We quantify the net effect of recent U.S. tax reform on the tax rates of public U.S. corporations and find they decreased by 7.5 to 11.4 percentage points on average following tax reform. Further, we separately examine the effect of tax reform on purely domestic firms and multinational firms because some key provisions only affect multinational firms.
We examine the role of political affiliation during the selection of Opportunity Zones, a place-based tax incentive enacted by the Tax Cuts and Jobs Act of 2017. We find governors are on average 7.6% more likely to select a census tract as an Opportunity Zone when the tract’s state representative is a member of the governor’s political party.
We study the foreign externalities of the recent U.S. tax reform, commonly known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine foreign firms’ stock returns around key tax reform events. We find significant heterogeneity in market responses by country, industry, and firm.
This study provides evidence on whether investors value tax gross-up provisions for executives, and how the elimination of these provisions changes executive compensation. We examine the market response to tax gross-up eliminations and find investors react favorably to the removal of these provisions, suggesting that on average, investors perceived these agreements as a bad compensation practice that destroyed firm value.
This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes—bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements.
Corporations are able to deduct some strange things on their tax returns. But new tax proposals from President Joe Biden and Sen. Elizabeth Warren introduce a few doozies.
Sound crazy? We think it does. But because Biden and Warren want to place a tax on financial accounting income (the income that companies report to investors), everything that is allowed as an expense for financial accounting purposes would become a proper deduction under the new proposed taxes.And that includes a lot of things.
This paper investigates the extent to which the expiration of a temporary tax law makes corporate earnings harder to predict and understand. Examining evidence from eight separate expirations of the R&D tax credit, I find that analysts’ forecast errors and abnormal volume increase surrounding quarterly earnings announcements for firms affected by the R&D tax credit.
Prior research examines practitioner, investor, and executive perceptions of corporate tax planning. However, little is known about how the typical U.S. consumer views corporate tax planning. We examine consumers’ perceptions of corporate tax planning using both survey and experimental methods.
Although subsidiary disclosures in firms’ filings with the Securities and Exchanges Commission (SEC; Exhibit 21) represent the most granular required public disclosure of a firm's geographic footprint, little is understood about the quality of the disclosure, and anecdotal evidence suggests firms may not fully comply with the disclosure requirements. We use data provided by multinational firms to the Internal Revenue Service regarding their foreign subsidiary locations to explore the accuracy of public subsidiary disclosures on Exhibit 21 of Form 10‐K per SEC rules.
We keep hearing that the corporate tax code is riddled with “loopholes” and that large corporations are tax cheats for using them and not paying their “fair share.” Is it true? No, most large corporations pay the amount in taxes they do because Congress expressly wrote the tax code to allow them to pay that amount.
The more significant revenue loss, however, is from exceptions to the tax code. When it comes to lost corporate tax revenue, exceptions are the rule, and not following the rules is the exception.
We investigate the consequences of public disclosure of information from company income tax returns filed in Australia. Supporters of more disclosure argue that increased transparency will improve tax compliance, while opponents argue that it will divulge sensitive information that is, in many cases, misunderstood.
Many online retail firms (e-tailers) do not collect sales tax from the majority of their customers, providing these firms a potential competitive advantage over traditional retailers. We examine stock market returns and analysts’ sales forecast revisions surrounding federal legislative proposals, such as the Marketplace Fairness Act, that could erode this alleged competitive advantage for e-tailers. Following events that indicated an increased likelihood of federal sales tax legislation, we find negative abnormal stock returns for e-tail firms relative to traditional retail firms. We also find that analysts forecast a future reduction in sales revenue for e-tailers. These findings imply the existence of a competitive advantage for e-tailers, which advantage will potentially diminish with the enactment of federal sales tax legislation.
This study examines the relation between audit personnel salaries and office-level audit quality. We measure audit personnel salaries at the associate, senior, and manager ranks for Big 4 audit offices from 2004 to 2013, using unique individual-auditor-level data obtained from the U.S. Department of Labor.
We undertake the first large-sample analysis of foreign tax holiday participation by U.S. firms.
We investigate tax planning by privately-held corporations. Privately-held firms are commonly believed to face lower costs of tax planning relative to publicly-held firms, and thus are believed to engage in greater tax planning.
Following 2 decades of discussion, the border adjustment tax (BAT) briefly emerged as part of proposed US corporate tax reform in early 2017. While heavily debated, little empirical evidence exists regarding the BAT. We take advantage of the period during which the BAT was under strong consideration to examine its effects on shareholder value.
We undertake the first empirical analysis of profit shifting by U.S. firms during foreign tax holidays.