Sysco Reaches Agreement With IRS

by Glen Shapiro, LawAndTax-News.com, New York

26 August 2009

Sysco Corporation, the food distribution company, has announced that it has agreed to a payment schedule with the Internal Revenue Service regarding a disputed tax deferral relating to a company affiliate.

Sysco announced in a Securities and Exchange Commission filing that it reached a settlement with the IRS on August 21, 2009 to cease paying US federal taxes related to its affiliate, Baugh Supply Chain Cooperative (BSCC) on a deferred basis and pay the amounts - representing a total of USD952m - over a three year period.

The agreement will see Sysco pay USD104m by August 31 and a further USD212m on September 15. An additional USD212m will be paid quarterly over three years starting on October 15 and ending on June 15, 2012.

The company will also make a one-time payment of USD41m this month, representing prior interest. Of this, approximately USD39m is non-deductible, the company stated.

Sysco said that BSCC is a cooperative taxed under subchapter T of the United States Internal Revenue Code, the operation of which has resulted in a deferral of tax payments. However, the IRS proposed adjustments accelerating the amounts payable following audits of Sysco’s tax returns for the years 2003 through 2006.

"Reaching agreement on this matter at this point in time is an appropriate and a favorable development for Sysco because it removes the uncertainty regarding the ultimate resolution of our tax deferral," said Bill DeLaney, Sysco's chief executive officer.

"Our current cash levels, anticipated future cash flow from operations, and current access to capital are more than sufficient to cover this payment schedule,” he added.

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