Facebook Inc. has sued the Internal Revenue Service seeking access to an internal IRS appeal process regarding a decision related to the social media giant’s tax bill.
In a 12-page complaint filed in U.S. District Court for the Northern District of California on Wednesday, Facebook claims that IRS counsel have stymied the company’s request to pursue an internal IRS appeal by citing a new and so far seldom-used rule that allows IRS exam teams to deny access to internal appeals when they determine such an appeal would not be in the interest of “sound tax administration.”
Facebook wants a finding that the IRS violated the Administrative Procedure Act by issuing the new rule—Revenue Procedure 2016-22, 2016-15 I.R.B. 1—and by denying Facebook’s request for an internal appeal.
“Facebook is entitled to an independent administrative forum, and upon information and belief, the IRS decision to deny Facebook access to IRS Appeals was made by individuals in IRS Counsel who were charged with litigating against, or overseeing litigation against Facebook, and were thus not independent,” wrote Facebook’s lawyers at Baker McKenzie.
Baker McKenzie has represented Facebook in its ongoing dispute with the IRS over the value of assets the company transferred in 2010 to its Irish holding company, which underlies the lawsuit filed Wednesday. Facebook has been challenging the IRS’s claim that it underpaid taxes, possibly by more than $3 billion, due to the way it valued intangible assets transferred to its Irish subsidiary in 2010. According to Facebook’s lawsuit, the decision to refuse an internal appeal was made in retaliation against Facebook for refusing to extend the statute of limitations in the ongoing matter.
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