AIG 2013 Annual Report Download - page 344

At December 31, 2013 and 2012, we had deferred tax asset valuation allowances of $2.0 billion and $2.9 billion,
respectively, related to foreign subsidiaries, state and local tax jurisdictions, and certain domestic subsidiaries that file
separate tax returns. We maintained these valuation allowances following our conclusion that we could not
demonstrate that it was more likely than not that the related deferred tax assets will be realized. This was primarily
due to factors such as cumulative losses in recent years and the inability to demonstrate profits within the specific
jurisdictions over the relevant carryforward periods.
We file a consolidated U.S. federal income tax return with our eligible U.S. subsidiaries. Several U.S. subsidiaries
included in the consolidated financial statements previously filed separate U.S. federal income tax returns and were
not part of our U.S. consolidated income tax group. Income earned by subsidiaries operating outside the U.S. is
taxed, and income tax expense is recorded, based on applicable U.S. and foreign law.
The statute of limitations for all tax years prior to 2000 has expired for our consolidated federal income tax return.
We are currently under examination for the tax years 2000 through 2006.
On March 20, 2008, we received a Statutory Notice of Deficiency (Notice) from the IRS for years 1997 to 1999. The
Notice asserted that we owe additional taxes and penalties for these years primarily due to the disallowance of
foreign tax credits associated with cross-border financing transactions. The transactions that are the subject of the
Notice extend beyond the period covered by the Notice, and the IRS is challenging the later periods. It is also
possible that the IRS will consider other transactions to be similar to these transactions. We have paid the assessed
tax plus interest and penalties for 1997 to 1999. On February 26, 2009, we filed a complaint in the United States
District Court for the Southern District of New York seeking a refund of approximately $306 million in taxes, interest
and penalties paid with respect to its 1997 taxable year. We allege that the IRS improperly disallowed foreign tax
credits and that our taxable income should be reduced as a result of the 2005 restatement of our consolidated
financial statements.
We also filed an administrative refund claim on September 9, 2010 for our 1998 and 1999 tax years.
On March 29, 2011, the U.S. District Court for the Southern District of New York, ruled on a motion for partial
summary judgment that we filed on July 30, 2010 related to the disallowance of foreign tax credits associated with
cross-border financing transactions. The court denied our motion with leave to renew following the completion of
discovery regarding certain transactions referred to in our motion, which we believe may be significant to the
outcome of the action.
On August 1, 2012, we filed a motion for partial summary judgment related to the disallowance of foreign tax credits
associated with cross border financing transactions. On March 29, 2013, the U.S. District Court for the Southern
District of New York (the Southern District of New York) denied our motion. On April 17, 2013, we initiated a process
for immediate appeal to the U.S. Court of Appeals for the Second Circuit (the Second Circuit) and on November 5,
2013, the Southern District of New York certified our request. We are presently awaiting a decision from the Second
Circuit on whether to accept our immediate appeal to review the decision of the Southern District of New York.
We will vigorously defend our position and continue to believe that we have adequate reserves for any liability that
could result from the IRS actions.
We continue to monitor legal and other developments in this area and evaluate the effect, if any, on our position,
including recent decisions adverse to other taxpayers.
Tax Examinations and Litigation
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AIG 2013 Form 10-K326
ITEM 8 / NOTE 23. INCOME TAXES
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