $14 billion in royalties and cost-sharing payments, according to the court filing.

The company said the low valuation reflected the risks associated with Facebook’s international expansion, which took place in 2010 before its IPO and the development of its most lucrative digital advertising products.

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If the IRS prevails, Facebook would face an additional federal tax liability of up to $9 billion, plus interest and any penalties, the company estimated in a recent securities filing.

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