Coca-Cola recently announced that the Internal Revenue Service is seeking $3.3 billion in extra taxes plus interest following an audit of tax years 2007 through 2009. The dispute involves how profits from foreign countries are recorded and taxed because of the licensing of properties to overseas businesses in countries with lower taxes.
This issue could produce huge tax whistleblower rewards, as Coke is not the only business to be in a dispute of this sort with the IRS. Amazon and Microsoft are also involved in disputes over transfer pricing, the amount of income that is properly attributed to different jurisdictions in intracompany transactions. It is unlikely they are the only businesses with this issue. If businesses book income in low-tax countries and leave the profits there, they are able to avoid being taxed at the higher rates applied to income in the United States.
IRS whistleblowers are eligible for rewards of between 15 and 30 percent of the amount recovered by the IRS after the individual submits the information through the tax whistleblower program when the amount in dispute exceeds $2 million. If there was an individual behind this enforcement action, the resulting award could be the largest ever.
For years, the IRS has been going after individuals and businesses for offshore tax evasion. And this led to the largest reward in the history of the program, just over $100 million to one individual. However, in the past, the issue has involved unreported income and assets overseas. These disputes involve the allocation of the income and profits for tax purposes.
Coca-Cola disclosed the information in a filing to the SEC. The chief counsel at the IRS has recommended the matter be litigated. It will probably be several years before we find out whether there are whistleblowers behind these types of cases.
If you have questions about this aspect of tax law, or have evidence of corporate wrongdoing that you wish to report, feel free to contact one of our IRS whistleblower attorneys via our contact form or by calling 1-800-590-4116.