Facebook reignites transfer pricing battle with the IRS

If the IRS prevails here, periodic adjustments shift from a theory to a standing enforcement tool.

Facebook (a.k.a. Meta) is back in Tax Court over the same IP transfer it thought had been resolved.

The IRS issued new adjustments in September tied to later cost-sharing years, not the original 2010 transfer.

Facebook says the agency is relitigating issues that have already been decided. The case now puts the IRS’s aggressive view of periodic, commensurate-with-income adjustments directly in play.

The Law in Play

The dispute sits at the intersection of §482 and the transfer pricing regulations governing intangibles. The earlier case focused on the valuation of a platform contribution transaction, or PCT, tied to Facebook’s 2010 IP transfer to Facebook Ireland. The court agreed with the IRS on method and regulatory framework but largely rejected its valuation.

The new case centers on cost-sharing arrangements and the IRS’s authority to apply the commensurate-with-income standard after the fact. The agency argues that later profits from the IP show Facebook’s original projections were too…