AIG 2007 Annual Report Download - page 248

American International Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Continued
of 2004 amended the federal income tax law to permit life
20. Ownership and Transactions With
insurance companies to distribute amounts from their policyhold-
Related Parties
ers’ surplus accounts in 2005 and 2006 without incurring federal
Continued
income tax on the distributions. In 2005 and 2006, AIG made
its subsidiaries paid commissions to Starr and its subsidiaries for distributions and eliminated the aggregate balance of $945 million
the production and management of insurance business in the from its policyholders’ surplus accounts.
ordinary course of business. Payment for the production of
insurance business to Starr aggregated approximately $12 million Tax Examinations
in 2007, $47 million in 2006, and $214 million in 2005. AIG also
received no rental fees in 2007, approximately $4 million in In December 2007, AIG reached a settlement with the IRS in the
2006, and $23 million in 2005 from Starr, and paid no rental United States Tax Court for SunAmerica, Inc. and Subsidiaries
fees in 2007 or 2006 and approximately $20,000 in 2005 to (‘‘SunAmerica’’) for tax years ended September 30, 1993 and
Starr. AIG also received none in 2007 and 2006 and approxi- September 30, 1994, which are years prior to AIG’s 1999
mately $2 million in 2005, respectively, from SICO, and paid none acquisition of SunAmerica. The terms of this settlement will be
in 2007 and 2006 and approximately $1 million in 2005 to SICO, incorporated into the IRS examinations for tax years of SunAmer-
as reimbursement for services rendered at cost. AIG also paid to ica from September 30, 1995 through December 31, 1998, and
SICO $2 million in 2007, $2 million in 2006, and $3 million in for SunAmerica Life Insurance Company and Subsidiaries for tax
2005 in rental fees. There are no significant receivables year December 31, 1999, to resolve these years. As a result of
from/payables to related parties at December 31, 2007. this settlement, a net refund is due AIG for the periods from 1993
to 1999, the amount of which is immaterial to AIG’s consolidated
21. Federal Income Taxes financial condition. The IRS’s examination of the separate life
consolidated federal return for SunAmerica Life and its subsidiar-
Tax Filings
ies for years 2000-2002 was closed in January 2008 with a
AIG and its eligible U.S. subsidiaries file a consolidated signed settlement agreement. An immaterial amount is payable to
U.S. federal income tax return. Prior to 2007, Life Insurance the IRS for these years. AIG is in a net refund position for all
subsidiaries of AIG Life Holdings (US), Inc. (AIGLH), formerly years 1993-2002 for aggregated SunAmerica audits.
known as American General Corporation, also filed a consolidated AIGLH’s tax years prior to 2000 are closed. Although a
U.S. federal income tax return and were not eligible to be included Revenue Agent’s Report has not yet been issued to AIGLH for
in AIG’s consolidated federal income tax return. AIGLH will be years ended December 31, 2000, August 29, 2001, Decem-
included in the 2007 AIG consolidated federal income tax return. ber 31, 2001, and December 31, 2002, AIGLH has received from
Other U.S. subsidiaries included in the consolidated financial the IRS a notice of proposed adjustment for certain items during
statements also file separate U.S. federal income tax returns. that period.
Subsidiaries operating outside the U.S. are taxed, and income tax The statute of limitations for all tax years prior to 1997 has
expense is recorded, based on applicable U.S. and foreign now expired for AIG’s consolidated federal income tax return. In
statutes. June, 2007, AIG filed a refund claim for years 1991-1996. The
refund claim relates to the tax effects of the restatements of
Undistributed Earnings and Distributions from Life Surplus AIG’s 2004 and prior financial statements. A refund claim for the
tax years ending December 31, 1997-2004 will be filed before
U.S. federal income taxes have not been provided on $1.5 billion
September 30, 2008.
of undistributed earnings of certain U.S. subsidiaries that are not
AIG has executed a partial settlement with the IRS for tax
included in the consolidated AIG U.S. federal income tax return.
years 1997 through 1999. Two issues remain open, neither one
Tax planning strategies are available, and would be utilized, to
of which, separately or in total, is material to AIG’s consolidated
eliminate the tax liability related to these earnings. U.S. federal
financial condition. The statute of limitations for these years
income taxes have not been provided on the undistributed
expires on March 31, 2008. AIG is currently under examination for
earnings of certain non-U.S. subsidiaries to the extent that such
the tax years 2000 through 2002.
earnings have been reinvested abroad indefinitely. At Decem-
AIG believes there are substantial arguments in support of the
ber 31, 2007, the cumulative amount of undistributed earnings in
tax positions taken in its tax returns. Although the final outcome
these subsidiaries approximated $21.2 billion. Determining the
of any issue still outstanding is uncertain, AIG believes that any
deferred tax liability that would arise if these earnings were not
tax obligation, including interest thereon, would not be material to
permanently reinvested abroad is not practicable.
AIG’s consolidated financial condition, results of operations, or
A component of life insurance surplus accumulated prior to
liquidity.
1984 is not taxable unless it exceeds certain statutory limitations
or is distributed to shareholders. The American Jobs Creation Act
194 AIG 2007 Form 10-K