AIG using federal funds to sue IRS

Life can be funny. And sad. And infuriating. And just downright wrong.

All of those apply to the financial situation of American International Group Inc., better known by its initials AIG. We're all too familiar with the recent $150 billion federal bailout of the insurance giant.

After the money was forked over, the fun revelations started coming.

We soon learned, but not soon enough, that the deal was structured to protect AIG's loan interest tax deduction. Well played, AIG tax attorneys. You obviously are much better than our government lawyers.

Then came word of the AIG retreat. Apparently AIG execs wanted to show that they, not the excessive Enron folks, are the smartest guys in the room.

Now we discover that AIG is using bailout money in an effort to wipe out a multimillion dollar tax bill.

Fed money to fight fed fines: The Wall Street Journal reports that in securities filings last week, AIG revealed that the company has filed a "claim for refund" with the IRS in connection with $329 million in back taxes and penalties.The company has paid a portion of the IRS-assessed money. Now AIG wants it back.

And yes, we taxpayers are helping pay for AIG's efforts against the IRS.

The tax bill comes, in part, from IRS "disallowance of foreign tax credits associated with cross-border financing transactions." Those maneuvers by AIG, says the IRS, were an abusive tax scheme.

A huge international company using questionable tactics to avoid taxes is not a surprise. Neither is its use of every available avenue to argue for the validity of its tax techniques.

Oversight issues: But what has become a recurring surprise to us taxpayers is how little attention our lawmakers paid to all these bailout deals.

I admit that I agreed with the basic concept that federal action needed to be taken to keep the country's finances from imploding back in September.

But silly me, I thought that meant the folks in D.C. who would sign off on the deals would do the proper due diligence and, like any investor or lender or prospective owner, would put some conditions on how the money would be used.

That's not an unreasonable request. I mean the companies are coming to the feds for help because they already proved they're ill-equipped to adequately run their operations. It seems only sensible to put a few strings on any money you hand over to the ne'er-do-well child.

Even worse, our legislators gave control of the implementation details to Treasury Secretary Henry Paulson. The outgoing Treasury Secretary, who just last week decided the original plan wasn't going to work and so shifted gears.

Is Paulson right? How do we know? Exactly how much will this new direction cost us?

To paraphrase a recent vice presidential candidate, what's he got to lose?

One more request: Now there's talk of helping bailing out the flailing, failing U.S. auto industry.

As this and other economic plan discussions continue, I want to urge one thing: Pay attention, Congress!

We -- the struggling companies, national and international economies and U.S. taxpayers -- cannot afford for you to keep doing such a shoddy job.

Comments

[Jeff T]

How incredible! When will everyone wake up and start to deal with these people? Why should taxpayer's money be spent so friviously? With so many taxpayers paying into our system, and many that are not, isn't there enough of a strain on the system without having to further complicate things with this type of insanity? Let's put an end to this as quickly as possible!

[Jan Dillaha]

We let Paulson hold a gun to our head. That was a miserable deal from the beginning but everyone was in such a hurry to get it done that there was no time to do any due diligence.

Frankly, some of them ought to be charged with taking money under false pretenses after that lovely training session that they enjoyed at the expense of the tax payer.

And the domestic auto industry can only ask for the bailout because Congress caved in on this one.