TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, November 12, 2017

Facebook Sues IRS Seeking Access To Internal Agency Appeal

Facebook (2016), Facebook Sues IRS Seeking Access to Internal Agency Appeal:

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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I have been telling my tax procedure there is no such right. Will I have to change my lecture next year?

Posted by: Prof Mad | Nov 12, 2017 2:33:24 PM

I tell my students the same thing. There is no right to Appeals during tax determination. I don't have the case cite handy right now. Will post it tomorrow. There is a right to an Appeals hearing during collection. It's called Collection Due Process. See 6320 and 6330.

Posted by: Bryan Camp | Nov 12, 2017 7:57:36 PM

The case I was thinking of is Estate of Weiss, TC Memo 2005-284. I have not shepped it in a year but I would think it still good law for the proposition that a taxpayer has no substantive right to an Appeals conference during the tax determination process.

Posted by: Bryan Camp | Nov 13, 2017 1:32:45 PM

What, no calling in a Fast Track appeals officer to use settlement authority for an amicable disposition?

Posted by: MalibuMike | Nov 13, 2017 3:33:21 PM