Coca-Cola argues that IRS is trying to “increase substantially the amount of tax”
Coca-Cola said Friday that the Internal Revenue Service (IRS) has notified them that the company may owe $3.3 billion in federal income taxes after an audit. The SEC filing, which can be found here, states that the company’s reported income may have been higher in 2007 to 2009. The Wall Street Journal reported that as recently as 2009 (the last audit), Coca-Cola was in compliance with the way it reported its foreign licensing.
“We firmly believe the IRS’ proposed income tax assessments of our Company are without merit, and we plan to pursue all administrative and judicial remedies necessary to resolve this matter,” according to a Coca-Cola statement sent to Fortune via email. “The Company has followed the same methodology for determining our U.S. taxable income from certain foreign company operations for nearly 30 years.”
Coke said the dispute relates to how it reports income from foreign licensing of manufacturing, distribution, sale, marketing and promotion of products in overseas markets. Coke said it followed the methodology for the licenses that had been outlined in a 1996 agreement with the IRS. The statement continued, “The IRS formally agreed to this methodology for the Company’s 1987-1995 tax returns and subsequently approved the methodology during five successive audits through tax year 2006.
The IRS now seeks to depart from this long-standing practice in order to increase substantially the amount of tax.” “We are among hundreds of other companies currently facing these types of adjustments involving payments between related companies, and we will vigorously defend our position,” said Coca-Cola. “We are confident we will prevail on the merits of this case.”