The U.S. Tax Court issued an order dated 26 October 2021 denying Coca-Cola's request to file an out of time motion for reconsideration in respect of the opinion of the Court issued 18 November 2021 concerning whether the IRS abused its discretion by making transfer pricing reallocations of royalties by employing a comparable profits method (CPM). As previously reported, the relocation was made in respect of income reported from supply points in various countries that produced concentrate used in the production of Coca-Cola's beverages. To enable the supply points to manufacture and sell concentrate, Coca-Cola licensed them to use its intangible property (IP), including trademarks, brand names, logos, patents, secret formulas, and proprietary manufacturing processes. In reporting the income from the supply points for the rights to use its IP for 2007-2009, Coca-Cola used a formulary apportionment method that had been agreed to with the IRS for earlier years. The method permitted the supply points to retain profit equal to 10% of their gross sales, with the remaining profit being split 50%-50% with Coca-Cola. For 2007-2009, the IRS determined that this method did not reflect arm's length pricing and reallocated income to Coca-Cola using a CPM, treating the independent bottlers as comparable parties, which increased Coca-Cola's aggregate taxable income for 2007-2009 by more than USD 9 billion. In the 18 November 2021 opinion, the Tax Court upheld the IRS's approach.
Regarding the order denying Coca-Cola's request to file an out of time motion for reconsideration, the Tax Court notes that under Rule 161, a party must file a motion for reconsideration of an opinion or findings of fact within 30 days after the opinion is served. In the Coca-Cola case, the motion was 196 days after the opinion was served. The order also notes that the 30-day deadline may be extended at the discretion of the Court considering various factors. However, Coca-Cola's reasons to justify its delay were not compelling, according to the order. These included that new lawyers were hired, "including a preeminent constitutional scholar", who had to study "numerous issues of exceptional complexity" and the "massive" record of the case. In this respect the Court found that Coca-Cola is not entitled to a do-over just because it hired more lawyers, noting that if hiring a new team of lawyers was sufficient for granting a motion of leave, a party could string out litigation indefinitely if its pockets were deep enough.
The Tax Court order also addresses the purpose of Rule 161, including that reconsideration under Rule 161 serves the limited purpose of correcting substantial errors of fact or law and allows the introduction of newly discovered evidence that the moving party could not have introduced in the prior proceedings. Rule 161 is not for rehashing previously rejected arguments or tendering new legal arguments to reach the desired result of the moving party, which would be the case if Coca-Cola's motion were accepted.