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U.S. says AIG settles tax shelter lawsuit, will forgo foreign tax credits

Credit: REUTERS/STAFF

American International Group Inc agreed to settle a tax shelter lawsuit related to the entering of sham transactions designed to generate bogus foreign tax credits, Acting U.S. Attorney Audrey Strauss in Manhattan said on Friday.

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NEW YORK, Oct 23 (Reuters) - American International Group Inc AIG.N agreed to settle a tax shelter lawsuit related to the entering of sham transactions designed to generate bogus foreign tax credits, Acting U.S. Attorney Audrey Strauss in Manhattan said on Friday.

AIG agreed to the disallowance of more than $400 million in foreign tax credits and the imposition of a 10% tax penalty, Strauss said.

The government said AIG had filed a tax refund lawsuit in 2009, seeking to recover disallowed foreign tax credits and other taxes for the 1997 tax year.

But the government said it obtained "overwhelming evidence" that the underlying transactions lacked meaningful economic substance, had no legitimate business purpose, and were designed solely to manufacture tax benefits that AIG was not entitled to.

(Reporting by Jonathan Stempel in New York)

((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters Messaging: jon.stempel.thomsonreuters.com@reuters.net))

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