An Illinois appellate court held that a PepsiCo, Inc. subsidiary—Frito-Lay North America, Inc. (FLNA)—was not an 80/20 company excluded from PepsiCo’s unitary group. Illinois excludes 80/20 companies for the unitary group, where such companies have over 80% of their payroll and property from outside the United States. After a restructuring, PepsiCo created a single-member LLC as a division of FLNA to serve as a global employment company for expatriate employees. By including the expatriate employees in FLNA’s payroll factor, FLNA had over 80% foreign payroll. However, the court held that expatriate employees do not qualify as common law employees of the disregarded entity. Therefore, the court held that without those expatriate employees, FLNA’s foreign payroll did not exceed the 80% threshold to be an 80/20 company excluded from the unitary group.
