Pepsi Stuck With Illinois Penalty for Income Tax Avoidance Plan

PepsiCo Inc. failed to convince an Illinois tribunal to abate $2.1 million in penalties the state imposed for failure to pay income tax.

The Illinois Independent Tax Tribunal ruled last year that Pepsi set up PepsiCo Global Mobility as a “shell corporation with no economic reality” to recognize $14 million per year in state income tax savings in 13 states. In an opinion posted Wednesday, the tribunal upheld the 20% late penalty the state imposed on its assessment of additional taxes.

“If PepsiCo found a legitimate way to reduce its Illinois income taxes to zero for a tax year,” Chief ...