AIG suing federal government on tax claim

NEW YORK, March 20 (UPI) -- American International Group Inc. is suing the federal government to recover $306 million in taxes, court records show.

AIG filed the suit Feb. 27 in New York, concerning $244 million mostly caught up in carry-back provisions that allows the company to assign a current loss to previous tax years.

Part of the sum, $119 million, involves penalties and interest the company says it overpaid as the result 2004 accounting errors, The New York Times reported Friday.

The suit is steeped in irony. As Washington lawmakers press forward with a bonus pay tax law to recoup $165 million in taxpayer funds AIG used to reward employees, the company is suing its majority owner and using taxpayer funds to pay lawyers to press their case, the Times said.

The government owns 80 percent of AIG, which has accepted $170 billion in emergency bailout funds.

Further, part of the tax case involves offshore businesses the Internal Revenue Service considers tax-credit generators.

Tax laws allow companies to claim credit for taxes paid to foreign governments.

AIG's financial unit, where losses were central to AIG's collapse, controls businesses in the Cayman Islands, Ireland and the Dutch Antilles, known as tax havens, the Times said.