SAN FRANCISCO — Baker & McKenzie is representing Facebook Inc. in its dispute with the IRS over the value of assets the company transferred to its Irish holding company.
Lawyers with the U.S. Department of Justice asked earlier this month for a court order forcing Facebook to provide information to the IRS related to agreements between the company and the holding company, Facebook Ireland Holdings. Baker & McKenzie partner Scott Frewing filed court papers on Monday on behalf of the company in the dispute over the documents, which is pending in the U.S. District Court for the Northern District of California.
The IRS has accused a growing number of U.S. multinational corporations of transferring profits to countries with lower tax rates over the past few years. These so-called “transfer pricing” cases have focused heavily on technology and pharmaceutical companies, whose intangible assets—patents, trademarks, user bases and customer lists—can be transferred across borders and cross-licensed to lower tax liability.
Despite the growing interest, the IRS’s track record when challenged in court in transfer pricing cases has been lackluster. Just last month, lawyers at Baker & McKenzie won a transfer pricing case in U.S. Tax Court on behalf of medical device company Medtronic Inc. The Tax Court sided with the company in the $1.4 billion dispute finding that the IRS’s approach to the value of intellectual property licenses Medtronic granted to its Puerto Rico affiliate was “arbitrary, capricious, or unreasonable.”
Frewing’s name was not among the Baker & McKenzie lawyers listed on the opinion in the Medtronic case, but his firm bio says that he’s defending multiple technology companies from IRS adjustments of more than $1 billion related to transfers of intangible property. Frewing didn’t immediately respond to messages.
Both the company and lawyers from the Justice Department have consented to have the dispute heard by U.S. Magistrate Judge Laurel Beeler in San Francisco.
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