KO · 10-Q · 2026Q3 · Full report

IRS Tax Litigation

COCA COLA CO · 2026-07-29 · Importance 71 · Surprise 60 · In source text

The Company is litigating with the IRS over tax years 2007 through 2009 involving Brazilian royalty-payment restrictions and blocked-income regulations. The Tax Court’s August 2, 2024 decision assessed $2.7 billion of additional tax, producing a total liability of $6.0 billion including interest; Coca-Cola paid the IRS Tax Litigation Deposit on September 10, 2024. The Eleventh Circuit heard the Company’s appeal on June 25, 2026, while the Company estimates potential incremental tax and interest liability of approximately $14 billion for 2010 through 2025 as of December 31, 2025. Continued application of the IRS methodology could increase that exposure by approximately $450 million for the quarter and $900 million for the six months ended July 3, 2026.

Key facts

• The Company estimates the potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2025 could be approximately $14 billion as of December 31, 2025.
• The Company appeals the Tax Court’s decision to the U.S. Court of Appeals for the Eleventh Circuit and the U.S. Court of Appeals for the Eleventh Circuit heard the case on June 25, 2026.
• With applicable interest, the total liability for the 2007 through 2009 tax years resulting from the Tax Court’s decision is $6.0 billion, for which the IRS issued invoices on September 3, 2024.
• The Company is currently in litigation with the IRS for tax years 2007 through 2009 and paid the IRS Tax Litigation Deposit on September 10, 2024.
• On August 2, 2024 the Tax Court entered a decision reflecting additional federal income tax of $2.7 billion for the 2007 through 2009 tax years.
• The Company estimates the impact of the continued application of the IRS methodology for the three and six months ended July 3, 2026 would increase the potential aggregate incremental tax and interest liability by approximately $450 million and $900 million, respectively.
• The Company’s effective tax rates for the three and six months ended July 3, 2026 included $40 million and $319 million, respectively, of net tax benefits related to various discrete tax items, including net interest income of $43 million and $98 million, respectively, related to the IRS Tax Litigation Deposit.
• The Company’s effective tax rates for the three and six months ended June 27, 2025 included $12 million and $155 million, respectively, of net tax benefits related to various discrete tax items, including net interest income of $54 million and $107 million, respectively, related to the IRS Tax Litigation Deposit.

Impact estimates