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Caterpillar settles long-running tax dispute with IRS

Federal agents raided Caterpillar's administration building at 100 NE Adams in downtown Peoria on March 2, 2017.

PEORIA — Caterpillar has settled a long-running tax dispute with the Internal Revenue Service.

The IRS maintained Caterpillar owes the federal government more than $2.3 billion in unpaid taxes and penalties stemming from the company’s alleged tax avoidance practice of funneling U.S. profits through the Swiss subsidiary CSARL, as of 2018.

Caterpillar announced it reached a settlement with the IRS in a Form 8-K filed with the U.S. Securities and Exchange Commission on Thursday.

“We have been cooperating with the government in its review of the issues and are pleased to have reached this resolution with the IRS,” said Caterpillar spokesperson Rachel Potts in an emailed statement.

The settlement covers tax years 2007 through 2016 for an undisclosed sum. It also covers the “disputed tax treatment” of profits from CSARL through parts transactions, the company said in the filing.

“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,” read the Caterpillar filing. “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.”

The company “vigorously opposed” any increases to taxes or accuracy-based penalties, and said the settlement doesn’t include them.

Caterpillar’s tax practices began drawing federal scrutiny years ago. A federal grand jury subpoenaed the company in connection with the case as early as January 2015.

Federal authorities raided three Caterpillar office buildings in the Peoria area in March 2017 for documents linked to the tax matter.

The U.S. Department of Justice’s criminal probe into Caterpillar’s tax practices reportedly halted soon after Bill Barr became U.S. Attorney General in 2018. Barr assisted Caterpillar as a private attorney in 2017, when he was retained to assist the company in the tax case.

Two Democratic U.S. Senators launched an inquiry into the “stalled” DOJ probe in April 2021. As late as March of this year, a Senate aide told WCBU there was no new information to share in relation to that inquiry.

Caterpillar’s world headquarters is currently based in Deerfield, Illinois; but the company announced earlier this year it’s moving its C-suite to Irving, Texas.

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