Chrysler Group LLC, the No. 3 U.S. automaker, has abandoned plans for an initial public offering this year so it can sort out a U.S. tax issue, according to two people familiar with the process.

An IPO is not likely until 2014, one of the people said, adding that underwriters were notified of the decision late last week. Fiat said Monday that it would “not be practicable” to complete a Chrysler IPO this year.

Chrysler needs a letter from the Internal Revenue Service to clarify tax liabilities after the IPO, said the people, who asked not to be identified because the matter is private. It hasn’t obtained that and didn’t want to proceed without it, they said. Bank advisers were considering a valuation of about $10 billion for Chrysler, the people with knowledge of the matter told Bloomberg News last week.

The Chrysler board determined after speaking with the carmaker’s underwriters that a share sale in 2013 is no longer feasible, Turin, Italy-based Fiat SpA said in a statement Monday. Chrysler will continue to work on the IPO as required by a United Auto Workers medical trust, which is selling the shares, and an offering may be held in the first quarter, Fiat said.

“No assurance can be given as to whether or when an offering will be launched,” Fiat, Chrysler’s majority owner, said in the statement. “Any launch will be subject to market conditions and other relevant considerations.”

Chrysler was previously looking to kick off its IPO road show in early December.

But the timeline hit a snag because of complications involving the conversion of Chrysler from a limited liability company, or LLC, to a C corporation, the people said.

Most public companies are C corporations, and in Chrysler’s case, the conversion to this structure would likely mean additional taxes, Peter Bible, chief risk officer of accounting firm EisnerAmper, said.

As a limited liability corporation, Chrysler has few shareholders and passes losses and the responsibility of paying taxes to its owner. But a C corporation pays its own taxes, can have an unlimited number of shareholders and also bears a greater tax burden.

Spokesmen for Chrysler and Fiat declined to comment on the tax issue.

The delay is the latest twist in chief executive Sergio Marchionne’s effort to execute the next stage of the Fiat-Chrysler turnaround. Marchionne has led both automakers since Chrysler’s 2009 government-funded bankruptcy restructuring.

Marchionne wants to formally merge the two companies and form the world’s seventh-largest auto group. He has repeatedly said he prefers to avoid an IPO for the time being.

But Chrysler was forced to file IPO paperwork in late September after it failed to reach a buyout deal with Chrysler’s minority shareholder, a retiree health-care trust tied to the United Auto Workers union.