Coca-Cola to appeal US tax court penalty worth $6 billion

Coca-Cola said Friday it plans to pay a tax penalty worth $6 billion (£4.7bn) while it pursues an appeal in a long-running dispute with the Internal Revenue Service.

“The company believes it will prevail on appeal,” Coca-Cola said of a US tax court ruling dated July 31 that covered the years 2007, 2008 and 2009. The back taxes amount to $2.7 billion, which with interest makes the total owed “approximately $6.0 billion,” the company said.

“The company looks forward to the opportunity to begin the appellate process and, as part of that process, will pay the agreed-upon liability and interest to the IRS,” Coca-Cola said Friday, adding that it has 90 days to file a notice with the US Court of Appeals.

The case dates to 2015 when Coca-Cola received a notice from the IRS contesting the company’s accounting of income from foreign affiliates over the need for “arms-length” pricing of transactions with these entities, Coca-Cola said in a securities filing.

Following a November 2020 decision in which the US Tax Court ruled against Coca-Cola, the company set aside reserves of $438 million.

On June 28 following an updated analysis, Coca-Cola increased the tax reserves to $456 million.

Coca-Cola’s press release Friday did not give a timeframe for the $6 billion payments.

In its latest quarterly filing, Coca-Cola said the IRS could also look to apply its methodology on pricing with foreign affiliates for the years 2010 through 2023, resulting in “the potential aggregate incremental tax and interest liability” of $16 billion.

The Coca-Cola filing also said the company was evaluating the recent court rulings for the tax case. This includes the Supreme Court decision overturning the 40-year Chevron v Natural Resources Defense Council precedent to reign in federal regulatory agencies.