Coca-Cola to appeal $6bn US Tax Court decision amid ongoing IRS dispute

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The Coca-Cola Company has announced that it will appeal a recent US Tax Court decision that determined the beverage giant owes approximately $2.7 billion in federal income taxes, potentially escalating the total liability to around $6 billion when interest is included.

The ruling is part of a protracted legal battle with the US Internal Revenue Service (IRS) concerning tax liabilities for the years 2007 to 2009.

The IRS claims that it will reallocate over $9 billion of income to Coca-Cola's US parent company from its foreign affiliates, a move the company argues retroactively rejects a previously agreed-upon income allocation methodology.

Coca-Cola received the initial IRS notice in September 2015, which sought an additional $3.3 billion in taxes. Following the IRS's designation of the matter for litigation in October 2015, Coca-Cola was barred from exploring alternative resolution avenues.

The Tax Court's opinion in November 2020 largely sided with the IRS, and a subsequent opinion in November 2023 reaffirmed this stance on remaining issues.

Coca-Cola maintains that the IRS and the Tax Court misinterpreted relevant regulations and plans to vigorously defend its position in the appellate court. The company has a 90-day window to file a notice of appeal with the US Court of Appeals for the Eleventh Circuit.

Coca-Cola has provided guidance regarding the implications of a potentially unfavourable outcome on appeal, which is detailed in its recent Securities and Exchange Commission (SEC) filings, including a Form 10-Q submitted on 29 July 2024.

Despite the legal challenges, Coca-Cola remains optimistic about its chances of appeal. "We believe we will prevail in the case and will continue to vigorously defend our position," the company stated.

#CocaCola