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Deferred Tax Positions And Incentives For Corporate Behavior Around Corporate Tax Changes

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  • Poterba, James M.
  • Rao, Nirupama S.
  • Seidman, Jeri K.
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    Abstract

    A firm’s deferred tax position can influence how it is affected by a transition from one tax regime to another. We compile disaggregated deferred tax position data for a sample of large U.S. firms between 1993 and 2004 to explore how these positions might affect firm behavior before and after a pre-announced change in the statutory corporate tax rate. Our results suggest that the heterogeneous deferred tax positions of large U.S. corporations create substantial variation in the short-run effects of tax rate changes on reported earnings. Recognizing these divergent incentives is important for understanding the political economy of corporate tax reform.

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    Bibliographic Info

    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 64 (2011)
    Issue (Month): 1 (March)
    Pages: 27-57

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    Handle: RePEc:ntj:journl:v:64:y:2011:i:1:p:27-57

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Douglas Shackelford & Joel Slemrod & James Sallee, 2011. "Financial reporting, tax, and real decisions: toward a unifying framework," International Tax and Public Finance, Springer, Springer, vol. 18(4), pages 461-494, August.
    2. Mills, Lillian F., 2006. "Five Things Economists and Lawyers Can Learn from Accountants: An Illustration Using the Domestic Production Activities Deduction," National Tax Journal, National Tax Association, National Tax Association, vol. 59(3), pages 585-97, September.
    3. James Poterba & Nirupama Rao & Jeri Seidman, 2007. "Deferred Tax Positions and Incentives for Corporate Behavior Around Corporate Tax Changes," NBER Working Papers 12923, National Bureau of Economic Research, Inc.
    4. Myron S. Scholes & G. Peter Wilson & Mark A. Wolfson, 1992. "Firms' Responses to Anticipated Reductions in Tax Rates: The Tax Reform Act of 1986," NBER Working Papers 4171, National Bureau of Economic Research, Inc.
    5. Plesko, George A., 2004. "Corporate Tax Avoidance and the Properties of Corporate Earnings," National Tax Journal, National Tax Association, National Tax Association, vol. 57(3), pages 729-37, September.
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    Cited by:
    1. John Graham & Jana Raedy & Douglas Shackelford, 2010. "Research in Accounting for Income Taxes," NBER Working Papers 15665, National Bureau of Economic Research, Inc.
    2. Evers, Maria Theresia & Finke, Katharina & Matenaer, Sebastian & Meier, Ina & Zinn, Benedikt, 2014. "Evidence on book-tax differences and disclosure quality based on the notes to the financial statements," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 14-047, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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