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Coke Seeks Transfer Pricing Information From IRS in FOIA Suit

MAR. 3, 2017

The Coca-Cola Co. et al. v. IRS

DATED MAR. 3, 2017
DOCUMENT ATTRIBUTES
  • Case Name
    THE COCA-COLA COMPANY & SUBSIDIARIES ONE COCA-COLA PLAZA NW ATLANTA, GA 30313-2420 Plaintiff, v. INTERNAL REVENUE SERVICE 1111 CONSTITUTION AVENUE NW WASHINGTON, D.C. 20224 Defendant.
  • Court
    United States District Court for the District of Columbia
  • Docket
    No. 1:17-cv-00393
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2017-3042
  • Tax Analysts Electronic Citation
    2017 TNT 43-17

The Coca-Cola Co. et al. v. IRS

 

IN THE UNITED STATES DISTRICT COURT

 

FOR THE DISTRICT OF COLUMBIA

 

 

COMPLAINT

 

 

Plaintiff, The Coca-Cola Company & Subsidiaries (collectively, "Coca-Cola"), brings this action for injunctive relief and damages against the Internal Revenue Service ("Defendant") to compel compliance with the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA").

 

NATURE OF THE ACTION

 

 

1. Coca-Cola seeks records in Defendant's control that relate to (1) Defendant's administrative audit of Coca-Cola's federal income tax returns for the tax years 2005 through 2009, and (2) a royalty closing agreement Coca-Cola and Defendant entered into in 1996 and that the parties relied upon to resolve Defendant's administrative audits of Coca-Cola's federal income tax returns for the tax years 1987 through 2004 ("Royalty Closing Agreement") and Defendant's application or interpretation of 26 U.S.C. § 482 with respect to Coca-Cola for the tax years 1987 through 2004. Defendant received Coca-Cola's requests for the records at issue under the FOIA on January 18, 2017. Defendant has not claimed that the records do not exist, that Defendant does not have control of them, or that Coca-Cola is not entitled to them. As of the date of this filing, Defendant has withheld all requested records in response to Coca-Cola's FOIA requests. Defendant has not claimed that any exemption allows such withholding. Coca-Cola brings this action to compel Defendant to disclose the records to which Coca-Cola is entitled.

 

JURISDICTION

 

 

2. This Court has jurisdiction over this action pursuant to 5 U.S.C. § 552(a)(4)(B) and 28 U.S.C. § 1331.

 

VENUE

 

 

3. Venue is proper in this Court pursuant to 5 U.S.C. § 552(a)(4)(B) and 28 U.S.C § 1391(e).

 

PARTIES

 

 

4. Plaintiff is a corporation organized under the laws of the State of Delaware with its principal place of business at One Coca-Cola Plaza NW, Atlanta, Georgia, 30313-2420. Coca-Cola is a global business in the non-alcoholic ready-to-drink beverage industry with beverage products sold in more than 200 countries. Coca-Cola's products include sparkling soft drinks, purified bottled water, sports drinks, juice drinks, teas and coffees, and energy drinks.

5. Defendant is an agency of the United States within the meaning of 5 U.S.C. § 552(f)(1) with its headquarters at 1111 Constitution Avenue NW, Washington, D.C. 20224. Defendant is responsible for the administration and enforcement of the federal tax laws. Defendant is subject to the FOIA. Defendant has control of the records which Coca-Cola seeks and is responsible for fulfilling Coca-Cola's FOIA requests.

 

STATEMENT OF FACTS

 

 

6. The FOIA requires federal government agencies to release requested agency records to the public unless one or more specific statutory exemptions apply. 5 U.S.C. § 552(a)(3)(A).

7. Records are agency records subject to the FOIA if the agency created or obtained them and the agency controlled them when the FOIA request is made.

8. Coca-Cola is seeking the production of agency records in response to two FOIA requests Coca-Cola submitted and Defendant received on January 18, 2017.

9. The Horst Frisch Examination Contractor Request. Coca-Cola requested records arising from Defendant's engagement of Horst Frisch, Inc. ("Horst Frisch"), to assist Defendant in Defendant's examination of Coca-Cola's tax years ending December 31, 2005 and December 31, 2006, and in Defendant's examination of Coca-Cola's tax years ending December 31, 2007, December 31, 2008, and December 31, 2009 (the "Horst Frisch Examination Contractor Request").

10. Defendant received the Horst Frisch Examination Contractor Request on January 18, 2017. The Examination Contractor Request sought access to all records maintained by Horst Frisch relating to Horst Frisch's provision of valuation, economic, transfer-pricing, or other assistance to Defendant in connection with Defendant's examinations of any of Coca-Cola's 2005 through 2009 tax years.

11. At Defendant's request, individuals employed by or affiliated with Horst Frisch participated in Defendant's examinations of Coca-Cola's 2005 through 2009 tax years.

12. Defendant engaged Horst Frisch for assistance with Defendant's examinations in the course of Defendant's official duties. Defendant oversaw the creation of the records relating to Horst Frisch's assistance with Defendant's examinations. Defendant made use of the records relating to Horst Frisch's assistance with Defendant's examinations. Defendant relied on the records relating to Horst Frisch's assistance with Defendant's examinations. At the time Coca-Cola mailed the Horst Frisch Examination Contractor Request, Defendant controlled the records relating to Horst Frisch's assistance with Defendant's examinations.

13. To facilitate Defendant's search and disclosure, the Horst Frisch Examination Contractor Request included the names and titles of specific individuals employed by, or affiliated with, Horst Frisch as examples of individuals likely to possess records within the scope of the Horst Frisch Examination Contractor Request.

14. The Royalty Closing Agreement Request. Coca-Cola requested records related to, evidencing, or concerning the Royalty Closing Agreement and Defendant's application or interpretation of 26 U.S.C. § 482 with respect to Coca-Cola for the tax years 1987 through 2004 (the "Royalty Closing Agreement Request").

15. Defendant received the Royalty Closing Agreement Request on January 18, 2017. The Royalty Closing Agreement Request sought access to records maintained in Defendant's examination administrative files, tax litigation files, and related files concerning Defendant's audits of Coca-Cola's 1987 through 2004 federal income tax years.

16. To facilitate Defendant's search and disclosure, the Royalty Closing Agreement Request included the names of specific forms as examples of records that were within the scope of the Royalty Closing Agreement Request. The Royalty Closing Agreement Request also attached an executed copy of the Royalty Closing Agreement.

17. Defendant's Failure to Disclose. By letters dated February 15, 2017, Frederick O. Crismon, Defendant's Disclosure Manager for Disclosure Office 8, responded to Coca-Cola's FOIA requests and assigned them "case number F17018-0071" and "case number F17019-0037." Mr. Crismon's letters each notified Coca-Cola that Defendant would be unable to send the information Coca-Cola requested "by February 15, 2017, which is the 20 business-day period allowed by law." Mr. Crismon's letters each also notified Coca-Cola that Defendant had "extended the statutory response date to March 2, 2017, after which [Coca-Cola] can file suit." Mr. Crismon's letters each also stated that "[u]nfortunately, we will still be unable to locate and consider release of the requested records by March 2, 2017" and again informed Coca-Cola that it could "file suit after March 2, 2017."

18. Neither of Mr. Crismon's letters explained the search Defendant conducted for the records Coca-Cola requested or claimed that any such search was reasonable.

19. As of the date of the filing of this Complaint, Defendant has not disclosed any records in response to Coca-Cola's Horst Frisch Examination Contractor Request or Royalty Closing Agreement Request.

20. Coca-Cola did not agree to any extension of time with respect to the FOIA's statutory deadlines.

21. Because Defendant has failed to comply with the FOIA's time limit provisions, Coca-Cola is deemed to have exhausted its administrative remedies. 5 U.S.C. § 552(a)(6)(C)(i).

22. Defendant cannot show that exceptional circumstances exist and that Defendant is exercising due diligence in responding to Coca-Cola's request because Defendant has not produced any records in response to Coca-Cola's FOIA requests, has not described the search Defendant conducted (if any), has not claimed that any such search was reasonable, has not explained the scope of the records at issue, and has not provided a status of Defendant's review.

23. Upon complaint, this Court "has jurisdiction to enjoin the agency from withholding agency records and to order the production of any agency records improperly withheld from the complainant." 5 U.S.C. § 552(a)(4)(B).

24. Coca-Cola is entitled to reasonable attorney fees and other litigation costs reasonably incurred in prosecuting this action in accordance with 5 U.S.C. § 552(a)(4)(E).

 

CAUSES OF ACTION

 

 

COUNT I

 

VIOLATION OF FOIA

 

 

25. Coca-Cola repeats and incorporates by reference paragraphs 1-24.

26. Defendant is subject to the FOIA.

27. Coca-Cola properly requested, in the Horst Frisch Examination Contractor Request, records within Defendant's control in accordance with the FOIA.

28. Coca-Cola is entitled under the FOIA to the records requested in the Horst Frisch Examination Contractor Request.

29. Defendant did not conduct an adequate search for the records requested in the Horst Frisch Examination Contractor Request.

30. Defendant failed to comply with statutory deadlines imposed by the FOIA.

31. Defendant improperly withheld the records requested in the Horst Frisch Examination Contractor Request in violation of the FOIA.

32. Coca-Cola exhausted its administrative remedies with regard to the wrongfully withheld records requested in the Horst Frisch Examination Contractor Request.

 

COUNT II

 

VIOLATION OF FOIA

 

 

33. Coca-Cola repeats and incorporates by reference paragraphs 1-32.

34. Defendant is subject to the FOIA.

35. Coca-Cola properly requested, in the Royalty Closing Agreement Request, records within Defendant's control in accordance with the FOIA.

36. Coca-Cola is entitled under the FOIA to the records requested in the Royalty Closing Agreement Request.

37. Defendant did not conduct an adequate search for the records requested in the Royalty Closing Agreement Request.

38. Defendant failed to comply with statutory deadlines imposed by the FOIA.

39. Defendant improperly withheld the records requested in the Royalty Closing Agreement Request in violation of the FOIA.

40. Coca-Cola exhausted its administrative remedies with regard to the wrongfully withheld records requested in the Royalty Closing Agreement Request.

 

RELIEF REQUESTED

 

 

WHEREFORE, Plaintiff respectfully requests that this Court:

(a) order Defendant to conduct a reasonable search for all documents and records responsive to Coca-Cola's FOIA requests;

(b) enjoin Defendant from withholding and order Defendant to produce to Coca-Cola the documents and records that Coca-Cola's FOIA requests seek, in accordance with 5 U.S.C. § 552(a)(4)(B);

(c) assess against Defendant the reasonable attorneys' fees and other litigation costs Coca-Cola reasonably incurred in prosecuting this action, in accordance with 5 U.S.C. § 552(a)(4)(E); and

(d) award Coca-Cola such other relief as this Court considers just and proper.

Dated: March 3, 2017

Respectfully submitted,

 

 

Robert R. Martinelli

 

(Bar No. 499294)

 

Morgan, Lewis & Bockius LLP

 

1111 Pennsylvania Avenue, NW

 

Washington, D.C. 20004

 

Phone: (202) 739-5929

 

Fax: (202) 739-3001

 

Email: robert.martinelli@morganlewis.com
DOCUMENT ATTRIBUTES
  • Case Name
    THE COCA-COLA COMPANY & SUBSIDIARIES ONE COCA-COLA PLAZA NW ATLANTA, GA 30313-2420 Plaintiff, v. INTERNAL REVENUE SERVICE 1111 CONSTITUTION AVENUE NW WASHINGTON, D.C. 20224 Defendant.
  • Court
    United States District Court for the District of Columbia
  • Docket
    No. 1:17-cv-00393
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2017-3042
  • Tax Analysts Electronic Citation
    2017 TNT 43-17
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