ATLANTA — Coca-Cola is continuing its legal challenge against the U.S. Internal Revenue Service over a major transfer pricing dispute involving taxes from prior years, with the case now before a federal appeals court, company filings and court records show.
The dispute centers on whether the IRS correctly adjusted how Coca-Cola allocated income between its U.S. parent company and foreign affiliates for tax years 2007 through 2009, according to filings from the company and the government. The case, The Coca-Cola Company and Subsidiaries v. Commissioner of Internal Revenue, is pending before the U.S. Court of Appeals for the Eleventh Circuit.
The U.S. Tax Court previously ruled that the IRS properly used a different transfer pricing method to calculate Coca-Cola’s taxable income, according to court and company documents. The Tax Court’s decision resulted in additional federal income tax liability for the disputed years, with Coca-Cola reporting that the IRS issued invoices after the ruling.
Coca-Cola has disputed the IRS calculation and argued that its previous approach to allocating income among related entities was appropriate, according to company filings. The company said it paid the amount requested by the IRS as a tax litigation deposit while continuing its appeal, noting that the payment could be refunded if its legal position is ultimately upheld.
The IRS has defended its position, arguing that the agency’s method properly reflected income under federal transfer pricing rules, according to government filings summarized in legal reports. The government has also argued that recent appellate decisions involving other companies should not change the outcome of Coca-Cola’s case.
Transfer pricing rules govern how multinational companies allocate income and expenses among related entities in different countries. The IRS uses those rules to determine whether taxable income has been appropriately reported in the United States, according to federal tax regulations and court filings.
Coca-Cola said in its financial filings that it continues to believe its tax positions are valid and that it intends to pursue available legal options. “We intend to vigorously defend our positions,” the company said in its filings regarding the litigation.
The case has attracted attention because it involves a dispute over how profits from global operations should be allocated between a U.S. company and overseas affiliates. Details of the appeals process and the final outcome remain unresolved.
As of the latest company disclosures, the appeal remains pending before the Eleventh Circuit. The court has not issued a final decision, and the amount ultimately owed or refunded will depend on the outcome of the proceedings.
