AIG 2010 Annual Report Download - page 375

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005 restatement of its consolidated financial statements. AIG has also paid additional taxes, interest, and
penalties assessed for 1998 and 1999, and filed an administrative refund claim on September 9, 2010 for these
periods. AIG will vigorously defend its position, and continues to believe that it has adequate reserves for any
liability that could result from the IRS actions.
Accounting for Uncertainty in Income Taxes
The following table presents a rollforward of the beginning and ending balances of the total amounts of gross
unrecognized tax benefits:
Year Ended December 31,
(in millions) 2010 2009 2008
Gross unrecognized tax benefits, beginning of year $4,843 $3,368 $1,310
Increases in tax positions for prior years 888 1,628 1,175
Decreases in tax positions for prior years (470) (132) (248)
Increases in tax positions for current year 49 142 1,092
Lapse in statute of limitations (6) (47) (26)
Settlements (12) (9) (25)
Activity of discontinued operations -(46) 90
Less: Unrecognized tax benefits of held for sale entities 4(61) -
Gross unrecognized tax benefits, end of year $5,296 $4,843 $3,368
At December 31, 2010, 2009 and 2008, AIG’s unrecognized tax benefits, excluding interest and penalties, were
$5.3 billion, $4.8 billion and $3.4 billion, respectively. At December 31, 2010, 2009 and 2008, AIG’s unrecognized
tax benefits were $1.7 billion, $1.4 billion and $665 million, respectively, related to tax positions that if recognized
would not affect the effective tax rate as they relate to such factors as the timing, rather than the permissibility, of
the deduction. Accordingly, at December 31, 2010, 2009 and 2008, the amounts of unrecognized tax benefits that,
if recognized, would favorably affect the effective tax rate were $3.6 billion, $3.4 billion and $2.7 billion,
respectively.
Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At
December 31, 2010 and 2009, AIG had accrued $952 million and $835 million, respectively, for the payment of
interest (net of the federal benefit) and penalties. For the years ended December 31, 2010, 2009 and 2008, AIG
had accrued $152 million, $393 million and $146 million, respectively, for the payment of interest (net of the
federal benefit) and penalties.
AIG 2010 Form 10-K 359