American International Group (AIG) has settled a tax shelter lawsuit, related to seven cross-border transactions made during the mid-1990s – transactions designed to generate bogus foreign tax credits, a US attorney said.
According to the acting US attorney for the Southern District of New York, AIG has agreed to pay a 10% penalty and disallow more than $400 million (around CA$526 million) in foreign tax credits.
The settlement ends a US investigation into the tax shelters; prosecutors said those shelters allowed AIG to create phony foreign tax credits and reduce its taxes in the US. In 2009, AIG filed a suit seeking a refund based on claimed credits for 1997. But the federal government determined that the transactions “lacked any meaningful economic substance” or legitimate business purpose.
“AIG created an elaborate series of sham transactions that were designed to do nothing — and in fact did nothing — other than generate hundreds of millions of dollars in ill-gotten tax benefits for AIG,” said US attorney for the Southern District of New York Audrey Strauss.
Bloomberg reported that the settlement deal was approved last Thursday by US District Judge Louis Stanton.
“After already reaching and disclosing our January 2018 agreement in principle regarding these transactions that date to the 1990s, we are pleased to put this longstanding matter behind us,” an AIG spokesperson said in an email statement.