Bring on tomorrow - AIG.com

ITEM 8 / NOTE 24. INCOME TAXES.....................................................................................................................................................................................Accounting For Uncertainty in Income Taxes..............................................................................................................................................................................................The following table presents a rollforward of the beginning and ending balances of the total amounts ofgross unrecognized tax benefits:Years Ended December 31,(in millions) 2012 2011 2010Gross unrecognized tax benefits, beginning of year $ 4,279 $ 5,296 $ 4,843Increases in tax positions for prior years 322 239 888Decreases in tax positions for prior years (253) (1,046) (470)Increases in tax positions for current year – 48 49Lapse in statute of limitations (8) (7) (6)Settlements (5) (259) (12)Activity of discontinued operations 50 8 –Less: Unrecognized tax benefits of held for sale entities – – 4Gross unrecognized tax benefits, end of year $ 4,385 $ 4,279 $ 5,296At December 31, 2012, 2011 and 2010, our unrecognized tax benefits related to tax positions that if recognizedwould not affect the effective tax rate as they relate to such factors as the timing, rather than the permissibility, of thededuction were $0.2 billion, $0.7 billion and $1.7 billion, respectively. Accordingly, at December 31, 2012, 2011and 2010, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax ratewere $4.2 billion, $3.5 billion and $3.6 billion, respectively.The decrease in the gross unrecognized tax benefits for 2012 was primarily related to tax positions that did not affectthe effective tax rate because they relate to timing.Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At December 31,2012 and 2011, we had accrued liabilities of $935 million and $744 million, respectively, for the payment of interest(net of the federal benefit) and penalties. For the years ended December 31, 2012, 2011 and 2010, we accruedexpense (benefits) of $189 million, $(174) million and $149 million, respectively, for the payment of interest (net ofthe federal benefit) and penalties.We regularly evaluate adjustments proposed by taxing authorities. At December 31, 2012, such proposedadjustments would not have resulted in a material change to our consolidated financial condition, although it ispossible that the effect could be material to our consolidated results of operations for an individual reporting period.Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within thenext 12 months, based on the information currently available, we do not expect any change to be material to ourconsolidated financial condition.Listed below are the tax years that remain subject to examination by major tax jurisdictions:At December 31, 2012Open Tax YearsMajor Tax JurisdictionUnited States 2000 - 2011Australia 2008 - 2011France 2008 - 2011Japan 2007 - 2011Korea 2007 - 2011Singapore 2011United Kingdom 2010 - 2011..................................................................................................................................................................................................................................334 AIG 2012 Form 10-K