The U.S. Internal Revenue Service is bringing "more than typical scrutiny" to an audit of Google over how the Web giant has valued software rights and other intellectual property it licensed abroad, according to a Bloomberg report.
The IRS audit is looking into how Google may have avoided federal income taxes by shifting profit into offshore subsidiaries, the news service writes, citing "a person with knowledge of the matter." Google declined to comment on the report, but spokesmen Jim Prosser told Bloomberg that the audit "is a routine inquiry."
Like many multinational companies, Google tax attorneys are in frequent contact with the IRS. Audits are common.
Bloomberg writes that the agency is seeking information about offshore deals related to three Google acquisitions, including YouTube, which it bought for $1.65 billion in 2006. According to the report, the IRS is also looking into the prices Google's foreign subsidiaries paid for software and intellectual property rights in its $625 million acquisition of e-mail security service Postini in 2007, and its $3.2 billion purchase of Web-advertising firm DoubleClick in 2008.
Shifting the software and intellectual property rights abroad could allow Google to attribute earnings to foreign units that pay lower taxes. Subsidiaries are supposed to pay parent companies the market value for whatever rights they acquire.