Pepsi Hammered by Illinois Judges Over Foreign Entity Tax Dodge

PepsiCo Inc. received tough questions from Illinois appellate judges Tuesday in a case over a $10.9 million income tax bill and whether a foreign subsidiary was formed just to avoid taxes.

Pepsi wants the Illinois Appellate Court, Fourth Judicial District, to reverse the trial court’s ruling that income from the company’s snack food subsidiary Frito-Lay North America Inc. should have been included on Pepsi’s state tax returns.

Pepsi set up PepsiCo Global Mobility LLC as a foreign shell company under Frito-Lay to exclude Frito-Lay’s earnings from its Illinois combined tax return in 2016 and 2017, the trial court held. Similar ...