Coca-Cola’s $20 Billion Tax Case is Headed to Appeals Court, WSJ Reports

With a 5-Year Average Dividend Growth Rate of 6.21%, The Coca-Cola Company (NYSE:KO) is included among the Top 11 Dividend Kings to Buy for Safe Dividend Growth.

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On June 22, The Wall Street Journal reported that The Coca-Cola Company (NYSE:KO) and the IRS are heading to court in a long-running dispute involving $20 billion. The case focuses on the beverage company’s reporting of profits generated in the US and overseas.

Coca-Cola is taking the matter to a federal appeals court in Miami as it seeks to resolve a tax liability issue linked to how the company and its foreign subsidiaries reported profits between 2007 and 2009. The reporting was based on an accounting practice known as transfer pricing.

The dispute focuses on a 1996 agreement between Coca-Cola and the IRS regarding how the company would report foreign profits. Coca-Cola’s US corporation licenses its intellectual property, including recipes, brand names, and trademarks, to foreign subsidiaries that produce concentrates used for its beverages in international markets.

Coca-Cola said it organized its operations according to the 1996 agreement by using a “10-50-50” method. Under this approach, foreign suppliers keep 10% of gross sales, while the US parent company and foreign subsidiaries divide the remaining profits.

“Far from seeking to evade its tax obligations, Coca-Cola carefully structured its operations to adhere to a method that the IRS had repeatedly blessed,” the company said in a court filing, according to The Wall Street Journal.

The Coca-Cola Company (NYSE:KO) is a beverage company. Its segments include Europe, the Middle East and Africa (EMEA), Latin America, North America, Asia Pacific, and Bottling Investments.

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