Pepsi Loses Bid to Overturn Illinois Tax Avoidance Ruling (1)

PepsiCo Inc. should have included its snack food subsidiary Frito-Lay’s income on its Illinois tax returns because the latter doesn’t qualify as an exempt foreign corporation, a state appeals court affirmed Wednesday.

The state tax tribunal correctly ruled that Pepsi set up PepsiCo Global Mobility (PGM) under Frito-Lay as a “shell corporation with no economic reality” to recognize $14 million per year in income tax savings in 13 states, Justice LeRoy K. Martin Jr. wrote for the Illinois Appellate Court, First Judicial District. The unpublished opinion also upheld $2.1 million in penalties.

The Illinois Department of Revenue determined that Frito-Lay ...