Caterpillar settles tax dispute with IRS

PEORIA − Caterpillar has settled a dispute with the federal government over how much taxes it owed, the company announced on Thursday.

The announcement, filed in a form 8K with the U.S. Securities and Exchange Commission, states:

"On September 8, 2022, the Company reached a settlement with the U.S. Internal Revenue Service (IRS) that resolves all issues for tax years 2007 through 2016, without any penalties," the statement said. "The Company’s settlement includes the resolution of disputed tax treatment of profits earned by Caterpillar SARL (CSARL) from certain parts transactions."

On March 2, 2017, federal agents raided what was then Caterpillar's world headquarters in downtown Peoria, as well as a data center in East Peoria and the logistics center in Morton.

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The investigation stemmed from allegations made by a former employee in a 2009 lawsuit that alleged the earth-moving giant was avoiding paying taxes on its profits by funneling the money it made in parts sales through its foreign subsidiaries, including Switzerland-based CSARL.

A Senate subcommittee investigation in 2014 found that Caterpillar shifted profits to the Swiss entity to pay a lower negotiated tax rate, resulting in $2.4 billion in tax savings over 13 years.

However, the settlement announced on Thursday had no penalties and "does not include any increases to tax in the United States. . . The settlement is within the total amount of gross unrecognized tax benefits for uncertain tax positions and enables us to avoid the costs and burdens of further disputes with the IRS. We are subject to the continuous examination of our income tax returns by the IRS, and tax years subsequent to 2016 are not yet under examination," according to the SEC filing.

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In a prepared statement, Rachel Potts, a Caterpillar spokeswoman, said the company, which is now based in Deerfield, has "been cooperating with the government in its review of the issues and are pleased to have reached this resolution with the IRS."

This article originally appeared on Journal Star: Caterpillar says it pays no penalties to IRS after settling tax dispute