Clark Armitage Comments on Meta’s New Transfer Pricing Dispute in Bloomberg

Meta Platforms Inc. may have thought its transfer pricing problems with the IRS ended with a mixed decision from the US Tax Court last spring. Not so much.

Just months later, the agency took further action, and now the company could be the first to test new-found, controversial IRS assertiveness around periodic adjustments and transfer pricing.

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Caplin & Drysdale Member Clark Armitage said Meta is arguing that the IRS took a “lump sum” value position in the earlier case, and that the court’s calculations of the value of that amount should settle any questions about the value of the IP transfer—making the periodic adjustments the IRS is now trying to claim inconsistent with that decision.

“If the IRS wanted to make periodic adjustments for later years, it should have done the same for 2010,” he said. “Under a periodic adjustments approach, one would expect the value in 2010 to be only a fraction of the full lump sum value for that year.”

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Armitage said the agency has had the chance to try something like this in the past—in disputes with Amazon.com Inc. and Veritas Spftware Corp., for example—but chose not to. With the GLAM and now this case, things may be different.

“In fact, if the IRS is allowed to apply periodic adjustments to Facebook/Meta, maybe it could do the same even at this late date for Veritas and Amazon,” he said. “The IRS does seem to think it has that authority based on the examples in its recent periodic adjustment GLAM.”

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