The case could set a precedent for U.S. businesses that transfer intellectual property abroad. A victory for the IRS would give tax authorities a free hand in similar multibillion-dollar disputes with other tech and pharmaceutical giants. The agency is already pursuing similar cases against Meta and Amgen.
According to The Wall Street Journal, the dispute concerns the company’s tax returns for 2007–2009. The IRS alleges that Coca-Cola systematically underreported its profits in the U.S. and transferred them to its foreign subsidiaries (in Ireland, Brazil, Mexico, and Costa Rica) using internal transfer prices below market rates.
According to the WSJ, the court case will not only address past claims: since Coca-Cola continues to use this scheme, if it loses, it will have to pay back taxes for the entire period up through 2025. This additional amount is estimated at $14 billion.
In addition, Coca-Cola will attempt to appeal a 2020 ruling by the U.S. Tax Court in favor of the government. The court ruled at the time that the profit-allocation method artificially understated the parent company’s income from its main intangible assets—the brand and the secret formula. As a result of that ruling, the company has already paid $6 billion to the government.
In the upcoming appeal, the company will have a chance to recover that $6 billion plus interest. If it loses, however, the total cost of paying additional taxes and interest will exceed $20 billion—an amount that surpasses the corporation’s entire net profit for 2025.
