IRS Ruling A Serious Hurdle In AIG (AIG), MetLife (MET) Deal
February 17, 2010 5:07 PM
According to a report by the Wall Street Journal, the sale of a large foreign life-insurance unit, which is worth $15 billion, of American International Group, Inc. (NYSE: AIG) to MetLife, Inc. (NYSE MET) is held up by a tax dispute.
The AIG-MetLife deal has been viewed as one of the major steps for the government in recovering its massive investment it made in the insurer to save it from a collapse during the financial crisis. But the deal has run into problem. The problem is whether the AIG subsidiary, American Life Insurance Co. (Alico), will remain exempt from the 2004 IRS ruling, which requires insurers to withhold US taxes on income distributed to foreign clients who own its annuities, and life-insurance products.
Alico is domiciled in Delaware but operates in almost 50 countries, and earns more than 80% of its income overseas. The government-controlled insurer has asked the IRS for a "private letter ruling" to confirm its interpretation that Alico is exempt from the US tax-withholding requirement but according to a person familiar with the matter, Treasury officials have told AIG that the company won't get any special treatment from the IRS.
