[Corp. Watch] Banks' rapsheet: To fraud, add tax evasion and perjury

[Corporation Watch]

AIG and other Bailed-Out Companies Fight IRS on Taxes

  by Phil Mattera

(Dirt Diggers Digest, March 20) -- Rep. John Lewis (D-Georgia) has  
come out with the remarkable news that 13 corporate recipients of  
federal bail-out money under the Troubled Asset Relief Program (TARP)  
are federal tax deadbeats, together owing more than $220 million to  
Uncle Sam.

	Lewis said he cannot reveal the names of the companies, thus setting  
off a tantalizing guessing game as to which TARP participants  
apparently lied on forms requiring all recipients to certify they were  
not significantly in arrears on their tax payments.

	Assuming Lewis is talking about companies in disputes with the  
Internal Revenue Service (IRS), there are some likely suspects -- 
beginning with the country's favorite villain these days: American  
International Group (AIG).

	AIG has been battling with the IRS over the disallowance of foreign  
tax credits associated with cross-border financing transactions. In  
its 10-K annual report filed with the Securities and Exchange  
Commission (SEC) earlier this month, AIG says that it received a  
"notice of deficiency" from the IRS for the years 1997-99 and  
acknowledged it is likely that the feds will go after the credits for  
subsequent years as well.

	AIG paid the assessed taxes and penalties, but then it turned around  
and demanded its money back. Last month, AIG filed suit in federal  
court against the United States seeking the recovery of more than $300  
million that it claims was "erroneously and illegally assessed."

	The fact that AIG paid the extra taxes while disputing them may not  
have qualified it for the list assembled by Rep. Lewis. Yet it is  
still quite remarkable that, after receiving a $170 billion bail-out,  
AIG did not think there was anything wrong with hauling its rescuer  
into court to pursue a $300+ million tax claim.

	AIG is not an isolated instance. In its recent 10-K filing, Citigroup  
states it is "currently at IRS Appeals for the years 1999–2002. One of  
the issues relates to the timing of the inclusion of interchange fees  
received by the company relating to credit card purchases by its  
cardholders. It is reasonably possible that within the next 12 months  
the company can either reach agreement on this issue at Appeals or  
decide to litigate the issue." Here's another ward of the state that  
does not hesitate to sue its benefactor.

	Then there's Bank of America (B of A). Like AIG, it has been at odds  
with the IRS over foreign tax credits. According to its recent 10-K, B  
of A faces an "unagreed proposed adjustment" for the years 2000-02,  
which sounds like it is at an impasse with the feds.

	The bank doesn't mention litigation, but it does not waver from its  
position that "the corporation continues to believe the crediting of  
these foreign taxes against U.S. income taxes was appropriate."  
Receiving $45 billion in TARP funds does not seem to have affected its  
position.

	JPMorgan Chase, the recipient of $25 billion in TARP capital  
infusions, discloses that it has administrative appeals pending with  
the IRS. The same goes for some banks in the second tier of bail-out  
recipients.

	SunTrust Banks ($4.9 billion from TARP) reveals that it is sparring  
with the IRS over its tax returns for the period from 1997 to 2004.  
Its 10-K states that "the company has paid the amounts assessed by the  
IRS in full for tax years 1997 and 1998, and has filed refund claims  
with the IRS related to the disputed issues for those two years."

	Capital One Financial ($3.5 billion from TARP) is still pursuing  
suits filed against the government in U.S. Tax Court in 2005  
contesting tax assessments for the period 1995-1999.

	"At issue," the company says in its 10-K, "are proposed adjustments  
by the IRS with respect to the timing of recognition of items of  
income and expense derived from the company's credit card business."

	Under normal circumstances, companies are within their rights to  
contest IRS assessments. But it is a different story when a company is  
being kept afloat by the generosity of the U.S. taxpayers.

	If it is now unacceptable for bailed-out companies to pay lavish  
employee bonuses, shouldn't it also be taboo for them to pursue  
aggressive tax avoidance cases against the IRS?

	Shouldn't there be a moratorium on such actions while a company  
continues to dine at the public trough? AIG, at least, should have the  
decency to drop its lawsuit and stop biting the hand that has fed it  
so much.