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Mergers and Acquisitions: Tax Liability

Helps provide financial protection against challenge by a tax authority of a tax position. 

Why choose AIG Tax Liability Insurance?

Enables insureds to reduce or eliminate certain financial loss arising from a tax authority’s successful challenge of tax treatment during a transaction. AIG tax liability insurance can support several key areas of tax coverage: 

  • Renewable energy tax credits (solar, wind, fuel cell, carbon capture): investment tax credits (ITCs), production tax credits (PTCs) and carbon sequestration (Sec. 45Q)
    a) AIG products facilitate investment in renewable projects by shifting some of the financial risk associated with the potential loss of credits from tax equity investors.
  • U.S. M&A-related issues including, but not limited to, S Corporation status, REIT qualification, tax-free reorganizations, international tax (CFCs, FTCs, Sec. 367), dividend treatment, partnership distributions, compensation, and state tax.
  • Canadian tax issues including taxable Canadian property, capital loss, partnership treatment, Canadian GST, GAAR, and Canadian land transfer tax.
  • AIG can underwrite certain tax exposures in the U.S., Canada, Mexico, and other countries in Central and South America on a case-by-case basis.
  • AIG can provide policy limits of up to $50,000,000 and policy terms of 6 or 7 years.
  • An insured can also request that the policy include coverage to be “grossed-up” for the income taxes arising from insurance proceeds received under the policy.

AIG works with brokers and clients to help understand and structure tax liability insurance solutions for potential tax liabilities, including those arising from:

  • Tax-free reorganizations and spin-offs
  • Net operating losses
  • Tax credits (such as investment, production, historic, low income housing)
  • Status issues (S-corps, RICs, REITs, PTPs)
  • Debt versus equity issues
  • Deferred compensation
  • Issues related to real estate and international tax
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The AIG Advantage

Dedicated Underwriters with Legal and Tax Expertise

Multi-decade experience enabled AIG to expediently tailor a tax liability solution for the client.

Prompt Solutions from Experienced Carrier

AIG’s underwriting and claims professionals manage one of the industry’s largest, most varied claims portfolios to deliver tailored solutions and expert claims counsel.

Expertise and Solutions Around the Globe

AIG tax liability experts provide solutions for clients around the globe.

Prompt Solutions to Tax Issues

  • Employs former lawyers and tax experts empowered to provide tailored client solutions quickly and strategically
  • Helps address certain tax liabilities arising from inaccurate tax representations and re-thought tax treatments 
  • Enables clients to reduce or eliminate a contingent tax exposure arising from tax treatment of a transaction, investment or other tax position that may be challenged by U.S. or foreign tax authorities

Underwriting and Claims Expertise

  • Leverages decades of proven experience to provide clients with creative, high-quality solutions to certain potential tax exposures
  • Employs dedicated, in-house claims professionals who collaborate with underwriters to handle clients’ complex transactional claims 
  • Customizes solutions utilizing our broad underwriting and claims expertise across various tax risks, geographies, and sectors

Multinational Capabilities

  • Leverages expertise of tax liability teams strategically located in the U.S., U.K., Europe, and Asia Pacific to help support clients’ needs across the globe
  • Enables dedicated regional underwriters with local tax expertise to be creative problem solvers and provide client-specific solutions 
  • Provides consistent, seamless service and solutions across the globe

Real-World Problem Solving

Benefit from our proven experience in working with customers and their brokers and agents to deliver successful outcomes.

Challenge

A developer of a renewable energy project sought investment from a tax equity investor. At the last minute, the investor required a credit-worthy party to provide a 10-year indemnity for certain risks relating to the tax credits to which it was entitled.

Solution

Decades of experience underwriting complex tax risks positioned AIG to quickly provide a tailored coverage solution.

AIG Benefit

The developer secured the critical equity investment allowing them to complete the project.

Challenge

A target company was contemplating an internal reorganization in anticipation of a divestiture. This reorganization resulted in a potential tax liability issue that created an impasse as to who should bear that transactional risk.

Solution

With a deep understanding of complex tax exposures, AIG tailored a coverage solution that bridged the gap in negotiations and transferred a portion of the financial risk associated with the potential tax liability to AIG.

AIG Benefit

The parties proceeded with the acquisition knowing they had some financial protection should the acquired business’s tax position be successfully challenged by the taxing authority.

Challenge

A buyer of an overseas target company discovered a potential complex tax issue that could have a materially negative impact on the investment rationale.

Solution

AIG underwrote the tax risk and bound a local policy, leveraging the expertise and capabilities of its global network.

AIG Benefit

The buyer proceeded with the overseas acquisition knowing they had some protection from the financial risk of an adverse tax determination.

Brokers: Meet Your AIG Team

View contact information for AIG’s national product and distribution teams.

Downloadable Materials

Download PDF [114.1 kb]

Filename
aig-tax-liability-insurance-highlight-sheet.pdf
Size
145 KB
Format
application/pdf
M&A Tax Liability Highlight Sheet

The scenarios described herein are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in the above product(s) should request a copy of the standard form of policy for a description of the scope and limitations of coverage.

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