Are Tax and Non-tax Factors Associated with Fin 48 Disclosures?

Are Tax and Non-tax Factors Associated with Fin 48 Disclosures?
Author: Janet L. McDonald
Publisher:
Total Pages:
Release: 2011
Genre:
ISBN:
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This study examines the determinants of tax aggressiveness. I utilize the unrecognized tax benefits (UTB) disclosed by the adoption of Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) to proxy for firms̕̕ tax aggressiveness. I hand collect UTB disclosures for 562 calendar year-end firms in the S & P 1500. Controlling for firms̕ incentives and abilities to engage in aggressive tax positions (tax factors) and firms̕ discretion over recognizing the financial reporting benefits of aggressive tax positions, I examine whether firms̕ level of aggressive tax positions is influenced by (1) financial reporting aggressiveness, (2) choice of auditor, (3) analyst coverage, and (4) corporate governance quality. Using ordinary least squares regression, I examine the determinants of firms total UTB and its permanent and temporary components. I find that UTB and its permanent component are positively associated with firm size, presence of foreign operations, research and development activity, selling, general and administrative activity, firm value, and the probability that the firm engages in tax shelter activity. However, the temporary component is only increasing in firm size. Also, I find that UTB and its permanent component are positively associated with firms engaging in financial reporting aggressiveness and increasing auditor provided tax services, but negatively associated with analyst coverage, while the temporary component is only positively associated with financial reporting aggressiveness. Finally, I split the sample based on firms̕ use of discretion over recognizing the tax benefits of aggressive tax positions prior to FIN 48 adoption. I find that firms which aggressively recognize tax benefits prior to FIN 48 adoption (i.e. firms that increased UTBs at FIN 48 adoption) have UTBs that are positive and significantly associated with (1) the probability that a firm engages in tax shelter activity, (2) auditor provided tax services, and (3) their record of using last chance earnings management to meet or beat analyst forecasts. These associations are not significant for firms that did not aggressively recognize tax benefits prior to FIN 48 adoption, suggesting that firms̕ financial reporting aggressiveness is positively associated with firms̕ level of tax aggression.

Fin 48 Answer Book, 2009 Edition

Fin 48 Answer Book, 2009 Edition
Author: Mark L. Friedlich
Publisher: CCH
Total Pages: 974
Release: 2008-08
Genre: Business & Economics
ISBN: 9780808091783
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FIN 48 Answer Book is designed to for practitioners who need quick and authoritative answers to questions concerning the implementation of FIN 48. This book uses simple straightforward language to provide guidance on consistent accounting practices and criteria for enterprises reporting tax benefits from uncertain tax positions. The question-and-answer format, with its breadth of coverage, effectively conveys the complex subject matter of implementing and applying FIN 48.

FIN 48 and Tax Compliance

FIN 48 and Tax Compliance
Author: Lillian F. Mills
Publisher:
Total Pages: 48
Release: 2011
Genre:
ISBN:
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We develop a model to examine the effects of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on the strategic interaction between publicly-traded corporate taxpayers and the government. Several of our findings contradict conjectures voiced by members of the business community regarding the economic effects of implementing FIN 48. Specifically, taxpayers with strong facts obtain higher expected payoffs from uncertain tax benefits and some disclosed liabilities understate the expected tax liability. Consistent with the common conjectures, however, some taxpayers are more likely to be audited or are deterred from entering into transactions that generate uncertain benefits because of FIN 48.

Can a Financial Statement Pronouncement Increase State Tax Compliance and Revenues?

Can a Financial Statement Pronouncement Increase State Tax Compliance and Revenues?
Author: Ann Boyd Davis
Publisher:
Total Pages: 157
Release: 2010
Genre:
ISBN:
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Since 1982, 40 states and the District of Columbia have offered amnesty programs. In December 1990, the Multistate Tax Commission (MTC) established the National Nexus Program (NNP), a permanent tax amnesty program. Prior literature has focused on amnesty programs and has shown that these programs do little to increase tax revenues and compliance when increased future enforcement is absent. I examine the impact of the NNP on state corporate tax revenues. From 1991 through 2008, state corporate tax revenues are significantly lower than revenues from 1973 through 1990. Further, I find that states joining the NNP have a negative impact on state corporate tax revenues; however, the initial year impacts revenues differently than all other years. The implementation of Financial Interpretation No. 48 (FIN 48) provides another reason for firms to disclose in the NNP. Specifically, to reduce the FIN 48 liability on financial statements, firms may disclose in the NNP. The primary purpose of FIN 48 is to increase the comparability and transparency of financial reporting of income taxes through requiring consistent recording and disclosure across firms. Although FIN 48 has been replaced with the Accounting Standard Codification 740-10, I continue to refer to FIN 48 because of familiarity. I examine whether FIN 48 resulted in an increased number of firms entering the NNP by state. I also investigate whether FIN 48 impacted the dollar amount of NNP disclosures by state. Using aggregated proprietary data obtained from the NNP and matched with hand-collected data from 1994 through 2008, I find that FIN 48 has a positive effect on the number of NNP disclosures but has no impact on the dollar amount of disclosure. Rather, for states joining the NNP, the dollar amount of disclosure tends to be driven by the states adopting combined reporting requirements. In examining publicly-traded firms on an individual case basis, I find that economic presence and voluntary compliance initiatives predominately have a negative effect on the dollar amount of disclosure while FIN 48 has an insignificant impact.

FIN 48 Adoption Disclosures

FIN 48 Adoption Disclosures
Author: Amy E. Dunbar
Publisher:
Total Pages: 19
Release: 2009
Genre:
ISBN:
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We analyze the first quarter 2007 10-Q filings of 348 Samp;P 500 calendar year-end firms to provide evidence concerning the levels of, and changes in, unrecognized tax benefits (UTBs) resulting from the adoption of FASB Interpretation No. 48 (FIN 48). We draw the following conclusions. First, firms need more guidance regarding how to disclose the FIN 48 UTBs, particularly with respect to interest and penalties, and how changes in UTBs affected accounts other than retained earnings (e.g., the UTBs' associated with temporary differences effect on deferred tax assets and liabilities). Second, focusing on reported UTBs, and not adding interest and penalties, understates the magnitude of firms' beginning (post-FIN 48 adoption) tax reserves. Third, scaling beginning tax reserves by firm size provides a different view of firms' aggressiveness in their prior tax return positions than the absolute UTB levels. Similarly, the percentage change in firms' UTBs that affect retained earnings is a more meaningful measure of firms' pre-FIN 48 tax reporting behavior than raw changes. Moreover, it appears that the largest firms in our sample displayed the most conservative tax reporting behavior. Finally, we present preliminary evidence that such behavior varied by auditor.

Accounting for Income Taxes

Accounting for Income Taxes
Author: John R. Graham
Publisher: Now Pub
Total Pages: 176
Release: 2012-11-09
Genre: Business & Economics
ISBN: 9781601986122
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Accounting for Income Taxes is the most comprehensive review of AFIT research. It is designed both to introduce new scholars to this field and to encourage active researchers to expand frontiers related to accounting for income taxes. Accounting for Income Taxes includes both a primer about the rules governing AFIT (Sections 3-4) and a review of the scholarly studies in the field (Sections 5-8). The primer uses accessible examples and clear language to express essential AFIT rules and institutional features. Section 3 reviews the basic rules and institutional details governing AFIT. Section 4 discusses ways that researchers, policymakers, and other interested parties can use the tax information in financial statements to better approximate information in the tax return. The second half of the monograph reviews the extant scholarly studies by splitting the research literature into four topics: earnings management, the association between book-tax differences and earnings characteristics, the equity market pricing of information in the tax accounts, and book-tax conformity. Section 5 focuses on the use of the tax accounts to manage earnings through the valuation allowance, the income tax contingency, and permanently reinvested foreign earnings. Section 6 discusses the association between book-tax differences and earnings characteristics, namely earnings growth and earnings persistence. Section 7 explores how tax information is reflected in share prices. Section 8 reviews the increased alignment of accounting for book purposes and tax purposes. The remainder of the paper focuses on topics of general interest in the economics and econometric literatures. Section 9 highlights some issues of general importance including a theoretical framework to interpret and guide empirical AFIT studies, the disaggregated components of book-tax differences and research opportunities as the U.S. moves toward International Financial Reporting Standards (IFRS). Section 10 discusses econometric weaknesses that are common in AFIT research and proposes ways to mitigate their deleterious effects.

Model Rules of Professional Conduct

Model Rules of Professional Conduct
Author: American Bar Association. House of Delegates
Publisher: American Bar Association
Total Pages: 216
Release: 2007
Genre: Law
ISBN: 9781590318737
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The Model Rules of Professional Conduct provides an up-to-date resource for information on legal ethics. Federal, state and local courts in all jurisdictions look to the Rules for guidance in solving lawyer malpractice cases, disciplinary actions, disqualification issues, sanctions questions and much more. In this volume, black-letter Rules of Professional Conduct are followed by numbered Comments that explain each Rule's purpose and provide suggestions for its practical application. The Rules will help you identify proper conduct in a variety of given situations, review those instances where discretionary action is possible, and define the nature of the relationship between you and your clients, colleagues and the courts.

The IRS Research Bulletin

The IRS Research Bulletin
Author:
Publisher:
Total Pages: 170
Release: 2003
Genre: Economic forecasting
ISBN:
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