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Financial Planning > Tax Planning > Tax Deductions

TIAA Tax Charge Wouldn't Hurt Ratings: S&P

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NU Online News Service, March 5, 2004, 11:45 a.m. EST – Standard & Poor’s Ratings Services says a potential tax liability recently cited by Teachers Insurance & Annuity Assoc. of America would not affects its ratings.

TIAA disclosed in a footnote to its 2003 annual financial filing that it might be liable for federal taxes that would cause it to suffer a reduction in its surplus.

S&P says it has determined that the potential liability would not affect its ratings on TIAA or its subsidiary, TIAA-CREF Life Insurance Company.

In its statutory filing, TIAA stated that the IRS is considering whether to reject certain tax deductions on company tax returns going back to 1998 and 1999, the first two years that all the business was subject to federal taxation.

The IRS has made no final ruling on the matter, and TIAA says it believes the deductions are lawful. However, if the deductions are barred and appeals are unsuccessful, TIAA estimates it could suffer a $1.2 billion reduction in reserves set aside to cover insurance claims.

The company noted if the deductions were disallowed, it could also lose net operating loss carry forwards.

Based on TIAA’s own estimates, S&P says the company’s excess capital position, strong investment margins and solid market presence would enable it to absorb the potential tax liability.


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