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IRS Audits Google’s Profit Moves

Agency looks at how company avoided taxes by shifting profits to offshore subsidiaries.

By Jesse Drucker, Bloomberg | Updated on October 13, 2011

The U.S. Internal Revenue Service is auditing how Google Inc. avoided federal income taxes by shifting profit into offshore subsidiaries, according to a person with knowledge of the matter.

The agency is bringing more than typical scrutiny to how the company valued software rights and other intellectual property it licensed abroad, said the person, who requested anonymity because the audit isn’t public. The IRS has requested information from Google about its offshore deals after three acquisitions, including its $1.65 billion purchase of YouTube, the person said. The transfer overseas of these kinds of rights rights has enabled Google to attribute earnings to foreign units that pay lower taxes, Bloomberg News reported a year ago.

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