Facebook is now being investigated by the IRS for allegedly understating the value of its assets. On Wednesday, the U.S. Justice Department filed a petition to push the social networking giant to cooperate with an ongoing investigation over whether or not it understated the value of its property transferred to its subsidiary on Ireland with the intention of lowering its tax.IRS Investigating Facebook Over Ireland Asset Transfer; Could Owe Billions

Facebook not complying with IRS requests

According to the IRS, it all started in 2010, when the U.S. firm transferred the rights of its worldwide business – excluding the business in Canada and the U.S. – to its Ireland subsidiary (Facebook Ireland Holdings). The rights that were transferred include quantified assets like its “user base, online platform and marketing intangibles.” In turn, Facebook’s Ireland subsidiary leased the rights to use the platform to its own subsidiary (Facebook Ireland Ltd) for a fee, according to Facebook Ireland Ltd’s accounts filed with the Irish company registry.

According to a copy of the legal filing reviewed by ValueWalk, the IRS believes the accounting firm responsible for valuing the assets in question, Ernst & Young, may have underestimated the value by “billions of dollars.”

IRS investigator Nina Wu Stone notes in one of the filings that she issued six summonses to Facebook to submit the official records for the assets transfer, but each time the U.S. firm failed to comply with the requests. The IRS has been collecting information on the 2010 deal for years with limited resources.

In a statement, a Facebook spokesperson said the company “complies with all applicable rules and regulations in the countries where we operate.”

Major tech firms using tax havens to evade taxes

In recent years, Facebook and other major tech firms such as Google and Apple have been facing accusations of curbing assets in tax havens with a low corporate tax rate like Ireland. In March, however, the social networking giant caved to the pressure by agreeing to stop routing U.K. revenue through Ireland.

The Justice Department’s suit comes as time is running out on the issue. According to the filing, the statute of limitations will expire by July 31. Apart from the documents filed, there have been no comments from the Justice Department or the IRS. Also Ernst & Young has yet to comment on the matter.

On Thursday, Facebook shares closed down 0.73% at $115.85. Year to date, the stock is up more than 9%, while in the last year, it is up almost 33%. The stock has a 52-week high of $121.08 and a 52-week low of $72.