RICHMOND, VA - Altria Group, Inc. announced yesterday that it has executed a Closing Agreement (Agreement) with the Internal Revenue Service (IRS) that, subject to court approval, resolves the federal income tax treatment for all prior tax years of certain leveraged lease transactions entered into by Altria's wholly-owned subsidiary, Philip Morris Capital Corporation (PMCC).

As a result of the agreement, Altria said it expects to pay roughly $500 million in federal and state income taxes and related interest for the 2000 through 2010 tax years.

The IRS disallowed the tax benefits pertaining to PMCC's lease-in/lease-out (LILO) and sale-in/lease-out (SILO) tax shelter transactions for the 1996 - 2003 tax years and was expected to disallow such benefits for the 2004 - 2009 tax years. Altria did not claim tax benefits pertaining to the LILO and SILO transactions in the 2010 and 2011 tax years and, under the terms of the Agreement, will not claim such benefits in future tax years.

The Agreement stipulates the IRS will not assess against Altria any additional taxes or penalties in any open tax year through the 2010 tax year related to the LILO and SILO transactions, nor will it impose penalties with respect to any prior tax years.

Altria also agreed to dismiss the pending litigation in federal court related to the tax treatment of the transactions, along with a relinquishment of its right to seek refunds for federal taxes and interest previously paid.