Tax issues stalls AIG-MetLife deal: WSJ
The pending $15-billion sale of American International Group's (AIG) life-insurance unit to MetLife is facing tax issues that may require a ruling from the internal revenue service of the US administration, according to media reports.
Quoting people familiar with the matter, The Wall Street Journal (WSJ) said the pending $15-billion sale of AIG's American Life Insurance Co (Alico) to MetLife is being held up by a tax dispute that may require a ruling from the internal revenue service (IRS).
According to the daily, the issue is whether Alico would remain exempt from a crucial 2004 IRS ruling.
As per the IRS ruling, insurers requires to withhold US taxes on income distributed to foreign clients who own their annuities and life-insurance products.
The company has considered itself exempt from the IRS ruling since it only sells policies to non-US citizens who reside abroad and it earns more than 80 per cent of its income overseas, the report noted.
The government-controlled insurer has asked the IRS for a "private letter ruling" to confirm its interpretation that Alico is exempt from the tax-withholding requirement, the report said.
The tax issue could put the treasury department, as overseer of the IRS, in an awkward situation. The treasury is supervising AIG while trying to recoup taxpayers' $120 billion-odd investment in AIG and related entities.
The WSJ report further said that US treasury officials have told AIG that the company won't get any special treatment from the IRS.
The tax issue so far has not derailed talks between the two companies, and AIG's sale of Alico to MetLife is expected to proceed, but a final deal has been pushed back several times as a result.
AIG has reportedly announced almost a year ago that it would sell Alico to raise about $9 billion.