Coca-Cola Co. announced on Friday that it will pay $6 billion in back taxes and interest to the Internal Revenue Service while it pursues an appeal in a federal tax court case that dates back 17 years. The Atlanta-based company remains steadfast in its belief that it will prevail in the legal dispute concerning taxes and interest the IRS claims are owed from 2007, 2008, and 2009.
The company expressed its eagerness to engage in the appellate process and confirmed its intention to settle the agreed-upon liability and interest as part of that process. A spokesperson for Coca-Cola, Scott Leith, refrained from providing further details to the media.
U.S. Tax Court Judge Albert Lauber issued a concise two-sentence decision on Friday, concluding his examination of the case. The disagreement entered the court's jurisdiction in December 2015, following Coca-Cola's disclosure to the IRS that it was liable for an additional $3.3 billion in federal taxes and interest for the specified three years.
In its official statement on Friday, Coca-Cola accused the IRS of altering the methodology used to determine the company's U.S. income based on profits exceeding $9 billion from foreign licensees and affiliates. The IRS did not respond immediately to requests for comment on the matter.
In a filing with the Securities and Exchange Commission in 2015, Coca-Cola disclosed that it had consistently applied the same approach to calculate its taxable U.S. income from foreign affiliates for nearly three decades.
In a recent quarterly report submitted to the SEC, Coca-Cola asserted that it believes both the IRS and Judge Lauber misinterpreted and misapplied the relevant regulations in reallocating income earned by the company's foreign licensees. The company anticipates that if successful in its appeal, a portion or all of the $6 billion, along with accrued interest, could be refunded. The deadline for filing appeal documents is within 90 days.
Last week, Coca-Cola revised its full-year sales forecast upward following a robust second-quarter performance, which was bolstered by price hikes on its products.
