What changed in this filing

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Item 1. Legal Proceedings

2025-10-23 compared with 2025-07-24 · 27 added, 16 removed, 71 unchanged (38% of the section changed)

2 unchanged sentences

Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2024, as updated in Part II, “Item 1.

Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarter ended March 28, 2025.

Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarter ended March 28, 2025, and as further updated in Part II, “Item 1.

Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarter ended June 27, 2025.

The following updates and restates the description of the previously reported U.S.

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On November 8, 2023, the Tax Court issued a supplemental opinion, siding with the IRS in concluding both that certain U.S.

tax regulations (known as the blocked-income regulations) that address the effect of certain Brazilian legal restrictions on royalty payments by the Company’s licensee in Brazil apply to the Company’s operations and that the Tax Court opinion in 3M Co.

Commissioner (February 9, 2023) controlled as to the validity of those regulations.

On October 1, 2025, the U.S.

Court of Appeals for the Eighth Circuit issued an opinion reversing the judgment of the Tax Court in the 3M case.

In its decision, the

court concluded that the blocked-income regulation was inconsistent with IRC Section 482 and that the IRS therefore could not reallocate income from 3M’s subsidiary in Brazil to 3M in contravention of Brazilian restrictions on the payment of royalties.

Further, the U.S.

Court of Appeals for the Eighth Circuit specifically rejected the IRS’ argument that the ability of 3M’s subsidiary in Brazil to pay dividends, rather than royalties, meant that royalty income should not be treated as blocked.

Both of these conclusions are highly supportive of the Company’s position in its case and reinforce its prior conclusions.

The Company believes that the IRS and the Tax Court misinterpreted and misapplied the applicable regulations in reallocating income earned by the Company’s foreign licensees to increase the Company’s U.S.

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That amount, plus interest earned, would be refunded in full or in part if the Company’s tax positions are ultimately sustained on appeal.

For the three and six months ended June 27, 2025, the Company recorded net interest income of $54 million and $107 million, respectively, related to this tax payment in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy.

The payment of the IRS invoices and the related accrued interest were recorded in the line item other noncurrent assets in our consolidated balance sheets as of June 27, 2025 and December 31, 2024.

For the three and nine months ended September 26, 2025, the Company recorded net interest income of $55 million and $162 million, respectively, related to this tax payment in the line item income taxes in our consolidated statements of income, in accordance with our accounting policy.

The payment of the IRS invoices and the related accrued interest were recorded in the line item other noncurrent assets in our consolidated balance sheets as of September 26, 2025 and December 31, 2024.

On October 22, 2024, the Company appealed the Tax Court’s decision to the U.S.

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The IRS filed its appellate brief on July 7, 2025.

The Company filed its reply brief on August 27, 2025.

In determining the amount of tax reserve to be recorded as of December 31, 2020, the Company completed the required two-step evaluation process prescribed by Accounting Standards Codification 740, Accounting for Income Taxes .

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parent company by its foreign licensees, in reliance upon the Closing Agreement, that would be recharacterized as royalties in accordance with the Opinions and the Company’s analysis.

The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of June 27, 2025.

However, based on the required probability analysis and the accrual of interest through the current reporting period, we updated our tax reserve as of June 27, 2025 to $493 million.

The Company’s conclusion that it is more likely than not the Company’s tax positions will ultimately be sustained on appeal is unchanged as of September 26, 2025.

However, based on the required probability analysis and the accrual of interest through the current reporting period, we updated our tax reserve as of September 26, 2025 to $502 million.

While the Company strongly disagrees with the IRS’ positions and the portions of the Opinions affirming such positions, it is possible that some portion or all of the adjustments proposed by the IRS and sustained by the Tax Court could ultimately be upheld.

In that event, the Company would not receive a refund of the applicable portion or all of the $6.0 billion it paid in response to the IRS invoices issued in September 2024 and the related accrued interest receivable of $241 million as of June 27, 2025.

Additionally, the Company would likely be subject to significant additional liabilities for subsequent years, which could have a material adverse impact on the Company’s financial position, results of operations and cash flows.

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The calculations incorporated the estimated impact of correlative adjustments to the previously accrued transition tax payable under the 2017 Tax Cuts and Jobs Act.

The Company estimates that the potential aggregate remaining incremental tax and interest liability for the tax years 2010 through 2024 could be approximately $12 billion as of December 31, 2024.

The Company estimates that the potential aggregate remaining incremental tax and interest

liability for the tax years 2010 through 2024 could be approximately $12 billion as of December 31, 2024.

Additional income tax and interest on any unpaid potential liabilities for the 2010 through 2024 tax years would continue to accrue until the time any such potential liability, or portion thereof, were to be paid.

The Company estimates the impact of the continued application of the Tax Court Methodology for the three and six months ended June 27, 2025 would increase the potential aggregate incremental tax and interest liability by approximately $400 million and $800 million, respectively.

We currently project the continued application of the Tax Court Methodology in 2025, assuming similar facts and circumstances as of December 31,

2024, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5%.

The Company estimates the impact of the continued application of the Tax Court Methodology for the three and nine months ended September 26, 2025 would increase the potential aggregate incremental tax and interest liability by approximately $400 million and $1.2 billion, respectively.

We currently project the continued application of the Tax Court Methodology in 2025, assuming similar facts and circumstances as of December 31, 2024, would result in an incremental annual tax liability that would increase the Company’s effective tax rate by approximately 3.5%.

Environmental Matter

On June 20, 2024, the Mayor and City Council of Baltimore filed a lawsuit against the Company and several unrelated parties in the Circuit Court for Baltimore City, Maryland (“Baltimore Circuit Court”), concerning the environmental impacts of plastic packaging on the city’s lands and waterways.

The Company believes it has strong defenses to the claims.

On July 21, 2025, the Baltimore Circuit Court granted in part the Company’s Motion to Dismiss, dismissing with prejudice all claims except the public nuisance claim.

Proceedings on the public nuisance claim have been stayed pending the outcome of informative Maryland Supreme Court cases.

On October 30, 2024, Los Angeles County Counsel filed a lawsuit against the Company, Reyes Coca-Cola Bottling, LLC, as well as other unrelated parties in the Superior Court for the State of California for the County of Los Angeles concerning the environmental impacts of plastic packaging on coastal areas and waterways.

The complaint asserts (a) state-law claims for public nuisance;

(b) violations of California’s Unfair Competition Law;

and (c) violations of California’s False Advertising Law.

The complaint seeks injunctive relief, restitution and civil penalties but does not specify an amount of damages sought.

Defendants’ Motion to Dismiss was denied on September 23, 2025.

The Company continues to evaluate its options in light of the court’s decision and believes it has strong defenses to the claims.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings