Mergers & Acquisitions: Tax Liability

What is Tax Liability Insurance?

  • Enables insureds to reduce or eliminate a contingent tax exposure arising from tax treatment of a transaction, investment or other tax position where the underlying legal conclusions may be subject to future challenge by the IRS or state or foreign tax authorities.
  • Available limits up to $50M for any single risk; minimum premium of $250K.
  • Coverage is available for risks on a 100%, shared, layered or excess basis from AIG’s non-admitted carriers only.
  • Preferred risks include those:
    • With written advice or guidance from legal or other tax advisers.
    • That demonstrate a clear business purpose; whether the jurisdiction has GAAR (General Anti-Avoidance Rules) in place will be taken into consideration.
    • In politically stable jurisdictions with developed legal systems/tax authorities/tribunals with a recognized, accepted route of appeal and a reputation for competence, probity, sophistication and fairness.

The AIG Advantage

Underwriting Expertise

  • Tailored programs underwritten by accomplished M&A professionals, many of whom were investment bankers, lawyers and tax experts before joining AIG and understand how to best structure solutions quickly and strategically.

Multinational Solutions

  • Expertise, solutions and service delivered in a globally consistent and seamless fashion through one of the largest global networks in the industry, spanning 215+ countries and jurisdictions.

Claims Capabilities 

  • In-house claims professionals specialize in handling complex transaction disputes and one of the largest and most varied claims portfolios in the industry.

Why AIG

Problem Solvers

Challenge: The insured, a buyer of a target company, discovered a potential complex tax issue just days before signing that could have a materially negative impact on the investment thesis for acquiring the target (if such issue were successfully challenged by the IRS).

Solution: AIG underwrote the tax risk and bound a policy that enabled the buyer to proceed with the acquisition while transferring some of the financial risk of an adverse tax determination.

Benefit: Given our deep expertise and broad appetite, AIG was able to underwrite a complicated tax issue in a compressed deal timeline which allowed the buyer to proceed with the M&A transaction without delay.

Creative Solutions

Challenge: The insured developer of a renewable energy project was seeking an investment from a tax equity investor that would entitle the investor to tax credits. However, the investor wanted a credit-worthy party to provide a 10 year indemnity for certain risks relating to the tax credits.

Solution: AIG underwrote the complex tax risk and enabled the developer to secure an investment from the tax equity investor and proceed towards completion of the renewable energy project.

Benefit: AIG’s institutional knowledge, multi-decade experience in underwriting tax insurance and flexibility and agility enabled us to provide a tailored solution in an expedient manner.

National Leadership

Mary Duffy

Global Head of M&A

 

Allison Barrett

Head of North America Financial Lines

Anna Rozin

North America Head of M&A

Downloadable Materials