Bloomberg Law
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The company petitioned US Tax Court on July 30 to contest an IRS determination that it underpaid its taxes by $1.33 billion for 2013 as well as the $573 million in fines tacked on by the IRS in the process. The IRS had already claimed Airbnb understated its income by $4.2 billion based on resources and rights it made to its foreign affiliate, Airbnb International.
The company’s international arm was formed in 2013. Airbnb entered into a technology and intellectual property licensing agreement with the Ireland-based subsidiary that year, sharing technology, products, and customer and marketing intangibles under a cost-sharing agreement. This is known as a transfer pricing arrangement.
The firm said in the suit that it shared with the IRS its relevant documents and the economic analyses it used to determine the cost of the licenses. The IRS has not responded with its own method justifying the redetermination of tax, the company said.
Airbnb International, the firm said, faces a “patchwork” of different legal hurdles as well as a multitude of competition in other countries. Airbnb said as a result it has invested more than $10 billion in intangible development costs and other expenses to build an international business, causing a loss that justifies the numbers it sent to the IRS.
The firm was also levied a smaller fine and penalty for the 2016 tax year, which it is not disputing in the case but “reserves all rights to challenge those determinations” in a separate case, it said..."
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