Illinois Appellate Court Upholds Tax Assessment Against Corporation, Includes Subsidiary in Unitary Tax Group

The Illinois Appellate Court, Fourth District, upheld the trial court’s judgment in favor of the Department of Revenue, holding that Frito-Lay North America (FLNA), a subsidiary of PepsiCo, must be included in PepsiCo’s Illinois combined unitary business group for tax years 2016 and 2017. PepsiCo had excluded FLNA from its unitary group, claiming it was an “80/20 company” based on payroll from PepsiCo Global Mobility (PGM), which employed expatriates. The court found that PGM lacked economic substance and was not the true employer of the expatriates, serving merely as a shell company to shield FLNA from tax liability. Consequently, FLNA ...