Coca-Cola Hires Former U.S. Judge as Special Adviser for Ongoing IRS Litigation
06 Gennaio 2021 - 2:57PM
Dow Jones News
By Dave Sebastian
Coca-Cola Co. said it has tapped J. Michael Luttig, a former
U.S. federal judge and general counsel for Boeing Co., as its
counselor and special adviser to the company for its ongoing
litigation with the U.S. Internal Revenue Service.
Mr. Luttig served on the U.S. Court of Appeals from 1991 to
2006. At Boeing, he handled legal matters associated with accidents
involving the 737 MAX aircraft.
A judge in U.S. Tax Court in November ruled that the soda giant
placed too much of its profit in its foreign operations instead of
its higher-taxed domestic parent company. The IRS had been seeking
more than $3.3 billion for the tax years 2007 through 2009. The
cost to Coca-Cola could be more if the government applies the same
rationale to subsequent tax years.
"The company intends to vigorously defend its position and
consider all avenues, including appealing any ultimate decision,"
Coca-Cola said Wednesday.
The dispute stemmed from Coca-Cola's subsidiaries in countries
including Brazil, Ireland and Egypt. Those operations produce
syrups and other ingredients for use in the company's
beverages.
Especially before the 2017 U.S. tax law cut the corporate tax
rate, U.S. companies had an incentive to pack profits into low-tax
countries and defer U.S. taxes on those profits rather than
attribute earnings to the U.S. parent, which faced an immediate 35%
rate.
Companies within a single corporate structure are supposed to
allocate profits between the parent and a foreign subsidiary based
on what unrelated companies would do in an equivalent arm's length
transaction. But there are plenty of gray areas, especially when
companies profit from mobile, intangible assets like trademarks and
patents. The IRS regularly engages in protracted legal fights with
corporations over how those rules should apply in each
situation.
Mr. Luttig, in a Wednesday statement, said Coca-Cola for 20
years reported U.S. taxable income from its non-U.S. operations
under a methodology agreed to by the IRS.
"American companies cannot run their businesses with the
uncertainty of the retroactive application of newly minted IRS tax
policies to prior tax years that are contrary to the IRS' own
previously approved policies and then be required to pay billions
of dollars in unanticipated increased taxes that result from the
retroactive application of these new tax policies," Mr. Luttig
said.
--Richard Rubin contributed to this article.
Write to Dave Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
January 06, 2021 08:42 ET (13:42 GMT)
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