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IRS Takes Facebook to Court, Signaling Start of Tougher Approach

  • U.S. parent’s dealings with Irish subsidiary under question
  • Case may turn on whether IRS can beat July 31 deadline

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 Inc.’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.