ABSTRACT While not explicitly stated, many tax avoidance studies seek to investigate tax avoidance that is the result of firms' deliberate actions. However, measures of firms' tax avoidance can als...
{"title":"The Potential of Tax Surprises to Affect Measures of Tax Avoidance and Researchers' Inferences","authors":"Chelsea Rae Austin","doi":"10.2308/ATAX-52135","DOIUrl":"https://doi.org/10.2308/ATAX-52135","url":null,"abstract":"ABSTRACT While not explicitly stated, many tax avoidance studies seek to investigate tax avoidance that is the result of firms' deliberate actions. However, measures of firms' tax avoidance can als...","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":"41 1","pages":"1-30"},"PeriodicalIF":1.6,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42442658","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT This study investigates the use of a cost-sharing arrangement (CSA) by a multinational corporation (MNC) to shift the income attributable to intangible property (IP) to low-tax foreign jur...
{"title":"Income Shifting Using a Cost-Sharing Arrangement","authors":"L. Simone, R. Sansing","doi":"10.2308/ATAX-52142","DOIUrl":"https://doi.org/10.2308/ATAX-52142","url":null,"abstract":"ABSTRACT This study investigates the use of a cost-sharing arrangement (CSA) by a multinational corporation (MNC) to shift the income attributable to intangible property (IP) to low-tax foreign jur...","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":"41 1","pages":"123-136"},"PeriodicalIF":1.6,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46948890","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines whether acquirer NOL-related tax benefits generated in an acquisition are shared with the target. For a sample of 1,959 acquisitions, we find that acquisitions of profitable targets by acquirers with NOLs are associated with higher acquisition premiums than acquisitions by non-NOL acquirers. This result indicates that potential post-acquisition tax benefits from use of acquirer NOLs are shared with the target in the form of higher transaction prices. We also find that the acquirer's merger announcement stock price response is positively associated with these tax benefits, which is consistent with the conclusion that acquirers retain part of these potential tax benefits.
{"title":"The Effect of Acquirer Net Operating Losses on Acquisition Premiums and Acquirer Abnormal Returns","authors":"Merle M. Erickson, Karen Ton, Shiing-wu Wang","doi":"10.2308/ATAX-52395","DOIUrl":"https://doi.org/10.2308/ATAX-52395","url":null,"abstract":"\u0000 This study examines whether acquirer NOL-related tax benefits generated in an acquisition are shared with the target. For a sample of 1,959 acquisitions, we find that acquisitions of profitable targets by acquirers with NOLs are associated with higher acquisition premiums than acquisitions by non-NOL acquirers. This result indicates that potential post-acquisition tax benefits from use of acquirer NOLs are shared with the target in the form of higher transaction prices. We also find that the acquirer's merger announcement stock price response is positively associated with these tax benefits, which is consistent with the conclusion that acquirers retain part of these potential tax benefits.","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2019-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49621257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the extent to which deferred tax valuation allowance (VA) releases—a discretionary accounting judgment that increases net income based on estimated future tax benefit realizations—are predictive of future earnings. We first find that profitable firms releasing at least a portion of a full VA have higher subsequent earnings relative to a control group that maintains a full VA. These results vary depending on firms' cumulative profitability in recent years and suggest some firms appear to rely on historical fact patterns rather than estimations of future profitability to justify the VA release. In additional analysis, we observe that among firms lacking cumulative profits in recent years, VA releasers generate higher subsequent abnormal returns than VA maintainers, suggesting investors are not timely responding to the information content from the VA release decision.
{"title":"The Information Content from Releases of the Deferred Tax Valuation Allowance","authors":"Andrew R. Finley, A. Ribal","doi":"10.2308/ATAX-52394","DOIUrl":"https://doi.org/10.2308/ATAX-52394","url":null,"abstract":"\u0000 We examine the extent to which deferred tax valuation allowance (VA) releases—a discretionary accounting judgment that increases net income based on estimated future tax benefit realizations—are predictive of future earnings. We first find that profitable firms releasing at least a portion of a full VA have higher subsequent earnings relative to a control group that maintains a full VA. These results vary depending on firms' cumulative profitability in recent years and suggest some firms appear to rely on historical fact patterns rather than estimations of future profitability to justify the VA release. In additional analysis, we observe that among firms lacking cumulative profits in recent years, VA releasers generate higher subsequent abnormal returns than VA maintainers, suggesting investors are not timely responding to the information content from the VA release decision.","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":"1 1","pages":""},"PeriodicalIF":1.6,"publicationDate":"2019-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43373503","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Shane R. Stinson, B. Barnes, Steve Buchheit, M. Morrow
ABSTRACT We investigate whether consumer-directed tax credits motivate purchasing behavior in the same manner as traditional retail concessions (e.g., price discounts). In our experimental study, c...
{"title":"Do Consumer-Directed Tax Credits Effectively Increase Demand? Experimental Evidence of Conditional Success","authors":"Shane R. Stinson, B. Barnes, Steve Buchheit, M. Morrow","doi":"10.2308/ATAX-51960","DOIUrl":"https://doi.org/10.2308/ATAX-51960","url":null,"abstract":"ABSTRACT We investigate whether consumer-directed tax credits motivate purchasing behavior in the same manner as traditional retail concessions (e.g., price discounts). In our experimental study, c...","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":"40 1","pages":"1-19"},"PeriodicalIF":1.6,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46154210","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT This study examines whether the quality of a firm's internal information environment influences its tax-motivated income shifting activities. Although income shifting is an important tax-planning strategy, evidence regarding its determinants is limited. We find that higher internal information quality (IIQ) is associated with greater tax-motivated income shifting, which suggests that higher IIQ enables managers to better identify and execute income shifting opportunities. We find that the influence of IIQ on tax-motivated income shifting varies with firm characteristics. Specifically, we find that higher IIQ is associated with tax-motivated income shifting for firms with greater uncertainty and greater coordination needs. Overall, these results suggest that the improved information obtained through higher-quality internal information environments allows managers to increase tax-motivated income shifting.
{"title":"Internal Information Quality and Tax-Motivated Income Shifting","authors":"Sean McGuire, Scott G. Rane, C. Weaver","doi":"10.2308/ATAX-51959","DOIUrl":"https://doi.org/10.2308/ATAX-51959","url":null,"abstract":"ABSTRACT This study examines whether the quality of a firm's internal information environment influences its tax-motivated income shifting activities. Although income shifting is an important tax-planning strategy, evidence regarding its determinants is limited. We find that higher internal information quality (IIQ) is associated with greater tax-motivated income shifting, which suggests that higher IIQ enables managers to better identify and execute income shifting opportunities. We find that the influence of IIQ on tax-motivated income shifting varies with firm characteristics. Specifically, we find that higher IIQ is associated with tax-motivated income shifting for firms with greater uncertainty and greater coordination needs. Overall, these results suggest that the improved information obtained through higher-quality internal information environments allows managers to increase tax-motivated income shifting.","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":"40 1","pages":"25-44"},"PeriodicalIF":1.6,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47731237","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
IRC §162(m) originally denied corporations tax deductions for nonperformance compensation in excess of $1 million per executive when paid to the CEO and the next four highest paid named executive officers. Following the 2006 SEC proxy statement revision, which the IRS deemed incompatible with §162(m), the IRS excluded CFOs from §162(m). This exclusion exogenously altered the CFO compensation environment, creating a natural experiment we exploit to examine how §162(m) influences executive compensation. Using a difference-in-differences design, our analysis allows us to draw causal influences generally lacking in prior §162(m) studies. We find that after the IRS exclusion of CFOs, firms increased the nonperformance compensation of CFOs who otherwise would have been affected by §162(m). Consistent with the shift to less risky compensation reducing the risk premium demanded by CFOs, we find some evidence of a reduction in their compensation growth. Our analysis provides evidence that tax policy influences compensation design.
{"title":"The Impact of Regulation on Executive Compensation: IRC Section 162(m) and the Unexpected Exclusion of CFOs","authors":"S. Balsam, J. Evans, Amy J. N. Yurko","doi":"10.2308/ATAX-52248","DOIUrl":"https://doi.org/10.2308/ATAX-52248","url":null,"abstract":"\u0000 IRC §162(m) originally denied corporations tax deductions for nonperformance compensation in excess of $1 million per executive when paid to the CEO and the next four highest paid named executive officers. Following the 2006 SEC proxy statement revision, which the IRS deemed incompatible with §162(m), the IRS excluded CFOs from §162(m). This exclusion exogenously altered the CFO compensation environment, creating a natural experiment we exploit to examine how §162(m) influences executive compensation. Using a difference-in-differences design, our analysis allows us to draw causal influences generally lacking in prior §162(m) studies. We find that after the IRS exclusion of CFOs, firms increased the nonperformance compensation of CFOs who otherwise would have been affected by §162(m). Consistent with the shift to less risky compensation reducing the risk premium demanded by CFOs, we find some evidence of a reduction in their compensation growth. Our analysis provides evidence that tax policy influences compensation design.","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43554849","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In each issue, JATA publishes reviews of textbooks and other books of interest to tax scholars. All book reviews are solicited by the Associate Editor. However, if you know of a book that you would like reviewed, or if you are interested in reviewing a book, please contact the Associate Editor. The Associate Editor is: Jay A. Soled Department of Accounting and Information Systems Rutgers University 1 Washington Park Newark, New Jersey 07102 Phone: (973) 353-1727 Fax: (973) 375-1283 Email: jaysoled@andromeda.rutgers.edu
在每一期中，JATA都会出版税务学者感兴趣的教科书和其他书籍的评论。所有书评均由副主编征集。但是，如果你知道你想复习的书，或者你有兴趣复习一本书，请联系副主编。副主编：Jay A.Soled罗格斯大学会计与信息系统系1 Washington Park Newark，New Jersey 07102电话：（973）353-1727传真：（1973）375-1283电子邮件：jaysoled@andromeda.rutgers.edu
{"title":"Book Reviews","authors":"Jay A. Soled","doi":"10.2308/atax-10609","DOIUrl":"https://doi.org/10.2308/atax-10609","url":null,"abstract":"In each issue, JATA publishes reviews of textbooks and other books of interest to tax scholars. All book reviews are solicited by the Associate Editor. However, if you know of a book that you would like reviewed, or if you are interested in reviewing a book, please contact the Associate Editor.\u0000 The Associate Editor is:\u0000 Jay A. Soled\u0000 Department of Accounting and Information Systems\u0000 Rutgers University\u0000 1 Washington Park\u0000 Newark, New Jersey 07102\u0000 Phone: (973) 353-1727\u0000 Fax: (973) 375-1283\u0000 Email: jaysoled@andromeda.rutgers.edu","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49642454","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
James D. Brushwood, Derek Johnston, L. Kutcher, James Stekelberg
Part of the FASB's broader simplification initiative, ASU 2016-09 was issued on March 30, 2016 and became effective for all firms for fiscal years beginning after December 15, 2016. ASU 2016-09 simplifies the accounting for the tax effects of stock-based compensation by requiring firms to record all related tax windfalls and shortfalls as components of current income tax expense rather than as direct-to-equity adjustments, as was required under prior guidance. Many observers note this change may introduce significant volatility and uncertainty into firms' ETRs. Consistent with this concern, we document that errors in analysts' “clean” ETR forecasts significantly increased among firms reporting a material ETR effect due to early-adopting ASU 2016-09, relative to other firms. Our results suggest that simplification came at the cost of a decrease in the predictability of tax-related financial information; as such, this study provides timely evidence on an important economic consequence of ASU 2016-09.
{"title":"Did the FASB's Simplification Initiative Increase Errors in Analysts' Implied ETR Forecasts? Evidence from Early Adoption of ASU 2016-09","authors":"James D. Brushwood, Derek Johnston, L. Kutcher, James Stekelberg","doi":"10.2308/ATAX-52247","DOIUrl":"https://doi.org/10.2308/ATAX-52247","url":null,"abstract":"\u0000 Part of the FASB's broader simplification initiative, ASU 2016-09 was issued on March 30, 2016 and became effective for all firms for fiscal years beginning after December 15, 2016. ASU 2016-09 simplifies the accounting for the tax effects of stock-based compensation by requiring firms to record all related tax windfalls and shortfalls as components of current income tax expense rather than as direct-to-equity adjustments, as was required under prior guidance. Many observers note this change may introduce significant volatility and uncertainty into firms' ETRs. Consistent with this concern, we document that errors in analysts' “clean” ETR forecasts significantly increased among firms reporting a material ETR effect due to early-adopting ASU 2016-09, relative to other firms. Our results suggest that simplification came at the cost of a decrease in the predictability of tax-related financial information; as such, this study provides timely evidence on an important economic consequence of ASU 2016-09.","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44505600","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
P. Bianchi, Diana Falsetta, Miguel Minutti-Meza, Eric Weisbrod
Under the Italian statutory audit regime, three individual accountants are jointly appointed to audit each client's annual financial statements and sign off on the tax return. These individuals can belong to the same or different accounting firms and through multiple and repeated collaborations they form a professional network. We use network measures of centrality to capture individuals' ability to acquire and apply tax expertise across clients. We demonstrate that clients engaging better-connected individual auditors have comparatively lower effective tax rates. Our results are robust to controlling for a number of client, individual, and accounting firm characteristics, as well as for alternative network connections between clients. We also use instrumental variables, individual fixed effects, and matching to mitigate the effect of endogenous pairing of clients and auditors. Our findings demonstrate that in a joint audit environment, individual auditor professional networks have consequences for tax outcomes. Data Availability: Data are obtainable from the public sources cited in the text and are available upon request.
{"title":"Joint Audit Engagements and Client Tax Avoidance: Evidence from the Italian Statutory Audit Regime","authors":"P. Bianchi, Diana Falsetta, Miguel Minutti-Meza, Eric Weisbrod","doi":"10.2308/ATAX-52151","DOIUrl":"https://doi.org/10.2308/ATAX-52151","url":null,"abstract":"\u0000 Under the Italian statutory audit regime, three individual accountants are jointly appointed to audit each client's annual financial statements and sign off on the tax return. These individuals can belong to the same or different accounting firms and through multiple and repeated collaborations they form a professional network. We use network measures of centrality to capture individuals' ability to acquire and apply tax expertise across clients. We demonstrate that clients engaging better-connected individual auditors have comparatively lower effective tax rates. Our results are robust to controlling for a number of client, individual, and accounting firm characteristics, as well as for alternative network connections between clients. We also use instrumental variables, individual fixed effects, and matching to mitigate the effect of endogenous pairing of clients and auditors. Our findings demonstrate that in a joint audit environment, individual auditor professional networks have consequences for tax outcomes.\u0000 Data Availability: Data are obtainable from the public sources cited in the text and are available upon request.","PeriodicalId":45477,"journal":{"name":"Journal of the American Taxation Association","volume":" ","pages":""},"PeriodicalIF":1.6,"publicationDate":"2018-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49045057","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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