Caterpillar's $2 billion tax fight with the IRS could change how US companies do business

  • Federal officials have been investigating Caterpillar's taxes and profits processed through its Swiss subsidiary, Caterpillar SARL.
  • The outcome of that investigation could influence other American companies' tax strategies, The Wall Street Journal reported.

Caterpillar has long used a subsidiary in Geneva, Switzerland, called Caterpillar SARL, to process sales and profits for international orders, and the IRS wants the heavy-machinery maker to pay a $2 billion tax bill on that business, according to The Wall Street Journal.

Although the company maintains that its Swiss strategy — which results in an effective tax rate there of as low as 4 percent — is legal, some Caterpillar employees have questioned the practice, which began in 1999, the Journal reports.

No civil or criminal charges have been filed, and a Caterpillar spokeswoman told the Journal that the company is "in the process of responding to the government's concerns."

Federal officials raided Caterpillar's offices in March, and the outcome of the investigation could influence other U.S. companies' tax strategies. A sweeping new tax law took effect Monday, partially aimed at persuading American companies to bring their overseas cash holdings back to the U.S.

Read the Journal's full report on Caterpillar.