Coca Cola 2015 Annual Report Download - page 26

U.S. Federal Income Tax Dispute
On September 17, 2015, the Company received a Statutory Notice of Deficiency ("Notice") from the IRS for the tax years 2007 through 2009, after a five-year
audit. In the Notice, the IRS claims that the Company's United States taxable income should be increased by an amount that creates a potential additional
federal income tax liability of approximately $3.3 billion for the period, plus interest. No penalties were asserted in the Notice; however, the IRS has since
taken the position that it is not precluded from asserting penalties and notified the Company that it may do so. The disputed amounts largely relate to a
transfer pricing matter involving the appropriate amount of taxable income the Company should report in the United States in connection with its licensing
of intangible property to certain related foreign licensees for use in connection with the manufacturing, distribution, sale, marketing and promotion of
products in overseas markets.
The Company has followed the same transfer pricing methodology for these licenses since the methodology was agreed with the IRS in a 1996 closing
agreement that applied back to 1987. The closing agreement provides prospective penalty protection as long as the Company follows the prescribed
methodology and material facts and circumstances and relevant Federal tax law have not changed. On February 11, 2016, the IRS notified the Company,
without further explanation, that the IRS has determined that material facts and circumstances and relevant Federal tax law have changed and that it may
assert penalties. The Company does not agree with this determination. The Company's compliance with the closing agreement was audited and confirmed by
the IRS in five successive audit cycles covering the subsequent 11 years through 2006, with the last audit concluding as recently as 2009.
The Notice represents a repudiation of the methodology previously adopted in the 1996 closing agreement. The IRS designated the matter for litigation on
October 15, 2015. Therefore, the Company will be prevented from pursuing any administrative settlement at IRS Appeals or under the IRS Advance Pricing
and Mutual Agreement Program.
The Company firmly believes that the IRS' claims are without merit and plans to pursue all available administrative and judicial remedies necessary to
resolve this matter. To that end, the Company filed a petition in the U.S. Tax Court on December 14, 2015. The Company intends to vigorously defend its
position and is confident in its ability to prevail on the merits.
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Not applicable.
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The following are the executive officers of our Company as of February 25, 2016:
Alexander B. Cummings, Jr., 59, is Executive Vice President and Chief Administrative Officer of the Company. Mr. Cummings joined the Company in 1997
as Deputy Region Manager, Nigeria. In 1998, Mr. Cummings was named Managing Director/Region Manager, Nigeria, and in 2000, he became President of
the North West Africa Division based in Morocco. In 2001, Mr. Cummings became President of the Africa Group and served in this capacity until June 2008.
Mr. Cummings was appointed Chief Administrative Officer of the Company effective July 1, 2008, and was elected Executive Vice President of the Company
effective October 15, 2008. Mr. Cummings will be retiring from the Company on March 31, 2016.
Marcos de Quinto, 57, is Executive Vice President and Chief Marketing Officer of the Company. Mr. De Quinto first joined the Company in 1982 in the
marketing department of Coca-Cola Spain, where he held positions including District Manager and Merchandising Manager. In 1988, he left the Company to
be Regional Manager for Southern Publicity Agencies ALAS BATES/BSB Advertising before rejoining Coca-Cola Spain in 1990 as Marketing Services
Manager. From September 1992 to September 1994, Mr. De Quinto served as Senior Vice President, Marketing Operations Manager, Coca-Cola Southeast
and West Asia, and from September 1994 to February 1995, he served as Regional Manager for Singapore and Malaysia. From February 1995 to October
1996, Mr. De Quinto served as Marketing Manager, Central Europe Division, and from October 1996 to January 2000, he served as Regional Manager, Coca-
Cola Spain. In January 2000, he was appointed President of the Iberia Business Unit and served in that role until his appointment to the position of Chief
Marketing Officer effective January 1, 2015. He also served as Vice President, Europe Group from May 2007 to December 2012. Mr. De Quinto was elected
Executive Vice President of the Company effective February 19, 2015.
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